Northstar Realty 10-k (annual Reports) 2009-02-25

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-K (Mark One)

˝

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2008 or

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from

to

Commission file number: 001-32330

NorthStar Realty Finance Corp. (Exact Name of Registrant as Specified in its Charter) Maryland (State or other Jurisdiction of Incorporation or Organization)

11-3707493 (I.R.S. Employer Identification No.)

399 Park Avenue, 18th Floor New York, New York (Address of Principal Executive Offices)

10022 (Zip Code)

(212) 547-2600 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each C lass

Nam e of Each Exch an ge on W h ich Re giste re d

Common Stock, $0.01 par value

New York Stock Exchange

Preferred Stock, $0.01 par value 8.75% Series A Cumulative Redeemable

New York Stock Exchange

Preferred Stock, $0.01 par value 8.25% Series B Cumulative Redeemable

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o

No ˝

No ˝

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ˝ No o

Processed and formatted by SEC Watch - Visit SECWatch.com

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of "large accelerated filer", "accelerate filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ˝

Accelerated filer o

Nonaccelerated filer o

Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o

No ˝

The aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2008, was $522,983,760. As of February 24, 2009, the registrant had issued and outstanding 63,021,773 shares of common stock, par value $0.01 per share. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement for the registrant's 2009 Annual Meeting of Stockholders (the "2009 Proxy Statement"), to be filed within 120 days after the end of the registrant's fiscal year ending December 31, 2008, are incorporated by reference into this Annual Report on Form 10-K in response to Part III, Items 10, 11, 12, 13 and 14.

INDEX

Page

PART I Item 1.

Business

4

Item 1A. Risk Factors

17

Item 1B.

Unresolved Staff Comments

46

Item 2.

Properties

47

Item 3.

Legal Proceedings

49

Item 4.

Submission of Matters to a Vote of Security Holders

49

PART II Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

50

Item 6.

Selected Financial Data

53

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

56

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

88

Item 8.

Financial Statements and Supplementary Data

93

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

165

Item 9A. Controls and Procedures

165

Item 9B.

166

Other Information PART III

Item 10.

Directors, Executive Officers and Corporate Governance

167

Processed and formatted by SEC Watch - Visit SECWatch.com

Item 11.

Executive Compensation

167

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

167

Item 13.

Certain Relationships and Related Transactions and Directors Independence

167

Item 14.

Principal Accountant Fees and Services

167 PART IV

Item 15.

Exhibits and Financial Statement Schedules

168 2

Table of Contents

FORWARD LOOKING STATEMENTS This Annual Report on Form 10-K contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, the operating performance of our investments and financing needs. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "potential," "intend," "expect," "seek," "anticipate," "estimate," "believe," "could," "project," "predict," "continue" or other similar words or expressions. Forward-looking statements are not guarantees of performance and are based on certain assumptions, discuss future expectations, describe plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Our ability to predict results or the actual effect of plans or strategies is inherently uncertain, particularly given the economic environment. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from those forward looking statements. We are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results. Factors that could have a material adverse effect on our operations and future prospects are set forth in "Risk Factors" in this Annual Report on Form 10-K beginning on page 14. The factors set forth in the Risk Factors section could cause our actual results to differ significantly from those contained in any forward-looking statement contained in this report. 3

Table of Contents

PART I Item 1. Business Our Company We are a real estate finance company that has focused primarily on originating, investing in and managing commercial real estate debt, commercial real estate securities and net lease properties. We have invested in those areas of commercial real estate finance that enabled us to leverage our real estate investment expertise, utilize our broad capital markets knowledge, and capitalize on our ability to employ innovative financing structures. We believe that our three principal business lines are complementary to each other due to their overlapping sources of investment opportunities, common reliance on real estate fundamentals and ability to apply similar asset management skills to maximize value and to protect capital. We conduct our operations so as to qualify as a real estate investment trust, or a REIT, for federal income tax purposes. We rely on the normal functioning of credit and equity markets to finance and grow our business. The current worldwide economic and financial crisis, which began in 2007 with increasing credit issues in U.S. sub-prime residential mortgage loans, has resulted in severe credit and liquidity issues throughout the worldwide financial system, a global economic recession, the failure of several financial institutions and several multinational financial institutions requiring governmental assistance to remain in business. Global deleveraging by financial institutions and economic contraction has virtually shut down the availability of capital for most businesses, including those involved in the commercial real estate sector. As a result, most businesses, including ours, have significantly reduced new investment activity until the capital markets become more stable, the macroeconomic outlook becomes clearer and market liquidity increases. It is unclear whether existing or proposed government programs will help a return of capital market stability. In this environment we are focused on actively managing portfolio credit to preserve capital, generating and recycling liquidity from existing assets, managing debt maturities by purchasing our issued debt at discounts to par and optimizing corporate overhead.

Processed and formatted by SEC Watch - Visit SECWatch.com

The following describes the major commercial asset classes in which we have invested and which we continue to actively manage to maximize value and to preserve our capital through this difficult economic and capital markets environment. During the second half of 2007 and throughout 2008, we significantly reduced new investment activity in these businesses, which was generally limited to a level supported by recycled capital from repayments and asset sales. Real Estate Debt Overview Our real estate debt business has historically focused on originating, structuring and acquiring senior and subordinate debt investments secured primarily by commercial and multifamily properties, including first lien mortgage loans, which are also referred to as senior mortgage loans, junior participations in first lien mortgage loans, which are often referred to as B-Notes, second lien mortgage loans, mezzanine loans and preferred equity interests in borrowers who own such properties. We generally hold these instruments for investment, but we sometimes syndicate or sell portions of loans to maximize risk adjusted returns, manage credit exposure and generate liquidity. We have built a franchise with a reputation for providing capital to high quality real estate investors who want a responsive and flexible balance sheet lender. Given that we are a lender who does not generally seek to sell or syndicate the full amount of the loans we originate, we are able to maintain flexibility in how we structure loans that meet the unique needs of our borrowers. For example, we can make a loan to a borrower that provides for an increase in loan proceeds over the loan term if the borrower increases the value of the collateral property. Typical commercial mortgage-backed securities, or CMBS, and other conduit securitization lenders generally could not provide these 4

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

types of loans because of constraints within their funding structures and because they usually originated loans with the intent to sell them to third parties and relinquish control. Additionally, our centralized investment organization has enabled senior management to review potential new loans early in the origination process which, unlike many large institutional lenders with several levels of approval required to commit to a loan, allowed us to respond quickly and provided a high degree of certainty to our borrowers that we would close a loan on terms substantially similar to those initially proposed. We believe that this level of service has enhanced our reputation in the marketplace. As of December 31, 2008, our average funded loan size was $19.2 million and we managed 108 separate commercial real estate loans totaling $2.0 billion. The collateral underlying our real estate debt investments generally consists of income-producing real estate assets, properties that require some capital investment to increase cash flows, or assets undergoing repositionings or conversions, and may involve vertical construction or unimproved land. We seek to make real estate debt investments that offer the most attractive risk-adjusted returns and evaluate the risk based upon our underwriting criteria, sponsorship and the pricing of comparable investments. We historically accessed the asset-backed markets to match-fund our real estate debt investments with non-recourse, term debt liabilities which were structured as collateralized debt obligations, or CDOs, and sold under the N-Star brand. These term debt, or CDO, transactions are flexible financing structures that typically permit us to re-invest proceeds from asset repayments for a five-year period after issuance with no repayment of the term debt, subject to certain criteria; thereafter, the term debt is repaid when the underlying assets pay off. In addition to these term debt transaction financings we have utilized secured term financings and credit facilities to finance real estate debt investments. Targeted Investments Our real estate debt investments typically have many of the following characteristics: (i) terms of two to ten years inclusive of any extension options; (ii) collateral in the form of a first mortgage or a subordinate interest in a first mortgage on real property, a pledge of ownership interests in a real estate owning entity or a preferred equity investment in a real estate owning entity; (iii) investment amounts of $5 million to $200 million; (iv) floating interest rates priced at a spread over LIBOR or fixed interest rates; (v) an interest rate cap or other hedge to protect against interest rate volatility; and (vi) an intercreditor agreement that outlines our rights relative to other investors in the capital structure of the transaction and that typically provides us with a right to cure any defaults to the lender of those tranches senior to us and, under certain circumstances, to purchase senior tranches. Investment Process for Real Estate Debt We have employed a standardized investment and underwriting process that focuses on a number of factors in order to ensure each investment is being evaluated appropriately, including: (i) macroeconomic conditions that may influence operating performance; (ii) fundamental analysis of the underlying real estate collateral, including tenant rosters, lease terms, zoning, operating costs and the asset's overall competitive position in its market: (iii) real estate market factors that may influence the economic performance of the collateral; (iv) the operating expertise and financial strength of the sponsor or borrower; (v) real estate and leasing market conditions affecting the asset; (vi) the cash flow in place and projected to be in place over the term of the loan; (vii) the appropriateness of estimated costs associated with rehabilitation or new construction; (viii) a valuation of the property, our investment basis relative to its value and the ability to liquidate an investment through a sale or refinancing of the underlying asset; (ix) review of third-party reports including appraisals, engineering and environmental reports; (x) physical inspections of properties and markets; and (xi) the overall structure of the investment and the lenders' rights in the loan documentation. 5

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Our real estate lending professionals may originate and structure debt investments directly with borrowers or may acquire loans from third parties. In the past we emphasized direct origination of our debt investments because this allows us a greater degree of control in loan structuring and in potential future loan modification or restructuring negotiations, provides us the opportunity to create subordinate interests in the loan, if desired, that meet our risk-return objectives, allows us to maintain a more direct relationship with our borrowers and to earn origination and other fees. Although the majority of our debt investments have been directly originated, we expect that current difficult credit market conditions may present more opportunities to acquire real estate debt investments at attractive prices from third-party originators who are motivated to sell by liquidity issues or are exiting the business. At December 31, 2008 we held the following real estate debt investments (dollars in thousands):

De ce m be r 31, 2008

C arrying Value (1)

Whole loans, floating rate $1,048,310 Whole loans, fixed rate 96,252 Subordinate mortgage interests, floating rate 200,556 Subordinate mortgage interests, fixed rate 24,349 Mezzanine loans, floating rate 463,765 Mezzanine loan, fixed rate 191,438 Other loans—floating 16,609 Other loans—fixed 6,191 Total/Weighted average $2,047,470

(1)

Allocation by Inve stm e n t Type

51.2% 4.7 9.8 1.2 22.6 9.4 0.8 0.3 100.0%

Ave rage Fixe d Rate

—% 7.58 — 7.51 — 11.65 — 5.53 9.99%

Ave rage S pre ad O ve r LIBO R

2.89% — 6.42 — 4.43 — 1.60 — 3.70%

Nu m be r of Inve stm e n ts

52 8 13 2 15 15 2 1 108

Approximately $1.3 billion of these investments serve as collateral for our three term debt transactions backed by commercial real estate loans and the balance is financed under other borrowing facilities. We have future funding commitments, which are subject to certain conditions that borrowers must meet to qualify for such fundings, totaling $271.0 million related to our debt investments. We expect that a minimum of $133.9 million of these future fundings will be funded within our existing term debt transactions and require no additional capital from us. We expect that our secured credit facility lenders generally will advance a majority of future fundings that are not otherwise funded within our term debt transactions. Based upon currently approved advance rates on our credit and term debt facilities and assuming that all commercial real estate loans that have future fundings meet the terms to qualify for such funding, our equity requirement would be approximately $94.5 million. 6

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents The following charts display our loan portfolio by collateral type and by geographic location: Loan Portfolio by Collateral Type

Loan Portfolio by Geographic Location

LOGO

LOGO

Real Estate Securities Overview Our real estate securities business has historically invested in, created and managed portfolios of primarily investment grade commercial real estate debt securities, which we have financed by issuing term debt. In July 2007, we created the NorthStar Real Estate Securities Opportunity Fund, or the Securities Fund, of which we are the manager and general partner. Our interest in the Securities Fund was 53.1% at December 31, 2008. We receive fees from the Securities Fund for managing the third party private capital. Other than in connection with making new investments to reinvest proceeds from asset sales or repayments in previously issued non-recourse term debt transactions, we intend to conduct substantially all of our new securities investment activities in the Securities Fund or in vehicles similar to the Securities Fund to minimize the amount of securities we hold on balance sheet. This fund format also allows us to utilize long and short investment strategies that would not be efficient to conduct on-balance sheet and in our REIT structure. Our managed commercial real estate debt securities include CMBS, fixed income securities issued by REITs, credit-rated tenant loans and term debt transactions backed primarily by commercial real estate securities. Most of our securities investments have explicit ratings assigned by at least one of the three leading nationally-recognized statistical rating agencies (Moody's Investors Service, Standard & Poor's and Fitch Ratings, generally referred to as rating agencies) and generally are not insured or otherwise guaranteed. In addition to these securities, our investment grade term debt issuances may also be backed by bank loans to REITs and real estate operating companies, and real estate whole loans or subordinate debt investments such as B-Notes and mezzanine loans. We seek to mitigate credit risk through credit analysis, subordination and diversification. Within the Securities Fund we may also utilize credit default swaps and credit-linked indices such as the CMBX to hedge long positions or to take net short positions on commercial real estate fixed income securities. The CMBS we invest in are generally junior in right of payment of interest and principal to one or more senior classes, but benefit from the support of one or more subordinate classes of securities or other form of credit support within a securitization transaction. The senior unsecured REIT debt securities we invest in reflect comparable credit risk. Credit risk refers to each individual borrower's ability to make required interest and principal payments on the scheduled due dates. While the expected yield on our securities investments is sensitive to the performance of the underlying assets, 7

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

the more subordinated securities and certain other features of a securitization, in the case of mortgage backed securities, and the issuer's underlying equity and subordinated debt, in the case of REIT securities, are designed to bear the first risk of default and loss. The real estate securities portfolios of our investment grade term debt issuances are diversified by asset type, industry, location and issuer. We further seek to minimize credit risk by monitoring the real estate securities portfolios of our investment grade term debt issuances and the underlying credit quality of their holdings. Our general financing strategy focuses on the use of match-funded structures. This means that we seek to align the maturities of our debt obligations with the maturities of our investments in order to minimize the risk of being forced to refinance our liabilities prior to the maturities of our assets, as well as to reduce the impact of fluctuating interest rates on earnings. In addition, we generally match interest rates on our assets with like-kind debt, so that fixed rate assets are financed with fixed rate debt and floating rate assets are financed with floating rate debt, directly or through the use of interest rate swaps, caps or other financial instruments or through a combination of these strategies. Our investment grade term debt issuances utilize interest rate swaps to minimize the mismatch between their fixed rate assets and floating rate liabilities. During 2008, the asset-backed markets in which we had historically obtained match-funded financing remained virtually closed, and we expect the markets to remain difficult through 2009. Consequently, most of our securities investment activity in 2008 was funded using proceeds from repayments and sales of existing investments. The average rating of our securities investments was Baa2/BBB (investment grade) as of December 31, 2008. In addition, our securities portfolio had an average investment size of approximately $5.2 million as of December 31, 2008. Our Real Estate Securities Investments The various types of securities backed by real estate assets that we invest in, including CMBS, fixed income securities issued by REITs and real estate term debt transactions, are described in more detail below. CMBS. CMBS securities, or commercial mortgage backed securities, are securities backed by obligations (including certificates of participation in obligations) that are principally secured by mortgages on real property or interests therein having a multifamily or commercial use, such as regional malls, other retail space, office buildings, industrial or warehouse properties, hotels, apartment buildings, nursing homes and senior living centers, and may include, without limitation, CMBS conduit securities, CMBS credit tenant lease securities and CMBS large loan securities. The properties are primarily located in the United States. The loan collateral is held in a trust that issues securities in the form of various classes of debt secured by the cash flows from the underlying loans. The securities issued by the trust have varying levels of priority in the allocation of cash flows from the pooled loans and are rated by one or more of the rating agencies. These ratings reflect the risk characteristics of each class of CMBS and range from "AAA" to "CCC". Any losses realized on defaulted loans are absorbed first by the most junior, lowest-rated bond classes. Typically, all principal received on the loans is allocated first to the most senior outstanding class of bonds and then to the next class in order of seniority. REIT Fixed Income Securities: REIT fixed income securities include both secured and unsecured debt issued by REITs. REITs own a variety of property types with a large number of companies focused on the office, retail, multifamily, industrial, healthcare and hotel sectors. In addition, several REITs focus on the ownership of self-storage properties and triple-net lease properties. Certain REITs are more diversified in nature, owning properties across various asset classes. Both REIT secured and unsecured debt typically have credit ratings issued by one or more rating agencies. The majority of our long-term investments in REIT fixed income securities are in REIT unsecured debt. We also invest in junior unsecured debt or preferred equity of REITs. 8

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Commercial Real Estate Term Debt Transactions: Commercial real estate term debt transactions (also referred to as collateralized debt obligations, or CDO's), or CRE term debt transactions, are debt obligations typically collateralized by a combination of CMBS and REIT unsecured debt. CRE term debt transactions may also include real estate whole loans and other asset-backed securities as part of their underlying collateral, although this is less common in the market. A CRE term debt transaction is a special-purpose vehicle that finances the purchase of CMBS, REIT debt and other assets by issuing liabilities rated by rating agencies and equity in private securities offerings. Underwriting Process for Real Estate Securities Our underwriting process for real estate securities is focused on evaluating both the real estate risk of the underlying assets and the structural protections available to the particular class of securities in which we are investing. We believe that even when a security such as a CMBS or a REIT bond is backed by a diverse pool of properties, risk cannot be evaluated purely by statistical or quantitative means. Properties backing loans with identical debt service coverage ratios or loan-to-value ratios can have very different risk characteristics depending on their location, lease structure and physical condition. Our underwriting process seeks to identify those factors that may lead to an increase or decrease in credit quality over time. Our underwriting process for the acquisition of real estate securities backed by a single loan or a small pool of large loans includes: (i) review of the rent roll and historical operating statements in order to evaluate the stability of the underlying property's cash flow; (ii) utilization of our network of relationships with real estate investors and other professionals to identify market and sub-market trends in order to assess the property's competitive position within its market; and (iii) evaluation of the loan's structural protections and intercreditor rights. When evaluating a CMBS pool backed by a large number of loans, we combine real estate analysis on individual loans with stress testing of the portfolio under various sets of default and loss assumptions. First, we identify a sample of loans in the pool which are subject to individual analysis. This sample typically includes the largest 10 to 15 loans in the pool, loans selected for risk characteristics such as low debt service coverage ratios, unusual property type or location in a weak market, and a random sample of small to medium sized loans in the pool. The loans in the sample are analyzed based on the available information, as well as any additional market or property level information that we are able to obtain. Each loan in the sample is assigned a risk rating, which affects the default assumptions for that loan in our stress test. A loan with the lowest risk rating is assumed to default and suffer a loss whereas loans with better risk ratings are assigned a lower probability of default. The stress tests we run allow us to determine whether the bond class in which we are investing would suffer a loss under the stressed assumptions. REIT securities are evaluated based on the quality, type and location of the property portfolio, the capital structure and financial ratios of the company, and management's track record, operating expertise and strategy. We also evaluate the REIT's debt covenants. Our investment decision is based on the REIT's ability to withstand financial stress, as well as more subjective criteria related to the quality of management and of the property portfolio. 9

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents At December 31, 2008, we held the following real estate security investments: De ce m be r 31, 2008

C arrying Value

Estim ate d Fair Value

CMBS Real estate term debt—N-Star Real estate term debt—Third party REIT debt Term debt equity Trust preferred securities Total

$ 444,790 50,680 16,156 82,753 70,532 15,000 $ 679,911

$ 124,594 7,040 1,322 44,935 38,764 4,488 $ 221,143

The first four term debt issuances in our securities business were accounted for as off-balance sheet financings. This means that rather than consolidate the assets and investment grade notes we sold on our balance sheet we account for our equity in the financing as an available for sale security. For example, if we financed $100 of assets by issuing $80 of term debt notes, we would show our interest as a $20 available for sale security on our balance sheet. N-Star VII, our fifth securities term debt issuance, is accounted for as an on-balance sheet financing. A summary of the collateral and term debt notes for our off-balance sheet term debt transactions at December 31, 2008 is provided below.

Issu an ce

C ollate ral—De ce m be r 31, 2008 Te rm Note s—De ce m be r 31, 2008 W e ighte d W e ighte d W e ighte d Ave rage Ave rage Par Value Ave rage Expe cte d O u tstan ding Inte re st Date of Inte re st Life Te rm Rate S tate d C lose d C ollate ral Rate (ye ars) Note s(1) at 12/31/08 Maturity

N-Star I(2) N-Star II N-Star III N-Star V Total

8/21/03 $ 299,316 7/01/04 331,242 3/10/05 410,188 9/22/05 499,745 $1,540,491

(1)

Includes only notes held by third parties.

(2)

We have an 83.3% interest.

6.60% 6.17 5.70 5.52 5.92%

4.16 $ 278,000 4.77 295,098 4.11 358,556 6.23 456,319 4.95 $ 1,387,973

6.37% 5.51 4.88 4.58 5.23%

8/01/2038 6/01/2039 6/01/2040 9/05/2045

10

Table of Contents The following charts display our CMBS assets under management by vintage and our on-balance sheet securities assets under management by asset type based on par values. CMBS AUM by Vintage

GRAPHIC

Securities AUM

GRAPHIC

Processed and formatted by SEC Watch - Visit SECWatch.com

Net Lease Overview Our net lease strategy involved investing primarily in office, industrial, retail and healthcare-related properties across the United States that are net leased long term to corporate tenants. Net lease properties are typically leased to a single tenant who agrees to pay basic rent, plus all taxes, insurance, capital and operating expenses arising from the use of the leased property. We may also invest in properties that are leased to tenants for which we are responsible for some of the operating expenses and capital costs. At the end of the lease term, the tenant typically has a right to renew the lease at market rates or to vacate the property with no further ongoing obligation. Accordingly, we generally target properties that are located in primary or secondary markets with strong demand fundamentals, and that have a property design and location that make them suitable and attractive for alternative tenants. During 2008 we made no new net lease investments because opportunities in commercial real estate loans, commercial real estate fixed income securities and repurchases of our debt were more attractive. Also, our increased cost of capital relative to prior years has made investing in net lease assets uneconomical. Our primary focus in this area during 2008 was to actively manage the existing asset base and to find opportunities to generate liquidity and to recycle capital. Based on current capital markets and economic conditions we do not expect new net lease investing to be a material part of our business going forward. Core Net Lease We believe that the majority of net lease investors who acquire office, industrial and retail properties are primarily focused on assets leased to investment-grade tenants with lease terms of 15 years or longer. In our experience, there is a more limited universe of investors with the real estate and capital markets expertise necessary to underwrite net lease assets with valuations that are more closely linked to real estate fundamentals than to tenant credit. In a normalized market, we believe that well-located, general purpose real estate with flexible design characteristics can maintain or increase in value when re-leasing opportunities arise. 11

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Healthcare Net Lease We invest in healthcare net lease assets through our Wakefield joint venture. Healthcare real estate has typically attracted less capital than more traditional commercial real estate such as office and industrial properties, due to the more complex operating issues associated with the business, such as public and private sources of revenue and the Federal, State and Local regulatory environment. The management team of our partner has significant experience investing in a wide variety of healthcare properties, ranging from low-acuity assisted living facilities to higher-acuity skilled nursing facilities. Wakefield has sought out opportunities to acquire individual assets or portfolios of assets from local or regionally-focused owner/operators with established track records and in markets where barriers to entry exist. The assets typically have been purchased from and leased back to private operators under long-term net leases. We believe that our partner provides us a competitive advantage in this sector because of its management team's extensive relationships in the industry and their knowledge of and experience in operating, owning and lending to healthcare-related assets. Underwriting Process and Financing for Net Lease Investments Our core net lease investments were underwritten utilizing our skills in evaluating real estate market and property fundamentals, real estate residual values and tenant credit. At inception and throughout the life of our ownership we conduct detailed tenant credit analyses to assess, among other things, the potential for credit deterioration and lease default risk. This analysis is also employed to measure the adequacy of landlord protection mechanisms incorporated into the underlying lease. Our underwriting process included sub-market and property-level due diligence in order to understand downside investment risks, including quantifying the costs associated with tenant defaults and releasing scenarios. We also evaluated stress scenarios to understand refinancing risk. Our health care net lease investments were underwritten utilizing a comprehensive analysis of the profitability of a targeted business or facility, its cash flow, occupancy, patient and payer mix, financial trends in revenues and expenses, barriers to competition, the need in the market for the type of healthcare services provided by the business or the facility, the strength of the location and the underlying value of the business or the facility, as well as the financial strength and experience of the management team of the business or the facility. Our core and healthcare net lease investments are principally financed with non-recourse first mortgages having terms approximately matching the term of the underlying leases. Our Net Lease Investments At December 31, 2008, we held the following net lease investments (dollars in thousands): Nu m be r of Prope rtie s

Type of Prope rty

Healthcare Office Retail Investment in unconsolidated joint venture-office/flex(1) Office/Flex Distribution center Retail/Office Total

(1)

118 17 12 3 1 1 1 153

C arrying Value

$ 692,931 297,632 77,411 24,581 31,439 24,177 3,410 $1,151,581

Our investment in the unconsolidated net lease joint venture is $7.3 million. 12

Pe rce n tage of Aggre gate C arrying Valu e

60.2% 25.9 6.7 2.1 2.7 2.1 0.3 100.0%

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents LandCap Venture During 2007, we entered into a joint venture with Whitehall Street Global Real Estate Limited Partnership 2007 to form LandCap Partners, which we refer to as LandCap. The venture is managed by professionals who have extensive experience in the single family housing sector. LandCap's investment strategy was to opportunistically invest in single family residential land through land loans, lot option agreements and select land purchases. These investments were expected to generate very little current cash flow and to be held for several years prior to liquidation. The venture made no investments in 2007 and $39.1 million of investments during 2008. Our share of the investment was $16.9 million. During the second half of 2008, we and Whitehall directed the venture's management team to raise third party capital to fund new investment activity. This mandate was due to the existing partners' desires to conserve liquidity in their respective businesses as capital markets conditions further deteriorated. The venture has not received any new capital commitments and we do not currently expect to provide any new investment capital to LandCap in the future. The venture will continue to manage existing investments and we do not expect the venture to return capital to us for several years. Portfolio Management We actively monitor collateral and property-level performance of our asset base through our portfolio management group which is closely supervised by our senior executive team. All major portfolio management strategies and tactics are developed using the extensive experience of our senior executives and a majority of our employees are dedicated to portfolio management activities. For commercial real estate loans, we typically have a contractual right to regularly receive updated information from our borrowers such as budgets, operating statements, rent rolls, major tenant lease signings, renewals, expirations and modifications. We also monitor for changes in property management, borrower's and sponsor's financial condition, timing and funding of distributions from reserves and capital accounts or future funding draws, real estate market conditions, sales of comparable and competitive properties, occupancy and asking rents at competitive properties and financial performance of major tenants. When a borrower cannot comply with its requirements according to the loan terms, we generally have a range of strategies to choose from, including foreclosing on the collateral in order to sell it, extending the final maturity date in return for a paydown and/or a fee, changing the interest rate or making any other modification to the loan terms which we believe maximizes long-term value and preserves capital. We closely monitor our securities investments by using sophisticated third-party applications that are designed to screen for performance issues in the loan collateral underlying the securities. We also utilize our capital markets expertise to seek opportunities to sell securities investments which we believe the market is valuing too highly relative to the underlying risk. We inspect our owned net lease assets to ensure the tenants are complying with the terms of their respective leases, and seek to enter into renewal discussions with tenants well in advance of lease expirations. Poor economic conditions and scarcity of new debt capital have negatively impacted commercial real estate cash flows, valuations and real estate investors' ability to refinance properties when existing debt is due. The commercial real estate industry may experience increasing stress and decreasing credit quality the longer these conditions continue. We expect that a majority of our efforts in 2009 will be spent in portfolio management activities. Business Strategy Our long-term primary objectives are to make real estate-related investments that increase our franchise value, produce attractive riskadjusted returns and generate predictable cash flow for 13

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

distribution to our stockholders. The current global economic recession and financial crisis has required us to focus on preserving capital and managing liquidity. Like most finance companies, we cannot currently raise corporate capital at attractive levels and we are observing weakening performance levels in our asset base due to the shrinking economy and lack of capital for commercial real estate. We believe that we have created a franchise that derives a competitive advantage from the combination of our real estate, credit underwriting and capital markets expertise, which enables us to manage credit risk across our business lines as well as to structure and finance our assets efficiently. We hope that our reputation in the marketplace will enable us to be early in raising corporate capital when market conditions improve. We will also seek to conduct certain new investment activities, where possible, in managed vehicles capitalized primarily with private capital sources rather than with 100% of our equity capital. If we are successful in raising these managed vehicles, we believe that these structures could provide a higher return on our invested equity capital due to the management and incentive fees that may be generated, and would broaden our sources of capital so that we would be less reliant on the public equity markets to grow our business. We believe that our complementary core businesses provide us with the following synergies that enhance our competitive position: Sourcing Investments. CMBS, purchased real estate debt and net leased properties are often sourced from the same originators. We can offer a single source of financing by purchasing or originating a rated senior interest for our real estate securities portfolio and an unrated junior interest for our real estate debt portfolio. Credit Analysis. Real estate debt interests are usually marketed to investors prior to the issuance of CMBS backed by rated senior interests secured by the same property. By participating in both sectors, we can utilize our underwriting resources more efficiently and enhance our ability to underwrite the securitized debt. Flexible Asset-Backed and Secured Term Financing. We believe our experience and reputation as an issuer and manager of term debt transaction financings, our credit track record and our relationships with major money-center banks should provide us preferential access to match-funded financing for our real estate securities, real estate debt and net lease investments. Match funded debt capital is currently very difficult to obtain. The asset-backed markets for commercial real estate are not functioning and banks and life companies are currently working to deleverage their balance sheets and therefore are not making significant new lending commitments. Our current strategy has been to use our existing flexible financing structures to leverage new investments, or to acquire new investments that generate attractive returns without leverage. Capital Allocation. Through our participation in these three principal businesses and the fixed income markets generally, we benefit from market information that enables us to make more informed decisions with regard to the relative valuation of financial assets and capital allocation. Our investment and portfolio management processes are centralized and overseen by our senior management team. We have formal guidelines which require senior management approval for all new investments, and Board approval is generally required for investments exceeding size and concentration limits. Senior management also reviews and approves portfolio management strategies including all loan modification and workout situations. Financing Strategy We seek to access a wide range of secured and unsecured debt and public and private equity capital sources to fund our investment activities and asset growth. Since our IPO in 2004, we have completed preferred and common equity offerings raising $647.8 million of aggregate net proceeds. We 14

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

also raised over $81.0 million of private capital for our Securities Fund. Additionally, during 2007 and 2008 we issued $252.5 million of unsecured exchangeable senior notes. We have also raised $286.3 million of long-term, subordinated debt capital that is equity-like in nature due to its 30-year term and relatively few covenants. In the past, we have sought to access diverse short and long-term funding sources that enable us to deliver attractive risk-adjusted returns to our shareholders while match-funding our investments to minimize interest rate and maturity risk. This means we financed assets with debt having like-kind interest rate benchmarks (fixed or floating) and similar maturities. Our real estate debt and securities businesses have typically used warehouse and secured credit facilities with major financial institutions to initially fund investments until a sufficient pool of assets was accumulated to efficiently execute a term debt transaction, which in the past has been structured as a CRE CDO. More recently, we have used a term facility with an institutional lender to complement term debt transaction financing to match-fund our assets as best we can. In a term debt transaction, rated bonds are issued and backed by pools of securities or loan collateral originated or acquired by us. The bonds are non-recourse and the interest in the collateral is used to service the interest on the rated bonds. After a reinvestment period, which is typically five years, principal from collateral payoffs is used to amortize the notes, so there is no maturity risk. We sell all of the investmentgrade rated term debt transaction bonds, and retain the non-investment grade classes as our "equity" interest in the financing. Term debt transactions provide low cost financing because the most senior bond classes are rated "AAA/Aaa" by the rating agencies. For example, approximately 68.8% of the notes issued in our real estate securities term debt transactions were rated "AAA/Aaa" by at least one of the rating agencies at the time of the initial issuance. Net lease investments are generally match-funded with non-recourse first mortgage debt representing approximately 75% to 80% of the total value of the investment. We seek to match the term of the financing with the remaining lease term. Since mid-2007, there has been very little liquidity in the asset-backed, real estate, corporate and most other major debt markets due to issues precipitated by the subprime residential lending industry. Consequently, the asset backed securities, or ABS, markets remain unavailable to most issuers who have therefore greatly reduced new investment activity. We believe that in the longer term liquidity and attractive pricing could return to the ABS markets, but that in the near term new financing sources must be developed in order to attractively finance new investment activity. We expect the ABS markets for commercial real estate to be unavailable for at least the next year as most originators and traditional buyers of this product have disassembled or drastically reduced their investment platforms. While we believe that market conditions will remain difficult for an extended period of time, we believe that in the future match funded debt sources could include term loans from financial institutions and life companies, more restrictive ABS structures which may not permit reinvestment from asset repayments, and financing provided by motivated sellers of assets. We believe that our credit track record and our reputation with lenders and in the asset-backed markets could enable us to develop alternative sources of debt financing while the capital markets remain unattractive or unavailable. Hedging Strategy We use derivatives primarily to manage interest rate risk exposure. These derivatives are typically in the form of interest rate swap agreements and the primary objective is to minimize the interest rate risks associated with our investing and financing activities. The counterparties of these arrangements are major financial institutions with which we may also have other financial relationships. Creating an effective strategy for dealing with interest rate movements is complex and no strategy can completely insulate us from risks associated with such fluctuations. There can be no assurance that 15

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

our hedging activities will have the intended impact on our results. A more detailed discussion of our hedging policy is provided in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources." Regulation We are subject, in certain instances, to supervision and regulation by state and federal governmental authorities and may be subject to various laws and judicial and administrative decisions imposing various requirements and restrictions, which, among other things: (1) regulate credit granting activities; (2) establish maximum interest rates, finance charges and other fees we can charge our customers; (3) require disclosures to customers; (4) govern secured transactions; and (5) set collection, foreclosure, repossession and claims-handling procedures and other trade practices. Although most states do not regulate commercial finance, certain states impose limitations on interest rates and other charges and on certain collection practices and creditor remedies and require licensing of lenders and financiers and adequate disclosure of certain contract terms. We are also required to comply with certain provisions of the Equal Credit Opportunity Act that are applicable to commercial real estate loans. We believe that we are not, and intend to conduct our operations so as not to become regulated as an investment company under the Investment Company Act. We have been, and intend to continue to rely on current interpretations of the staff of the Securities and Exchange Commission in an effort to continue to qualify for an exemption from registration under the Investment Company Act. For more information on the exemptions that we utilize, see "Item 1A—Risk Factors—Maintenance of our Investment Company Act exemption imposes limits on our operations." Certain of our subsidiaries may apply to be registered investment advisors under the Investment Advisors Act of 1940, or the Investment Advisors Act, and, as such, may also be supervised by the Securities and Exchange Commission. The Investment Advisors Act requires registered investment advisors to comply with numerous obligations, including record-keeping requirements, operational procedures and disclosure obligations. Such subsidiaries may also be registered with various states and thus, subject to the oversight and regulation of such states' regulatory agencies. We have elected and expect to continue to make an election to be taxed as a REIT under Section 856 through 860 of the Code. As a REIT, we must currently distribute, at a minimum, an amount equal to 90% of our taxable income. In addition, we must distribute 100% of our taxable income to avoid paying corporate federal income taxes. REITs are also subject to a number of organizational and operational requirements in order to elect and maintain REIT status. These requirements include specific share ownership tests and assets and gross income composition tests. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates. Even if we qualify for taxation as a REIT, we may be subject to state and local income taxes and to federal income tax and excise tax on our undistributed income. In the judgment of management, existing statutes and regulations have not had a material adverse effect on our business. However, it is not possible to forecast the nature of future legislation, regulations, judicial decisions, orders or interpretations, nor their impact upon our future business, financial condition, results of operations or prospects. Competition We have been subject to significant competition in seeking real estate investments. Historically, we have competed with many third parties engaged in real estate investment activities including other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance 16

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

companies, mutual funds, private institutional funds, hedge funds, private opportunity funds, investment banking firms, lenders, governmental bodies and other entities. In addition, there are other REITs with asset investment objectives similar to ours and others may be organized in the future. Some of these competitors, including larger REITs, have substantially greater financial resources than we do and generally may be able to accept more risk. They may also enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. Competition may limit the number of suitable investment opportunities offered to us. It may also result in higher prices, lower yields and a narrower spread of yields over our borrowing costs, making it more difficult for us to acquire new investments on attractive terms. Employees As of December 31, 2008, NorthStar had 60 employees. Management believes that a major strength of NorthStar is the quality and dedication of our people. We strive to maintain a work environment that fosters professionalism, excellence, diversity and cooperation among our employees. Corporate Governance and Internet Address We emphasize the importance of professional business conduct and ethics through our corporate governance initiatives. Our Board of Directors consists of a majority of independent directors; the audit, nominating and corporate governance, and compensation committees of our Board of Directors are composed exclusively of independent directors. We have adopted corporate governance guidelines and a code of business conduct and ethics, which delineate our standards for our officers, directors and employees. Our internet address is www.nrfc.com. The information on our website is not incorporated by reference in this Annual Report on Form 10K. We make available, free of charge through a link on our site, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports, if any, as filed with the securities and exchange commission, or the SEC, as soon as reasonably practicable after such filing. Our site also contains our code of business conduct and ethics, code of ethics for senior financial officers, corporate governance guidelines, and the charters of our audit committee, nominating and corporate governance committee and compensation committee of our Board of Directors. Within the time period required by the rules of the SEC and the New York Stock Exchange, or NYSE, we will post on our website any amendment to our code of business conduct and ethics and our code of ethics for senior financial officers as defined in the code. Item 1A. Risk Factors Our business is subject to a number of risks that are substantial and inherent in our business. This section describes some of the more important risks that we face, any of which could have a material adverse effect on our business, financial condition, results of operations and future prospects. The risk factors set forth in this section could cause our actual results to differ significantly from those contained in this Annual Report on Form 10-K. In connection with the forward-looking statements that appear in this Annual Report on Form 10-K, you should carefully review the factors discussed below and the cautionary statements referred to under "Forward-Looking Statements." 17

Table of Contents

Risks Related to Our Businesses The commercial real estate finance industry has been and will continue to be adversely affected by conditions in the global financial markets and economic conditions in the United States generally. Since mid-2007, and particularly during the second half of 2008, the global financial markets were expansively impacted by significant declines in the values of nearly all asset classes and by an unprecedented lack of liquidity. This was initially triggered by the subprime residential lending and single family housing markets experiencing significant default rates, declining residential real estate values and increasing backlog of housing supply. Other lending markets also experienced extreme volatility and decreased liquidity resulting from the poor credit performance in the residential lending markets. The residential sector capital markets issues quickly spread more broadly into the asset-backed commercial real estate, corporate and other credit and equity markets. The global markets have been characterized by substantially increased volatility and an overall loss of investor confidence, initially in financial institutions, but more recently in companies in a number of other industries, including our industry, and in the broader markets. The markets have produced downward pressure on stock prices and the lack of available credit for certain issuers without regard to those issuers' underlying financial strength. The resulting economic conditions and the difficulties currently being experienced in the commercial real estate finance industry have increased pressure on our stock price and adversely affected our business model, financial condition, results of operations and our prospects for future growth. We do not expect that the difficult conditions in the financial markets are likely to improve in the near future. A worsening of

Processed and formatted by SEC Watch - Visit SECWatch.com

these conditions would exacerbate the adverse effects that the current market environment has had on us, on others in the commercial real estate finance industry and on commercial real estate generally. Liquidity is essential to our businesses and we rely on outside sources of capital that have been severely impacted by the current economic crisis. We require significant outside capital to fund our businesses. Our businesses have been and will continue to be adversely affected by disruptions in the capital markets, including the lack of access to capital or prohibitively high costs of obtaining capital. A primary source of liquidity for us has been the equity and debt capital markets, including issuing common equity, preferred equity, trust preferred securities and convertible senior notes. With capital market conditions devastated by the current global economic crisis, companies in the real estate industry, including us, are currently experiencing an unprecedented lack of capital sources. Additionally, nearly all financial industry participants, including commercial real estate lenders and investors, continue to find it nearly impossible to obtain cost-effective debt capital to finance new investment activity or to refinance maturing debt. We do not know whether any sources of capital will be available to us in the future on terms that are acceptable to us, if at all. If we cannot obtain sufficient capital on acceptable terms, our businesses and our ability to operate will be severely impacted. For information about our available sources of funds, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" and the notes to the consolidated financial statements in this Annual Report on Form 10-K. We also depend on external sources of capital because one of the requirements of the Internal Revenue Code of 1986, as amended, for a REIT is that it distributes 90% of its taxable income to its shareholders, including taxable income where we do not receive corresponding cash. We intend to distribute all or substantially all of our REIT taxable income in order to comply with the REIT distribution requirements of the Internal Revenue Code. These distribution requirements are partly mitigated for calendar year 2009 because REITs are permitted to pay up to 90% of its distribution requirement in common stock or other company securities, rather than cash. 18

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

The credit facilities that we use to finance our investments may require us to provide additional collateral, which could significantly impact our liquidity position. We have used credit facilities to finance some of our investments. Although our secured credit facility with a major financial institution, or the Secured Term Loan, which is our primary credit facility in our real estate debt business, is not subject to margin calls based on credit spread widening, if the market value of the commercial real estate loans pledged by us decline in value due to credit quality deterioration, we may be required by the lending institution to provide additional collateral or pay down a portion of the funds advanced. Additionally, our Master Repurchase Agreement, or the JP Facility, with a major financial institution provides the lender with a similar ability to require repayment, but also provides the lender with the ability to require repayment due to decreases in the value of the commercial real estate loan collateral based upon market credit spread movements. In a weakening economic environment, we would generally expect credit quality and the value of the commercial real estate loans that serve as collateral for our credit facilities to decline, resulting in a higher likelihood that the lenders would require partial repayment from us, which could be substantial. Posting additional collateral to support our credit facilities could significantly reduce our liquidity and limit our ability to leverage our assets. In the event we do not have sufficient liquidity to meet such requirements, lending institutions can accelerate our indebtedness and foreclose upon the assets securing these facilities, which could have a material adverse effect on our business and operations. If we are unable to extend or renew our existing secured credit facilities, our results of operations, financial condition and business could be significantly harmed. Credit facilities are critical to our business. If we are unable to extend or renew our existing secured credit facilities, our results of operations, financial condition and business could be significantly harmed. In particular, the Secured Term Loan, which has $379.7 million outstanding as of December 31, 2008, of which we have guaranteed $200 million, has an initial maturity in November 2009 and contains a oneyear extension at our option provided that we are in compliance with the terms of the Secured Term Loan. If we fail to comply with such terms we may be unable to exercise the extension option and be required to repay the facility in full, which would have a material adverse affect on us and our business and operations. Additionally, Wachovia, the original lender under our Secured Term Loan has recently merged with another financial institution, which creates additional uncertainly regarding the facility. Furthermore, the JP Facility, which has $44.9 million outstanding as of December 31, 2008, all of which we have guaranteed, matures in August 2009. The facility is extendable for an additional year at the lender's option. If the lender decides to not renew that facility, we would be required to repay amounts due at the maturity date, which could have a significant impact on our liquidity position. Our lenders under our credit facilities may choose to not fund future commitments. Our business plan and liquidity projections assume that our lenders under our secured credit facilities fund a certain portion of our future funding obligations to borrowers under our commercial real estate loans. At December 31, 2008, we expected this amount to be $42.6 million. Nonetheless, our lenders retain discretion over their obligation to fund such future funding commitments under our commercial real estate loans. As a result, we may be required to fund future commitments with existing liquidity, which could have a significant impact on our liquidity position. Furthermore, if our lenders do not fund such future funding commitments, we may not be able to leverage our assets as fully as we would choose, which will reduce our returns on such assets. If we are unable to meet future funding commitments, our borrowers may take legal action against us, which could have a material adverse effect on us. 19

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Our credit facilities contain restrictive covenants relating to our operations. Our secured credit facilities contain negative covenants that, among other things, limit the amount of leverage that we may employ, require that we maintain certain interest and fixed charge coverage ratios (which may be particularly difficult to comply with given low LIBOR rates due to most of our assets paying a floating interest rate), require that we maintain a certain minimum tangible net worth, limit our recourse indebtedness, limit our ability to distribute more than a certain amount of our funds from operations and require us to hedge our interest rate exposure. At December 31, 2008, we were in compliance with all debt covenants under our borrowings. However, if economic conditions continue to weaken and capital for commercial real estate remains scarce, we expect credit quality in our assets and across the commercial real estate sector to weaken. While we have devoted a majority of our resources to managing our existing asset base, a continued weak environment will make maintaining compliance with the credit facilities' covenants more difficult. If we are not in compliance with any of our covenants, there can be no assurance that our lenders would waive such non-compliance in the future and any such non-compliance could have a material adverse effect on us. Our credit facilities and exchangeable senior notes contain cross-default provisions. Our credit facilities and our indentures governing our exchangeable senior notes contain cross-default provisions whereby a default under one agreement could result in a default and acceleration of indebtedness under other agreements. If a cross-default were to occur, we may not be able to pay our debts or access capital from external sources in order to refinance our debts. If some or all of our debt obligations default and it causes a default under other indebtedness, our business, financial condition and results of operations could be materially and adversely affected. Our term debt transactions have certain coverage tests that are required to be met in order for payments to be made to our subordinate bonds and equity notes. Failing coverage tests could significantly impact our cash flow and overall liquidity position. Our term debt transactions generally require that the underlying collateral and cash flow generated by the collateral to be in excess of ratios stipulated in the related indentures. These ratios are called overcollateralization, or OC, and interest coverage, or IC, tests and are used primarily to determine whether and to what extent principal and interest proceeds on the underlying collateral debt securities and other assets may be used to pay principal of, and interest on, the subordinate classes of bonds in the term debt transactions. Uncured defaults on commercial real estate loans and rating agency downgrades on commercial real estate securities are the primary causes for decreases in the OC and IC ratios. In the event these tests are not met, cash that would normally be distributed to us would be used to amortize the senior notes until the financing is back in compliance with the tests. Additionally, we may be required to buy assets out of our term debt transactions in order to preserve cash flow, which could have a significant impact on our liquidity. As of December 31, 2008 we are in compliance with all of the OC and IC tests in our term debt transactions. Nonetheless, we expect that continued weak economic conditions, lack of capital for commercial real estate, decreasing real estate values and credit ratings downgrades of real estate securities will make complying with OC and IC tests more difficult in the future. Our failure to satisfy the coverage tests could adversely affect our operating results, liquidity and cash flows. We retain the subordinate classes of bonds and equity notes in the term debt transactions that we have issued, which entails certain risks, including that subordinate classes of bonds and equity notes in the term debt transactions receive distributions only if the term debt transaction generates enough income to pay all of the other bond classes. The subordinate classes of bonds and equity notes that we retain in the term debt transactions that we have issued represent leveraged investments in the underlying assets. Various classes of securities 20

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

participate in the income stream in term debt transactions and distributions on subordinate classes of bonds and equity notes are generally made only after payment of interest on, and principal of, the senior bond classes. Although generally there is no interest or principal due on the equity notes, distributions may be made to holders of the subordinate classes of bonds and equity notes on each payment date after all of the other required payments are made on each payment date. There will be little or no income available to the subordinate classes of bonds and equity notes if there are defaults by the obligors under the underlying collateral and those defaults exceed a certain amount. In that event, the value of our investment in the term debt transaction could decrease quickly and substantially. There can be no assurance that after making required payments on the senior bond classes there will be any remaining funds available to pay us. Accordingly, our subordinate classes of bonds and equity notes may not be paid in full and we may be subject to a loss of all of our interest in the event that payments are not made on the underlying assets or losses are incurred with respect to the underlying assets, which could have a material adverse effect on us. We are unable to complete additional term debt transactions due to the collapse of the credit markets and the severe economic recession. We historically accessed the asset-backed markets to match-fund our real estate debt investments with non-recourse, term debt liabilities which were structured as collateralized debt obligations and sold under the N-Star brand. Due to the collapse of the credit markets and the severe economic recession, and the resulting investor concerns surrounding the real estate markets and the asset-backed markets generally, among other things, there is currently no liquidity available through the issuance of new term debt transactions. Issuing term debt transactions was a critical part of our overall business plan and we currently believe that term debt transactions will not be available for the foreseeable future, if ever. Continued disruptions in the financial markets and deteriorating economic conditions could adversely affect the values of investments we made. Weakening macroeconomic conditions combined with turmoil in the capital markets has constrained equity and debt capital available for investment in commercial real estate, resulting in fewer buyers seeking to acquire commercial properties and increases in discount rates and lower valuations for commercial real estate properties. Furthermore, these deteriorating economic conditions have negatively impacted commercial real estate fundamentals, which have resulted, and may in the future result, in adverse effects on the collateral securing our commercial real estate loans. Adverse economic conditions could significantly reduce the amount of income we earn on our commercial real estate loans. Adverse economic conditions have caused us to experience an increase in the number of commercial real estate loans that could result in loan delinquencies, foreclosures and nonperforming assets and a decrease in the value of the property or other collateral which secures our commercial real estate loans, all of which could adversely affect our results of operations. Loan defaults result in a decrease in interest income and may require the establishment of, or an increase in, loan loss reserves. The decrease in interest income resulting from a loan default or defaults may be for a prolonged period of time as we seek to recover, primarily through legal proceedings, the outstanding principal balance, accrued interest and default interest due on a defaulted commercial real estate loan, plus the legal costs incurred in pursuing our legal remedies. Legal proceedings, which may include foreclosure actions and bankruptcy proceedings, are expensive and time consuming. The decrease in interest income, and the costs involved in pursuing our legal remedies will reduce the amount of cash available to meet our expenses and adversely impact our liquidity and operating results. 21

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

Our borrowers may increasingly be unable to achieve their business plans due to the economic environment and strain on commercial real estate, which may cause stress in our commercial real estate loan portfolio. Many of our commercial real estate loans were made to borrowers who had a business plan to improve the collateral property. The current economic environment has created a number of obstacles to borrowers attempting to achieve their business plans, including lower occupancy rates and lower lease rates across all property types, which continues to be exacerbated by rising unemployment and overall financial uncertainty. If borrowers are unable achieve their business plans, the related commercial real estate loans could go into default and severely impact our operating results and cash flows. Many of our commercial real estate loans are funded with interest reserves and our borrowers may be unable to replenish those interest reserves once they run out. Given the transitional nature of many of our commercial real estate loans, we required borrowers to pre-fund reserves to cover interest and operating expenses until the property cash flows were projected to increase sufficiently to cover debt service costs. We also generally required the borrower to refill reserves if they became deficient due to underperformance or if the borrower wanted to exercise extension options under the loan. Despite low interest rates, revenues on the properties underlying any commercial real estate loan investments will likely decrease in the current economic environment, making it more difficult for borrowers to meet their payment obligations to us. We expect that in the future some of our borrowers may have difficulty servicing our debt and will not have sufficient capital to replenish reserves, which could have a significant impact on our operating results and cash flow. Our mortgage loans, mezzanine loans, participation interests in mortgage and mezzanine loans, real estate securities and preferred equity investments have been and may continue to be adversely affected by widening credit spreads, and if spreads continue to widen, the value of our loan and securities portfolios would decline further. Our investments in commercial real estate loans and real estate securities are subject to changes in credit spreads. When credit spreads widen, as continues to be the case into 2009, the economic value of our existing loans decrease. If a lender were to originate a similar loan today, such loan would carry a greater credit spread than the existing loan. Even though a loan may be performing in accordance with its loan agreement and the underlying collateral has not changed, the economic value of the loan may be negatively impacted by the incremental interest foregone from the widened credit spread. The economic value of our commercial real estate loan portfolio and our real estate securities portfolio has been significantly impacted, and may continue to be significantly impacted, by credit spread widening. Loan repayments are unlikely in the current market environment. In the past, a source of liquidity for us was the voluntary repayment of loans. Because the commercial real estate asset-backed markets remain closed, and banks and life insurance companies have drastically curtailed new lending activity, real estate owners are having difficulty refinancing their assets at maturity. If borrowers are not able to refinance loans at their maturity, the loans could go into default and the liquidity that we would receive from such repayments will not be available. Furthermore, without a functioning commercial real estate finance market, borrowers that are performing on their loans will almost certainly extend such loans if they have that right, which will further delay our ability to access liquidity through repayments. Higher loan loss reserves are expected if economic conditions do not improve. If the decline in the U.S. economy does not stabilize and reverse in 2009, we will likely experience significant increases in loan loss reserves, potential defaults and asset impairment charges in 2009. 22

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

Borrowers may also be less able to pay principal and interest on loans if the economy continues to weaken and they continue to experience financial stress. Declining real property values also would increase loan-to-value ratios on our loans and, therefore, weaken our collateral coverage and increase the likelihood of higher loan loss reserves. Any sustained period of increased defaults and foreclosures would adversely affect our interest income, financial condition, business prospects and our cash flows. Loan loss reserves are particularly difficult to estimate in a turbulent economic environment. Our loan loss reserves are evaluated on a quarterly basis. Our determination of loan loss reserves requires us to make certain estimates and judgments, which are particularly difficult to determine during a recession where commercial real estate credit has been nearly shut off and commercial real estate transactions have dramatically decreased. Our estimates and judgments are based on a number of factors, including projected cash flows from the collateral securing our commercial real estate loans, loan structure, including the availability of reserves and recourse guarantees, likelihood of repayment in full at the maturity of a loan, potential for a refinancing market coming back to commercial real estate in the future and expected market discount rates for varying property types. If our estimates and judgments are not correct, our results of operations and financial condition could be severely impacted. The mortgage loans we originate and invest in and the commercial mortgage loans underlying the mortgage-backed securities we invest in are subject to risks of delinquency, foreclosure, loss and bankruptcy of the borrower under the loan. If the borrower defaults, it may result in losses to us. Mortgage loans are secured by real estate and are subject to risks of delinquency, foreclosure, loss and bankruptcy of the borrower, all of which are and will continue to be more prevalent if the overall economic environment does not improve significantly. The ability of a borrower to repay a loan secured by real estate is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower's ability to repay the loan may be impaired. Net operating income of a property can be affected by, among other things: •

macroeconomic conditions;

•

tenant mix;

•

success of tenant businesses;

•

property management decisions;

•

property location and condition;

•

property operating costs, including insurance premiums, real estate taxes and maintenance costs;

•

competition from comparable types of properties;

•

changes in governmental rules, regulations and fiscal policies;

•

changes in laws that increase operating expense or limit rents that may be charged;

•

any need to address environmental contamination at the property;

•

the occurrence of any uninsured casualty at the property;

•

changes in national, regional or local economic conditions and/or specific industry segments;

•

declines in regional or local real estate values;

•

declines in regional or local rental or occupancy rates; 23

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents •

increases in interest rates;

•

real estate tax rates and other operating expenses;

•

acts of God;

•

social unrest and civil disturbances;

•

terrorism; and

•

increases in costs associated with renovation and/or construction.

Any one or a combination of these factors may cause a borrower to default on a loan or to declare bankruptcy. If a default or bankruptcy occurs and the underlying asset value is less than the loan amount, we will suffer a loss. Additionally, we may suffer losses for a number of reasons, including the following, which could have a material adverse effect on our financial performance. •

If the value of real property or other assets securing our commercial real estate loans deteriorates. The majority of our commercial real estate loans are fully or substantially non-recourse, although a large amount of our commercial real estate loans provide for interest reserve replenishments which are recourse. In the event of a default by a borrower on a non-recourse loan, we will only have recourse to the real estate-related assets (including escrowed funds and reserves) collateralizing the loan. For this purpose, we consider commercial real estate loans made to special purpose entities formed solely for the purpose of holding and financing particular assets to be non-recourse loans. We sometimes also make commercial real estate loans that are secured by equity interests in the borrowing entities or by investing directly in the owner of the property. In the current recession, asset values have deteriorated and there can be no assurance that the value of the assets securing our commercial real estate loans will not deteriorate further. Mezzanine loans are subject to the additional risk that other lenders may be directly secured by the real estate assets of the borrowing entity.

•

If a borrower or guarantor defaults on recourse obligations under our commercial real estate loans. We sometimes obtain individual or corporate guarantees, which are not secured, from borrowers or their affiliates. In cases where guarantees are not fully or partially secured, we typically rely on financial covenants from borrowers and guarantors which are designed to require the borrower or guarantor to maintain certain levels of creditworthiness. Due to deteriorating economic conditions, many borrowers and guarantors are facing financial difficulties and are unable to comply with their financial covenants. Where we do not have recourse to specific collateral pledged to satisfy such guarantees or recourse loans, we will only have recourse as an unsecured creditor to the general assets of the borrower or guarantor, some or all of which may be pledged to satisfy other lenders. There can be no assurance that a borrower or guarantor will comply with its financial covenants, or that sufficient assets will be available to pay amounts owed to us under our commercial real estate loans and guarantees.

•

Our due diligence may not reveal all of a borrower's liabilities and may not reveal other weaknesses in its business. Before making a commercial real estate loan to a borrower, assess the strength and skills of an entity's management and other factors that we believe are material to the performance of the investment. This process is particularly important and subjective with respect to newly organized entities because there may be little or no information publicly available about the entities. In making the assessment and otherwise conducting customary due diligence, we rely on the resources available to us and, in some cases, an investigation by third parties. There can be no assurance that our due diligence processes will uncover all relevant facts or that any investment will be successful. 24

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents •

In the event of a default or bankruptcy of a borrower, particularly in cases where the borrower has incurred debt that is senior to our commercial real estate loan. If a borrower defaults on our commercial real estate loan and the mortgaged real estate or other borrower assets collateralizing our commercial real estate loan are insufficient to satisfy our commercial real estate loan, we may suffer a loss of principal or interest. In the event of a borrower bankruptcy, we may not have full recourse to the assets of the borrower, or the assets of the borrower may not be sufficient to satisfy our commercial real estate loan. In addition, certain of our commercial real estate loans are subordinate to other debt of the borrower. If a borrower defaults on our commercial real estate loan or on debt senior to our commercial real estate loan, or in the event of a borrower bankruptcy, our commercial real estate loan will be satisfied only after the senior debt. Bankruptcy and borrower litigation can significantly increase the time needed for us to acquire underlying collateral in the event of a default, during which time the collateral may decline in value. In addition, there are significant costs and delays associated with the foreclosure process. Given the difficult economic environment, borrower bankruptcies and litigation relating to our assets will increase appreciably, which will require us to spend significant amounts of money and require significant senior management resources in order to protect our interests.

•

If provisions of our commercial real estate loan agreements are unenforceable. Our rights and obligations with respect to our commercial real estate loans are governed by written loan agreements and related documentation. It is possible that a court could determine that one or more provisions of a loan agreement are unenforceable, such as a loan prepayment provision or the provisions governing our security interest in the underlying collateral.

The subordinate mortgage notes, participation interests in mortgage notes, mezzanine loans and preferred equity investments we have originated and invested in may be subject to risks relating to the structure and terms of the transactions, as well as subordination in bankruptcy, and there may not be sufficient funds or assets remaining to satisfy our investments, which may result in losses to us. We have focused on originating, structuring and acquiring senior and subordinate debt investments secured primarily by commercial properties, including first lien mortgage loans, junior participations in first lien mortgage loans, which are often referred to as B-Notes, second lien mortgage loans, mezzanine loans and preferred equity interests in borrowers who own such properties. These investments may be subordinate to other debt on commercial property and are secured by subordinate rights to the commercial property or by equity interests in the commercial entity. If a borrower defaults or declares bankruptcy, after senior obligations are met, there may not be sufficient funds or assets remaining to satisfy our subordinate interests. Because each transaction is privately negotiated, subordinate investments can vary in their structural characteristics and lender rights. Our rights to control the default or bankruptcy process following a default will vary from transaction to transaction. The subordinate investments that we originate and invest in may not give us the right to demand foreclosure as a subordinate real estate debtholder. Furthermore, the presence of intercreditor agreements may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies and control decisions made in bankruptcy proceedings relating to borrowers. Similarly, a majority of the participating lenders may be able to take actions to which we object but to which we will be bound. Certain transactions that we have originated and invested in could be particularly difficult, time consuming and costly to workout because of their complicated structure and the diverging interests of all the various classes of debt in the capital structure of a given asset. We are subject to risks associated with construction lending, such as declining real estate values, cost over-runs and delays in completion. Our commercial real estate loan assets include loans made to developers to construct prospective projects. The primary risks to us of construction loans are the potential for cost over-runs, particularly 25

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

given the recent increased costs of raw materials, the developer's failing to meet a project delivery schedule and the inability of a borrower to sell or refinance the project at completion and repay our commercial real estate loan due to declining real estate values. These risks could cause us to have to fund more money than we originally anticipated in order to complete the project. We may also suffer losses on our commercial real estate loans if the borrower is unable to sell the project or refinance our commercial real estate loan. We have and may continue to invest in CMBS securities, including subordinate securities, which entail certain risks. Collateralized mortgage backed securities, or CMBS, are generally securities backed by obligations (including certificates of participation in obligations) that are principally secured by mortgages on real property or interests therein having a multifamily or commercial use, such as regional malls, other retail space, office buildings, industrial or warehouse properties, hotels, apartment buildings, nursing homes and senior living centers, and may include, without limitation, CMBS conduit securities, CMBS credit tenant lease securities and CMBS large loan securities. We invest in a variety of CMBS, including CMBS which are subject to the first risk of loss if any losses are realized on the underlying mortgage loans. CMBS entitle the holders thereof to receive payments that depend primarily on the cash flow from a specified pool of commercial or multi-family mortgage loans. Consequently, CMBS will be affected by payments, defaults, delinquencies and losses on the underlying commercial real estate loans, which began to increase significantly towards the end of 2008 and are expected to continue to increase into 2009. Furthermore, a weakening rental market generally, including reduced occupancy rates and reduced market rental rates could reduce cash flow from the loan pools underlying our CMBS investments. Additionally, CMBS are subject to particular risks, including lack of standardized terms and payment of all or substantially all of the principal only at maturity rather than regular amortization of principal. Additional risks may be presented by the type and use of a particular commercial property. Special risks are presented by hospitals, nursing homes, hospitality properties and certain other property types. Commercial property values and net operating income are subject to volatility, which may result in net operating income becoming insufficient to cover debt service on the related commercial real estate loan, particularly if the current economic environment continues to deteriorate. The repayment of loans secured by income-producing properties is typically dependent upon the successful operation of the related real estate project rather than upon the liquidation value of the underlying real estate. Furthermore, the net operating income from and value of any commercial property are subject to various risks. The exercise of remedies and successful realization of liquidation proceeds relating to CMBS may be highly dependent on the performance of the servicer or special servicer. Expenses of enforcing the underlying commercial real estate loans (including litigation expenses) and expenses of protecting the properties securing the commercial real estate loans may be substantial. Consequently, in the event of a default or loss on one or more commercial real estate loans contained in a securitization, we may not recover our investment. The CMBS market has been severely impacted by the current economic turbulence, which has had a negative impact on the CMBS that we own. Because the CMBS markets remain closed and other participants in the commercial real estate lending have drastically curtailed new lending activity, real estate owners are having difficulty refinancing their assets. Property values have also decreased over the past year because of scarcity of financing, which, when it is available, has terms generally at much lower leverage and higher cost than available in prior years. Uncertainty regarding future economic conditions and higher returning investment opportunities available in other asset classes have also negatively impacted commercial real estate values. These conditions, together with wide-spread downgrades of CMBS by the rating agencies, significantly higher risk premiums required by investors and uncertainty surrounding commercial real 26

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

estate generally, have had a negative impact on CMBS and have significantly decreased the value of most of the CMBS that we own. Credit ratings assigned to our investments are subject to ongoing evaluations and we cannot assure you that the ratings currently assigned to our investments will not be downgraded. Some of our investments are rated by Moody's Investors Service, Fitch Ratings and/or Standard & Poor's, Inc. The rating agencies have commenced re-evaluations of their ratings methodologies for all securitized asset classes, including commercial real estate, in light of questionable ratings previously assigned to residential mortgage portfolios. Their reviews, when overlaid with more negative economic assumptions, are resulting in large amounts of ratings downgrade actions for CMBS, negatively impacting market values of CMBS and in some cases negatively impacting the CDO financing structures used by us and others to leverage these investments. If rating agencies assign a lower-than-expected rating or reduce, or indicate that they may reduce, their ratings of our investments in the future, the value of these investments could significantly decline, which may have an adverse affect on our financial condition. Recent market conditions and the risk of continued market deterioration have caused and may continue to cause uncertainty in valuing our real estate securities. The continued market volatility and the lack of liquidity has made the valuation process pertaining to certain of our assets extremely difficult, particularly our CMBS assets for which there is very little market activity. Historically, our estimate of the value of these investments was primarily based on active issuances and the secondary trading market of such securities as compiled and reported by independent pricing agencies. The current market environment is absent new issuances and there has been very limited secondary trading of CMBS. Therefore, our estimate of fair value, which is based on the notion of orderly market transactions, requires significant judgment and consideration of other indicators of value such as current interest rates, relevant market indices, broker quotes, expected cash flows and other relevant market and security-specific data as appropriate. The amount that we could obtain if we were forced to liquidate our securities portfolio into the current market could be materially different than management's best estimate of fair value. Our investments in REIT securities are subject to risks relating to the particular REIT issuer of the securities and to the general risks of investing in senior unsecured real estate securities, which may result in losses to us. In addition to the risks resulting from the continued disruptions in the financial markets and deteriorating economic conditions, our investments in REIT securities involve special risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer. REITs generally are required to substantially invest in real estate or real estate-related assets and are subject to the inherent risks associated with real estate-related investments. Our investments in REIT securities and other senior unsecured debt are also subject to the risks described above with respect to commercial real estate loans and mortgage-backed securities and similar risks, including risks of delinquency and foreclosure, the dependence upon the successful operation of, and net income from, real property, risks generally related to interests in real property, and risks that may be presented by the type and use of a particular commercial property. REITs have been severely impacted by the current economic environment and have had very little access to the capital markets or the debt markets in order to meet their existing obligations or to refinance maturing debt. 27

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents REIT securities are generally unsecured and may also be subordinate to other obligations of the issuer. We may also invest in securities that are rated below investment-grade. As a result, investments in REIT securities are also subject to risks of: •

limited liquidity in the secondary trading market;

•

substantial market price volatility resulting from changes in prevailing interest rates and real estate values;

•

subordination to the prior claims of banks and other senior lenders to the REIT;

•

the operation of mandatory sinking fund or redemption provisions during periods of declining interest rates that could cause the issuer to reinvest redemption proceeds in lower yielding assets;

•

the possibility that earnings of the REIT may be insufficient to meet its debt service and distribution obligations;

•

the declining creditworthiness and potential for insolvency of the issuer during periods of rising interest rates, declining real estate values and economic downturns;

•

rating agency credit rating downgrades negatively impacting value of securities; and

•

covenants not being sufficient to protect investors from the adverse credit impact of merger and acquisition transactions and increased leverage of the REIT.

These risks may adversely affect the value of outstanding REIT securities we hold and the ability of the issuers thereof to repay principal and interest or make distributions. Investments in net lease properties may generate losses. The value of our investments and the income from our investments in net lease properties may be significantly adversely affected by a number of factors, including: •

national, state and local economic conditions;

•

real estate conditions, such as an oversupply of or a reduction in demand for real estate space in an area;

•

the perceptions of tenants and prospective tenants of the quality, convenience, attractiveness and safety of our properties;

•

competition from comparable properties;

•

the occupancy rate of, and the rental rates charged at, our properties;

•

the ability to collect on a timely basis all rent from tenants;

•

the effects of any bankruptcies or insolvencies of tenants;

•

the expense of re-leasing space;

•

changes in interest rates and in the availability, cost and terms of mortgage funding;

•

the impact of present or future environmental legislation and compliance with environmental laws;

•

cost of compliance with the Americans with Disabilities Act of 1990, or ADA;

•

adverse changes in governmental rules and fiscal policies;

•

civil unrest; 28

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents •

acts of nature, including earthquakes, hurricanes and other natural disasters (which may result in uninsured losses);

•

acts of terrorism or war;

•

adverse changes in zoning laws; and

•

other factors which are beyond our control.

We may not be able to relet or renew leases at the properties held by us on terms favorable to us. Our net leased assets could be negatively impacted by the deteriorating economic conditions and weaker rental markets. Upon expiration or earlier termination of leases for space located at our properties, the space may not be relet or, if relet, the terms of the renewal or reletting (including the cost of required renovations or concessions to tenants) may be less favorable than current lease terms. The poor economic conditions would likely reduce tenants' ability to make rent payments in accordance with the contractual terms of their leases and lead to early termination of leases. Furthermore, corporate space needs may contract resulting in lower lease renewal rates and longer releasing periods when leases are not renewed. Any of these situations may result in extended periods where there is a significant decline in revenues or no revenues generated by a property. Additionally, to the extent that market rental rates are reduced, property-level cash flows would likely be negatively affected as existing leases renew at lower rates. If we are unable to relet or renew leases for all or substantially all of the space at these properties, if the rental rates upon such renewal or reletting are significantly lower than expected, or if our reserves for these purposes prove inadequate, we will experience a reduction in net income and may be required to reduce or eliminate distributions to our stockholders. Lease defaults or terminations or landlord-tenant disputes may adversely reduce our income from our net lease property portfolio. As was the case with our leases to WaMu Bank, N.A., lease defaults or terminations by one or more tenants may reduce our revenues unless a default is cured or a suitable replacement tenant is found promptly. The creditworthiness of our tenants in our net leased assets, particularly given the difficult economic environment, could be significantly impacted, which could result in their inability to meet the terms of their leases. In addition, disputes may arise between the landlord and tenant that result in the tenant withholding rent payments, possibly for an extended period. These disputes may lead to litigation or other legal procedures to secure payment of the rent withheld or to evict the tenant. Any of these situations may result in extended periods during which there is a significant decline in revenues or no revenues generated by a property. If this were to occur, it could adversely affect our results of operations. Environmental compliance costs and liabilities associated with our properties or our real estate related investments may materially impair the value of our investments. Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be required to investigate and clean up certain hazardous substances released at the property, and may be held liable to a governmental entity or to third parties for property damage and for investigation and cleanup costs incurred by such parties in connection with the contamination. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and the costs it incurs in connection with the contamination. The presence of contamination or the failure to remediate contamination may adversely affect the owner's ability to sell or lease real estate or to borrow using the real estate as collateral. The owner or operator of a site may be liable under common law to third parties for damages and injuries resulting from environmental contamination emanating from the site. We may experience environmental liability arising from conditions not known to us. 29

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents We may invest in real estate, or mortgage loans secured by real estate, with environmental problems that materially impair the value of the real estate. There are substantial risks associated with such an investment. We have only limited experience in investing in real estate with environmental liabilities. Uninsured losses or losses in excess of our insurance coverage could adversely affect our financial condition and our cash flows. Although we believe our net leased assets and properties collateralizing our commercial real estate loan and securities investments are adequately covered by insurance, there are certain types of losses, generally of a catastrophic nature, such as earthquakes, floods, hurricanes, terrorism or acts of war that may be uninsurable or not economically insurable. Inflation, changes in building codes and ordinances, environmental considerations and other factors, including terrorism or acts of war, also might make the insurance proceeds insufficient to repair or replace a property if it is damaged or destroyed. Under such circumstances, the insurance proceeds received might not be adequate to restore our economic position with respect to the affected real property. Any uninsured loss could result in both loss of cash flow from, and the asset value of, the affected property. As a result of the events of September 11, 2001, insurance companies are limiting and charging significant premiums to cover acts of terrorism in insurance policies. As a result, although we, our tenants and our borrowers may carry terrorism insurance, we may suffer losses from acts of terrorism that are not covered by insurance. In addition, the commercial real estate loans which are secured by certain of our properties contain customary covenants, including covenants that require us to maintain property insurance in an amount equal to the replacement cost of the properties, which may increase the cost of obtaining the required insurance. Many of our investments are illiquid, and we may not be able to vary our portfolio in response to further changes in economic and other conditions, which may result in losses to us. Our investments are relatively illiquid. Especially in the current economic environment, we do not have the ability to sell properties, securities or commercial real estate loans in response to further changes in economic and other conditions, except at distressed prices. The Internal Revenue Code also places limits on our ability to sell properties held for fewer than four years. These considerations could make it difficult for us to dispose of any of our assets even if a disposition were in the best interests of our stockholders. As a result, our ability to vary our portfolio in response to further changes in economic and other conditions may be relatively limited, which may result in losses to us. We may make investments in assets with lower credit quality, which will increase our risk of losses. Most of our securities investments have explicit ratings assigned by at least one of the three leading nationally-recognized statistical rating agencies. However, given the current economic conditions and lack of credit market, we may invest in unrated securities, enter into net leases with unrated tenants or participate in unrated or distressed mortgage loans. Because the ability of obligors of net leases and mortgages, including mortgages underlying mortgage-backed securities, to make rent or principal and interest payments may be impaired during such economic recession, prices of lower credit quality investments and securities have declined. The existing credit support in the securitization structure may be insufficient to protect us against loss of our principal on these investments and securities. We have not established and do not currently plan to establish any investment criteria to limit our exposure to these risks for future investments. 30

Table of Contents We have no established investment criteria limiting the geographic concentration of our investments in real estate debt, real estate securities or net lease properties. If our investments are concentrated in an area that experiences adverse economic conditions, our investments may lose value and we may experience losses. Certain commercial real estate loans and securities in which we invest may be secured by a single property or properties in one geographic location. Additionally, net lease properties that we may acquire may also be located in a geographic cluster. These current and future investments carry the risks associated with significant geographical concentration. We have not established and do not plan to establish any investment criteria to limit our exposure to these risks for future investments. As a result, properties underlying our investments may be overly concentrated in certain geographic areas, and we may experience losses as a result. A worsening of economic conditions in the geographic area in which our investments may be concentrated could have an adverse effect on our business, including reducing the demand for new financings, limiting the ability of customers to pay financed amounts and impairing the value of our collateral. Our portfolio is highly leveraged, which may adversely affect our return on our investments and may reduce cash available for distribution on our securities. We leverage our portfolio through borrowings, generally through the use of bank credit facilities, commercial real estate loans, securitizations, including the issuance of term debt transactions, and other borrowings, many of which are not currently available to us. The type and percentage of leverage varies depending on our ability to obtain credit facilities and the lender's estimate of the stability of the portfolio's cash flow. However, we do not restrict the amount of indebtedness that we may incur. Our return on our investments and cash available for distribution to our stockholders has been reduced because of the current deteriorating market conditions which have caused the cost of financing to increase relative to the income that can be derived from our assets. Moreover, we may have to incur more recourse

Processed and formatted by SEC Watch - Visit SECWatch.com

indebtedness in order to obtain financing for our business. We are subject to risks associated with managing residential land investments in our LandCap joint venture. In late 2007, we entered into a joint venture with Whitehall Street Global Real Estate Limited Partnership 2007 to form LandCap Partners, which we refer to as LandCap. The venture is managed by professionals who have extensive experience in the single family housing sector. LandCap's investment strategy was to opportunistically invest in single family residential land through land loans, lot option agreements and select land purchases. These investments were expected to generate very little current cash flow and to be held for several years prior to liquidation. The venture has been seeking third party capital, but has not received any new capital commitments and we do not currently expect to provide any new investment capital to LandCap in the future. The venture will continue to manage existing investments and we do not expect the venture to return capital to us for several years. In addition to the risks associated with the continuing decline in the value of residential land, certain loans in which we invested in our LandCap joint venture are either distressed or non-performing. These loans will generally have a greater risk of loss to us and our ability to generate positive returns on these loans will be subject to many factors, including, but not limited to, our ability to obtain a discounted payoff from the borrower of these loans in excess of our purchase price and our ability to foreclose and liquidate the asset(s) underlying such loans accretively. Additionally, if loans that we purchase have evidence of deterioration of credit quality at the time of purchase, we will apply the American Institute of Certified Public Accountants Statement of Position 03-3 "Accounting for Certain Loans or Debt Securities Acquired in a Transfer", or SOP 03-3, to these loans. SOP 03-3 addresses accounting for loans for which it is probable, at the time of our acquisition, that we will be unable to collect all contractual principal and interest. For these loans, the amount representing the excess of cash flows estimated by us at acquisition over the purchase price is accreted into income over the life of a loan. If we cannot reasonably estimate the cash flows that we expect to receive from a 31

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

loan, then we will first apply any cash received from a loan as a reduction to our carrying value, and any cash received in excess of the carrying value will be recorded as income. Estimating the amount of a loan's future cash flows involves significant judgment. The amount and timing of actual cash flows could differ materially from our estimates. Any decreases in our estimates of expected cash flows from purchased loans accounted for under SOP 03-3 may result in a significant negative adjustment to the amount of revenue that we had previously recorded from a purchased loan. Interest rate fluctuations may reduce the spread we earn on our interest-earning investments and may reduce our net income. Although we seek to match-fund our assets and mitigate the risk associated with future interest rate volatility, we are primarily subject to interest rate risk because we do not hedge our retained equity interest in our floating rate term debt transactions. To the extent a term debt transaction has floating rate assets, our earnings will generally increase with increases in floating interest rates, and decrease with declines in floating interest rates. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. Our interest rate risk sensitive assets, liabilities and related derivative positions are generally held for non-trading purposes. As of December 31, 2008, a hypothetical 100 basis point increase in interest rates applied to our variable rate assets would increase our annual interest income by approximately $30.8 million offset by an increase in our interest expense of approximately $25.1 million on our variable rate liabilities. Similarly, a hypothetical 100 basis point decrease in interest rates would decrease our annual interest income by the same net amount. Our hedging transactions may limit our gains and could result in losses. To limit the effects of changes in interest rates on our operations, we may employ hedging strategies, including engaging in interest rate swaps, caps, floors and other interest rate exchange contracts as well as engaging in short sales of securities or of future contracts. The use of these types of derivatives to hedge our assets and liabilities carries certain risks, including the risks that: •

losses on a hedge position will reduce the cash available for distribution to stockholders;

•

losses may exceed the amount invested in such instruments;

•

a hedge may not perform its intended use of offsetting losses on an investment;

•

the counterparties with which we trade may cease making markets and quoting prices in such instruments, which may render us unable to enter into an offsetting transaction with respect to an open position; and

•

the counterparties with which we trade may experience business failures, which would most likely result in a default. Default by such counterparty may result in the loss of unrealized profits, which were expected to offset losses on our assets. Such defaults may also result in a loss of income on swaps or caps, which income was expected to be available to cover our debt service payments.

Our results of operations may be adversely affected during any period as a result of the use of derivatives. If we anticipate that the income from any such hedging transaction will not be qualifying income for REIT income test purposes, we may conduct some or all of our hedging activities through a corporate subsidiary that would be subject to corporate income taxation. We may change our investment strategy without stockholder consent and make riskier investments. We may change our investment strategy at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the 32

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

investments described in this Annual Report on Form 10-K. A change in our investment strategy may increase our exposure to interest rate and real estate market fluctuations. We have been, and may in the future be, subject to significant competition, and we may not be able to compete successfully for investments. We have been, and may in the future be, subject to significant competition for attractive investment opportunities from other real estate investors, some of which have greater financial resources than us, including publicly traded REITs, private REITs, investment banking firms, private institutional funds, hedge funds and private opportunity funds. We may not be able to compete successfully for investments.

Risks Relating to Investments in Healthcare Assets We have limited experience with owning and operating senior housing and healthcare facilities. In May 2006, we entered the healthcare-related net lease business by forming a joint venture with Chain Bridge Capital LLC to invest in senior housing and healthcare-related net leased assets, called Wakefield. In 2008, we brought another equity partner, Inland American Real Estate Trust, Inc., or Inland American, into the Wakefield venture by selling a $100 million preferred partnership interest to Inland American, convertible into an approximate 42% interest in the venture. As of December 31, 2008, we owned 51.6% of Wakefield and consolidated the venture in our financial statements. Although the principals of Chain Bridge have extensive experience owning and investing in senior and assisted living facilities, this is a relatively new business for us with risks that differ from those to which we have been subject historically. There can be no assurance that we have the skills needed to run this business profitably and there can be no assurance that we will be able to retain the principles of Chain Bridge. The senior living industry is highly competitive and we expect it to become more competitive. The senior living industry is highly competitive, and we expect that it may become more competitive in the future. The operators of the facilities we own or lend to compete with numerous other companies that provide long-term care alternatives such as home healthcare agencies, life care at home, facility-based service programs, retirement communities, convalescent centers and other independent living, assisted living and skilled nursing providers, including not-for-profit entities. In general, regulatory and other barriers to competitive entry in the independent living and assisted living segments of the senior living industry are not substantial, although there are generally barriers to the development of skilled nursing facilities. Consequently, our operators may encounter increased competition that could limit their ability to attract new residents, raise resident fees or expand their businesses, which could adversely adverse effect our revenues and earnings. Operators of independent care, assisted living and memory care facilities must comply with the rules and regulations of governmental reimbursement programs such as Medicare or Medicaid, licensing and certification requirements, fraud and abuse regulations and are subject to new legislative developments. The healthcare industry is highly regulated by federal, state and local licensing requirements, facility inspections, reimbursement policies, regulations concerning capital and other expenditures, certification requirements and other laws, regulations and rules. Any failure to comply with such laws, requirements and regulations could affect our operators' ability to operate the facilities that we own or finance. Healthcare operators are subject to federal and state laws and regulations that govern financial and other arrangements between healthcare providers. These laws prohibit certain direct and indirect payments or fee-splitting arrangements between healthcare providers that are designed to induce or encourage the referral of patients to, or the recommendation of, a particular provider for medical products and services. They also require compliance with a variety of safety, health, staffing and other requirements relating to the design and conditions of the licensed facility and quality of care provided. 33

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

These regulations may also enable the regulatory agency to place liens on the property which may be senior to our secured position. Possible sanctions for violation of these laws and regulations include loss of licensure or certification, the imposition of civil monetary and criminal penalties, and potential exclusion from the Medicare and Medicaid programs. Failure of our operators to comply with these rules or regulations could have an adverse effect on our financial condition or results of operations. In addition, this area of the law currently is subject to intense scrutiny. Additional laws and regulations may be enacted or adopted that could require changes in the design of the properties and our joint venture's operations and thus increase the costs of these operations. A significant portion of our leases expire in the same year. A significant portion of the leases that we have entered into expire in 2017, which coincides with the debt maturities on the properties subject to these leases. As a result, we could be subject to a sudden and material change in value of the assets in Wakefield and available cash flow from Wakefield in the event that these leases are not renewed or in the event that we are not able to extend or refinance the loans on the properties that are subject to these leases. State law may limit the availability of certain types of healthcare facilities for our acquisition or development and may limit our ability to replace obsolete properties. Certificate-of-Need laws may impose investment barriers for us. Some states regulate the supply of some types of retirement facilities, such as skilled nursing facilities or assisted living facilities, through Certificate-of-Need laws. A Certificate-of-Need typically is a written statement issued by a state regulatory agency evidencing a community's need for a new, converted, expanded or otherwise significantly modified retirement facility or service which is regulated pursuant to the state's statutes. These restrictions may create barriers to entry or expansion and may limit the availability of properties for our acquisition or development. In addition, we may invest in properties which cannot be replaced if they become obsolete unless such replacement is approved or exempt under a Certificate-of-Need law. The bankruptcy, insolvency or financial deterioration of our facility operators could significantly delay our ability to collect unpaid rents or require us to find new operators. Our financial position and our ability to make distributions to our stockholders may be adversely affected by financial difficulties experienced by any of our major operators, including bankruptcy, insolvency or a general downturn in the business, or in the event any of our major operators do not renew or extend their relationship with us as their lease terms expire. We are exposed to the risk that our operators may not be able to meet their obligations, which may result in their bankruptcy or insolvency. Although our leases and loans provide us the right to terminate an investment, evict an operator, demand immediate repayment and other remedies, the bankruptcy laws afford certain rights to a party that has filed for bankruptcy or reorganization. An operator in bankruptcy may be able to restrict our ability to collect unpaid rents or interest during the bankruptcy proceeding. Our operators are faced with increased litigation and rising insurance costs that may affect their ability to make their lease or mortgage payments. In some states, advocacy groups have been created to monitor the quality of care at healthcare facilities, and these groups have brought litigation against operators. Also, in several instances, private litigation by patients has succeeded in winning very large damage awards for alleged abuses. The effect of this litigation and potential litigation has been to materially increase the costs incurred by our operators for monitoring and reporting quality of care compliance. In addition, the cost of liability and medical malpractice insurance has increased and may continue to increase so long as the present 34

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

litigation environment affecting the operations of healthcare facilities continues. Continued cost increases could cause our operators to be unable to make their lease or mortgage payments, potentially decreasing our revenue and increasing our collection and litigation costs. Moreover, to the extent we are required to take back the affected facilities, our revenue from those facilities could be reduced or eliminated for an extended period of time.

Risks Related to the Investment Management Business The organization and management of our Securities Fund, and any future funds that we raise, may create conflicts of interest. In addition to managing the assets of our term debt transactions, we manage an off-balance sheet fund, or our Securities Fund, which we formed in July 2007, to prospectively conduct our real estate securities investment business. We are the manager, and have a combined general partner and limited partner interest of 53.1% in the Securities Fund at December 31, 2008. We may in the future manage other third party funds or other investment vehicles. The Securities Fund, along with any new funds we may manage, which together are referred to as our "Funds," will hold assets that we determine should be acquired by the Funds and doing so may create conflicts of interest, including between investors in these Funds and our shareholders, since many investment opportunities that are suitable for us may also be suitable for the Funds. Additionally, our executives and other real estate and debt finance professionals may face conflicts of interest in allocating their time among NorthStar, our Securities Fund and any other third party funds we may manage. Although as a company we will seek to make these decisions in a manner that we believe is fair and consistent with the operative legal documents governing these investment vehicles, the transfer or allocation of these assets may give rise to investor dissatisfaction or litigation or regulatory enforcement actions. Appropriately dealing with conflicts of interest is complex and difficult and our reputation as a company could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential or actual conflicts of interest. Regulatory scrutiny of, or litigation in connection with, conflicts of interest would have a material adverse effect on our reputation which would materially adversely affect our business and our ability to attract investors for future vehicles. Difficult market conditions and the collapse of the CMBS market have adversely affected our Securities Fund, which may impact our ability to raise capital for future Funds and may cause investor redemptions. The current global recession, deterioration of the capital markets and credit spread widening and corresponding lower mark-to-market adjustments to the assets in the Securities Fund have adversely affected the performance of our Securities Fund. Due to the foregoing, raising capital for future Funds could be more difficult and redemptions within the Securities Fund have occurred and are expected to occur in the future. The creation and management of Funds and other investment vehicles could require us to register with the SEC as an investment adviser under the Investment Advisers Act and subject us to costs and constraints that we are not currently subject to. A consequence of creating and managing Funds and other investment vehicles, including term debt vehicles, is that we may be required to register with the SEC as an investment adviser under the Investment Advisers Act. Registered investment advisers must establish policies and procedures for their operations and make regulatory filings. The Investment Advisers Act and the rules and regulations under this Act generally grant the SEC broad administrative powers, including, in some cases, the power to limit or restrict doing business for failure to comply with such laws and regulations. These laws and regulations have increased, and could further increase, our expenses and require us to devote substantial time and effort to legal and regulatory compliance issues. In addition, the regulatory environment in which investment advisors operate changes frequently and regulations have increased 35

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

significantly in recent years. We may be adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations. We have used, and may in the future use, capital to preserve the existence of our Securities Fund and any future third party funds we manage. Our Securities Fund is, and any future third party funds we manage may be, subject to mark-to-market volatility and may at times be subject to margin calls or require other financial assistance from us. We have, and may in the future, provide all or a portion of the capital necessary to preserve our Funds, including by satisfying margin calls if the Funds are not able to meet such obligations without our assistance or by providing credit or credit support to the Funds. Investors in our Securities Fund and, likely, any new third party funds, may redeem their investments after a stated lock-up period or elect to remove us as manager of the Funds at any time without cause upon approval of 50% of the limited partners of our Funds. Investors in our Securities Fund are, and investors in any future third party funds will likely be, able to redeem their investments on an annual or quarterly basis, subject to the applicable Fund's specific redemption provisions, and remove us as manager of the Fund without cause upon approval of 50% of the limited partners in the Fund (excluding us). Investors may decide to move their capital away from our Funds to other investments or remove us as manager of the Funds for any number of reasons in addition to poor investment performance. Factors which could result in investors leaving our Funds include changes in interest rates which make other investments more attractive, changes in investor perception regarding the Fund's focus or alignment of interest, unhappiness with changes in or broadening of a Fund's investment strategy, changes in our reputation, and departures or changes in responsibilities of key investment professionals. In a declining financial market, the pace of redemptions and consequent reduction in our assets under management could accelerate. The decrease in our Funds' revenues that would result from significant redemptions in our Funds may have a material effect on our business by reducing our management fees and incentive income, and could result in significant reputational damage as well. If we were removed as a manager of any Fund, we would no longer be entitled to receive management or incentive fees, which may have a material effect on our business, and such removal could also cause significant reputational damage to us. Valuation methodologies for certain assets in our Funds may be subject to significant subjectivity and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses for our Funds. There may not be readily-ascertainable market prices for illiquid investments in our Funds. The value of the investments of our Funds will be determined periodically by us based on the fair value of such investments. The fair value of investments is determined using a number of methodologies. The valuation policies of the Securities Fund are based on a number of factors, including the nature of the investment, the expected cash flows from the investment, bid or ask prices provided by third parties for the investment, the length of time the investment has been held, the trading price of securities, restrictions on transfer and other recognized valuation methodologies. The methodologies we may use in valuing individual investments will be based on a variety of estimates and assumptions specific to the particular investments, and actual results related to the investment therefore often vary materially as a result of the inaccuracy of such assumptions or estimates. There are risks in using prime brokers and custodians. Our Funds will likely depend on the services of prime brokers and custodians to carry out certain securities transactions. In the event of the insolvency of a prime broker and/or custodian, our Funds might not be able to recover equivalent assets in full as they will rank among the prime broker and custodian's unsecured creditors in relation to assets which the prime broker or custodian borrows, lends 36

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

or otherwise uses. In addition, the Funds' cash held with a prime broker or custodian will not be segregated from the prime broker's or custodian's own cash, and the Funds will therefore rank as unsecured creditors in relation thereto. We are subject to certain counterparty risks in our Securities Fund. We have entered into credit default swaps with counterparties. As a result of the global credit crises, there is a risk that counterparties could fail, shut down, file for bankruptcy or be unable to pay out contracts. The failure of a counterparty that holds collateral that we post in connection with certain credit default swaps could result in the loss of such collateral.

Risks Related to Our Company Our ability to operate our business successfully would be harmed if key personnel with long-standing business relationships terminate their employment with us. Our future success depends, to a significant extent, upon the continued services of our key personnel, including certain of our executive officers and Mr. Hamamoto in particular. For instance, the extent and nature of the experience of our executive officers and nature of the relationships they have developed with real estate developers and financial institutions are critical to the success of our business. Our executive officers have significant real estate investment experience. We cannot assure you of their continued employment with us. The loss of services of certain of our executive officers could harm our business and our prospects. Our Board of Directors has and will likely in the future adopt certain incentive plans to create incentives that will allow us to retain and attract the services of key employees. These incentive plans may be tied to the performance of our common stock and as a result of the decline in our stock price, we may be unable to motivate and retain our management and these other employees. Our inability to motivate and retain these individuals could also harm our business and our prospects. Additionally, competition for experienced real estate professionals could require us to pay higher wages and provide additional benefits to attract qualified employees, which could result in higher compensation expenses to us. Our ability to issue equity awards to employees as compensation could be impacted, which will require greater cash compensation in relation to previous levels of cash compensations. We have historically paid a substantial portion of our overall compensation in the form of equity awards. Currently, we do not have availability under our incentive plans to issue a meaningful amount of equity awards to our employees. We will likely seek shareholder approval for additional equity awards, but may be required to compensate our employees in a greater proportion of cash compared to equity awards. Because adjusted funds from operations, or AFFO, excludes equity based compensation expense, payment of higher levels of cash relative to equity awards will have a negative impact on our AFFO and reduce our liquidity position. Additionally, the lack of availability of equity awards could impact our ability to retain employees as equity awards historically have been a significant component of our long-term incentives. If our risk management systems are ineffective, we may be exposed to material unanticipated losses. We continue to refine our risk management techniques, strategies and assessment methods. However, our risk management techniques and strategies may not fully mitigate the risk exposure of our operations in all economic or market environments, or against all types of risk, including risks that we might fail to identify or anticipate. Any failures in our risk management techniques and strategies to accurately quantify such risk exposure could limit our ability to manage risks in our operations or to seek adequate risk-adjusted returns. See "Management Discussion and Analysis of Financial Condition and Results of Operations—Risk Management". 37

Table of Contents The use of estimates and valuations may be different from actual results, which could have a material effect on our consolidated financial statements. We make various estimates that affect reported amounts and disclosures. Broadly, those estimates are used in measuring the fair value of certain financial instruments, accounting for goodwill, establishing provisions for potential losses that may arise from loans that we make and potential litigation liability. Recent market volatility has made it extremely difficult to value certain of our real estate securities and term debt equity. Subsequent valuations, in light of factors then prevailing, may result in significant changes in the values of these securities in future periods. In addition, at the time of any sales and settlements of these securities, the price we ultimately realize will depend on the demand and liquidity in the market at that time and may be materially lower than our estimate of their current fair value. Estimates are based on available information and judgment. Therefore, actual values and results could differ from our estimates and that difference could have a material effect on our consolidated financial statements.

Processed and formatted by SEC Watch - Visit SECWatch.com

We believe AFFO is an appropriate measure of our operating performance; however, in certain instances AFFO may not be reflective of actual economic results. We utilize AFFO as a measure of our operating performance and believe that it is useful to investors because it facilitates an understanding of our operating performance after adjustment for certain non-cash expenses, such as real estate depreciation, equity based compensation and unrealized gains/losses from mark-to-market adjustments. Additionally, AFFO serves as a good measure of our operating performance because it facilitates evaluation of our company without the effects of selected items required in accordance with accounting principles generally accepted in the United States, or GAAP, that may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Nonetheless, in certain instances AFFO may not necessarily be reflective of our actual economic results. For example, if a CMBS position that we purchased at par in a given year is marked down at the end of such year and then sold the subsequent year at a price above the marked down price, but less than par, we would still have a gain for purposes of AFFO between the difference of the year-end mark and the amount that we sold the CMBS for, even though we would have suffered an economic loss on the CMBS position. Our book value would, however, accurately reflect the economic loss because the decrease in value of the CMBS investment in its year of purchase would have been recorded as an unrealized loss in our income statement. Conversely, if we repurchase, for example, one of our issued CDO bonds for 50% of par in a given year and if such CDO bond were marked below 50% of par at the end of the previous year, for AFFO purposes we would recognize a realized loss on retirement of debt from the repurchase even though there is a positive economic impact to the retirement of the debt. Consistent with the prior example, while our book value would properly reflect the economic benefit from the debt repurchase because the decrease in value of the debt would have been recorded as an unrealized gain in the prior year, the impact to AFFO would not be reflective of actual economic results. GAAP requirements and our mark-to-market adjustments of our liabilities under SFAS 159 in particular, do not necessarily provide a precise economic reflection of our shareholders' equity. Pursuant to SFAS 159, we have elected to mark-to-market our liabilities in our real estate term debt transactions, but we do not mark-tomarket the corresponding loans, which we hold at par net of any related credit loss reserves. Even if these loans are performing, because of a number of factors, including credit spread widening and concerns over commercial real estate generally, a third-party would not likely be willing to pay par for such loans. Therefore, our carrying value for these loans is likely above their current economic value. Additionally, while we have liabilities that are marked below the principal amount that we owe on such liabilities, which correspondingly increases our shareholders' equity, absent repurchasing such liabilities at a discount we will be required to repay the full par 38

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

amount of such liabilities at maturity or upon a liquidation of the underlying collateral or our company. As a result of the foregoing, our shareholders' equity is and will likely continue to not necessarily be reflective of current economic or liquidation value. Our dividend policy is subject to change. On a quarterly basis, our Board of Directors determines an appropriate common stock dividend based upon numerous factors, including REIT qualification requirements, the amount of cash flows provided by operating activities, availability of existing cash balances, borrowing capacity under existing credit agreements, access to cash in the capital markets and other financing sources, our view of our ability to realize gains in the future through appreciation in the value of our assets, general economic conditions and economic conditions that more specifically impact our business or prospects. Although we have significantly reduced the cash portion of our first quarter 2009 dividend relative to prior periods, future dividend levels are subject to further adjustment based upon any one or more of the risk factors set forth in this Form 10-K, as well as other factors that our Board of Directors may, from time to time, deem relevant to consider when determining an appropriate common stock dividend. We are highly dependent on information systems, and systems failures could significantly disrupt our business. As a financial services firm, our business is highly dependent on communications and information systems. Any failure or interruption of our systems could cause delays or other problems in our activities, which could have a material adverse effect on our financial performance. Maintenance of our Investment Company Act exemption imposes limits on our operations. We conduct our operations so that we are not required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. Section 3(a)(1)(C) of the Investment Company Act defines as an investment company any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer's total assets (exclusive of government securities and cash items) on an unconsolidated basis. Excluded from the term "investment securities," among other things, are securities issued by majority owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act. Because we are a holding company that conducts its businesses through subsidiaries, the securities issued by our subsidiaries that rely on the exception from the definition of "investment company" in Section 3(c)(1) or 3(c)(7) of the Investment Company Act, together with any other investment securities we may own directly, may not have a combined value in excess of 40% of the value of our total assets on an unconsolidated basis. This requirement limits the types of businesses in which we may engage through these subsidiaries. We believe that neither our operating partnership nor the subsidiary REIT through which we hold the substantial majority of our investments are investment companies because each of them satisfy the 40% test of Section 3(a)(1)(C). We must monitor their holdings to ensure that the value of their investment securities does not exceed 40% of their respective total assets (exclusive of government securities and cash items) on an unconsolidated basis. Certain of our other subsidiaries do not satisfy the 40% test, but instead rely on exceptions and exemptions from registration as an investment company under the Investment Company Act that either limits the types of assets these subsidiaries may purchase or the manner in which these subsidiaries may acquire and sell assets. For instance, certain of our term debt transactions rely on the exemption from registration as an investment company under the Investment Company Act provided by Rule 3a-7 thereunder, which is available for certain structured financing vehicles. This exemption limits the ability of these term debt transactions to sell their assets and reinvest the proceeds from asset sales. Our subsidiary that invests in net lease 39

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

properties relies on the exception from the definition of "investment company" provided by Sections 3(c)(6) and 3(c)(5)(C) of the Investment Company Act, and certain of our other term debt transactions similarly rely on the 3(c)(5)(C) exception from the definition of "investment company." These provisions exempt companies that primarily invest in real estate, mortgages and certain other qualifying real estate assets. When a term debt transaction relies on the exception from the definition of "investment company" provided by 3(c)(5)(C) of the Investment Company Act, the term debt transaction is limited in the types of real estate related assets that it could invest in. Our subsidiaries that engage in operating businesses and satisfy the 40% test are also not subject to the Investment Company Act. If the combined value of the investment securities issued by our subsidiaries that rely on the exception provided by Section 3(c)(1) or 3(c)(7) of the Investment Company Act, together with any other investment securities we may own directly exceeds 40% of our total assets on an unconsolidated basis, we may be deemed to be an investment company. If we fail to maintain an exemption, exception or other exclusion from registration as an investment company, we could, among other things, be required either (a) to substantially change the manner in which we conduct our operations to avoid being required to register as an investment company or (b) to register as an investment company, either of which could have an adverse effect on us and the market price of our common stock. If we were required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), portfolio composition, including restrictions with respect to diversification and industry concentration and other matters. Maryland takeover statutes may prevent a change of our control. This could depress our stock price. Under Maryland law, "business combinations" between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as any person who beneficially owns 10% or more of the voting power of the corporation's shares or an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding voting stock of the corporation. A person is not an interested stockholder under the statute if the Board of Directors approved in advance the transaction by which he otherwise would have become an interested stockholder. However, in approving a transaction, the Board of Directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board. After the five-year prohibition, any business combination between the Maryland corporation and an interested stockholder generally must be recommended by the Board of Directors of the corporation and approved by the affirmative vote of at least 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder. These super-majority vote requirements do not apply if the corporation's common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form previously paid by the interested stockholder for its shares. 40

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents The business combination statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer, including potential acquisitions that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders. The statute permits various exemptions from its provisions, including business combinations that are exempted by the Board of Directors prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, our Board of Directors has exempted any business combinations between us and any person, provided that any such business combination is first approved by our Board of Directors (including a majority of our directors who are not affiliates or associates of such person). Consequently, the five-year prohibition and the super-majority vote requirements do not apply to business combinations between us and any of them. As a result, such parties may be able to enter into business combinations with us that may not be in the best interest of our stockholders, without compliance with the supermajority vote requirements and the other provisions in the statute. Our authorized but unissued common and preferred stock and other provisions of our charter and bylaws may prevent a change in our control. Our charter authorizes us to issue additional authorized but unissued shares of our common stock or preferred stock and authorizes our board, without stockholder approval, to amend our charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have the authority to issue. In addition, our Board of Directors may classify or reclassify any unissued shares of common stock or preferred stock and may set the preferences, rights and other terms of the classified or reclassified shares. Our board could establish a series of common stock or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for the common stock or otherwise be in the best interest of our stockholders. Our charter and bylaws also contain other provisions that may delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders. Maryland law also allows a corporation with a class of equity securities registered under the Securities Exchange Act of 1934, as amended, or the Securities Exchange Act, and at least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its Board of Directors and notwithstanding any contrary provision in the charter or bylaws, to a classified board, unless its charter prohibits such an election. Our charter contains a provision prohibiting such an election to classify our board under this provision of Maryland law. This makes us more vulnerable to a change in control. If our stockholders voted to amend this charter provision and to classify our Board of Directors, the staggered terms of our directors could reduce the possibility of a tender offer or an attempt at a change in control even though a tender offer or change in control might be in the best interests of our stockholders.

Risks Related to Our REIT Tax Status Our failure to qualify as a REIT would subject us to federal income tax and reduce cash available for distribution to our stockholders. We intend to continue to operate in a manner so as to qualify as a REIT for federal income tax purposes. However, qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only a limited number of judicial and administrative interpretations exist. Even an inadvertent or technical mistake could jeopardize our REIT status. Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. Moreover, new tax legislation, administrative guidance or court decisions, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify as a 41

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

REIT. If we were to fail to qualify as a REIT in any taxable year, we would be subject to federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and distributions to stockholders would not be deductible by us in computing our taxable income. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the value of, and trading prices for, our stock. We hold a substantial majority of our assets in a majority owned subsidiary, which we refer to as our private REIT. Our private REIT is organized to qualify as a REIT for federal income tax purposes. Our private REIT must also meet all of the REIT qualification tests under the Internal Revenue Code. If our private REIT did not qualify as a REIT, it is likely that we would also not qualify as a REIT. If, for any reason, we failed to qualify as a REIT and we were not entitled to relief under certain Internal Revenue Code provisions, we would be unable to elect REIT status for the four taxable years following the year during which we ceased to so qualify. Complying with REIT requirements may force us to borrow funds to make distributions to stockholders or otherwise depend on external sources of capital to fund such distributions. To qualify as a REIT, we are required to distribute annually at least 90% of our taxable income, subject to certain adjustments, to our stockholders. To the extent that we satisfy the distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we may elect to retain and pay income tax on our net longterm capital gain. In that case, a shareholder would be taxed on its proportionate share of our undistributed long-term gain and would receive a credit or refund for its proportionate share of the tax we paid. A shareholder, including a tax-exempt or foreign shareholder, would have to file a federal income tax return to claim that credit or refund. Furthermore, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws. While we intend to continue to make distributions sufficient to avoid imposition of the 4% tax, there can be no assurance that we will be able to do so. We anticipate that distributions generally will be taxable as ordinary income, although a portion of such distributions may be designated by us as long-term capital gain to the extent attributable to capital gain income recognized by us, or may constitute a return of capital to the extent that such distribution exceeds our earnings and profits as determined for tax purposes. We currently intend to satisfy the 90% distribution requirement and avoid the 4% nondeductible excise tax with distributions that are payable in cash or our stock. From time to time, we may generate taxable income greater than our net income for financial reporting purposes due to, among other things, amortization of capitalized purchase premiums. In addition, our taxable income may be greater than our cash flow available for distribution to stockholders as a result of investments in assets that generate taxable income in excess of economic income or in advance of the corresponding cash flow from the assets (for example, if a borrower defers the payment of interest in cash pursuant to a contractual right or otherwise). If we do not have other funds available in these situations we could be required to borrow funds on unfavorable terms, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to enable us to distribute enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Because of the distribution requirement, it is unlikely that we will be able to fund all future capital needs, including capital needs in connection with investments, from cash retained from operations. As a result, to fund future capital needs, we likely will have to rely on thirdparty sources of capital, including both debt and equity financing, which may or may not be available on favorable terms or at all. Our access to third-party sources of capital will depend upon a number of factors, including the market's perception of our growth potential and our current and potential future earnings and cash distributions and the market price of our stock. 42

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

We could fail to qualify as a REIT if the Internal Revenue Service successfully challenges our treatment of our mezzanine loans and repurchase agreements. We intend to continue to operate in a manner so as to qualify as a REIT for federal income tax purposes. However, qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only a limited number of judicial and administrative interpretations exist. If the Internal Revenue Service, or IRS, disagrees with the application of these provisions to our assets or transactions, including assets we have owned and past transactions, our REIT qualification could be jeopardized. For example, IRS Revenue Procedure 2003-65 provides a safe harbor pursuant to which a mezzanine loan, if it meets each of the requirements contained in the Revenue Procedure, will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from it will be treated as qualifying mortgage interest for purposes of the REIT 75% income test. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. Moreover, our mezzanine loans typically do not meet all of the requirements for reliance on this safe harbor. We have invested, and will continue to invest, in mezzanine loans in a manner that we believe will enable us to continue to satisfy the REIT gross income and asset tests. In addition, we have entered into sale and repurchase agreements under which we nominally sold certain of our mortgage assets to a counterparty and simultaneously entered into an agreement to repurchase the sold assets. We believe that we will be treated for federal income tax purposes as the owner of the mortgage assets that are the subject of any such agreement notwithstanding that we transferred record ownership of the assets to the counterparty during the term of the agreement. It is possible, however, that the IRS could assert that we did not own the mortgage assets during the term of the sale and repurchase agreement, in which case our ability to qualify as a REIT could be adversely affected. Even if the IRS were to disagree with one or more of our interpretations and we were treated as having failed to satisfy one of the REIT qualification requirements, we could maintain our REIT qualification if our failure was excused under certain statutory savings provisions. However, there can be no guarantee that we would be entitled to benefit from those statutory savings provisions if we failed to satisfy one of the REIT qualification requirements, and even if we were entitled to benefit from those statutory savings provisions, we could be required to pay a penalty tax. Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow. Even if we remain qualified for taxation as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from certain activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes, such as mortgage recording taxes. Any of these taxes would decrease cash available for distribution to our stockholders. In addition, in order to meet the REIT qualification requirements, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory, we may hold some of our assets through taxable subsidiary corporations. Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments. To qualify as a REIT for federal income tax purposes we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our stock. As discussed above, we may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. Additionally, we may be unable to pursue investments that would be otherwise attractive to us in order to satisfy the source of income requirements for qualifying as a REIT. 43

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents We must also ensure that at the end of each calendar quarter at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets can consist of the securities of any one issuer (other than government securities and qualified real estate assets), and no more than 20% (or, beginning with our 2009 taxable year, 25%) of the value of our total securities can be represented by securities of one or more taxable REIT subsidiaries. If we fail to comply with these requirements at the end of any calendar quarter, we must correct such failure within 30 days after the end of the calendar quarter to avoid losing our REIT status and suffering adverse tax consequences, unless certain relief provisions apply. As a result, compliance with the REIT requirements may hinder our ability to operate solely on the basis of profit maximization and may require us to liquidate or forego otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders. Complying with REIT requirements may limit our ability to hedge effectively. The REIT provisions of the Internal Revenue Code may limit our ability to hedge our operations effectively. Our aggregate gross income from non-qualifying hedges, fees, and certain other non-qualifying sources cannot exceed 5% of our annual gross income. As a result, we might have to limit our use of advantageous hedging techniques or implement those hedges through a taxable REIT subsidiary. Any hedging income earned by a taxable REIT subsidiary would be subject to federal, state and local income tax at regular corporate rates. This could increase the cost of our hedging activities or expose us to greater risks associated interest rate or other changes than we would otherwise incur. Liquidation of assets may jeopardize our REIT status. To continue to qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our mortgage, preferred equity or other investments to satisfy our obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our status as a REIT. We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common stock. At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. Any of those new laws or interpretations may take effect retroactively and could adversely affect us or you as a stockholder. Legislation enacted in 2003 and 2006 generally reduced the federal income tax rate on most dividends paid by corporations to investors taxed at individual rates to a maximum of 15% through the end of 2010. REIT dividends, with limited exceptions, do not benefit from the rate reduction, because a REITs income is generally not subject to corporate level tax. As such, this legislation could cause shares in non-REIT corporations to be a more attractive investment to investors taxed at individual rates than shares in REITs and could have an adverse effect on the value of our stock. The stock ownership restrictions of the Internal Revenue Code for REITs and the 9.8% stock ownership limit in our charter may inhibit market activity in our stock and restrict our business combination opportunities. To qualify as a REIT, five or fewer individuals, as defined in the Internal Revenue Code, may not own, actually or constructively, more than 50% in value of our issued and outstanding stock at any time during the last half of a taxable year. Attribution rules in the Internal Revenue Code determine if any individual or entity actually or constructively owns our stock under this requirement. Additionally, at least 100 persons must beneficially own our stock during at least 335 days of a taxable year. To help 44

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

insure that we meet these tests, our charter restricts the acquisition and ownership of shares of our stock. Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. Unless exempted by our Board of Directors, no person, including entities, may own more than 9.8% of the value of our outstanding shares of stock or more than 9.8% in value or number (whichever is more restrictive) of our outstanding shares of common stock. The board may not grant an exemption from these restrictions to any proposed transferee whose ownership in excess of 9.8% of the value of our outstanding shares would result in the termination of our status as a REIT. Despite these restrictions, it is possible that there will be five or fewer individuals who own more than 50% in value of our outstanding shares, which could cause us to fail to qualify as a REIT. These restrictions on transferability and ownership will not apply, however, if our Board of Directors determines that it is no longer in our best interest to continue to qualify as a REIT. These ownership limits could delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of the stockholders. Our dividends that are attributable to excess inclusion income will likely increase the tax liability of our tax-exempt stockholders, foreign stockholders, and stockholders with net operating losses. In general, dividend income that a tax-exempt entity receives from us should not constitute unrelated business taxable income as defined in Section 512 of the Internal Revenue Code. If we realize excess inclusion income and allocate it to our stockholders, however, then this income would be fully taxable as unrelated business taxable income to a tax-exempt entity under Section 512 of the Internal Revenue Code. A foreign stockholder would generally be subject to U.S. federal income tax withholding on this income without reduction pursuant to any otherwise applicable income tax treaty. U.S. stockholders would not be able to offset such income with their net operating losses. Although the law is not entirely clear, the IRS has taken the position that we are subject to tax at the highest corporate rate on our excess inclusion income allocated to "disqualified organizations" (generally tax-exempt investors, such as certain state pension plans and charitable remainder trusts, that are not subject to the tax on unrelated business taxable income) that own our stock in record name. To the extent that our stock owned by "disqualified organizations" is held in street name by a broker/dealer or other nominee, the broker/dealer or nominee would be liable for a tax at the highest corporate rate on the portion of our excess inclusion income allocable to the stock held on behalf of the "disqualified organizations." A regulated investment company or other pass-through entity owning our stock may also be subject to tax at the highest corporate tax rate on any excess inclusion income allocated to their record name owners that are "disqualified organizations." Excess inclusion income could result if a REIT held a residual interest in a real estate mortgage investment conduit, or REMIC. In addition, excess inclusion income also may be generated if a REIT issues debt obligations with two or more maturities and the terms of the payments of these obligations bear a relationship to the payments that the REIT received on mortgage loans or mortgage-backed securities securing those debt obligations. Although we do not hold any REMIC residual interests, we anticipate that certain of the term debt transactions conducted by our private REIT will produce excess inclusion income that will be allocated to our stockholders. Accordingly, we expect that a portion of our dividends will constitute excess inclusion income, which will likely increase the tax liability of tax-exempt stockholders, foreign stockholders, stockholders with net operating losses, regulated investment companies and other pass-through entities whose record name owners are disqualified organizations, and brokers/dealers and other nominees who hold stock on behalf of disqualified organizations. 45

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

The prohibited transactions tax may limit our ability to engage in transactions, including certain methods of securitizing loans, that would be treated as sales for federal income tax purposes. A REIT's net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property, other than foreclosure property, but including loans, held primarily for sale to customers in the ordinary course of business. If we securitize loans in a manner that is, for federal income tax purposes, treated as a sale of the loans we may be subject to the prohibited transaction tax. Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans and may limit the structures we utilize for our securitization transactions even though such sales or structures might otherwise be beneficial to us. Because of the inability to offset capital losses against ordinary income, we may have REIT taxable income, which we would be required to distribute to our stockholders, in a year in which we are not profitable under GAAP principles or other economic measures. We may deduct our capital losses only to the extent of our capital gains, and not against our ordinary income, in computing our REIT taxable income for a given taxable year. Consequently, we could have REIT taxable income, and would be required to distribute such income to our stockholders, in a year in which we are not profitable under GAAP principles or other economic measures. We may lose our REIT status if the IRS successfully challenges our characterization of our income from our foreign taxable REIT subsidiaries. We have elected to treat several Cayman Islands companies, including issuers in term debt transactions, as taxable REIT subsidiaries. We intend to treat certain income inclusions received with respect to our equity investments in those foreign taxable REIT subsidiaries as qualifying income for purposes of the 95% gross income test but not the 75% gross income test. Because there is no clear precedent with respect to the qualification of such income for purposes of the REIT gross income tests, no assurance can be given that the IRS will not assert a contrary position. In the event that such income was determined not to qualify for the 95% gross income test, we could be subject to a penalty tax with respect to such income to the extent it exceeds 5% of our gross income or we could fail to qualify as a REIT. If our foreign taxable REIT subsidiaries are subject to U.S. federal income tax at the entity level, it would greatly reduce the amounts those entities would have available to distribute to us and that they would have available to pay their creditors. There is a specific exemption from federal income tax for non-U.S. corporations that restrict their activities in the United States to trading stock and securities (or any activity closely related thereto) for their own account whether such trading (or such other activity) is conducted by the corporation or its employees through a resident broker, commission agent, custodian or other agent. We intend that our foreign taxable REIT subsidiaries will rely on that exemption or otherwise operate in a manner so that they will not be subject to U.S. federal income tax on their net income at the entity level. If the IRS were to succeed in challenging that tax treatment, it would greatly reduce the amount that those foreign taxable REIT subsidiaries would have available to pay to their creditors and to distribute to us. Item 1B. Unresolved Staff Comments Not applicable. 46

Table of Contents Item 2. Properties Our investments in net lease properties, which comprise our net lease business segment, are described under "Business—Net Lease." The following table sets forth certain information with respect to each of our net lease properties as of December 31, 2008:

Processed and formatted by SEC Watch - Visit SECWatch.com Location C ity, State Bloomingdale, IL Concord Holdings, NH Fort Wayne, IN Keene, NH Melville, NY Millbury, MA New York, NY North Attleboro, MA P ortland, ME Wichita, KS

Ne t Le ase Portfolio: Prope rty In form ation S qu are Re n t pe r Nu m be r of O wn e rship Prope rty Le ase h old Le ase /S u ble ase En cu m bran ce s Fe e t squ are ft. Bu ildings Inte re st Type Expiration Date Expiration Date (In Th ou san ds) 50,000 10.50 1 Leasehold Retail January 2027 January 2022 $ 5,753 50,000 11.00 1 Fee Retail N/A May 2016 5,995 20,087 12.75 1 Fee Retail N/A January 2016 2,409 50,000 7.25 1 Leasehold Retail January 2025 August 2024 3,479 45,471 15.03 1 Fee Retail N/A October 2020 6,791 46,533 8.75 1 Leasehold Retail January 2022 January 2022 4,463 54,175 8.49 1 Leasehold Retail January 2024 January 2024 4,744 7,500 78.02 1 Leasehold Retail December 2012 December 2012 — 10,800 64.81 1 Leasehold Retail April 2029 June 2017 — 50,025 8.62 1 Leasehold Retail January 2024 January 2024 4,725 52,900 15.66 1 Leasehold Retail August 2030 August 2023 4,824 48,782 12.00 1 Fee Retail N/A March 2023 6,149

T otal Retail

486,273

11.06

12

Auburn Hills, MI

50,000 55,692 183,529 214,150 199,112 165,000 160,000 97,336 180,481 68,000 15,038 106,000 117,553 139,264 173,145 174,554

11.61 13.47 16.92 12.30 11.70 12.72 25.50 23.58 14.36 22.32 7.00 15.51 19.70 10.00 10.07 14.25

1 1 1 1 1 1 2 1 2 1 1

2,098,854

15.09

17

19,649 36,235 33,722 68,601 18,174 19,778 22,383 49,000 46,026 39,393 26,000 20,000 19,062 69,806 30,929 31,377 25,688 22,395 26,262 78,482

17.37 18.74 17.29 12.84 12.99 13.71 21.08 8.73 18.64 14.27 14.96 17.90 25.15 21.89 15.78 10.51 19.01 41.68 21.12 16.56

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Aurora, CO Camp Hill, P A Columbus, OH Fort Mill, SC Los Angeles CA Milpitas, CA Rancho Cordova, CA Rockaway, NJ Salt Lake City, UT Springdale, OH

T otal Office Albemarle, NC Black Mountain, NC Blountstown, FL Bremerton, WA Brevard, NC Burnsville, NC Caroltton, GA Castletown, IN Charleston, IL Charlotte, NC Cherry Springs, NC Chesterfield, IN Cincinnati, OH Clemmons, NC Clinton, OK Clinton, NC Columbia City, IN Daly City, CA

1 1 1 1

49,332 Fee Fee Fee Fee Fee Fee Fee Leasehold Fee Fee Fee Fee Fee Fee Fee Fee

Office Office Office Office Office Office Office Office Office Office Office Office Office Office Office Office

N/A N/A N/A N/A N/A N/A N/A May 2039 N/A N/A N/A N/A N/A N/A N/A N/A

September 2015 September 2015 June 2015 September 2015 November 2017 October 2020 June 2015 June 2015 February 2017 September 2015 May 2015 July 2017 April 2012 March 2010 December 2009 December 2011

5,416 6,032 33,329 25,279 23,788 30,685 32,383 19,848 22,548 10,970 2,154 15,187 15,863 15,686 19,208 16,586 294,962

Fee Fee Fee Fee Fee Fee Fee Fee Fee Fee Fee Fee Fee Fee Fee Fee Fee Fee Fee Leasehold

47

Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare Healthcare

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A August 2021

October 2021 July 2021 July 2021 October 2021 August 2020 October 2021 October 2022 January 2017 June 2016 January 2017 October 2021 March 2016 June 2017 January 2017 April 2022 January 2017 May 2020 June 2017 August 2021 August 2021

2,275 4,873 3,702 6,720 2,087 1,725 3,000 2,988 6,813 5,862 2,500 2,772 4,075 11,468 3,250 1,355 2,324 8,079 3,463 7,937

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Location C ity, State Denmark, WI Dunkirk, IN East Arlington, T X Edenton, NC Effingham, IL Elk City, OK Elk P ark, NC Fairfield, IL Fort Wayne, IN Franklin, WI Fullerton, CA Garden Grove, CA Gastonia, NC Green Bay, WI Grove City Harrisburg, IL Hartford City, IN Haysville, NC Hillsboro, OR Hobart, IN Huntington, IN Indianapolis, IN Kenosha, WI Kingfisher, OK La Vista, NE LaGrange, IN Lancaster, OH Madison, WI Manitowoc, WI Marysville, OH Mattoon, IL McFarland, WI Mansfield, OH

Memphis, T N Menomonee, WI Middletown, IN Mooresville, IN Morris, IL Mt. Sterling, KY Oklahoma City, OK Olney, IL P aris, IL P eru, IN P eshtigo, WI P lymouth, IN P ortage, IN Racine, WI Raleigh, NC Rantoul, IL Robinson, IL Rockford, IL

Ne t Le ase Portfolio: Prope rty In form ation S qu are Re n t pe r Nu m be r of O wn e rship Prope rty Le ase h old Le ase /S u ble ase En cu m bran ce s Fe e t squ are ft. Bu ildings Inte re st Type Expiration Date Expiration Date (In Th ou san ds) 8,320 17.70 1 Fee Healthcare N/A January 2017 1,219 19,140 12.65 1 Fee Healthcare N/A June 2017 2,132 26,552 14.92 1 Fee Healthcare N/A December 2013 3,413 24,228 21.08 1 Fee Healthcare N/A October 2022 3,000 7,808 14.55 1 Fee Healthcare N/A January 2017 553 39,393 11.37 1 Fee Healthcare N/A January 2017 4,617 51,989 11.48 1 Fee Healthcare N/A January 2017 4,384 22,383 21.08 1 Fee Healthcare N/A October 2022 3,000 39,393 17.20 1 Fee Healthcare N/A January 2017 6,416 31,500 17.94 1 Fee Healthcare N/A June 2017 4,895 27,556 19.30 1 Fee Healthcare N/A January 2017 6,366 5,500 34.17 1 Fee Healthcare N/A January 2017 797 26,200 40.69 1 Fee Healthcare N/A January 2017 7,631 26,500 41.20 1 Fee Healthcare N/A January 2017 11,228 12,215 18.10 1 Fee Healthcare N/A August 2020 1,839 23,768 16.39 1 Fee Healthcare N/A January 2017 3,173 20,672 38.25 1 Fee Healthcare N/A January 2017 1,862 36,393 12.16 1 Fee Healthcare N/A January 2017 3,690 22,400 3.60 1 Fee Healthcare N/A June 2009 2,096 22,383 21.08 1 Fee Healthcare N/A October 2022 3,000 286,652 12.24 1 Fee Healthcare N/A December 2013 33,300 43,854 14.96 1 Fee Healthcare N/A June 2017 5,958 31,169 18.29 2 Fee Healthcare N/A June 2017 4,548 36,416 6.93 1 Fee Healthcare N/A June 2017 2,251 22,958 18.53 1 Fee Healthcare N/A January 2017 4,130 26,698 18.08 1 Fee Healthcare N/A January 2017 3,994 26,683 17.46 1 Fee Healthcare N/A January 2017 4,296 9,872 4.09 1 Fee Healthcare N/A June 2017 519 46,539 11.93 1 Fee Healthcare N/A June 2017 5,115 21,666 27.26 1 Fee Healthcare N/A January 2017 2,605 25,411 18.35 1 Fee Healthcare N/A January 2017 4,275 30,679 16.13 1 Fee Healthcare N/A January 2017 5,017 16,992 32.13 1 Fee Healthcare N/A January 2017 1,673 39,393 16.53 1 Fee Healthcare N/A January 2017 6,954 39,393 15.07 1 Fee Healthcare N/A January 2017 5,677 25,700 16.69 1 Fee Healthcare N/A January 2017 3,833 3,780 9.80 1 Fee Healthcare N/A December 2017 — 4,000 9.40 1 Fee Healthcare N/A December 2017 — 13,209 9.40 Fee Healthcare N/A December 2017 — 73,381 21.87 1 Fee Healthcare N/A January 2017 14,681 30,176 20.44 1 Fee Healthcare N/A January 2017 6,075 18,500 23.18 1 Fee Healthcare N/A June 2017 3,424 24,945 19.21 1 Fee Healthcare N/A June 2017 1,530 94,719 21.10 2 Fee Healthcare N/A March 2016 6,951 67,706 15.39 1 Fee Healthcare N/A January 2022 7,629 45,187 11.27 1 Fee Healthcare N/A January 2017 4,453 25,185 9.86 1 Fee Healthcare N/A January 2017 2,463 39,393 11.80 1 Fee Healthcare N/A January 2017 4,243 39,393 14.87 1 Fee Healthcare N/A January 2017 6,836 36,861 13.69 1 Fee Healthcare N/A June 2017 6,457 19,380 22.70 1 Fee Healthcare N/A December 2017 — 39,092 9.94 1 Fee Healthcare N/A June 2017 5,278 38,205 14.53 1 Fee Healthcare N/A June 2017 7,071 26,583 18.47 2 Fee Healthcare N/A January 2017 10,050 52,697 15.78 1 Fee Healthcare N/A April 2022 3,250 39,393 11.76 1 Fee Healthcare N/A January 2017 5,639 29,161 14.33 1 Fee Healthcare N/A January 2017 4,006 54,000 9.22 1 Fee Healthcare N/A January 2017 4,961

48

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Location C ity, State Rockport, IN Roxboro, NC Rushville, IN Santa Ana, CA Sheboygan, WI Stephenville, T X Sterling, IL Stevens P oint, WI Stoughton, WI Sullivan, IN Sycamore, IL Syracuse, IN T ipton, IN T uscola, IL T wo Rivers, WI Vandalia, IL Wabash, IN Wakarusa, IN Warsaw, IN Washington Crt Hse, OH Wausau, WI Weatherford, OK Wendell, NC Wichita, KS Williamston, NC Windsor, NC Winston Salem, NC Winter Garden, FL Wisconsin Rapids, WI Yanceyville, NC T otal Healthcare

New York, NY Indianapolis, IN Reading, PA T otal

Ne t Le ase Portfolio: Prope rty In form ation S qu are Re n t pe r Nu m be r of O wn e rship Prope rty Le ase h old Le ase /S u ble ase En cu m bran ce s Fe e t squ are ft. Bu ildings Inte re st Type Expiration Date Expiration Date (In Th ou san ds) 26,000 9.12 1 Fee Healthcare N/A June 2017 1,723 18,174 20.55 1 Fee Healthcare N/A August 2020 3,284 13,118 7.58 1 Fee Healthcare N/A June 2017 554 35,304 16.58 1 Fee Healthcare N/A June 2017 4,108 24,500 32.25 1 Fee Healthcare N/A January 2017 7,934 39,784 23.66 2 Fee Healthcare N/A January 2017 9,300 28,875 20.30 1 Fee Healthcare N/A January 2017 6,187 149,008 18.55 2 Fee Healthcare N/A March 2016 2,009 26,443 21.19 2 Fee Healthcare N/A January 2017 8,487 24,686 8.69 1 Fee Healthcare N/A January 2017 1,686 18,415 4.11 1 Fee Healthcare N/A January 2017 891 44,077 14.31 1 Fee Healthcare N/A January 2017 4,930 54,000 16.63 1 Fee Healthcare N/A January 2017 8,509 57,980 9.14 1 Fee Healthcare N/A January 2017 3,514 50,000 10.16 1 Fee Healthcare N/A June 2017 8,116 36,393 11.50 1 Fee Healthcare N/A January 2017 4,185 14,369 21.13 1 Fee Healthcare N/A January 2017 2,708 39,393 17.14 1 Fee Healthcare N/A January 2017 7,345 35,374 5.13 1 Fee Healthcare N/A June 2017 1,308 70,746 7.42 1 Fee Healthcare N/A June 2017 3,711 48,000 24.18 1 Fee Healthcare N/A June 2017 10,084 89,828 6.74 1 Fee Healthcare N/A June 2017 6,492 25,514 10.88 1 Fee Healthcare N/A June 2017 3,658 19,660 16.76 1 Fee Healthcare N/A January 2017 1,974 24,047 18.03 1 Fee Healthcare N/A January 2017 7,553 53,000 9.50 1 Fee Healthcare N/A January 2017 4,519 26,926 15.11 1 Fee Healthcare N/A August 2020 2,332 81,810 11.61 1 Fee Healthcare N/A December 2019 9,135 18,174 22.52 1 Fee Healthcare N/A August 2020 3,179 24,228 21.08 2 Fee Healthcare N/A October 2022 3,000 33,592 17.12 1 Fee Healthcare N/A March 2020 3,507 37,322 14.31 1 Fee Healthcare N/A February 2016 4,930 20,869 11.60 1 Fee Healthcare N/A January 2017 1,129 38,283 20.62 1 Fee Healthcare N/A August 2020 5,000 4,090,168

15.82

118

17,665 333,600 609,000

53.42 7.29 –

1 1 1

7,635,560

13.90

150

518,702

Leasehold Fee Fee

Retail/Office Office/Flex Distribution Ctr

July 2015 N/A N/A

June 2011– July 2016 December 2025

– 28,472 19,152 $

910,620

At December 31, 2008, we had no single property with a book value equal to or greater than 10% of our total assets. For the year ended December 31, 2008, we had no single property with gross revenues equal to or greater than 10% of our total revenues. Item 3. Legal Proceedings We are not subject to any material legal proceedings. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of our security holders during the fourth quarter of 2008. 49

Table of Contents

PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the New York Stock Exchange under the symbol "NRF".

Processed and formatted by SEC Watch - Visit SECWatch.com

The following table sets forth the high, low and last sales prices for our common stock, as reported on the New York Stock Exchange, and dividends per share for the periods indicated. Pe riod

High

Low

C lose

Divide n ds

2007 First Quarter Second Quarter Third Quarter Fourth Quarter

$18.15 $15.65 $13.25 $11.02

$13.50 $11.88 $ 7.61 $ 7.85

$15.21 $12.51 $ 9.93 $ 8.92

$ $ $ $

0.36 0.36 0.36 0.36

2008 First Quarter Second Quarter Third Quarter Fourth Quarter

$ 9.95 $10.74 $ 9.33 $ 7.79

$ $ $ $

$ $ $ $

$ $ $ $

0.36 0.36 0.36 0.25

7.00 8.10 6.46 2.60

8.17 8.32 7.75 3.91

On April 22, 2008, we declared a cash dividend of $0.36 per share of common stock. The dividend was paid on May 15, 2008 to the stockholders of record as of the close of business on May 5, 2008. On July 22, 2008, we declared a cash dividend of $0.36 per share of common stock. The dividend was paid on August 15, 2008 to the stockholders of record as of the close of business on August 5, 2008. On October 8, 2008, we declared a cash dividend of $0.36 per share of common stock. The dividend was paid on November 14, 2008 to the stockholders of record as of the close of business on November 4, 2008. On January 20, 2009, we declared a dividend of $0.25 per share of common stock, payable with respect to the quarter ended December 31, 2008, to stockholders of record as of January 28, 2009. The dividend will be paid on February 27, 2009 in a combination of 40% cash and 60% common stock to the stockholders of record as of the close of business on January 28, 2009. On October 8, 2008 our Board of Directors authorized a share repurchase program of up to 10,000,000 shares of our outstanding common stock, or approximately 16% of our outstanding common stock. Stock repurchases under this program may be made from time to time through the open market or in privately negotiated transactions. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. Purchase of equity securities by us:

Pe riod

October 1–October 31 November 1–November 30 December 1–December 31 Total

(1)

Total Num be r of S h are s Purchase d

— 475,051 — 475,051

Ave rage Price Paid pe r S h are

Total Num be r of S h are s Purchase d as Part of Publicly An n ou n ce d Plan s or Program s

Maxim u m Nu m be r (or Approxim ate Dollar Valu e ) of S h are s that m ay ye t be Purchase d Un de r the Plan s or Program s(1)

— 2.91 — 2.91

— 475,051 — 475,051

10,000,000 9,524,949 9,524,949 9,524,949

$ $

In October 2008, we announced an open market repurchase program for the repurchase of up to 10.0 million shares of our outstanding common stock. 50

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents On February 23, 2009, the closing sales price for our common stock, as reported on the NYSE, was $2.50. As of February 23, 2009, there were 119 record holders of our common stock. This figure does not reflect the beneficial ownership of shares held in nominee name. Performance Graph Set forth below is a graph comparing the cumulative total stockholder return on shares of our common stock with the cumulative total return of the NAREIT All REIT Index and the Russell 2000 Index. The period shown commences on October 26, 2004, the date that our common stock began trading on the NYSE after it was first registered under Section 12 of the Exchange Act, and ends on December 31, 2008, the end of our most recently completed fiscal year. The graph assumes an investment of $100 on October 26, 2004 and the reinvestment of any dividends. The stock price performance shown on this graph is not necessarily indicative of future price performance. The information in the graph and the table below was obtained from SNL Financial.

Total Return Performance GRAPHIC

Inde x

NorthStar Realty Finance Corp. Russell 2000 NAREIT All REIT Index

10/26/04

12/31/04

100.00 100.00 100.00

130.86 113.11 109.69 51

Pe riod En ding 12/31/05 12/31/06

122.93 118.27 118.78

220.64 139.99 159.58

12/31/07

12/31/08

135.08 137.80 131.12

70.70 91.24 82.17

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Equity Compensation Plan Information The following table summarizes information, as of December 31, 2008, relating to our equity compensation plans pursuant to which grants of securities may be made from time to time.

Plan C ate gory

Nu m be r of S e cu ritie s to Be Issu e d Upon Exe rcise of O u tstan ding O ptions, W arran ts an d Righ ts(1)

W e ighte d-Ave rage Exe rcise Price of O u tstan ding O ptions, W arran ts and Righ ts

Nu m be r of S e cu ritie s Available for Fu ture Issu an ce

7,628,447 438,767 8,067,214

n/a n/a n/a

275,508 — 275,508

Approved by Security Holders: 2004 Omnibus Stock Incentive Plan 2004 Long-Term Incentive Bonus Plan Total

(1)

Represents units of partnership interest which are structured as profits interest, or LTIP Units, in our operating partnership. Conditioned on minimum allocation to the capital accounts of the LTIP Unit for federal income tax purposes, each LTIP Unit may be converted, at the election of the holder, into one common unit of limited partnership interest in our operating partnership, or OP Units. Each of the OP Units underlying these LTIP Units are redeemable at the election of the OP Unit holder, at the option of the Company in its capacity as general partner of our operating partnership, for: (i) cash equal to the then fair market value of one share of our common stock; or (ii) one share of our common stock. 52

Table of Contents Item 6. Selected Financial Data The information below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the combined financial statements of our predecessor and the respective related notes, each included elsewhere in this Form 10-K. The selected combined historical financial information presented for the period January 1, 2004 to October 28, 2004 relates to the operations of our predecessor. The selected historical consolidated information presented for the years ended December 31, 2008, 2007, 2006, 2005 and the period October 29, 2004 to December 31, 2004 relates to our operations and has been derived from our audited consolidated statement of operations included in this Annual Report on Form 10-K or our prior Annual Reports on Form 10-K. Our consolidated financial statements include our majority-owned subsidiaries which we control. Where we have a non-controlling interest, such entity is reflected on an unconsolidated basis.

Th e C om pany Pe riod O ctobe r 29, 2004 to Ye ar En de d De ce m be r 31, De ce m be r 31, 2008 2007 2006 2005 2004 (In Th ou san ds, Exce pt pe r S h are Am ou n ts) S tate m e n ts of O pe ration s Data: Revenues: Interest income Interest income—related parties Rental and escalation income Advisory and management fee income—related parties Other revenue T otal revenues Expenses: Interest expense Real estate properties—operating expenses Asset management fees—related party Fund raising fees and other joint venture costs Impairment on operating real estate P rovision for loss on investments General and administrative Direct: Salaries and equity based compensation(1)

$

3,990 727 510 665 38

Th e Pre de ce ssor (C om bine d) Pe riod Janu ary 1, 2004 to O ctobe r 28, 2004

$212,444 14,995 116,073 12,496 16,496

$292,135 13,516 95,755 7,658 6,249

$134,847 11,671 37,546 5,906 5,874

$ 40,043 8,374 11,403 4,813 464

$

31 1,828 — 2,437 185

372,504

415,313

195,844

65,097

5,930

4,481

191,472 8,278 4,746 7,823 5,580 11,200

242,560 8,709 4,368 6,295 — —

104,239 8,552 594 — — —

32,568 2,044 — — — —

3,352 185 — — — —

285 — — — — —

53,269

36,148

22,547

11,337

3,788

953

Processed and formatted by SEC Watch - Visit SECWatch.com Shared services—related party Auditing and professional fees Other general and administrative Allocated: Salaries and other compensation Insurance Other general and administrative

— 7,098 14,492

— 6,787 13,626

— 4,765 7,739

1,145 3,634 2,881

231 790 1,043

— — 181

— — —

— — —

— — —

— — —

— — —

3,060 318 925

T otal general and administrative Depreciation and amortization

74,859 43,232

56,561 33,191

35,051 13,578

18,997 4,352

5,852 190

5,437 —

347,190

351,684

162,014

57,961

9,579

5,722

T otal expenses

53

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

Th e C om pany

Th e Pre de ce ssor (C om bine d) Pe riod Janu ary 1, 2004 to O ctobe r 28, 2004

Income (loss) from operations Equity in (loss) earnings of unconsolidated ventures Unrealized gain (loss) on investments and other Realized gain on investments and other

Pe riod O ctobe r 29, 2004 to Ye ar En de d De ce m be r 31, De ce m be r 31, 2008 2007 2006 2005 2004 (In Th ou san ds, Exce pt pe r S h are Am ou n ts) 25,314 63,629 33,830 7,136 (3,649) (11,918) (11,684) 432 226 83 752,332 (4,330) 4,934 867 200 36,036 3,559 1,845 2,160 293

Income (loss) from continuing operations before minority interest Minority interest in operating partnerships Minority interest in joint ventures

801,764 (77,484) (4,614)

51,174 (2,702) (580)

41,041 (3,938) (68)

10,389 (2,116) —

(3,073) 632 —

1,194 — —

Net income (loss) from continuing operations Income (loss) from discontinued operations, net of minority interest Gain (loss) on sale of discontinued operations, net of minority interest Gain on sale of joint venture interest, net of minority interest

719,666

47,892

37,035

8,273

(2,441)

1,194

Net income (loss) P referred stock dividends

719,666 (20,925)

(1,241) 1,520 279 636

—

(56)

306

547

2

—

— —

— —

445 279

28,852 —

— —

— —

47,836 (16,533)

38,065 (860)

37,672 —

(2,439) —

1,194 —

Net income available to common stockholders

$

698,741

$

31,303

$

37,205

$

37,672

$

(2,439)

$

1,194

Net income (loss) per share from continuing operations Income per share from discontinued operations (basic/diluted) Gain per share on sale of discontinued operations and joint venture interest (basic/diluted)

$

11.07 —

$

0.51 —

$

0.91 0.01

$

0.38 0.03

$

(0.12) —

$

— —

Net income (loss) per share available to common stockholders

$

11.07

$

0.51

$

0.94

$

1.74

$

(0.12)

Common stock dividends declared P referred stock dividends declared Weighted average number of shares of common stock outstanding: Basic Diluted

$ $

90,069 20,925

$ $

87,948 16,533

$ $

45,461 860

$ $

11,268 —

$ $

(1)

—

63,135,608 70,136,783

—

61,510,951 65,086,953

0.02

39,635,919 44,964,455

1.33

21,660,993 27,185,013

— — —

— — $ $

20,868,865 25,651,027

For the year ended December 31, 2008, 2007, 2006, 2005 and the period from October 29, 2004 to December 31, 2004, includes $24,680, $16,007, $9,080, $5,847 and $2,991 equity based compensation, respectively.

54

— —

— —

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents 2008 Balan ce S h e e t Data Operating real estate—net T rading securities Available for sale securities, at fair value Real estate debt investments, net Real estate debt investments, held-for-sale Corporate loan investments Investments in and advances to unconsolidated/uncombined ventures T otal assets Mortgage notes and loans payable Exchangeable senior notes Bonds payable Credit facilities Secured term loans Liability to subsidiary trusts issuing preferred securities Repurchase obligations T otal liabilities Minority interest in operating partnership Minority interest in joint ventures Stockholders' equity T otal liabilities and stockholders' equity

2008

De ce m be r 31, 2007 2006 2005 (In Th ou san ds, Exce pt pe r S h are Am ou n ts)

$1,127,000 — 221,143 1,976,864 70,606 — 101,507 3,936,026 910,620 112,576 468,638 44,881 403,907 69,617 176 2,209,270 109,110 101,171 1,516,475 $3,936,026

$1,134,136 — 549,522 2,007,022 — 457,139 33,143 4,792,782 912,365 172,500 1,654,185 501,432 416,934 286,258 1,864 4,152,248 7,534 14,961 618,039 $4,792,782

$ 468,608 — 788,467 1,571,510 — — 11,845 3,185,620 390,665 — 1,682,229 16,000 — 213,558 80,261 2,502,990 7,655 15,204 659,771 $3,185,620

$ 198,708 — 149,872 681,106 — — 5,458 1,156,565 174,296 — 300,000 243,002 — 108,258 7,054 863,862 44,278 — 248,425 $1,156,565

2004

$

43,544 826,611 37,692 70,569 — — 5,363 1,078,078 40,557 — — 27,821 — — 800,418 902,322 32,447 — 143,309 $1,078,078

Th e Pre de ce ssor Th e C om pany (C on solidate d) (C om bine d) Pe riod Pe riod O ctobe r 29, Janu ary 1, 2004 to 2004 to Ye ar En de d De ce m be r 31, De ce m be r 31, O ctobe r 28, 2007 2006 2005 2004 2004 (In Th ou san ds)

O the r Data: Cash Flow from: Operating activities from continuing operations $ 82,668 $ 102,238 $ 53,998 $ 849,625 $ Investing activities (110,708) (2,373,929) (1,852,961) (881,090) Financing activities 8,250 2,380,767 1,815,828 11,630

(828,783) $ (108,032) 981,923

2,440 (19,197) 18,369

55

Table of Contents Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included in Item 8 of this report. Organization and Overview We are a real estate investment trust, or REIT, that was formed in October 2003 to continue and expand the real estate debt, real estate securities and net lease businesses of our predecessor. We conduct substantially all of our operations and make our investments through our operating partnership, of which we are the sole general partner. Through our operating partnership, including its subsidiaries, we primarily: •

originate, structure and acquire senior and subordinate debt investments secured primarily by commercial and multifamily properties;

•

invest in, create and manage portfolios of primarily investment grade commercial debt, including CMBS and REIT unsecured debt; and

•

acquire office, industrial, retail and healthcare related properties that are primarily net leased to corporate tenants.

We believe that these businesses are complementary to each other due to their overlapping sources of investment opportunities, common reliance on real estate fundamentals and ability to utilize secured debt to finance assets and enhance returns. We seek to match-fund our real estate securities and real estate debt investments primarily by issuing term debt, obtaining secured term financing and accessing private equity.

Processed and formatted by SEC Watch - Visit SECWatch.com

Sources of Operating Revenues We primarily derive revenues from interest income on the real estate debt investments that we originate with borrowers or acquire from third parties and our real estate securities in which we invest. We generate rental income from our net lease investments. We also generate interest revenues from our ownership interest in non-consolidated securities term debt issuances and advisory fee income, and income from our unconsolidated ventures. Other income comprises a much smaller and more variable source of revenues and is generated principally from fees associated with early loan repayments. We primarily derive income through the difference between the interest and rental income we are able to generate from our investments, and the cost at which we are able to obtain financing for our investments. In order to protect this difference, or "spread", we seek to matchfund our investments using secured sources of long term financing such as term debt transaction financings, mortgage financings and longterm unsecured subordinate debt. Match-funding means that we try to obtain debt with maturities equal to our asset maturities, and borrow funds at interest rate benchmarks similar to our assets. Match-funding results in minimal impact to spread when interest rates are rising and falling and minimizes refinancing risk since our asset maturities match those of our debt. We may also acquire investments which generate attractive returns with no long-term financing. Real Estate Debt We primarily earn interest income from real estate debt investments. At December 31, 2008, our real estate debt portfolio consisted of approximately $2.1 billion of funded structured senior and subordinate debt investments. We completed 3 investments in 2008, 41 investments in 2007, 74 investments in 2006, 44 investments in 2005 and 3 investments for the period of October 29, 2004 to December 31, 2004. Approximately 84.4% of our loan assets generate interest income based upon a floating index, primarily one-month LIBOR, plus a credit spread. Our revenues will be impacted by changes in LIBOR; however, we seek to minimize the impact of changes in floating interest rates by financing 56

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

floating rate assets with floating rate debt having interest rates benchmarked to the same index as our assets. Decreases in floating interest rates may result in lower income for our stockholders, notwithstanding the match-funding of floating rate assets with floating rate liabilities. Real Estate Securities We earn interest income from real estate fixed income securities and management fees from our Securities Fund and off-balance sheet term debt transactions. During 2007, we raised $81 million of third-party capital to form the Securities Fund. At closing, we sold our equity interest in N-Star IX, our most recent term debt transaction completed in February 2007, and other securities interests to the Securities Fund. During 2008, we sold 67% of our N-Star IX advisory fee income stream to the Securities Fund for $8.8 million. Similar to our real estate debt business, we seek to minimize the impact of floating interest rates by funding floating rate assets with floating rate debt and by hedging fixed rate assets funded with floating rate debt. Net Lease Properties We earn rental and escalation income from our net leased properties. During 2007, we acquired $125.9 million of core net lease properties. We made no core net lease acquisitions during 2008. Part of our business strategy had been to expand our net lease business into underserved real estate sectors. In 2006, we partnered with experts in the healthcare-related net lease business and formed the Wakefield joint venture. The joint venture acquired approximately $591.0 million of healthcare facilities in 2007 and $4.2 million in 2008. Profitability and Performance Metrics We calculate several metrics to evaluate the profitability and performance of our business. •

Adjusted funds from operations: ("AFFO") (see "Non-GAAP Financial Measures—Funds from Operations and Adjusted Funds from Operations" for a description of this metric).

•

Return on Equity ("ROE"), before and after general and administrative expenses. We calculate return on equity using AFFO, inclusive and exclusive of general and administrative expenses, divided by average common book equity during the period as a measure of the profitability generated by our assets and company on common stockholders' equity invested.

•

Credit losses are a measure of the performance of our investments and can be used to compare the credit performance of our assets to our competitors and other finance companies.

•

Assets Under Management ("AUM") growth is a key driver of our ability to grow our earnings, but is of lesser importance than other metrics such as AFFO and ROE due to lack of available new investment capital in the commercial real estate sector.

Credit risk management is our ability to manage our assets in a manner that preserves principal and income and minimizes credit losses that would decrease income. Corporate expense management influences the profitability of our business. We must balance making appropriate investments in our infrastructure and employees with a recognition that our accounting, finance, legal and risk management infrastructure does not directly generate quantifiable revenues for us. We frequently refer to general and administrative expenses, excluding stock-based compensation expense, divided by total revenues as a measure of our efficiency in managing expenses. For 2008, a much higher percentage of our performance compensation was awarded in cash rather than stock equivalents compared to prior years, resulting in an unfavorable efficiency ratio compared to prior years. Availability and cost of capital will impact our profitability and earnings since we must raise new capital to fund a majority of our AUM growth. 57

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Outlook and Recent Trends In early 2007, the subprime residential lending and single family housing markets began to experience significant default rates, declining real estate values and increasing backlog of housing supply. Other lending markets also experienced higher volatility and decreased liquidity resulting from the poor credit performance in the residential lending markets. The residential sector capital markets issues quickly spread more broadly into the asset-backed commercial real estate, corporate and other credit and equity markets. During 2008, financial institutions curtailed their lending to peer institutions, even on a very short-term basis, as lack of transparency regarding asset quality reduced confidence in counterparty creditworthiness. Despite liquidity infusions from government-sponsored central banks worldwide, the cost of capital increased dramatically, and even the most liquid markets such as the commercial paper market experienced enormous outflows of capital. Those institutions deemed by the market to be most at risk for credit issues, principally those with large real estate and mortgage portfolios, experienced massive withdrawals from customer brokerage and deposit accounts. These institutions also became unable to transact in the capital markets because few participants were willing to take their counterparty risk, thereby resulting in their insolvency (most notably Bear, Stearns & Co. and Lehman Brothers Holdings, Inc.). The U.S. Government reacted to the rapid deterioration in the financial system by passing the Emergency Economic Stabilization Act of 2008, or the EESA, in early October. The EESA authorized and provided funds to the U.S. Treasury Department to acquire financial assets from institutions as a buyer of last resort in order to enable these institutions to reduce their exposure to troubled assets and to regain market confidence. During the fourth quarter of 2008, the U.S. abandoned the direct asset purchase strategy, committed to make up to $250 billion of direct equity investments into banking institutions and purchased commercial paper from corporations. In February 2009, the U.S. Government ratified a $787 billion economic stimulus package. However, it is unclear whether such government actions will result in any near-term recovery to the financial sector. As a result of the enormous credit market disruptions and worldwide economic recession, most financial industry participants, including commercial real estate lenders and investors, continue to find it difficult to obtain cost-effective debt and equity capital to fund new investment activity or to refinance maturing debt. Weakening macroeconomic conditions combined with the continued lack of liquidity in the U.S. commercial real estate market continue to pressure underlying real estate values and cash flows. Commercial Real Estate Macroeconomic Conditions Property types most directly and immediately impacted by these weaker conditions include residential condominium projects in markets which experienced a high level of development during the residential market boom, such as in South Florida, Las Vegas and areas of California. Multi-family properties located in nearby areas have generally been impacted by the oversupply of condominiums because many of these projects are being converted into competing rental properties. Also, hotels are generally most immediately impacted by changing economic conditions because revenues are generated on a nightly basis, based on room rates and occupancy. Business and leisure travel is declining as macroeconomic conditions worsen. The next most sensitive real estate class to changing economic conditions is retail, followed by office and industrial properties. Office, industrial and retail property types have longer-term, multi-year leases and therefore reset to market on a lagging basis. Business and retailer failures have become more frequent and are expected to negatively impact occupancy rates in the future. The degree to which commercial real estate values are impacted by weaker economic conditions and the level of credit losses in our asset base will be determined primarily by the length that such conditions persist and the severity of the economic contraction. Most of our real estate loans bear interest rates based on a spread to one-month LIBOR, a floating rate index based on rates that banks charge each other to borrow. One-month LIBOR is 58

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

currently below 0.50%, well below its 3.5% average over the past five years. Lower LIBOR means lower debt service costs for our borrowers which should partially offset decreasing cash flows caused by the economic recession, and extend the life of interest reserves for those loans that require interest reserves to service debt while the collateral properties are being repositioned by our borrowers. Lower interest rates also theoretically support real estate valuations because a lower discount rate is applied to underlying future real estate cash flow assumptions in valuing a property. Currently, a lack of readily available financing, economic uncertainty and higher returning alternative investment opportunities have increased investor return expectations resulting in much higher risk premiums and, despite the lower interest rate, lower valuations for commercial real estate properties. For existing loans, when credit spreads widen, the fair value of these existing loans decreases. If a lender were to originate a similar loan today, such loan would carry a greater credit spread than the existing loan. Even though a loan may be performing in accordance with its loan agreement and the underlying collateral has not changed, the fair value of the loan may be negatively impacted by the incremental interest foregone from the widened credit spread. Accordingly, when a lender wishes to sell or finance the loan, the reduced value of the loan will impact the total proceeds that the lender will receive. Our real estate securities investments could also be negatively impacted by weaker rental market conditions. Within the underlying loan pools, any slowdown in economic conditions would likely reduce tenants' ability to make rent payments in accordance with the terms of their leases. Additionally, to the extent that market rental rates are reduced, property-level cash flows would likely be negatively affected as existing leases renew at lower rates. Finally, declining occupancy rates could also impact cash flow and reduce borrowers' ability to service their outstanding loans. Real estate securities values are also influenced by credit ratings assigned to the securities by accredited rating agencies. The rating agencies have commenced re-evaluations of their ratings methodologies for all securitized asset classes, including commercial real estate, in light of questionable ratings previously assigned to residential mortgage portfolios. Their reviews, when overlayed with more negative economic assumptions, are resulting in large amounts of ratings downgrade actions for CMBS, negatively impacting market values of CMBS and in some cases negatively impacting the term debt transaction financing structures used by us and others to leverage these investments. Our net leased assets could be adversely impacted by a weaker economy as well. Corporate space needs may contract resulting in lower lease renewal rates and longer releasing periods when leases are not renewed. Poor economic conditions may negatively impact the creditworthiness of our tenants which could result in their inability to meet the contractual terms of their leases. Our Strategy We responded to these difficult conditions by decreasing investment activity when we observed deteriorating market conditions. We expect credit to continue to be challenging throughout the remainder of 2009 and into 2010 and have focused our company resources on portfolio management activities to preserve our invested capital and liquidity. We anticipate that most of our investment activity and uses of available unrestricted cash liquidity for the foreseeable future will be focused on discounted repurchases of our previously issued debt securities which generally have been available in the market at very attractive prices, and also allows us to reduce future debt maturities. Our business plan assumes that the gains from repurchasing this debt at discounts to par more than offsets credit losses during the same period. Approximately $4.0 billion of our term debt transaction liabilities (including the off-balance sheet and on-balance sheet term debt transaction financings) currently permit reinvestment of capital proceeds which means when the underlying assets repay we are able to reinvest the proceeds in new assets without having to repay the liabilities. We also have assets financed on a bank term loan with an outstanding balance of $379.6 million at December 31, 2008, which has a final maturity in October 59

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

2010. Rather than making new investments with loan repayment proceeds in our term debt transactions, in certain instances we have been amortizing the bank term loan by transferring performing assets financed by the term loan into our term debt transactions, providing match funded financing for these assets. Approximately $797.6 million of our funded loan commitments have their initial maturity date in 2009; however, most of the loans contain extension options of at least nine months (many subject to performance criteria). It is therefore difficult to estimate how much capital, if any, from initial maturities or prepayments will be generated in our term debt transactions from loan repayments during 2009 to create availability to further amortize the bank loan. Our term debt structures do not have corporate financial covenants but require that the underlying loans and securities meet debt service and collateral value coverage (as defined by the indentures) in order for us to receive regular cash flow distributions. If the tests are not met cash flow is diverted from us to repay the liabilities until the tests are back into compliance. In some cases, our ability to reinvest can be adversely impacted if these tests are not in compliance. Ratings downgrades of CMBS and other securities can reduce the deemed value of the security in measuring collateral coverage, depending on the level of the downgrade. Also, defaults in our loans can reduce the collateral coverage of the defaulted loan in our term debt structures. As economic conditions continue to weaken and capital for commercial real estate remains scarce, we expect credit quality in our assets and across the commercial real estate sector to weaken. While we have devoted a majority of our resources to managing our existing asset base, a continued weak environment will make maintaining compliance with the term debt structures more difficult, jeopardizing regular cash flow distributions to our company. We believe that in the longer term, liquidity could eventually return to the commercial real estate finance markets but that in the near term, new financing sources must be developed in order to attractively finance new investment activity. We believe these sources could include term loans from financial institutions and life insurance companies, more restrictive commercial real estate finance structures, which may not permit reinvestment from asset repayments, and financing provided by motivated sellers of assets. Risk Management We use many methods to actively manage our asset base to preserve our income and capital. Generally, for loans and net lease assets, frequent dialogue with borrowers/tenants and inspections of our collateral and owned properties have proven to be an effective process for identifying issues early and prior to missed debt service and lease payments. Many of our loans also require borrowers to replenish cash reserves for items such as taxes, insurance and future debt service costs. Late replenishments also may be an early indicator there could be a problem with the borrower or collateral property. We also may negotiate modifications to loan terms if we believe such modification improves our ability to maximize principal recovery. Modifications may include changes to contractual interest rates, maturity dates and other borrower obligations. Generally, when we make a concession such as reducing an interest rate or extending a maturity date, we seek to get additional collateral and/or fees in return for the modification. In some cases we may issue default notices and begin foreclosure proceedings when the borrower is not complying with the loan terms and we believe taking control of the collateral is the best course of action to protect our capital. For net leases, we may seek to obtain up-front or accelerated payment in return for an early cancelation of the lease if we believe the tenant's creditworthiness has significantly deteriorated and that taking control of the property and re-leasing it maximizes value. Securities investments generally have a more liquid market than loans and net lease assets, but we typically have very little control over restructuring decisions when there is a problem with the asset. Generally, we manage risk in the securities portfolio by selling the asset when we can obtain a price that is attractive relative to its riskiness. In certain situations, we may sell an asset because there is an opportunity to reinvest the capital into a new asset with a more attractive risk/return profile. 60

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents We conduct a quarterly comprehensive credit review which is designed to enable management to evaluate and proactively manage assetspecific credit issues and identify credit trends on a portfolio-wide basis as an "early warning system." Nevertheless, we cannot be certain that our review will identify all issues within our portfolio due to, among other things, adverse economic conditions or events adversely affecting specific assets; therefore, potential future losses may also stem from assets that are not identified by our credit reviews. Based on the quarterly reviews, loans and net lease assets are put on an internal "Watch List" if we believe there is greater near-term risk that we could lose invested capital and/or there is a situation at the underlying collateral which requires intensive risk management and portfolio management resources. Securities investments are generally added to the watch list if there is a default, although management may use its discretion to include or exclude any asset from the watch list based on qualitative factors such as likelihood of actual loss realization, level of resources required to work out the issue, and probability of default if there has not yet been an actual default. A Watch List asset does not necessarily mean it is non-performing or that there is an impaired loan basis, but indicates our view that the risk of the asset becoming non-performing or impaired is much greater than in the overall portfolio. We believe the Watch List is a useful internal tool for prioritizing management resources but delinquencies, realized losses, non-performing loans and actual credit loss reserves are the appropriate basis in which our investors should compare our credit performance to other financial services companies. These metrics are much more objective and comparable than management's assessment of Watch List criteria which are more subjective and difficult to define in the current environment. For this reason, in the future we may decide to not publish our internal Watch List in order to avoid investor confusion when comparing our credit track record to other companies. As of December 31, 2008 our loan portfolio had the following credit statistics: (dollar amounts in thousands) #

Non-performing loans(1) Loan loss reserves

(1)

1 7

$

$21,373 11,200

% of total loan portfolio

1.04% 0.55%

A loan is classified as non-performing at such time as the loan becomes 90 days delinquent in interest or principal payments or the loan has a maturity default.

During 2008, we recorded $15.7 million of credit loss provisions relating to 10 loans and reversed $4.5 million of previously recorded reserves relating to four loans. As of December 31, 2008, loan loss reserves totaled $11.2 million. Overall, the prolonged financial sector crisis and economic recession is resulting in increasing stress levels for commercial real estate credit. A shrinking economy generally results in decreasing real estate cash flows as corporations and consumers reduce their real estate needs, travel and spending. Because the commercial real estate asset-backed markets remain closed, and banks and life companies have drastically curtailed new lending activity, real estate owners are having difficulty refinancing their assets at maturity. Many owners are also having trouble achieving their business plans to the extent they acquired a property to reposition it or otherwise invest capital to increase the property's cash flows. Property values have also generally decreased over the past year because of scarcity of financing, which when it is available the terms generally are at much lower leverage and higher cost than available in prior years), uncertainty regarding future economic conditions and higher returning investment opportunities available in other asset classes. Decreasing values make it difficult for real estate investors to sell their properties and to recoup their capital. As a result of the weak commercial real estate market, many lenders, including us, are concluding that extending loans at original maturity, rather than foreclosure and sale, may be the most attractive path for maximizing value. 61

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Many of our loans were made to borrowers who had a business plan to improve the collateral property and who therefore needed a flexible balance sheet lender. In many cases we required the borrowers to pre-fund reserves to cover interest and operating expenses until the property cash flows increased sufficiently to cover debt service costs. We also generally required the investor to refill these reserves if they became deficient due to underperformance and if the borrower wanted to exercise extension options under the loan. Despite low interest rates, we expect that in the future some of our borrowers may have difficulty servicing our debt because they cannot achieve their business plan in this economic environment. If any of our borrowers are unable to replenish reserves and otherwise ultimately achieve their business plans, the related loans may become non-performing. In addition, even if a borrower's business plan is achieved, current real estate valuations and the financing environment may result in a borrower being unable to recoup its invested capital and a default under the loan causing a partial or full loss of our loan principal. Our net leased assets are generally leased to a single tenant and we typically financed these assets with non-recourse first mortgage loans. In the event a tenant goes out of business, we must decide whether to continue to pay debt service and property operating costs until we find a new tenant, or we may give the property to the mortgage lender and lose our invested equity capital. One of our net lease investments is comprised of three office buildings totaling 257,000 square feet located in Chatsworth, CA and 100% leased to Washington Mutual Bank, FA, or WaMu. The assets are financed with a non-recourse $43.0 million first mortgage loan. The assets are also financed with a $9.3 million mezzanine loan which is collateral for one of our securities term financings. On September 25, 2008, JPMorgan Chase & Co., or JPMorgan, announced that it had acquired substantially all of the assets and liabilities of WaMu from the Federal Deposit Insurance Corp. JPMorgan was entitled to a 90-day period from the WaMu acquisition date to decide whether they will accept or reject the terms of the lease. On February 5, 2009, we became aware that JPMorgan intends to vacate the properties by March 23, 2009. As a result, we took a $5.6 million impairment charge to these properties as of December 31, 2008. We are evaluating our options regarding this investment, which could include transferring our ownership in the properties to the first mortgage lender. Critical Accounting Policies Our discussion and analysis of our financial condition and results of operations is based on our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. These accounting principles requires the use of estimates and assumptions that could affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Actual results could differ significantly from those estimates. The estimates are based on information that is currently available to management, as well as on various other assumptions that management believes are reasonable under the circumstances. We have identified our critical accounting policies that affect the more significant judgments and estimates used by us in the preparation of our consolidated financial statements to be the following:. Principles of Consolidation The consolidated financial statements include our accounts and our majority-owned subsidiaries and variable interest entities ("VIE") where we are deemed the primary beneficiary in accordance with the provisions and guidance of Financial Accounting Standards Board ("FASB") Interpretation No. 46R, "Consolidation of Variable Interest Entities" ("Fin 46(R)"). All significant inter-company balances have been eliminated in consolidation. 62

Table of Contents Valuation of Financial Instruments Proper valuation of financial instruments is a critical component of our financial statement preparation. We adopted the provisions of SFAS No. 157 "Fair Value Measurements" ("SFAS 157") effective January 1, 2008. SFAS 157 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketplace participants at the measurement date (i.e., the exit price). We have categorized our financial instruments, based on the priority of the inputs to the valuation technique, into a three level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities recorded on the Condensed Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as follows: Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market (examples include active exchange-traded equity securities, listed derivatives, most U.S. Government and agency securities, and certain other sovereign government obligations). Level 2. Financial assets and liabilities whose values are based on the following:

Processed and formatted by SEC Watch - Visit SECWatch.com

a)

Quoted prices for similar assets or liabilities in active markets (for example, restricted stock);

b)

Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently);

c)

Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including interest rate and currency swaps); and

d)

Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability (for example, certain mortgage loans).

Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include private equity investments, commercial mortgage backed securities, and long-dated or complex derivatives including certain foreign exchange options and long dated options on gas and power). The fair values of our financial instruments are based on observable market prices when available. Such prices are based on the last sales price on the date of determination, or, if no sales occurred on such day, at the "bid" price at the close of business on such day and if sold short at the "asked" price at the close of business on such day. Interest rate swap contracts are valued based on market rates or prices obtained from recognized financial data service providers. Generally these prices are provided by a recognized financial data service provider. 63

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents We have valued our financial instruments, in the absence of observable market prices, using the valuation methodologies described below applied on a consistent basis. For some financial instruments little market activity may exist; management's determination of fair value is then based on the best information available in the circumstances, and may incorporate management's own assumptions and involves a significant degree of management's judgment. Investments for which market prices are not observable are generally investments in equity or income notes of term debt transactions, equity interests in collateralized loan obligations and trust preferred securities. Fair values of these investments are determined by reference to market rates or prices provided by the underwriters of the structured securities or cash flow models utilizing an internal rate of return provided by the underwriters of the term debt or CLO transaction. An analysis is applied to the estimated future cash flows using various factors depending on the investments, including various reinvestment parameters. Liabilities for which market prices are not generally observable include our liability to subsidiary trusts issuing preferred securities. The fair value of these debt instruments are based upon an analysis of other instruments issued by us that are currently actively traded including our preferred stock and exchangeable senior notes. An analysis is performed on the implied credit spreads that could be observed for these instruments. We believe that the credit spreads for our preferred stock and exchangeable senior notes are valid proxies for those of the liability to subsidiary trusts issuing preferred securities because they share many of the same structural and credit features. However, in deriving appropriate credit spreads for the liability to subsidiary trusts issuing preferred securities on the basis of observed credit spreads for preferred stock and exchangeable senior notes, several adjustments are made to reflect the differences between these instruments and the liability to subsidiary trusts issuing preferred securities. Operating Real Estate In accordance with Statement of Financial Standards ("SFAS 144") "Accounting for the Impairment or Disposal of Long-Lived Assets," a property to be disposed of is reported at the lower of its carrying value or its estimated fair value less the cost to sell. Once an asset is determined to be held for sale, depreciation and straight-line rental income are no longer recorded. In addition, the asset is reclassified to assets held for sale on the consolidated balance sheet and the results of operations are reclassified to income (loss) from discontinued operations in our consolidated statements of operations. In accordance with SFAS No. 141 "Business Combinations" ("SFAS 141"), we allocate the purchase price of operating properties to land, building, tenant improvements, deferred lease cost for the origination costs of the in-place leases and to intangibles for the value of the above or below market leases. We amortize the value allocated to the in-place leases over the remaining lease term. The value allocated to the above or below market leases are amortized over the remaining lease term as an adjustment to rental income. Fair Value Option SFAS 159" Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159") provides a fair value option election that allows companies to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and liabilities. Changes in fair value for assets and liabilities for which the election is made will be recognized in earnings as they occur. SFAS 159 permits the fair value option election on an instrument by instrument basis at initial recognition. We adopted SFAS No. 159 effective January 1, 2008 and have elected to fair value for our third party available for sale securities, our exchangeable senior notes, our N-Star bonds payable and our liabilities to subsidiary trust issuing preferred securities. We determine the fair value of these 64

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents financial assets and financial liabilities pursuant to the guidance in SFAS 157. See Note 3 to the condensed consolidated financial statements for further information. Available for Sale Securities We determine the appropriate classification of our investments in securities at the time of purchase and reevaluate such determination at each balance sheet date in accordance with SFAS "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"). Securities for which we do not have the intent or the ability to hold to maturity are classified as available for sale securities. We have designated our investments in the equity notes and our non investment grade notes of unconsolidated term debt transactions as available for sale securities as they meet the definition of a debt instrument due to their redemption provisions. These securities are carried at estimated fair value with the net unrealized gains or losses reported as a component of accumulated other comprehensive income (loss) in the consolidated statements of stockholders' equity. Our available for sale securities that serve as collateral for our term debt transactions, which we have elected the fair value option pursuant to SFAS 159, are carried at fair value with the net unrealized gains or losses reported as a component of earnings in the statement of operations. We determine the fair value of our available for sale securities pursuant to the guidance in SFAS 157. For additional information regarding unrealized gains and losses due to changes in the fair value of our available for sale securities at December 31, 2008 and 2007, see Note 5 of the notes to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Revenue Recognition Interest Income from our real estate debt investments is recognized on an accrual basis over the life of the investment using the effective interest method, Fees, discounts, premiums, anticipated exit fees and direct cost are recognized over the term of the loan as an adjustment to the yield. Fees on commitments that expire unused are recognized at expiration. Interest income from available for sale securities is recognized on an accrual basis over the life of the investment on a yield-to-maturity basis. We recognize interest income on our investments in the equity notes of our unconsolidated term debt transactions pursuant to Emerging Issues Task Force ("EITF") 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets." Interest income is recognized on an estimated effective yield to maturity basis. Accordingly, on a quarterly basis, we calculate a revised yield on the current amortized cost of the investment and a current estimate of cash flows based upon actual and estimated prepayment and credit loss experience. The revised yield is then applied prospectively to recognize interest income. Rental Income from our net lease portfolio is recognized on a straight-line basis over the non-cancelable term of the respective leases. Credit Losses, Impairment and Allowance for Doubtful Accounts We assess whether unrealized losses on the change in fair value on our available for sale securities reflect a decline in value which is other than temporary in accordance with EITF 03-1 "The Meaning of Other than Temporary Impairment and its Application to Certain Investments." If it is determined the decline in value is other than temporary, the impaired securities are written down through earnings to their fair values. Significant judgment of management is required in this analysis, which includes, but is not limited to, making assumptions regarding the collectability of the principal and interest, net of related expenses, on the underlying loans. 65

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Allowances for real estate debt investment losses are established based upon a periodic review of the loan investments. Income recognition is generally suspended for the investments at the earlier of the date at which payments become 90 days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. Income recognition is resumed when the suspended investment becomes contractually current and performance is demonstrated to be resumed. In performing this review, management considers the estimated net recoverable value of the investment as well as other factors, including the fair market value of any collateral, the amount and the status of any senior debt, the prospects for the borrower and the economic situation of the region where the borrower does business. Because this determination is based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized from the investments may differ materially from the carrying value at the balance sheet date. We review long-lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Upon determination that an impairment exists, the related asset is written down through earnings to its estimated fair value. Allowances for doubtful accounts for tenant receivables are established based on periodic review of aged receivables resulting from estimated losses due to the inability of tenants to make required rent and other payments contractually due. Additionally, we established, on a current basis, an allowance for future tenant credit losses on billed and unbilled rents receivable based upon an evaluation of the collectability of such amounts. Management is required to make subjective assessments as to whether there are impairments in the values of its investment in unconsolidated ventures accounted for using the equity method. As no public market exists for these investments, management estimates the recoverability of these investments based on projections and cash flow analysis. These assessments have a direct impact on our net income because recording an impairment loss results in an immediate negative adjustment to net income. Stock Based Compensation We have adopted the fair value method of accounting prescribed in SFAS No. 123 "Accounting for Stock Based Compensation" ("SFAS 123") (as amended by SFAS No. 148 and SFAS 123(R)) for equity based compensation awards. SFAS 123 requires an estimate of the fair value of the equity award at the time of grant rather than the intrinsic value method. For all fixed equity based awards to employees and directors, which have no vesting conditions other than time of service, the fair value of the equity award at the grant date will be amortized to compensation expense over the award's vesting period. For performance based compensation plans we recognize compensation expense at such time as the performance hurdle is anticipated to be achieved over the performance period based upon the fair value at the date of grant. For target-based compensation plans we recognize compensation expense over the vesting period based upon the fair value of the plan. Derivatives and Hedging Activities We account for our derivatives and hedging activities in accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires us to recognize all derivatives as either assets or liabilities in the consolidated balance sheet and to measure those instruments at fair value. Additionally, the fair value adjustments of each period will affect our consolidated financial statements differently depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. 66

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents For those derivative instruments that are designated and qualify as hedging instruments, we must designate the hedging instrument, based upon the exposure being hedged, as either a cash flow hedge or a fair value hedge. Generally, we enter into derivatives that are intended to qualify as hedges under accounting principles generally accepted in the United States, unless specifically stated otherwise. Toward this end, the terms of hedges are matched closely to the terms of hedged items. With respect to derivative instruments that have not been designated as hedges, or are hedges on debt that is remeasured at fair value pursuant to SFAS 159, any net payments under, or fluctuations in the fair value of, such derivatives are recognized currently in income. Our basis swaps have been designated as non-hedge derivatives. In January 2008, we adopted SFAS 159 and elected the fair value option for our bonds payable and its liability to subsidiary trusts issuing preferred securities. Under SFAS 159, the changes in fair value of these financial instruments are recorded in earnings. As a result of this election, the interest rate swap agreements associated with these debt instruments no longer qualify for hedge accounting, in accordance with SFAS 133 "Derivatives and Hedging Activity", since the underlying debt is remeasured with changes in the fair value recorded in earnings. The unrealized gains or losses accumulated in other comprehensive income, related to these interest rate swaps, will be reclassified into earnings over the shorter of either the life of the swap or the associated debt with current mark-to-market unrealized gains or losses recorded in earnings. Our derivative financial instruments contain credit risk to the extent that our bank counterparties may be unable to meet the terms of the agreements. We minimize such risk by limiting our counterparties to major financial institutions with single A or better credit ratings. In addition, the potential risk of loss with any one party resulting from this type of credit risk is monitored. Recent Accounting Pronouncements In December 2007, the FASB issued SFAS 141(R), "Business Combinations" ("SFAS 141(R)"). This Statement replaces SFAS 141, "Business Combinations", and requires an acquirer to recognize the assets acquired, the liabilities assumed, including those arising from contractual contingencies, any contingent consideration, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the statement. SFAS 141(R) also requires the acquirer in a business combination achieved in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the noncontrolling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with SFAS 141(R)). In addition, SFAS 141(R)'s requirement to measure the noncontrolling interest in the acquiree at fair value will result in recognizing the goodwill attributable to the noncontrolling interest in addition to that attributable to the acquirer. SFAS 141(R) amends SFAS No. 109, "Accounting for Income Taxes", to require the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. It also amends SFAS 142, "Goodwill and Other Intangible Assets", to, among other things, provide guidance on the impairment testing of acquired research and development intangible assets and assets that the acquirer intends not to use. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We are currently assessing the potential impact that the adoption of SFAS 141(R) could have on our financial statements. 67

Table of Contents In December 2007, the FASB issued SFAS 160, "Noncontrolling Interests in Consolidated Financial Statements" ("SFAS 160"). SFAS 160 amends Accounting Research Bulletin 51, "Consolidated Financial Statements", to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 also changes the way the consolidated income statement is presented by requiring consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. SFAS 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated and requires expanded disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent owners and the interests of the noncontrolling owners of a subsidiary. SFAS 160 is effective for fiscal periods, and interim periods within those fiscal years, beginning on or after December 15, 2008. We are currently assessing the potential impact that the adoption of SFAS 160 could have on our financial statements. In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities—An Amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 expands the disclosure requirements for derivative instruments and hedging activities. SFAS 161 specifically requires entities to provide enhanced disclosures addressing the following: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. SFAS 161 is effective for us on January 1, 2009. We are currently assessing the potential impact that the adoption of SFAS 161 could have on our financial statements.

Processed and formatted by SEC Watch - Visit SECWatch.com

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles in the United States for nongovernmental entities. SFAS 162 is effective 60 days following approval by the U.S. Securities and Exchange Commission ("SEC") of the Public Company Accounting Oversight Board's amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles". The adoption of SFAS 162 did not have a material impact on our financial statements. In May 2008, the FASB issued FASB Staff Position APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1 applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement of the conversion option. FSP APB 14-1 requires bifurcation of the instrument into a debt component that is initially recorded at fair value and an equity component. The difference between the fair value of the debt component and the initial proceeds from issuance of the instrument is recorded as a component of equity. The liability component of the debt instrument is accreted to par using the effective yield method; accretion is reported as a component of interest expense. The equity component is not subsequently re-valued as long as it continues to qualify for equity treatment. This practice marks a significant change from the current accounting practice for convertible debt instruments in the scope of the FSP. Current practice does not require separation of the liability and equity components of such instruments. Separately accounting for these instruments' liability and equity components will result in the recording of more non-cash interest cost over the life of the convertible debt instrument, because 68

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

of an initial debt discount. Additionally, FSP APB 14-1 precludes the use of the fair value option pursuant to SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities." FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. We intend to adopt FSP APB 14-1 effective January 1, 2009 and apply its provisions retrospectively to all periods presented in our financial statements. We have determined that FSP APB 14-1will result in the recognition of additional non-cash interest expense of approximately $0.8 million, $2.8 million and $3.6 million in our 2007, 2008 and 2009 statements of operations, respectively. The 2008 increase in non-cash interest expense will be offset by a $5.0 million capitalization of financing fees which were expensed upon the election of the fair value option on the convertible debt instruments. In October 2008, the FASB issued Staff Position No. FAS 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active ("FSP 157-3"). FSP 157-3 clarifies the application of SFAS 157, which we adopted as of January 1, 2008, in cases where a market is not active. We have considered the guidance provided by FSP 157-3 in our determination of estimated fair values as of December 31, 2008, and the impact was not material. In December 2008, the FASB issued Staff Position No. FAS 140-4 and FIN 46(R)-8, "Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities" ("FSP FAS 140-4 and FIN 46(R)-8"). FSP FAS 140-4 and FIN 46(R)-8 increases disclosure requirements for public companies and is effective for reporting periods (interim and annual) that end after December 15, 2008. The purpose of this FSP is to promptly improve disclosures by public entities and enterprises until the pending amendments to FASB Statement No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"("SFAS 140"), and FASB Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities" ("FIN 46(R)") , are finalized and approved by the Board. The FSP amends SFAS 140 to require public entities to provide additional disclosures about transferors' continuing involvements with transferred financial assets. It also amends FIN 46(R) to require public enterprises, including sponsors that have a variable interest in a variable interest entity, to provide additional disclosures about their involvement with variable interest entities. This pronouncement is related to disclosure only and will not have an impact on our consolidated financial position, results of operations or cash flows. Comparison of the Year Ended December 31, 2008 to the Year Ended December 31, 2007 Revenues Interest Income Interest income for the year ended December 31, 2008 totaled $212.4 million, representing a decrease of $79.7 million, or 27%, compared to $292.1 million for the year ended December 31, 2007. The decrease consisted of a $62.7 million decrease attributable to a lower average LIBOR rate during 2008 of approximately 250 basis points compared to 2007, a decrease of $32.0 million in interest income attributable to the sale of securities investments to the Securities Fund and the deconsolidation of Monroe Capital as a result of the recapitalization. The decrease was partially offset by a net increase to interest income of approximately $15.3 million resulting from the origination and acquisition of commercial real estate debt and commercial real estate securities during 2008 with a net book value of $388.5 million offset by approximately $330.0 million of investment dispositions and repayments during 2008. Interest Income—Related Parties Interest income from related parties for the year ended December 31, 2008 totaled $15.0 million, representing an increase of $1.5 million, or 11%, compared to $13.5 million for the year ended December 31, 2007. The increase is attributable to increases in our investments in the noninvestment 69

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

grade note classes of our unconsolidated term debt transactions. All of our real estate securities term debt transactions completed since 2006 in which we retain the equity notes have been accounted for as on-balance sheet financings. Rental and Escalation Income Rental and escalation income for the year ended December 31, 2008 totaled $116.1 million, representing an increase of $20.3 million, or 21%, compared to $95.8 million for the year ended December 31, 2007. The increase was primarily attributable to net lease property acquisitions by our Wakefield joint venture during 2007 for which we earned a full year of revenues in 2008. These acquisitions collectively contributed $16.6 million of additional rental income. The full year impact of other net lease properties acquired during 2007 contributed additional rental and escalation income of $3.7 million during 2008. Advisory and Management Fee Income—Related Parties Advisory fees from related parties for the year ended December 31, 2008 totaled $12.5 million, representing an increase of approximately $4.8 million, or 62%, compared to $7.7 million for the year ended December 31, 2007. In July 2007, we sold our equity interest in N-Star IX to the Securities Fund. As a result of the sale, N-Star IX is no longer consolidated into our financial statements, but we continue to earn advisory fees from the financing. During the second quarter 2008, we sold 67% of our advisory fee income stream, pursuant to our agreement with NStar IX, to the Securities Fund. The increase was primarily attributable to the recognition of an additional $4.8 million in fee income related to the sale and the advisory fees earned on N-Star IX prior to the sale of $1.0 million, partially offset by reduced advisory fees earned on N-Star IX after the sale of $1.0 million, all of which were formerly eliminated in consolidation. Other Revenue Other revenue for the year ended December 31, 2008 totaled $16.5 million, representing an increase of $10.3 million, or 166%, compared to $6.2 million the year ended December 31, 2007. Other revenue for the year ended December 31, 2008 consisted primarily of: (i) a $9.0 million lease termination fee; (ii) $5.6 million in profit participation proceeds from modifications of real estate debt investments; (iii) $0.6 million of exit fees; and (iv) $1.3 million of unused credit line fees, prepayment penalties, draw fees and other miscellaneous revenue. Other revenue for the year ended December 31, 2007 includes: (i) $2.6 million in early prepayment fees; (ii) $1.9 million of recurring income from premiums received on credit default swaps related to Abacus NS2 which was sold to the Securities Fund in 2007; (iii) $0.8 million of exit fees and loan draw fees; and (iv) $0.9 million in consent, assumption, unused credit line and other fees on loans in our real estate debt portfolio. Expenses Interest Expense Interest expense for the year ended December 31, 2008 totaled $191.5 million, representing a decrease of $51.1 million, or 21%, compared to $242.6 million for the year ended December 31, 2007. The decrease in interest was primarily the result of: (i) $41.2 million lower interest on NStar IV, VI, VII and VIII bonds payable and trust preferred debt due to lower average LIBOR rates, debt repurchases and debt repayments; (ii) $2.6 million of lower deferred financing fee amortization relating to debt which we elected to fair value under SFAS 159 in 2008; (iii) $15.8 million lower interest relating to the debt associated with assets sold to the Securities Fund in 2007; (iv) $8.3 million lower interest as a result of the recapitalization of our corporate lending venture in 2008; (v) $5.3 million relating to lower average balances and lower LIBOR rates on our WA Term Loan; (vi) $0.3 million related to the termination of our unsecured revolving credit line in May 2008; and (vii) $3.9 million lower interest 70

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

due to the partial repayment of repurchase obligations. The decrease in interest expense was partially offset by: (i) $10.0 million of additional interest on mortgage loans payable due to the full year impact of 2007 acquisitions in our net lease portfolio; (ii) an increase of $5.8 million relating to the full year impact of the June 2007 closing of our $172.5 million exchangeable senior notes offering; (iii) $5.4 million from $80.0 million exchangeable senior notes offering issued in May 2008; (iv) $2.9 million from the full year impact of the Euro-note; and (v) $2.2 million relating to the full .year impact of the August 2007 JP Facility and our new LB term loan which closed in June 2008. In additional interest expense for 2008 does not reflect the $15.0 million of interest rate swap payments which was classified in unrealized gain (loss) on investments (as required under SFAS 133), as a result of the fair value option elected for the debt associated with the interest rate swaps. Real Estate Properties—Operating Expenses Real estate property operating expenses for year ended December 31, 2008 totaled $8.3 million, representing a decrease of $0.4 million, or 5%, compared to $8.7 million for year ended December 31, 2007. The decrease was primarily attributable to lower tenant reimbursable expenses at one of our core net lease properties and reduced insurance expense at various net lease properties. Asset Management Fees—Related Party Advisory fees for related parties for the year ended December 31, 2008 totaled $4.7 million, representing an increase of $0.3 million, or 7%, compared to $4.4 million for the year ended December 31, 2007. The increase was primarily attributable to increased asset management fees in our Wakefield joint venture resulting from higher average assets under management during 2008. Fundraising Fees, Debt Issuance Costs and Other Fundraising fees, debt issuance costs and other for the year ended December 31, 2008 totaled $7.8 million, representing an increase of $1.5 million, or 24%, compared to $6.3 million for the year ended December 31, 2007. Fundraising fees, debt issuance costs and other for the year ended December 31, 2008 included $2.9 million associated with the write-off of goodwill relating to the NRF Capital acquisition in 2005 and $4.9 million of debt issuance cost related to the May 2008 issuance of our 11.50% exchangeable senior notes, which we refer to as the NNN Notes, for which we elected the fair value option under SFAS 159. Fundraising fees, debt issuance costs and other for the year ended December 31, 2007 included $3.2 million of placement fee expenses for raising private capital for our Securities Fund and a $3.1 million write-off of due diligence costs relating to the termination of a purchase agreement to acquire a portfolio of tax credit multi-family properties by one of our joint ventures. Impairment on Operating Real Estate Impairment on operating real estate for the year ended December 31, 2008 totaled $5.6 million. The impairment on operating real estate was taken on our net leased asset comprised of three office buildings totaling 257,000 square feet located in Chatsworth, CA and 100% leased as of December 31, 2008. The buildings have a combined $57.0 million net book value and are financed with a non-recourse $43.0 million first mortgage loan and a $9.3 million mezzanine loan. On February 5, 2009 we became aware that JPMorgan intends to vacate the properties by March 23, 2009. As a result, we took a $5.6 million impairment charge on these properties as of December 31, 2008. We had no impairment on operating real estate for the year ended December 31, 2007. Provision for Loan Losses Provision for loss on investments for the year ended December 31, 2008 totaled a net of $11.2 million. During 2008, we recorded $15.7 million of asset-specific loan reserves relating to 10 71

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

separate loans and reversed $4.5 million of reserves relating to four separate loans due to resolution of the impairment which resulted in the original reserve. We had no provision for loan losses for the year ended December 31, 2007. General and Administrative General and administrative expenses for the year ended December 31, 2008 totaled $74.9 million, representing an increase of $18.3 million, or 32%, compared to $56.6 million for the year ended December 31, 2007. The primary components of our general and administrative expenses were the following: Salaries and equity-based compensation for the year ended December 31, 2008 totaled $53.3 million, representing an increase of approximately $17.1 million, or 47%, compared to $36.2 million, for the year ended December 31, 2007. The increase was attributable to an $8.7 million increase in equity-based compensation expense and an increase of $8.4 million in cash compensation costs. The increase in equitybased compensation expense was principally attributable to $9.5 million of additional 2008 expense relating to vesting of equity retention grants issued to our executive officers and key employees in the fourth quarter 2007 and performance-based equity grants issued in January 2008 relating to calendar year 2007 performance, $2.7 million relating to employee compensation and separation agreements, and $0.9 million from accelerated vesting of equity awards previously granted to employees who were terminated in connection with our restructuring in December 2008. Equity grants are amortized over the related vesting periods based upon the value as of the date of grant. Equity-based compensation expense for 2008 represented a weighted-average share price of $9.86 per share based upon grant date values. The increase in salaries and benefits was attributable to $1.0 million of termination benefits paid to employees as part of the December 2008 restructuring and $7.4 million related to incentive compensation relating to 2008. The 2008 incentive compensation included a higher proportion of cash versus stock than prior periods due to our desire to issue less equity given the negative impact macroeconomic and capital markets conditions have had on our stock price and broader market indices. Total value of cash and equity based awards granted in 2008 were $7.4 million lower than such grants relating to 2007. The increase was offset by $2.3 million of lower costs relating to the 2004 Long Term Incentive Bonus Plan, which was fully vested as of December 31, 2007, and a decrease in equity-based compensation expense of $1.3 million related to our Employee Outperformance Plan. Auditing and professional fees for the year ended December 31, 2008 totaled $7.1 million, representing an increase of $0.3 million, or 4%, compared to $6.8 million for the year ended December 31, 2007. The increase was primarily attributable to increased legal and consulting fees relating to a corporate restructuring and general corporate matters. Other general and administrative expenses for the year ended December 31, 2008 totaled $14.5 million, representing an increase of approximately $0.9 million, or 7%, compared to $13.6 million for the year ended December 31, 2007. The increase was primarily attributable to increased computer software and supplies related to our information technology disaster recovery initiative, the write-off of accounts receivables at one of our properties in our healthcare net lease portfolio and legal fees and other costs related to investment initiatives ultimately not consummated. Depreciation and Amortization Depreciation and amortization expense for the year ended December 31, 2008 totaled $43.2 million, representing an increase of $10.0 million, or 30%, compared to $33.2 million for the year ended December 31, 2007. This increase was primarily attributable to the full year impact of $686.2 million of net lease acquisitions made during 2007. 72

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Equity in (Loss) Earnings of Unconsolidated Ventures Equity in (loss) earnings for the year ended December 31, 2008 totaled a loss of $11.9 million, representing a decrease of $0.2 million, compared to a loss of $11.7 million for the year ended December 31, 2007. In July 2007, we closed our Securities Fund, retaining a 25% interest that is accounted for under the equity method of accounting. During 2008, we increased our interest in the Securities Fund to 53.1%. For the year ended December 31, 2008, we recognized equity in loss of $12.4 million from the Securities Fund (which includes both realized and unrealized gains from asset sales and mark-to-market adjustments) and equity in loss of $3.3 million on the LandCap joint venture. The losses were partially offset by our investment in Monroe Management prior to terminating the joint venture in May 2008 and our investment in the corporate lending joint venture which was recapitalized in May 2008 resulting in deconsolidation of the venture. We are currently accounting for the venture under the equity method of accounting. We recognized $3.1 million of equity in earnings in connection with these joint ventures and $0.5 million in connection with our net lease joint venture. Equity in losses for the year ended December 31, 2007 consisted primarily of a loss of $9.2 million on the Securities Fund, the operations of Monroe Management, which generated a loss of $2.3 million and the LandCap joint venture, which generated a loss of $0.7 million. The losses were partially offset by a net lease joint venture we entered into in February 2006, which generated equity in earnings of $0.5 million. Unrealized Gain (Loss) on Investments and Other Unrealized gain (loss) on investments and other increased by approximately $756.6 million for the year ended December 31, 2008 to a gain of $752.3 million, compared to a loss of $4.3 million for the year ended December 31, 2007. The unrealized gain on investments for the year ended December 31, 2008 consisted primarily of unrealized gains related to SFAS 159 mark-to-market adjustments of $958.2 million on various N-Star bonds payable, $103.2 million on exchangeable senior notes and $95.2 million on liability to subsidiary trusts issuing preferred securities offset partially by unrealized losses related to SFAS 159 mark-to-market adjustments of $338.0 million on various N-Star available for sale securities, $30.0 million on our corporate lending joint venture (which is an equity investment that is marked to market) and $36.3 million on interest rate swaps as a result of these swaps no longer qualifying for hedge accounting under SFAS 133. The unrealized loss on investment for the year ended December 31, 2007 consisted of a $3.5 million mark-to-market loss on the securities in N-Star IX warehouse prior to the closing of the term debt transaction in February 2007, a $0.5 million unrealized loss related to the mark-to-market adjustments on a short sale and a $0.3 million unrealized loss related to the ineffective portion of our interest rate swaps. Realized Gain on Investments and Other The realized gain of $36.0 million for the year ended December 31, 2008 was attributable to the recapitalization of our corporate loan venture in which we recognized a $46.0 million realized gain upon the extinguishment of a portion of the debt, a simultaneous $27.1 million cost basis reduction of our investment in the recapitalized venture and a realized loss of $18.9 million related to the sale of certain corporate loans within the portfolio. In addition we recognized a $36.5 million gain on the repurchase of various N-Star bonds, exchangeable senior notes and liability to subsidiary trusts issuing preferred securities, a foreign currency translation loss of $0.3 million related to our Euro-denominated investment and a $0.2 million loss on the sale of certain securities. The realized gain of $3.6 million for the year ended December 31, 2007 is related to the increase in fair value related to the net Carry of securities during the warehouse period of $1.3 million, which was realized at the close of N-Star IX, a gain of $1.4 million on the early redemption of REIT debt securities in N-Star VII, a foreign currency translation gain of $0.1 million related to our Euro-denominated investment and a net realized gain of $1.0 million on the sale of certain assets to the Securities Fund, partially offset by a realized loss of $0.3 million on the closing of a short securities position. 73

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Income from Discontinued Operations, Net of Minority Interest Income from discontinued operations represents the operations of properties sold or held for sale during the period. In April 2007, our Wakefield venture sold two assisted care living facilities. Accordingly, these operations were reclassified to income from discontinued operations. We had no discontinued operations for the year ended December 31, 2008. Comparison of the Year Ended December 31, 2007 to the Year Ended December 31, 2006 Revenues Interest Income Interest income for the year ended December 31, 2007 totaled $292.1 million, representing an increase of $157.3 million or 117%, compared to $134.8 million for the year ended December 31, 2006. The increase was primarily attributable to increased investment activity and asset growth. We originated or acquired commercial real estate debt, commercial real estate securities and corporate debt with a net book value of $2.4 billion during 2007. Interest income from new investment activities was partially offset by approximately $636.6 million of real estate securities, corporate debt and real estate debt investment repayments and approximately $209.7 million of real estate securities, real estate debt and corporate debt investment sales during 2007. Interest Income—Related Parties Interest income from related parties for the year ended December 31, 2007 totaled $13.5 million, representing an increase of $1.8 million, or 15%, compared to $11.7 million for the year ended December 31, 2006. The increase is attributable to increases in our investments in the noninvestment grade note classes of our unconsolidated term debt transactions. All of our real estate securities term debt transactions completed since 2006 in which we retain the equity notes have been accounted for as on-balance sheet financings. Rental and Escalation Income Rental and escalation income for the year ended December 31, 2007 totaled $95.8 million, representing an increase of $58.3 million, or 155%, compared to $37.5 million for the year ended December 31, 2006. The increase was primarily attributable to net lease property acquisitions by our Wakefield joint venture, which was formed in May 2006. These acquisitions collectively contributed $43.7 million of additional rental income. Other net lease properties acquired during the year ended, or subsequent to, December 31, 2006, contributed additional rental and escalation income of $14.2 million and rent increases at various properties, which are based on CPI indices, resulted in additional rental income of $0.4 million for the year ended December 31, 2007. Advisory and Management Fee Income—Related Parties Advisory fees from related parties for the year ended December 31, 2007 totaled $7.7 million, representing an increase of approximately $1.8 million, or 31%, compared to $5.9 million for the year ended December 31, 2006. The majority of the increase was attributable to the advisory fees earned on N-Star IX, which were formerly eliminated in consolidation. In July 2007, we sold our equity interest in N-Star IX to the Securities Fund. As a result of the sale, N-Star IX is no longer consolidated into our financial statements, but we continue to earn management fees from the term debt issuances. The increase was partially offset by lower fees from N-Star I, II, III and V as a result of lower collateral balances due to asset paydowns. 74

Table of Contents Other Revenue Other revenue for the year ended December 31, 2007 totaled $6.2 million, representing an increase of $0.3 million, or 5%, compared to $5.9 million the year ended December 31, 2006. Other revenue for year ended December 31, 2007 consisted primarily of $2.6 million in early prepayment fees, $0.8 million of exit fees and loan draw fees, $0.2 million in assumption fees, $0.2 million in unused credit line fees and $0.2 million in other fees on loans in our real estate debt portfolio, $1.9 million of income earned from premiums received on credit default swaps, prior to the sale to the Securities Fund in July 2007, related to Abacus NS2, and $0.3 million related to a one-time consent fee on the early repayment of one of our real estate securities investment. Other revenue for the year ended December 31, 2006 included $1.5 million on the early repayment of our real estate debt investments, $1.4 million of premiums received on credit default swaps related to a synthetic term debt transaction we acquired in August 2006, $1.2 million of incentive fee income related to the sale of our interest in the NSF Venture, $1.0 million of net expense reimbursements at two properties in our net lease portfolio and $0.8 million of miscellaneous income related to investments. Expenses Interest Expense Interest expense for the year ended December 31, 2007 totaled $242.6 million, representing an increase of $138.4 million, or 133%, compared

Processed and formatted by SEC Watch - Visit SECWatch.com

to $104.2 million for the year ended December 31, 2006. This increase was primarily attributable to an increase in debt outstanding from the financing of our new investments. Our on-balance sheet financings of our real estate debt, securities, corporate loans and net lease investments increased from $2.4 billion as of December 31, 2006 to $3.9 billion as of December 31, 2007 and included the partial period impact of the June closing of our $172.5 million exchangeable senior notes offering and the $445.5 million in financing from our MC Facility. In addition there was an increase in our average borrowing rate on our non-hedged variable rate debt due to increased average LIBOR rates during 2007 as compared to 2006. Real Estate Properties—Operating Expenses Real estate property operating expenses for year ended December 31, 2007 totaled $8.7 million, representing an increase of $0.1 million, or 1%, compared to $8.6 million for year ended December, 2006. The increase was attributable to net lease property acquisitions. These acquisitions collectively contributed $0.1 million of additional operating expenses. Asset Management Fees—Related Party Advisory fees for related parties for the year ended December 31, 2007 totaled $4.4 million, representing an increase of $3.8 million, or 633%, compared to $0.6 million for the year ended December 31, 2006. The increase was primarily attributable to the full period impact of our Wakefield joint venture, which was formed in May 2006, and our Monroe Management joint venture, which was formed in March 2007. We incurred $3.1 million of advisory fees to Wakefield Capital Management and $1.3 million of advisory fees to Monroe Management for the year ended December 31, 2007. Fund Raising Fees and Other Joint Venture Costs Fundraising fees and other joint venture costs for the year ended December 31, 2007 totaled $6.3 million. These fees were comprised of $3.2 million of placement fee expenses for raising private capital for our Securities Fund and a $3.1 million write-off of due diligence costs relating to the termination of a purchase agreement to acquire a portfolio of tax credit multi-family properties by one of our joint ventures. We had no such fees for the year ended December 31, 2006. 75

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents General and Administrative General and administrative expenses for the year ended December 31, 2007 totaled $56.6 million, representing an increase of $21.5 million, or 61%, compared to $35.1 million for the year ended December 31, 2006. The primary components of our general and administrative expenses were the following: Salaries and equity-based compensation for the year ended December 31, 2007 totaled $36.2 million, representing an increase of approximately $13.6 million, or 60%, compared to $22.6 million, for the year ended December 31, 2006. The $13.6 million increase was comprised of $6.6 million related to salaries and $7.0 million related to equity-based compensation. The increase in salaries of $6.6 million was due to higher staffing levels to accommodate the expansion of our business throughout 2006 into 2007. The $7.0 million increase in equity-based compensation expense was attributable to approximately $6.2 million relating to the vesting of equity based awards issued under our 2004 Omnibus Stock Incentive Plan, relating to 2007 grants, $0.2 million in additional compensation in connection with the Long Term Incentive Bonus Plan, relating to the grant of unallocated shares under the Plan, $0.6 million in additional compensation expense related to our Employee Outperformance Plan and to our board of directors annual grants. Auditing and professional fees for the year ended December 31, 2007 totaled $6.8 million, representing an increase of $2.0 million, or 42%, compared to $4.8 million for the year ended December 31, 2006. The increase was primarily attributable to professional fees relating to legal fees for general corporate work and investment activities, recruiting fees, and fees related to agreed upon procedures in connection with term debt transactions. Other general and administrative expenses for the year ended December 31, 2007 totaled $13.6 million, representing an increase of approximately $5.9 million, or 77%, compared to $7.7 million for the year ended December 31, 2006. The increase was primarily attributable to the lease for our new LA office, the new lease for the relocation of our corporate offices and minor increases in printing expenses, public relations expenses, cash management fees, software costs, and licensing fees. Depreciation and Amortization Depreciation and amortization expense for the year ended December 31, 2007 totaled $33.2 million, representing an increase of $19.6 million, or 144%, compared to $13.6 million for the year ended December 31, 2006. This increase was primarily attributable to $716.9 million of net lease acquisitions made during 2007. Equity in (Loss) Earnings of Unconsolidated Ventures Equity in (loss) earnings for the year ended December 31, 2007 totaled a loss of $11.7 million, representing a decrease of $12.1 million, compared to earnings of $0.4 for the year ended December 31, 2006. In July 2007, we closed our Securities Fund, retaining a 25.7% interest that was accounted for under the equity method of accounting. We recognized equity in loss of $9.2 million from the Securities Fund, of which $11.2 million was the unrealized loss related to the mark-to-market adjustment on the securities in the Securities Fund. The decrease was also attributable to the operations of Monroe Management, which generated a loss of $2.3 million and the LandCap joint venture, which generated a loss of $0.7 million. The losses were partially offset by a net lease joint venture we entered into in February 2006, which generated equity in earnings of $0.5 million. Unrealized Gain (Loss) on Investments and Other Unrealized gain (loss) on investments and other decreased by approximately $9.2 million for the year ended December 31, 2007 to a loss of $4.3 million, compared to a gain of $4.9 million for the year 76

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

ended December 31, 2006. The unrealized loss on investments for the year ended December 31, 2007 consisted primarily of a $3.5 million markto-market loss on the securities in N-Star IX warehouse prior to the closing of the term debt transaction in February 2007. The mark-to-market adjustments resulted from credit spread widening in the commercial real estate securities markets precipitated by credit issues in the residential sub-prime lending markets. We also had a $0.5 million unrealized loss related to the mark-to-market adjustments on a short sale and a $0.3 million unrealized loss related to the ineffective portion of our interest rate swaps. The unrealized gain on investment for the year ended December 31, 2006 consisted of a $3.2 million mark-to-market gain on the securities and $1.7 million gain that represents the net carry on the accumulated securities held under the warehouse agreement. Realized Gain on Investments and Other The realized gain of $3.6 million for the year ended December 31, 2007 is related to the increase in fair value related to the net carry of securities during the warehouse period of $1.3 million, which was realized at the close of N-Star IX, a gain of $1.4 million on the early redemption of REIT debt securities in N-Star VII, a foreign currency translation gain of $0.1 million related to our Euro-denominated investment and a net realized gain of $1.0 million on the sale of certain assets to the Securities Fund, partially offset by a realized loss of $0.3 million on the closing of a short securities position. The realized gain of $1.8 million for the year ended December 31, 2006 represented the net carry of securities during the warehouse period, which we recognized at the close of N-Star VII and the sale of certain securities in N-Star VII subsequent to closing. Income from Discontinued Operations, Net of Minority Interest Income from discontinued operations represents the operations of properties sold or held for sale during the period. In 2007, our Wakefield venture sold two assisted care living facilities, which closed April 2007. In the first quarter 2006, we sold our leasehold interest in 27 West 34th Street and terminated the leasehold interest in 1372 Broadway in January 2006 and recognized income, net of minority interest of $0.3 million for the year ended December 31, 2006 as income from discontinued operations. Gain on Sale from Discontinued Operations, Net of Minority Interest We sold our leasehold interest in 27 West 34th Street and terminated the leasehold interest in 1372 Broadway in January 2006 and recognized a gain on sale, net of minority interest of $0.4 million for the year ended December 31, 2006. We had no such gain on sale for the year ended December 31, 2007. Gain on Sale of Joint Venture Interest, Net of Minority Interest On February 1, 2006, we sold our interests in the NSF venture to the NSF venture investor and terminated the associated advisory agreements for total consideration of $2.9 million. We recognized a gain on sale, net of minority interest of $0.3 million for the year ended December 31, 2006. We had no such gain on sale for the year ended December 31, 2007. Liquidity and Capital Resources We require significant capital to fund our investment activities and operating expenses. Our capital sources may include cash flow from operations, net proceeds from asset repayments and sales, borrowings under revolving credit facilities, financings secured by our assets such as first mortgage and term debt transaction financings, long-term senior and subordinate corporate capital such as senior notes, trust preferred securities and perpetual preferred and common stock. As we discussed in "Our Company" and "Outlook and Recent Trends", availability of such capital from all of these sources is 77

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

extremely scarce (if available at all) for financial institutions including commercial mortgage REITs, and we expect this capital to be difficult to obtain for the foreseeable future. Our total available liquidity at December 31, 2008 was approximately $256.6 million, including $134.0 million of unrestricted cash and cash equivalents and $122.6 million of uninvested and available funds in our term debt transactions, which is available only for reinvestment within the term debt transactions. As a REIT, we are required to distribute at least 90% of our annual REIT taxable income to our stockholders, including taxable income where we do not receive corresponding cash, and we intend to distribute all or substantially all of our REIT taxable income in order to comply with the REIT distribution requirements of the Internal Revenue Code and to avoid federal income tax and the non-deductible excise tax. For calendar year 2009, we will be permitted to pay up to 90% of our distribution requirement in common stock or other company securities which give us the flexibility to preserve cash. On January 20, 2009, we declared a $0.25 per common share dividend, of which up to 40% will be paid in cash in order to preserve our capital. In the past, we have maintained high unrestricted cash balances relative to the historical difference between our distributions and cash provided by operating activities. On a quarterly basis, our Board of Directors determines an appropriate common stock dividend based upon numerous factors, including REIT qualification requirements, the amount of cash flows provided by operating activities, availability of existing cash balances, borrowing capacity under existing credit agreements, access to cash in the capital markets and other financing sources, our view of our ability to realize gains in the future through appreciation in the value of our assets, general economic conditions and economic conditions that more specifically impact our business or prospects. Although we have significantly reduced the cash portion of our first quarter 2009 dividend relative to prior periods, future dividend levels are subject to further adjustment based upon our evaluation of the factors described above, as well as other factors that our Board of Directors may, from time to time, deem relevant to consider when determining an appropriate common stock dividend. We currently believe that our existing sources of funds should be adequate for purposes of meeting our short-term liquidity needs; however, our secured term debt transaction financing structures generally require that the underlying collateral and cash flow generated by the collateral to be in excess of ratios stipulated in the related indentures. These ratios are called overcollateralization, or OC, and interest coverage, or IC, tests. In the event these tests are not met, cash that would normally be distributed to us would be used to amortize the senior notes until the financing is back in compliance with the tests. In the event cash flow is diverted to repay the notes, this could decrease cash available to pay our dividend and to comply with REIT requirements. Additionally, we may be required to buy assets out of our term debt transactions in order to preserve cash flow. As of December 31, 2008 we are in compliance with all of the OC and IC tests in our secured term debt transactions. We expect that very weak economic conditions, lack of capital for commercial real estate, decreasing real estate values and credit ratings downgrades of real estate securities will make complying with OC and IC tests more difficult in the future. We also have four bank loans which permit the lender to require partial repayment under certain circumstances. The WA and Euro term loans with a combined balance of $379.7 million at December 31, 2008 allow the lender to require a partial repayment based on quarterly credit reviews of the loan assets which serve as collateral for the facilities. The amount of the repayment is based upon lender's sole discretion regarding the decrease in value of its collateral due to credit deterioration. The JP Facility and a secured term loan with $44.9 million and $24.2 million outstanding balances, respectively, as of December 31, 2008, provide the lenders with a similar ability to require repayment, except the lenders under both loans may require repayment at any time due to decreases in credit quality and decrease in value of the loan collateral based upon market credit spread movements. In a weakening economic environment we would generally expect credit quality and value of the underlying 78

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

loans to decline resulting in a higher likelihood that the lenders would require partial repayment from us. Such amounts could be material to our cash and liquidity position depending on performance of the loan collateral and market credit spreads. These bank loans also contain corporate financial covenants which we must comply with in order to avoid defaults under the loans. The interest and fixed charge coverage covenants are currently the most restrictive and as of December 31, 2008 we are in compliance with all financial covenants under these facilities. The interest and fixed charge covenants include credit loss provisions in their calculations; therefore, higher levels of credit provisions without corresponding increases in income from other sources could decrease our cushion under these covenants and result in a default which would allow the lenders to accelerate their debt. In addition, the WA and Euro term loans have an initial maturity in October 2009 and both contain a one-year extension at our option provided that we are in compliance with the terms of the loans. If we fail to comply with the financial and non-financial covenants in these loans we may be unable to exercise the extension option. Furthermore, the $44.9 million JP Facility reaches a maturity date in August 2009. The facility is extendable for an additional year at the lender's option. If the lender decides to not renew that facility, we would be required to repay amounts due at the maturity date. We will seek to meet our long term liquidity requirements, including the repayment of debt and our investment funding needs, through existing cash resources, our existing secured term debt and the liquidation or refinancing of assets at maturity. Nonetheless, our ability to meet a long-term (beyond one year) liquidity requirement may be subject to obtaining additional debt and equity financing. Any decision by our lenders and investors to provide us with financing will depend upon a number of factors, such as our compliance with the terms of its existing credit arrangements, our financial performance, industry or market trends, the general availability of and rates applicable to financing transactions, such lenders' and investors' resources and policies concerning the terms under which they make capital commitments and the relative attractiveness of alternative investment or lending opportunities. Exchangeable Senior Notes In May 2008, NRFC NNN Holdings, LLC, a wholly-owned subsidiary of ours, issued $80.0 million of 11.50% exchangeable senior notes, or the Notes, which are due in 2013. The net proceeds from the offering were approximately $71.4 million, after deducting fees and expenses. The proceeds of the offering were used to make additional investments. We have elected the SFAS 159 fair value option for the Notes. Changes in fair value of the Notes will be recognized in earnings as they occur. We adopted the provisions of FSP APB 14-1 on January 1, 2009. As a result, our exchangeable senior notes will no longer be eligible for the fair value option under SFAS 159. The exchangeable senior notes will be carried at the discounted value as determined in accordance with FSP APB 14-1. Unsecured Revolving Line of Credit On May 28, 2008, we voluntarily terminated the Revolving Credit Agreement, dated November 3, 2006 by us and KeyBanc Capital Markets and Bank of America, N.A. (the "Credit Agreement") in order to permit the issuance of the NNN Notes, given certain restrictive covenants set forth in the Credit Agreement. The Credit Agreement had a November 2009 expiration and no amounts were outstanding under the Credit Agreement at the time of termination. Secured Credit Facilities In August 2007, we entered into a new $350.0 million Master Repurchase Agreement, or the JP Facility, with a major financial institution. Advance rates under the JP Facility range from 65% to 97% of the value of the collateral for which the advance is to be made. Amounts borrowed under the JP Facility bear interest at spreads of 0.05% to 1.75% over one-month LIBOR, depending on the type of collateral for which the amount is borrowed. The JP Facility has a maximum term of three years. 79

Table of Contents In October 8, 2008, we and a subsidiary of ours entered into Amendment No. 1 (the "Amendment") to the Master Repurchase Agreement (as amended, the "Facility") with JPMorgan. The Facility had approximately $50.4 million outstanding on the amendment date and such amounts bear interest at spreads of 1.25% to 1.80% over one-month LIBOR. Advance rates for the assets currently financed under the Facility range from 55% to 80% of the value of the collateral for which the advance is made. Interest rates and advance rates on future borrowings under the Facility will be determined by JPMorgan. Pursuant to the Amendment, the maximum amount outstanding under the Facility shall not exceed $150 million and we have agreed to guaranty the outstanding amount under the Facility. The term of the Facility will expire on August 8, 2010, subject to renewal by JPMorgan on August 8, 2009. Secured Term Loan In March 2007, we entered into a Euro denominated note purchase agreement with a major financial institution, or Euro Note, to finance a note collateralized by a €75.0 million participation in a junior mezzanine loan that bears interest at three month EURIBOR plus 3.75%. We

Processed and formatted by SEC Watch - Visit SECWatch.com

borrowed approximately €75.0 million under the note purchase agreement. The loan bears interest at three month EURIBOR plus 1.50%. In November 2007, we terminated our secured credit facility and entered into a new term loan agreement (the "Term Loan Agreement", and together with the modified Euro Note, the "Secured Term Loan") with a major financial institution, which provides for approximately $600 million of term loan capacity. The proceeds under the Secured Term Loan were partially used to repay approximately $450 million outstanding under the WA Facilities, terminating these facilities. The Secured Term Loan agreement also provides for up to $300 million of revolving term loan capacity as portions of the outstanding balance under the Term Loan Agreement are repaid. The Secured Term Loan initially bears interest at LIBOR plus 2.00% and has an initial two-year term which we have the option to extend for an additional one year period, subject to certain conditions. Additionally, we entered into a Limited Guaranty Agreement in connection with the Term Facility, which provides for the guaranty by us of $200.0 million of the Term Facility. In June 2008, a wholly owned subsidiary of ours entered into a $24.2 million term loan agreement with an investment bank (the "LB Term Loan"). The collateral for the LB Term Loan is a $44.0 million mezzanine loan position and we have guaranteed 50% of such amount. The LB Term Loan matures in February 2010, has two one-year automatic term extensions and bears interest at a spread of 1.50% over one-month LIBOR. Both the LB Term Loan and the mezzanine loan collateral have three one-year extension options. The LB Term Loan contains certain covenants including, among others, financial covenants of a minimum tangible net worth and a minimum debt-to-equity ratio. Equity Distribution Agreement In May, 2008, we entered into an equity distribution agreement with Wachovia Capital Markets, LLC, or Wachovia. In accordance with the terms of the agreement, we may offer and sell up to 10,000,000 shares of our common stock from time to time through Wachovia. Wachovia will receive a commission from us of up to 2.5% of the gross sales price of all shares sold through it under the equity distribution agreement. For the year ended December 31, 2008, we issued a total of 114,100 shares of common stock related to our equity distribution agreement with Wachovia raising net proceeds of approximately $0.9 million. Dividend Reinvestment and Stock Purchase Plan Effective as of April 27, 2007, we implemented a Dividend Reinvestment and Stock Purchase Plan, or the Plan, pursuant to which we registered and reserved for issuance 15,000,000 shares of our 80

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents common stock. Under the terms of the Plan, stockholders who participate in the Plan may purchase shares of our common stock directly from us, in cash investments up to $10,000. At our sole discretion, we may accept optional cash investments in excess of $10,000 per month, which may qualify for a discount from the market price of 0% to 5%. Plan participants may also automatically reinvest all or a portion of their dividends for additional shares of our stock. We expect to use the proceeds from any dividend reinvestments or stock purchases for general corporate purposes. During the year ended December 31, 2008, we issued a total of 181,593 common shares pursuant to the Plan for a gross sales price of approximately $1.1 million. Debt Repurchases During 2008, we repurchased $111.4 million of our notes, which consisted of $93.6 million of our N-Star term debt transaction bonds payable, $11.7 million of our 7.25% exchangeable senior notes and $6.1 million of our liability to subsidiary trusts issuing preferred securities for a total of $49.8 million. We recorded a realized gain of $36.5 million in connection with the repurchase of our notes. These repurchases also represented a $61.6 million discount to the par value of the debt. Wakefield Preferred Equity On July 9, 2008, Wakefield sold a $100 million convertible preferred membership interest to Inland American Real Estate Trust, Inc., or Inland American. We received approximately $87.7 million of net proceeds from the transaction. Prior to conversion, the convertible preferred investment will yield a dividend of 10.5%. The convertible preferred membership interest may be converted or redeemed, at Inland American's option, upon the sale or recapitalization of the Wakefield venture. Wakefield may, at its option, redeem the convertible preferred interests at any time following the first anniversary of the closing, subject to payment of a call premium that declines over time. In addition, at any time after the second anniversary of the closing, Inland American may convert its preferred membership interests into common equity in Wakefield. Based on the current investment amount and capital accounts of the Wakefield members, the convertible preferred membership interests would represent, upon conversion, approximately a 42% common equity ownership interest in Wakefield. Inland American will have the option of contributing additional preferred membership interest and participating in new Wakefield investment opportunities in proportion to its percentage ownership interest, assuming it were to convert its interests to common equity. Cash Flows Year Ended December 31, 2008 Compared to December 31, 2007 The net cash flow provided by operating activities of $82.7 million, decreased by $19.5 million for the year ended December 31, 2008 from $102.2 million for the year ended December 31, 2007. This was primarily due to the lower LIBOR rates which decreased interest income generated from our asset base. The net cash flow used by investing activities was $110.7 million for the year ended December 31, 2008 compared to the net cash used by investing activities of $2.4 billion for the year ended December 31, 2007. This decrease from 2007 was primarily a result of decreased investment activity in 2008. Net cash flow used in investing activities in 2007 consisted primarily of the acquisitions of operating real estate, real estate securities, corporate loan investments, and the origination or acquisition of real estate debt investments. The net cash flow provided by financing activities was $8.3 million for the year ended December 31, 2008 compared to $2.4 billion of cash provided by financing activities for the year ended December 31, 2007. The primary source of cash flow provided by financing activities was the sale of 81

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

$100 million convertible preferred membership interest to Inland American, the issuance of $80.0 million of our 11.50% exchangeable senior notes and additional borrowings under our term loans and credit facilities. Net cash flow in provided by financing activity in 2007 was primarily from the issuance of preferred equity, the issuance of our 7.25% exchangeable senior notes, the issuance of term debt transaction bonds, borrowing under our credit facilities, operating real estate, acquisition financing and the issuance of trust preferred securities to finance our investing activities. Year Ended December 31, 2007 Compared to December 31, 2006 The net cash flow provided by operating activities of $102.2 million, increased by $48.2 million for the year ended December 31, 2007 from $54.0 million of cash provided by operations for the year ended December 31, 2006. This was primarily due to the operating cash flows generated from a greater asset base resulting from net origination/acquisition volumes generated by our business lines. The net cash flow used in investing activities of $2.4 billion increased by $0.5 billion for the year ended December 31, 2007 from $1.9 billion for the year ended December 31, 2006. Net cash used in investing activities in 2007 consisted primarily of the purchase of operating real estate, funds used to acquire real estate securities and originate or acquire real estate debt investments and corporate loan investments. The net cash flow provided by financing activities of $2.4 billion increased by $0.6 billion for the year ended December 31, 2007 from $1.8 billion for the year ended December 31, 2006. The primary source of cash flow provided by financing activities was the perpetual preferred equity offerings, the issuance of exchangeable debt, the issuance of term debt transaction bonds, borrowings under credit facilities, operating real estate, acquisition financing and the issuance of trust preferred securities. Capital Expenditures During 2009, we expect to incur $4.2 million in capital expenditures with respect to our healthcare net lease portfolio and $0.8 million with respect to our core net lease portfolio. 82

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Contractual Obligations and Commitments As of December 31, 2008, we had the following contractual commitments and commercial obligations (dollars in thousands):

C on tractu al O bligation s

Total

Mortgage notes $ 898,325 Mezzanine loan payable 12,295 Exchangeable senior notes(1) 240,800 Bonds payable 1,608,445 Credit facilities 44,881 Secured term loan(2) 403,907 Liability to subsidiary trusts issuing preferred securities 280,133 Repurchase agreements 176 Capital leases(3) 16,618 Operating leases 76,429 Placement fees 912 Outstanding unfunded commitments(4) 270,991 Total contractual obligations $3,853,912

Paym e n ts Due by Pe riod 1 ye ar 2–3 ye ars 4–5 ye ars

$ 8,951 1,719 — — 44,881 403,907 — 176 487 5,623 304 237,096 $703,144

$ 107,291 3,845 — — — — — — 974 11,211 608 33,895 $ 157,824

$ 175,859 4,425 240,800 — — — — — 997 10,869 — — $ 432,950

Afte r 5 Ye ars

$

606,224 2,306 — 1,608,445 — — 280,133 — 14,160 48,726 — — $ 2,559,994

(1)

$160.8 million of our 7.25% exchangeable senior notes have a final maturity date of June 15, 2027. The above table reflects the holders repurchase rights which may require us to repurchase the notes on June 15, 2012.

(2)

The WA and Euronote term loans have initial maturities in October 2009. We have a one-year option to extend the term for an additional year provided we are in compliance with the terms of the indentures.

(3)

Includes interest on the capital leases.

(4)

Our future funding commitments, which are subject to certain conditions that borrowers must meet to qualify for such fundings, totaled $271.0 million, of which a minimum of $133.9 million will be funded within our existing term debt transactions. Fundings are categorized by estimated funding period. We expect that our secured credit facility lenders generally will advance a majority of future fundings that are not otherwise funded within our term debt transactions. Based upon currently approved advance rates on our credit and term debt facilities and assuming that all loans that have future fundings meet the terms to qualify for such funding, our equity requirement would be approximately $94.5 million.

Our debt obligations contain covenants that are both financial and non-financial in nature. Significant financial covenants include a requirement that we maintain a minimum tangible net worth, a minimum level of liquidity and a minimum fixed charge coverage ratio. As of December 31, 2008, we were in compliance with all financial and non-financial covenants in our debt agreements. Off Balance Sheet Arrangements Term Debt Issuances The terms of the portfolio of real estate securities held by the term debt transactions are structured to be matched with the terms of the non-recourse term debt liabilities. These term debt liabilities are repaid with the proceeds of the principal payments on the real estate securities 83

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents collateralizing the term debt liabilities when these payments are actually received. There is no refinancing risk associated with the term debt liabilities, as principal is only due to the extent that it has been collected on the underlying real securities and the stated maturities are noted above. Term debt transactions produce a relatively predictable income stream based on the spread between the interest earned on the underlying securities and the interest paid on the term debt transaction liabilities. This spread may be reduced by credit losses on the underlying securities or by hedging mismatches. Our term debt transactions have not incurred any losses on any of their securities investments from the date of purchase through December 31, 2008. We receive quarterly cash distributions from N-Star I and monthly cash distributions from N-Star II, N-Star III and N-Star V, each representing our proportionate share of the residual cash flow from the term debt transactions, as well as collateral advisory fees and interest income on the unrated income notes of the term debt transactions. The following tables describe certain terms of the collateral for and the notes issued by term debt transactions for the year ended December 31, 2008 (dollars in thousands):

Issu an ce

N-Star I(2) N-Star II N-Star III N-Star V Total

Date C lose d

C ollate ral—De ce m be r 31, 2008 W e ighte d W e ighte d Ave rage Par Value of Ave rage Expe cte d Life C ollate ral Inte re st Rate (ye ars)

8/21/03 $ 7/01/04 3/10/05 9/22/05 $

299,316 331,242 410,188 499,745 1,540,491

(1)

Includes only notes held by third parties.

(2)

We have an 83.3% interest.

6.60% 6.17 5.70 5.52 5.92%

Te rm Note s—De ce m be r 31, 2008 W e ighte d Ave rage O u tstan ding Inte re st Rate at S tate d Te rm Note s(1) 12/31/08 Maturity

4.16 $ 4.77 4.11 6.23 4.95 $

278,000 295,098 358,556 456,319 1,387,973

6.37% 5.51 4.88 4.58 5.23%

8/01/2038 6/01/2039 6/01/2040 9/05/2045

Any potential losses in our off balance sheet term debt transactions is limited to the carrying value of our investment of $45.8 million at December 31, 2008. CLO Equity Notes In December 2006, we acquired 40% of the residual equity interests in a collateralized loan obligation originated by Monroe Capital, LLC, a specialty finance company, for $16.7 million. The CLO includes collateral of approximately $400 million backed primarily by first lien senior secured loans. We also acquired a 12.5% and 33.5% residual equity interest in two third party CLO's. The CLOs were determined to be variable interest entities under Fin 46(R)-6 and we were determined not to be the primary beneficiary; therefore, the financial statements of the CLOs were not consolidated into our condensed consolidated financial statements. On May 7, 2008, we completed a recapitalization of our middlemarket corporate lending venture. We contributed our CLO equity interests into the recapitalized entity. Prior to May 7, 2008, our residual combined equity interests were accounted for as debt securities available for sale pursuant to EITF 99-20. Upon completion of the recapitalization transaction, the new investor became the controlling manager of the assets and we deconsolidated the venture and now use the equity method of accounting for the investment, which includes our residual combined equity interests in the CLO's contributed in the recapitalization. NorthStar Real Estate Securities Opportunity Fund In July 2007, we closed on $109.0 million of equity capital for our Securities Fund, an investment vehicle in which we conduct most of our real estate securities investment business. 84

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents We are the manager and general partner of the Securities Fund. We receive base management fees ranging from 1.0% to 2.0% per annum on third-party capital and are entitled to annual incentive management fees ranging from 20% to 25% of the increase in the Securities Fund's net asset value in excess of an 8.0% per annum return. Base and incentive fees vary depending on the investor capital lockup periods. During the second quarter 2008, we invested an additional $20.0 million in the Securities Fund. Additionally, during the second quarter 2008, we sold 67% of our N-Star IX advisory fee income stream to the Securities Fund for $8.8 million. The Securities Fund owns all of the equity in the N-Star IX term financing but we retained the advisory fees when N-Star IX was sold to the Securities Fund at its inception. We recognized $4.8 million of advisory fee income from the sale and deferred the remaining $4.0 million, which represented our ownership interest in the Securities Fund. The deferred advisory fee income will be recognized into income as the fees are earned. For the year ended December 31, 2008, we recognized $0.2 million in additional income from the amortization of deferred advisory fee income. During the third quarter 2008, the Securities Fund made a claim against Lehman Brothers for $6.8 million (plus damages) to recover cash collateral held by Lehman Brothers and recorded a reserve of $3.4 million against the $6.8 million cash collateral receivable. At December 31, 2008, we had invested a total of $51.2 million in the Securities Fund and the carrying value of our investment was $29.3 million, representing a 53.1% interest. For the year ended December 31, 2008 and 2007, we recognized equity in losses of $12.4 million and $9.1 million, respectively. We also earned $0.5 million and $0.4 million in management fees from the Securities Fund for the year ended December 31, 2008 and 2007, respectively. Recent Developments On January 20, 2009, we declared a cash dividend of $0.54688 per share of Series A preferred stock and $0.51563 per share of Series B preferred stock. The dividends were paid on February 16, 2009 to the stockholders of record as of the close of business on February 6, 2009. On January 20, 2009, we declared a dividend of $0.25 per share of common stock. The dividends are payable on February 27, 2009 to the stockholders of record as of January 28, 2009. The common stock dividends will be paid in a combination of cash and common stock. From January 1, 2009 to February 24, 2009 we repurchased approximately $40.0 million of our 7.25% exchangeable senior notes for $17.7 million. We will record a realized gain of $22.0 million in connection with the repurchase of our notes. Inflation Our leases for tenants of operating real estate are generally either: •

net leases where the tenants are responsible for all or a significant portion of the real estate taxes, insurance and operating expenses and the leases provide for increases in rent either based on changes in the Consumer Price Index, or CPI, or prenegotiated increases; or

•

operating leases which provide for separate escalations of real estate taxes and operating expenses over a base amount, and/or increases in the base rent based on changes in the CPI.

We believe that most inflationary increases in expenses will be offset by the expense reimbursements and contractual rent increases described above to the extent of occupancy. 85

Table of Contents We believe that the risk associated with an increase in market interest rates on the floating rate debt used to finance our investments in our term debt transactions and our direct investments in real estate debt, will be largely offset by our strategy of matching the terms of our assets with the terms of our liabilities and through our use of hedging instruments. See "Quantitative and Qualitative Disclosures About Market Risk" in Item 7A of this Annual Report on Form 10-K for additional information on our exposure to market risk. Non-GAAP Financial Measures Funds from Operations and Adjusted Funds from Operations Management believes that funds from operations, or FFO, and adjusted funds from operations, or AFFO, each of which are non-GAAP measures, are additional appropriate measures of the operating performance of a REIT and NorthStar in particular. We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT, as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of depreciable properties, the cumulative effect of changes in accounting principles, real estate-related depreciation and amortization, and after adjustments for unconsolidated/uncombined partnerships and joint ventures. AFFO, as defined by NAREIT, is a computation made by analysts and investors to measure a real estate company's cash

Processed and formatted by SEC Watch - Visit SECWatch.com

flow generated by operations. We calculate AFFO by subtracting from (or adding) to FFO: •

normalized recurring expenditures that are capitalized by us and then amortized, but which are necessary to maintain our properties and revenue stream, e.g., leasing commissions and tenant improvement allowances;

•

an adjustment to reverse the effects of the straight-lining of rents and fair value lease revenue under SFAS 141;

•

the amortization or accrual of various deferred costs including intangible assets and equity based compensation; and

•

an adjustment to reverse the effects of unrealized gains/(losses).

Our calculation of AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable to AFFO reported by other REITs. Our management utilizes FFO and AFFO as measures of our operating performance, and believes they are also useful to investors, because they facilitate an understanding of our operating performance after adjustment for certain non-cash expenses, such as real estate depreciation, which assumes that the value of real estate assets diminishes predictably over time and, in the case of AFFO, equity based compensation. Additionally, FFO and AFFO serve as measures of our operating performance because they facilitate evaluation of our company without the effects of selected items required in accordance with GAAP that may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO, AFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and AFFO may provide us and our investors with an additional useful measure to compare our financial performance to certain other REITs. Neither FFO nor AFFO is equivalent to net income or cash generated from operating activities determined in accordance with U.S. GAAP. Furthermore, FFO and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor AFFO should be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity. 86

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Set forth below is a reconciliation of FFO and AFFO to net income from continuing operations before minority interest for the years ended December 31, 2008, 2007 and 2006 (in thousands): Ye ar En de d De ce m be r 31, 2008

Funds from Operations: Income from continuing operations before minority interest Minority interest in joint ventures Income from continuing operations before minority interest in operating partnership Adjustments: Preferred dividend Depreciation and amortization Funds from discontinued operations Real estate depreciation and amortization—unconsolidated ventures Funds from Operations Adjusted Funds from Operations: Funds from Operations Straight-line rental income, net Straight-line rental income, discontinued operations Straight-line rental income and fair value lease revenue (SFAS 141 adjustment), unconsolidated ventures Amortization of equity-based compensation Fair value lease revenue (SFAS 141 adjustment) Unrealized(gains)/losses from mark-to-market adjustments Unrealized losses from mark-to-market adjustments, unconsolidated ventures Adjusted Funds from Operations

$

$ $

$

Ye ar En de d De ce m be r 31, 2007

Ye ar En de d De ce m be r 31, 2006

801,764 $ (4,614) 797,150

51,174 $ (580) 50,594

41,041 (68) 40,973

(20,925) 43,232 — 945 820,402 $

(16,533) 33,191 17 990 68,259 $

(860) 13,578 550 905 55,146

820,402 $ (2,322) —

68,259 $ (2,653) 10

55,146 (958) 23

(155) 24,680 (1,740) (767,338) 17,026 90,553 $

(219) 16,007 (864) 3,473 11,670 95,683 $

(229) 9,080 (479) (3,175) — 59,408

Return on Average Common Book Equity We calculate return on average common book equity ("ROE") on a consolidated basis and for each of our major business lines. We believe that ROE provides a good indication of our performance and our business lines because we believe it provides the best approximation of cash returns on common equity invested. Management also uses ROE, among other factors, to evaluate profitability and efficiency of equity capital employed, and as a guide in determining where to allocate capital within its business. ROEs may fluctuate from quarter to quarter based upon a variety of factors, including the timing and amount of investment fundings, repayments and asset sales, capital raised and leverage used, and the yield on investments funded. 87

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

Return on Average Common Book Equity (including and excluding G&A and one-time items) (dollars in thousands)

Adjusted Funds from Operations (AFFO)

[A]

Plus: Fundraising Fees, Debt Issuance Costs and Other AFFO, excluding Fundraising Fees, Debt Issuance Costs and Other Plus: General & Administrative Expenses Plus: General & Administrative Expenses from Unconsolidated Ventures Less: Equity-Based Compensation and Straight-Line Rent included in G&A AFFO, excluding G&A Average Common Book Equity & Operating Partnership Minority Interest(1) Return on Average Common Book Equity (including G&A) Return on Average Common Book Equity (excluding Fundraising Fees, Debt Issuance Costs and Other) Return on Average Common Book Equity (excluding G&A)

(1)

Ye ar En de d De ce m be r 31, 2008

Ye ar En de d De ce m be r 31, 2007

Ye ar En de d De ce m be r 31, 2006

$

$

$

7,823 98,376 74,859 3,780 24,672 152,343

[B]

[C] [D]

90,553

$

887,515

95,683 6,295 101,978 56,561 4,810 16,214 147,135

$

442,012

59,408 — 59,408 35,051 — 9,813 84,646

$

378,628

[A]/[D]

10.2%

21.6%

15.7%

[B]/[D] [C]/[D]

11.1% 17.2%

23.1% 33.3%

15.7% 22.3%

Average Common Book Equity & Operating Partnership Minority Interest computed using beginning and ending of period balances. ROE will be impacted by the timing of new investment closings and repayments during the quarter.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk Although we seek to match-fund our assets and mitigate the risk associated with future interest rate volatility, we are primarily subject to interest rate risk prior to match-funding our investments and because we do not hedge our retained equity interest in our floating rate term debt transactions. To the extent a term debt transaction has floating rate assets, our earnings will generally increase with increases in floating interest rates, and decrease with declines in floating interest rates. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. Our interest rate risk sensitive assets, liabilities and related derivative positions are generally held for non-trading purposes. As of December 31, 2008, a hypothetical 100 basis point increase in interest rates applied to our variable rate assets would increase our annual interest income by approximately $30.8 million offset by an increase in our interest expense of approximately $25.1 million on our variable rate liabilities. Similarly, a hypothetical 100 basis point decrease in interest rates would decrease our annual interest income by the same net amount. Real Estate Debt We invest in real estate debt which is generally secured by commercial and multifamily properties, including first lien mortgage loans, junior participations in first lien mortgage loans, second lien mortgage loans, mezzanine loans, and preferred equity interests in borrowers who own such properties. We generally hold these instruments for investment rather than trading purposes. These investments 88

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

bear interest at either a floating or fixed rate. The interest rates on our floating rate investments typically float at a fixed spread over an index such as LIBOR. These instruments typically reprice every 30 days based upon LIBOR in effect at that time. Given the frequent and periodic repricing of our floating rate investments, changes in benchmark interest rates are unlikely to materially affect the value of our floating rate portfolio. Changes in short-term rates will, however, affect earnings from our investments. Increases in LIBOR will increase the interest income received by us on our investments and therefore increase our earnings. Decreases in LIBOR have the opposite effect. We also invest in fixed rate investments. The value of these investments may be affected by changes in long-term interest rates. To the extent that long-term interest rates increase, the value of long-term fixed rate assets is diminished. Any fixed rate real estate debt investments which we hold would be similarly impacted. We do not generally seek to hedge this type of risk unless the asset is leveraged as we believe the costs of such a hedging transaction over the term of such an investment would generally outweigh the benefits. If fixed rate real estate debt is funded with floating rate liabilities, we typically convert the floating rate to fixed through the use of interest rate swaps, caps or other hedges. Because the interest rates on our fixed rate investments are generally fixed through maturity of the investment, changes in interest rates do not affect the income we earn from our fixed rate investments. The value of our fixed and floating rate real estate debt investments changes with market credit spreads. This means that when marketdemanded risk premiums, or credit spreads, increase, the value of our fixed and floating rate assets decrease, and vice versa. Market credit spreads are currently much wider than existed at the time we originated a majority of our real estate debt investments. These wider market credit spreads imply that our real estate debt investments may be worth less than the amounts at which we carry these investments on our balance sheet, but because we have typically financed these investments with debt priced in a similar credit environment and intend to hold them to maturity we do not believe that intra- and inter-period changes in value caused by changing credit spreads material impacts the economics associated with our real estate debt investments. In our real estate debt business we are also exposed to credit risk, which is the risk that the borrower under our loan agreements cannot repay its obligations to us in a timely manner. Our loans are generally collateral dependent, meaning the principal source of repayment is from a sale or refinancing of the collateral securing our loan. Default risk increases in weak economic conditions because collateral cash flows may be below expectations when the loan was originated. Defaults also increase when, at loan maturity, the cost of debt and equity capital is higher than when the loan was originated. In the event that a borrower cannot repay our loan, we may exercise our remedies under the loan documents, which may include a foreclosure against the collateral. We describe many of the options available to us in this situation in "Item 1 Business." To the extent the value of our collateral exceeds the amount of our loan (including all debt senior to us) and the expenses we incur in collecting on our loan, we would collect 100% of our loan amount. To the extent that the amount of our loan plus all debt senior to our position exceeds the realizable value of our collateral, then we would incur a loss. We also incur credit risk in our periodically scheduled interest payments which may be interrupted as a result of the operating performance of the underlying collateral. We seek to manage credit risk through a thorough analysis of a transaction before we make such an investment. Our analysis is based upon a broad range of real estate, financial, economic and borrower-related factors which we believe are critical to evaluating the credit risk inherent in a transaction. We expect our investments to be denominated in U.S. dollars or, if they are denominated in another currency, to be converted back to U.S. dollars through the use of currency swaps. It may not be possible to eliminate all of the currency risk as the payment characteristics of the currency swap may not exactly match the payment characteristics of the investments. 89

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Real Estate Securities In our real estate securities business, we seek to mitigate credit risk through credit analysis, subordination and diversification. The CMBS we invest in are generally junior in right of payment of interest and principal to one or more senior classes, but benefit from the support of one or more subordinate classes of securities or other form of credit support within a securitization transaction. The senior unsecured REIT debt securities we invest in reflect comparable credit risk. Credit risk refers to each individual borrower's ability to make required interest and principal payments on the scheduled due dates. While the expected yield on these securities is sensitive to the performance of the underlying assets, the more subordinated securities and certain other features of a securitization, in the case of mortgage backed securities, and the issuer's underlying equity and subordinated debt, in the case of REIT securities, are designed to bear the first risk of default and loss. The real estate securities portfolios of our investment grade term debt transactions are diversified by asset type, industry, location and issuer. We further seek to minimize credit risk by monitoring the real estate securities portfolios of our investment grade term debt transactions and the underlying credit quality of their holdings. The real estate securities underlying our investment grade term debt transactions are also subject to credit spread risk. The majority of these securities are fixed rate securities, which are valued based on a market credit spread over the rate payable on fixed rate U.S. Treasuries of like maturity. In other words, their value is dependent on the yield demanded on such securities by the market, based on their credit relative to U.S. Treasuries. An excessive supply of these securities combined with reduced demand will generally cause the market to require a higher yield on these securities, resulting in the use of a higher or "wider" spread over the benchmark rate (usually the applicable U.S. Treasury security yield) to value these securities. Under these conditions, the value of our real estate securities portfolio would tend to decrease. Conversely, if the spread used to value these securities were to decrease or "tighten," the value of our real estate securities would tend to increase. Such changes in the market value of our real estate securities portfolio may affect our net equity or cash flow either directly through their impact on unrealized gains or losses on available-for-sale securities by diminishing our ability to realize gains on such securities, or indirectly through their impact on our ability to borrow and access capital. Returns on our real estate securities are sensitive to interest rate volatility. If interest rates increase, the funding cost on liabilities that finance the securities portfolio will increase if these liabilities are at a floating rate or have maturities shorter than the assets. Our general financing strategy has focused on the use of "match-funded" structures. This means that we seek to align the maturities of our debt obligations with the maturities of our investments in order to minimize the risk of being forced to refinance our liabilities prior to the maturities of our assets, as well as to reduce the impact of fluctuating interest rates on earnings. In addition, we generally match interest rates on our assets with like-kind debt, so that fixed rate assets are financed with fixed rate debt and floating rate assets are financed with floating rate debt, directly or through the use of interest rate swaps, caps or other financial instruments or through a combination of these strategies. Our investment grade term debt transactions utilize interest rate swaps to minimize the mismatch between their fixed rate assets and floating rate liabilities. Our financing strategy is dependent on our ability to place the match-funded debt we use to finance our real estate securities at spreads that provide a positive funding spread. Match funded debt is currently very difficult to obtain, and market-demanded yields on all real estate assets have increased. Our current strategy is to use our existing term debt structures to fund new investment activity when repayment or sale proceeds are available within the financing, or to acquire securities which generate attractive returns without leverage. Interest rate changes may also impact our net book value as our investments in debt securities are marked-to-market each quarter with changes in fair value reflected in unrealized gains/losses or other 90

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

comprehensive income (a separate component of owners' equity). Generally, as interest rates increase, the value of fixed rate securities within the term debt transaction, such as CMBS, decreases and as interest rates decrease, the value of these securities will increase. Conversely, we mark our term debt liabilities to market which causes a partial offset to the income and balance sheet impact of marking the securities assets to market. Net Lease Properties Our ability to manage the interest rate risk and credit risk associated with the assets we acquire is integral to the success of our net lease properties investment strategy. Although we may, in special situations, finance our purchase of net lease assets with floating rate debt, our general policy is to mitigate our exposure to rising interest rates by financing our net lease property purchases with fixed rate mortgages. We seek to match the term of fixed rate mortgages to our expected holding period for the underlying asset. Factors we consider to assess the expected holding period include, among others, the primary term of the lease as well as any extension options that may exist. The value of our net lease real estate properties may be influenced by long-term fixed interest rates. To derive value, an investor typically forecasts expected future cash flows to be generated by the property then discounts the cash flows at a discount rate based upon a long-term fixed interest rate (such as the 10-year U.S. Treasury Note yield) plus a risk premium based on the property type and creditworthiness of the tenants. Lower risk free rates generally result in lower discount rates and therefore higher valuations and vice versa although the scarcity of financing for net lease properties and investor concerns over commercial real estate generally have recently decreased commercial real estate valuations, including valuations for net lease properties. We generally intend to hold our net lease properties for long periods, but the market value of the asset may fluctuate with changes in interest rates, among other things. We are subject to the credit risk of the corporate lessee of our net lease properties. We undertake a rigorous credit evaluation of each tenant prior to acquiring net lease asset properties. This analysis includes an extensive due diligence investigation of the tenant's business as well as an assessment of the strategic importance of the underlying real estate to the tenant's core business operations. Where appropriate, we may seek to augment the tenant's commitment to the facility by structuring various credit enhancement mechanisms into the underlying leases. These mechanisms could include security deposit requirements or affiliate guarantees from entities we deem to be creditworthy. Derivatives and Hedging Activities We use derivatives primarily to manage interest rate risk exposure. These derivatives are typically in the form of interest rate swap agreements and the primary objective is to minimize interest rate risks associated with the our investment and financing activities. The counterparties of these arrangements are major financial institutions with which we may also have other financial relationships. We are exposed to credit risk in the event of non-performance by these counterparties and we monitor their financial condition; however, we currently do not anticipate that any of the counterparties will fail to meet their obligations because of their high credit ratings and financial support from the U.S. Government. For the year ended December 31, 2008, our counterparties hold approximately $30.2 million of cash margin as collateral against our swap contracts. In January 2008, we adopted SFAS 159 and elected the fair value option for our bonds payable and our liability to subsidiary trusts issuing preferred securities. Under SFAS 159, the changes in fair value of these financial instruments are now recorded in earnings. As a result of this election, the interest rate swap agreements associated with these debt instruments no longer qualify for hedge accounting, in accordance with SFAS 133 "Derivatives and Hedging Activity", since the underlying debt is remeasured with changes in the fair value recorded in earnings. The unrealized gains or losses accumulated in other comprehensive income, related to these interest rate swaps, will be reclassified into earning over the shorter of either the life of the swap or the associated debt with current 91

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

mark-to-market unrealized gains or losses recorded in earnings. For the year ended December 31, 2008, we recorded in earnings a mark-tomarket unrealized loss of $15.8 million and a $5.5 million reclassification from accumulated other comprehensive income for the non-qualifying interest rate swaps. The following table summarizes the notional amounts and fair (carrying) values of our derivative financial instruments as of December 31, 2008 (in thousands): De ce m be r 31, 2008

Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Basis Swap Interest rate swap Basis Swap Basis Swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Reverse interest rate swap Reverse interest rate swap Interest rate swap Total / weighted average

Notional Value

$

5,100 6,160 3,290 2,842 5,492 3,465 4,000 15,000 34,000 3,765 3,567 5,957 23,300 2,686 20,000 12,750 7,700 14,000 201,255 323,505 5,000 15,000 9,873 3,000 60,000 16,200 49,404 30,000 25,000 37,500 35,000 250,000 250,000 11,400 $1,495,211

S trik e Rate

4.18% 4.29 4.80 5.04 4.76 4.41 4.66 5.08 5.07 4.98 4.98 5.06 4.99 5.02 5.05 5.06 5.30 5.03 1.53 5.53 3.08 3.33 4.81 4.89 5.52 5.52 5.63 5.46 5.12 5.10 5.59 3.03 3.02 4.78 4.03

Expiration Date

12/2010 8/2012 12/2013 8/2018 3/2013 3/2010 11/2015 5/2016 5/2017 7/2015 6/2015 8/2015 12/2012 2/2016 6/2013 8/2017 5/2010 10/2015 3/2015 6/2018 12/2015 6/2018 8/2014 6/2015 6/2016 6/2018 7/2016 9/2016 9/2016 4/2017 7/2017 10/2009 10/2009 9/2010

Fair Value

$

(291) (552) (435) (627) (642) (142) (536) (2,903) (7,109) (284) (272) (447) (1,875) (155) (1,652) (814) (356) (1,134) (16) (32,398) 2 28 (830) (255) (5,291) (991) (3,872) (6,517) (4,841) (7,504) (3,793) 4,648 4,641 (687) $(77,902)

92

Table of Contents Item 8. Financial Statements and Supplementary Data The consolidated financial statements of NorthStar Realty Finance Corp. and the notes related to the foregoing financial statements, together with the independent registered public accounting firm's reports thereon are included in this Item 8.

INDEX TO FINANCIAL STATEMENTS NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES

Processed and formatted by SEC Watch - Visit SECWatch.com Page

Reports of Independent Registered Public Accounting Firm

94

Consolidated Balance Sheets as of December 31, 2008 and 2007

96

Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006

97

Consolidated Statement of Stockholders' Equity for the years ended December 31, 2008, 2007 and 2006

98

Consolidated Statements of Comprehensive Income for the years ended December 31, 2008, 2007 and 2006

99

Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006

100

Notes to Consolidated Financial Statements

102

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2008

158

Schedule IV—Loans and other Lending Investments as of December 31, 2008

163

93

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders NorthStar Realty Finance Corp. We have audited the accompanying consolidated balance sheets of NorthStar Realty Finance Corp. and subsidiaries (the "Company") as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders' equity, comprehensive income and cash flows for each of the three years in the period ended December 31, 2008. Our audits of the basic financial statements included the financial statement schedules, (Schedules III and IV) listed in the Index at Item 15 of the financial statements. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NorthStar Realty Finance Corp. and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2009 expressed an unqualified opinion thereon. /s/ GRANT THORNTON LLP New York, New York February 25, 2009 94

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Processed and formatted by SEC Watch - Visit SECWatch.com

Board of Directors and Stockholders NorthStar Realty Finance Corp. We have audited NorthStar Realty Finance Corp. and subsidiaries' (the "Company") internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, NorthStar Realty Finance Corp. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2008 and 2007 and the related consolidated statements of operations, stockholders' equity, comprehensive income and cash flows for each of the three years in the period ended December 31, 2008, and the accompanying financial statement schedules, and our report dated February 25, 2009 expressed an unqualified opinion thereon. /s/ GRANT THORNTON LLP New York, New York February 25, 2009 95

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in Thousands, Except per Share Data)

Processed and formatted by SEC Watch - Visit SECWatch.com

ASSETS: Cash and cash equivalents Restricted cash Operating real estate—net Available for sale securities, at fair value Collateral held by broker Real estate debt investments, net Real estate debt investments, held-for-sale Corporate loan investments Investments in and advances to unconsolidated ventures Receivables, net of allowance of $0 and $1 in 2008 and 2007, respectively Unbilled rents receivable Derivative instrument, at fair value Deferred costs and intangible assets, net Other assets Total assets

De ce m be r 31, 2008

De ce m be r 31, 2007

$

$

$

LIABILITIES AND STOCKHOLDERS' EQUITY: Liabilities: Mortgage notes and loans payable Exchangeable senior notes, measured at fair value as of December 31, 2008 Bonds payable, measured at fair value as of December 31, 2008 Credit facilities Secured term loans Liability to subsidiary trusts issuing preferred securities, measured at fair value as of December 31, 2008 Repurchase obligations Securities sold, not yet purchased, at fair value Obligations under capital leases Accounts payable and accrued expenses Escrow deposits payable Derivative liability, at fair value Other liabilities Total liabilities Minority interest in operating partnership Minority interest in joint ventures Stockholders' Equity: 8.75% Series A preferred stock, $0.01 par value, $25 liquidation preference per share, 2,400,000 shares issued and outstanding at December 31, 2008 and December 31, 2007, respectively 8.25% Series B preferred stock, $0.01 par value, $25 liquidation preference per share,7,600,000 shares issued and outstanding at December 31, 2008 and December 31, 2007, respectively Common stock, $0.01 par value, 500,000,000 shares authorized, 62,906,693 and 61,719,469 shares issued and outstanding at December 31, 2008 and December 31, 2007, respectively Additional paid-in capital Treasury stock, 475,051 and 0 shares held at December 31, 2008 and December 31, 2007, respectively Retained earnings (deficit) Accumulated other comprehensive loss Total stockholders' equity Total liabilities and stockholders' equity See accompanying notes to consolidated financial statements. 96

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Amount in Thousands, Except per Share Data)

$

134,039 163,157 1,127,000 221,143 — 1,976,864 70,606 — 101,507 24,806 7,993 9,318 71,933 27,660 3,936,026

$

153,829 202,295 1,134,136 549,522 12,746 2,007,022 — 457,139 33,143 32,141 5,684 — 126,677 78,448 4,792,782

910,620 112,576 468,638 44,881 403,907 69,617 176 — 3,555 27,478 46,353 87,220 34,248 2,209,269 109,110 101,171

912,365 172,500 1,654,185 501,432 416,934 286,258 1,864 12,856 3,541 34,893 65,445 49,280 40,695 4,152,248 7,534 14,961

57,867

57,867

183,505

183,505

634 610,834 (1,384) 759,363 (94,343) 1,516,476 3,936,026 $

617 595,418 — (40,075) (179,293) 618,039 4,792,782

Processed and formatted by SEC Watch - Visit SECWatch.com

Revenues and other income: Interest income Interest income—related parties Rental and escalation income Advisory and management fee income—related parties Other revenue Total revenues Expenses: Interest expense Real estate properties—operating expenses Asset management fees—related parties Fundraising fees, debt issuance costs and other Impairment on operating real estate Provision for loan losses General and administrative: Salaries and equity based compensation(1) Auditing and professional fees Other general and administrative Total general and administrative Depreciation and amortization Total expenses Income from operations Equity in (loss)/earnings of unconsolidated ventures Unrealized gain (loss) on investments and other Realized gain on investments and other Income from continuing operations before minority interest Minority interest in operating partnership Minority interest in joint ventures Income from continuing operations Income (loss) from discontinued operations, net of minority interest Gain on sale from discontinued operations, net of minority interest Gain on sale of joint venture interest, net of minority interest Net income Preferred stock dividends Net income available to common stockholders

Ye ar En de d De ce m be r 31, 2008

Ye ar En de d De ce m be r 31, 2007

Ye ar En de d De ce m be r 31, 2006

$

$

$

$

Net income per share from continuing operations (basic/diluted) $ Income per share from discontinued operations (basic/diluted) Gain on sale of discontinued operations and joint venture interest (basic/diluted) Net income available to common stockholders $ Weighted average number of shares of common stock: Basic Diluted

(1)

212,444 14,995 116,073 12,496 16,496 372,504

292,135 13,516 95,755 7,658 6,249 415,313

134,847 11,671 37,546 5,906 5,874 195,844

191,472 8,278 4,746 7,823 5,580 11,200

242,560 8,709 4,368 6,295 — —

104,239 8,552 594 — — —

53,269 7,098 14,492 74,859 43,232 347,190 25,314 (11,918) 752,332 36,036 801,764 (77,484) (4,614) 719,666 — — — 719,666 (20,925) 698,741 $

36,148 6,787 13,626 56,561 33,191 351,684 63,629 (11,684) (4,330) 3,559 51,174 (2,702) (580) 47,892 (56) — — 47,836 (16,533) 31,303 $

22,547 4,765 7,739 35,051 13,578 162,014 33,830 432 4,934 1,845 41,041 (3,938) (68) 37,035 306 445 279 38,065 (860) 37,205

11.07 — — 11.07 63,135,608 70,136,783

$

$

0.51 — — 0.51 61,510,951 65,086,953

$

$

0.91 0.01 0.02 0.94 39,635,919 44,964,455

The years ended December 31, 2008, 2007 and 2006 include $24,680, $16,007 and $9,080 of equity based compensation expense, respectively. See accompanying notes to consolidated financial statements. 97

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Amounts in Thousands)

Processed and formatted by SEC Watch - Visit SECWatch.com

Balance at December 31, 2005 Issuance of restricted shares of common stock Stock awards Net proceeds from secondary offering of common stock Issuance of shares of preferred stock, net of expenses Comprehensive loss Amortization of equity based compensation Conversion of OP /LT IP units Cash dividends on common stock Cash dividends on preferred stock Net income

Accum u late d Pre fe rre d S h are s of C om m on Addition al O the r Total S tock C om m on S tock Paid-in Tre asu ry C om pre h e n sive Re tain e d S tockh olde rs' at Par S tock at Par C apital S tock Incom e (Loss) Earn ings Equ ity $ — 30,465 $ 305 $ 224,893 $ — $ (738)$ 23,965 $ 248,425 5 — — — — — — — 44 — 525 — — — 525 — 26,320 263 323,294 — — — 323,557 24 — — 57,843 — — — 57,867 — — — — — (4,575) — (4,575) — — — 132 — — — 132 — 4,404 44 41,191 — — — 41,235 — — — — — — (44,600) (44,600) — — — — — — (860) (860) 38,065 38,065

Balance at December 31, 2006 P roceeds from dividend reinvestment and stock purchase plan Stock awards Issuance of shares of preferred stock, net of expenses Comprehensive loss Conversion of OP /LT IP units Cash dividends on common stock Cash dividends on preferred stock Net income

$

Balance at December 31, 2007 Net proceeds from dividend reinvestment and stock purchase plan Net proceeds equity distribution agreement Stock awards P urchase of treasury shares Comprehensive loss Conversion of OP /LT IP units SFAS No. 159 beginning balance adjustment Cash dividends on common stock Cash dividends on preferred stock Net income

$

Balance at December 31, 2008

$

24

61,238 $

— — 76 — — — — —

330 25 — — 126 — — —

100

61,719 $

— — — — — — — — — — 100

182 114 273 (475) — 1,094 — — — — 62,907 $

612 $ 647,878 4 — — — 1 — — —

— $

3,805 463 183,429 — 1,115 — — —

617 $ 836,690 2 1 3 — — 11 — — — —

1,139 875 2,411 —

— — — — — — — —

— — — — — — (173,980) — — — — (87,948) — (16,533) — 47,836

— $

(179,293)$ (40,075) $

— — — (1,384) — — — — — —

10,991 — — — —

(5,313)$ 16,570 $

634 $ 852,106 $ (1,384) $

— — — — (6,016) — 90,966 — — —

— — — — — — 190,766 (90,069) (20,925) 719,666

(94,343)$ 759,363 $

See accompanying notes to consolidated financial statements. 98

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in Thousands, Except per Share Data) Ye ar En de d De ce m be r 31, 2008

Net income Unrealized gain (loss) on available for sale securities Change in fair value of derivatives Reclassification adjustment for gains included in net income Comprehensive Income

$

$

Ye ar En de d De ce m be r 31, 2007

719,666 $ (20,545) (12,053) 26,582 713,650 $

Ye ar En de d De ce m be r 31, 2006

47,836 $ (158,755) (24,772) 9,547 (126,144) $

See accompanying notes to consolidated financial statements. 99

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES

38,065 10,553 (15,159) 31 33,490

659,771 3,809 463 183,505 (173,980) 1,116 (87,948) (16,533) 47,836 618,039 1,141 876 2,414 (1,384) (6,016) 11,002 281,732 (90,069) (20,925) 719,666 1,516,476

Processed and formatted by SEC Watch - Visit SECWatch.com

CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands, Except per Share Data)

C ash flows from ope ratin g activitie s: Net income Adjustments to reconcile net income to net cash provided by operating activities: Operating real estate Impairement Gains on sale of operating real estate and interest in unconsolidated ventures Equity in loss/(earnings) of unconsolidated ventures Depreciation and amortization Amortization of origination fees/costs Amortization of deferred financing costs Minority interest Equity based compensation Unrealized loss (gain) on investments and other Realized gain on sale of investments and other Amortization of bond discount/premiums on securities Operating real estate impairment Distributions from equity investments Capital lease Amortization of capitalized above/below market leases Unbilled rents receivable Interest accretion Loan loss provision Changes in assets and liabilities: Restricted cash Receivables Deferred costs and intangible assets Other assets Receivables—related parties Accounts payable and accrued expenses P ayables—related parties Escrow deposit payable Deferred management fee income Real estate debt investment origination fees Other liabilities Net cash provided by operating activities C ash flows from inve stin g activitie s: Acquisition of operating real estate, net Improvement of Operating real estate Acquisition of available for sale securities P roceeds from disposition of securities available for sale Available for sale securities repayments Increase in term debt transaction warehouse deposits Originations/acquisitions of real estate debt investments Real estate debt investment repayments P roceeds from the sale of real estate debt investments Net proceeds from disposition of operating real estate Real estate debt investment acquisition costs Intangible asset related to acquisition P roceeds from sale of assets Corporate debt investment acquisitions Corporate debt investment repayments P roceeds from disposition of corporate debt investment Cash receipts from term debt transaction issuer Other loans receivable Other loans receivable repayment Restricted cash used for investment activities Acquisition deposits Deferred lease costs

Ye ar En de d De ce m be r 31, 2008

Ye ar En de d De ce m be r 31, 2007

Ye ar En de d De ce m be r 31, 2006

$

$

$

719,666

38,065

5,580 — 11,918 43,232 (9,919) 5,821 82,098 24,680 (767,338) (38,141) (4,730) — 2,657 14 (1,758) (2,296) (8,737) 11,200

— 10,431 33,191 (8,522) 8,375 3,279 16,007 4,330 (3,372) (2,489) 45 458 87 (864) (2,866) (7,634) —

(846) (152) 13,646 (2,272) 4,408 4,186 9,080 (4,934) (1,845) (2,215) — 152 79 (1,711) (1,711) (3,284) —

21,686 6,929 260 4,202 (1,609) (7,625) 757 (19,092) 3,848 3,181 (3,816)

(22,493) (19,037) — (13,852) (528) 20,892 2,026 10,485 — 15,746 10,707

(43,581) (12,259) (640) (11,020) 126 10,312 82 46,907 — 11,147 2,268

82,668

102,238

53,988

(4,261) (20,289) (59,186) 6,115 3,043 — (329,266) 290,449 30,400 — (275) 2,875 — (16,362) 24,985 102,575 — (9,826) 14,000 (109,513) (741) —

100

47,836

(686,219) — (777,145) 136,924 54,466 (18,000) (1,158,215) 555,433 67,322 — (3,265) — 62,821 (489,209) 26,678 5,419 8,826 (13,590) — (112,735) (1,591) —

(260,653) (681,487) 29,434 37,789 (29,191) (1,322,936) 435,207 — 10,751 (1,095) (2,833) — — — — 1,048 — — (63,530) — (42)

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Amounts in Thousands, Except per Share Data) Ye ar En de d Ye ar En de d Ye ar En de d De ce m be r 31, De ce m be r 31, De ce m be r 31, 2008 2007 2006 (44,143) (33,099) (8,650) 8,712 1,250 322 — — 2,905

Investment in and advances to unconsolidated ventures Distributions from unconsolidated ventures Sale of investment in unconsolidated ventures Net cash (used in) investing activities C ash flows from fin an cin g activitie s: Collateral held by broker Securities sold, not yet purchased Settlement of short sales Settlement of derivative Collateral held by swap counter party Mortgage notes and loan borrowings Mortgage principal repayments Borrowing under credit facilities Repayments credit facilities Repurchase obligation borrowings Repurchase obligation repayments P roceeds from bonds Bond repayments Other loans payable Other loans payable repayments Borrowing under secured term loan Secured term loan repayment Bond repurchases Borrowings from subsidiary trusts issuing preferred securities P ayment of deferred financing costs Capital contributions by joint venture Restricted cash from financing activities P roceeds from exchangeable senior notes P roceeds from preferred stock offering P roceeds from common stock offerings P roceeds from dividend reinvestment and stock purchase plan P urchase of treasury stock Dividends (common and preferred) and distributions Offering costs Distributions to minority interest owners

(110,708)

(2,373,929)

(1,852,961)

12,746 — (12,778) — (20,837) 3,677 (5,422) 39,816 (118,403) 2,200 (3,887) 137,011 (95,300) — — 70,864 (80,190) (49,859) — (244) 94,822 86,832 80,000 — — 2,268 (1,384) (122,059) (252) (11,371)

(12,746) 28,471 (16,371) — (8,476) 506,252 (5,537) 1,598,760 (1,113,329) 27,084 (105,480) 881,300 (113,594) 13,300 (387) 462,387 (45,453) — 72,500 (27,007) 2,631 (10,917) 172,500 190,000 4,027 — — (109,733) (6,712) (2,703)

— — — 632 375 189,919 (5,913) 1,018,616 (1,245,618) 104,334 (31,127) 1,416,129 (33,900) — — — — — 105,000 (31,496) — — — 60,000 343,334 — — (52,547) (21,910) —

2,380,767 109,076 44,753 153,829

$

1,815,828 16,855 27,898 44,753

217,206

$

96,058

Net cash provided by financing activities Net (decrease) increase in cash & cash equivalents Cash and cash equivalents—beginning of period Cash and cash equivalents—end of period

$

8,250 (19,790) 153,829 134,039 $

Supplemental disclosure of cash flow information: Cash paid for interest

$

216,115

$

See accompanying notes to consolidated financial statements. 101

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in Thousands, Except per Share Data) 1. Formation and Organization NorthStar Realty Finance Corp., a Maryland corporation (the "Company"), is a self-administered and self-managed real estate investment trust ("REIT"), which was formed in October 2003 in order to continue and expand the real estate debt, real estate securities and net lease

Processed and formatted by SEC Watch - Visit SECWatch.com

businesses conducted by NorthStar Capital Investment Corp. ("NCIC"). Substantially all of the Company's assets are held by, and it conducts its operations through, NorthStar Realty Finance Limited Partnership, a Delaware limited partnership and the operating partnership of the Company (the "Operating Partnership"). On October 29, 2004, the Company closed its initial public offering (the "IPO") pursuant to which it issued 20,000,000 shares of common stock, with proceeds to the Company of approximately $160.1 million, net of issuance costs of $19.9 million. Simultaneously with the closing of the IPO on October 29, 2004, three majority-owned subsidiaries of NCIC (the "NCIC Contributing Subsidiaries") contributed certain controlling and non-controlling interests in entities through which NCIC conducted its subordinate real estate debt, real estate securities and net lease businesses (collectively the "Initial Investments") to the Operating Partnership in exchange for an aggregate of 4,705,915 units of limited partnership interest in the Operating Partnership (the "OP Units") and approximately $36.1 million in cash (the "Contribution Transactions") and an agreement to pay certain related transfer taxes on behalf of NCIC for approximately $1.0 million. From their inception through October 29, 2004, neither the Company nor the Operating Partnership had any operations. The combination of the Initial Investments contributed to the Operating Partnership represents the predecessor of the Company (the "Predecessor"). The Company succeeded to the business of the Predecessor upon the consummation of the IPO and the contribution of the initial investments on October 29, 2004. The ultimate owners of the entities which comprise the Predecessor were NCIC and certain other persons who held minority ownership interests in such entities. Joint Ventures Wakefield Capital, LLC In May 2006, the Company entered into a joint venture with Chain Bridge Capital LLC to invest in senior housing and healthcare-related net leased assets, called Wakefield. In connection with the formation of the venture, Chain Bridge contributed substantially all of its assets to Wakefield for its $15.1 million membership interest in the joint venture. On July 9, 2008, Wakefield sold a $100 million convertible preferred membership interest to Inland American Real Estate Trust, Inc. ("Inland American"). The Company received approximately $87.7 million of net proceeds from the transaction. Prior to conversion, the convertible preferred investment is entitled to a 10.5% dividend per annum. The convertible preferred membership interest may be converted or redeemed, at Inland American's option, upon the sale or recapitalization of the Wakefield venture. Wakefield may, at its option, redeem the convertible preferred interests at any time following the first anniversary of the closing, subject to payment of a call premium that declines over time. In addition, at any time after the second anniversary of the closing, Inland American may convert its preferred membership interests into common equity in Wakefield. Based on the initial investment amount and capital accounts of the Wakefield members, the convertible preferred membership interests represent, upon conversion, approximately a 42% common equity ownership interest in Wakefield. Inland American will have the option of contributing additional preferred membership interest and 102

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 1. Formation and Organization (Continued)

participating in new Wakefield investment opportunities in proportion to its percentage ownership interest, assuming it were to convert its interests to common equity. The Company controls substantially all major decisions of the joint venture. Accordingly, the joint venture's financial statements are consolidated into the Company's consolidated financial statements and Inland American's and Chain Bridge's capital are treated as minority interests. Monroe Capital NorthStar Funding, LLC In March 2007, the Company entered into a joint venture with Monroe Capital Holdco, LLC ("Monroe"), which served as a platform for originating middle-market loans. The joint venture ("Monroe Capital") originated, structured and syndicated middle-market corporate loans, including middle-market loans to highly leveraged borrowers. On May 7, 2008, the Company completed a recapitalization of this middle-market corporate lending venture. As part of the recapitalization, an institutional money-manager invested approximately $87.2 million of cash equity into the business and the Company contributed $6.8 million of new equity capital and its CLO equity interests. The lender under two consolidated revolving credit facilities totaling $800.0 million of capacity and having $378.0 million outstanding at May 7, 2008, which we refer to as the MC Facility and the MC VFCC Facility, extinguished a portion of the outstanding debt balance and refinanced the remaining indebtedness in the form of a private CLO which match funded the underlying assets. The venture was also permitted to sell a portion of the loan collateral and to use the cash to make new corporate loan investments. In connection with the recapitalization, the Company recognized a $46.0 million realized gain upon the extinguishment of a portion of the debt, a simultaneous $27.1 million cost basis reduction to its investment in the recapitalized venture and a realized loss of $18.9 million related to the sale of certain corporate loans within the portfolio, which were recorded in realized gain (loss) on investments and other in the condensed consolidated statement of operations. The new investor became the controlling manager of the entity and the Company deconsolidated the venture. Additionally, as part of this recapitalization, the Company terminated its joint venture with Monroe Management. 2. Summary of Significant Accounting Policies Basis of Accounting The accompanying consolidated financial statements of the Company are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. Principles of Consolidation The consolidated financial statements include the accounts of the Company, and its subsidiaries, which are either majority owned or controlled by the Company or a variable interest entity ("VIE") where the Company is the primary beneficiary in accordance with the provision of Fin 46(R)-6. All significant intercompany balances have been eliminated in consolidation. 103

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 2. Summary of Significant Accounting Policies (Continued) Variable Interest Entities In accordance with Fin 46(R)-6, the Company identifies entities for which control is achieved through means other than through voting rights (a "variable interest entity" or "VIE"), and determines when and which business enterprise, if any, should consolidate the VIE. In addition, the Company discloses information pertaining to such entities wherein the Company is the primary beneficiary or other entities wherein the Company has a significant variable interest. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that could affect the amounts reported in the consolidated financial statements. Actual results could differ from these estimates. Operating Real Estate Operating real estate properties are carried at historical cost less accumulated depreciation. Costs directly related to the acquisition are capitalized. Ordinary repairs and maintenance which are not reimbursed by the tenants are expensed as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their useful life. Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows: C ate gory

Building (fee interest) Building improvements Building (leasehold interest) Property under capital lease Tenant improvements Furniture and fixtures

Te rm

40 years Lesser of the remaining life of building or useful life Lesser of 40 years or the remaining term of the lease Lesser of 40 years or the remaining term of the lease Lesser of the useful life or the remaining term of the lease Four to seven years

In accordance with Statement of Financial Accounting Standards ("SFAS") 144 "Accounting for the impairment or Disposal of LongLived Assets" a property to be disposed of is reported at the lower of its carrying value or its estimated fair value less the cost to sell. Once an asset is determined to be held for sale, depreciation and straight-line rental income are no longer recorded. In addition, the asset is reclassified to assets held for sale on the consolidated balance sheet and the results of operations are reclassified to income (loss) from discontinued operations in the consolidated statements of operations. 104

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 2. Summary of Significant Accounting Policies (Continued) In accordance with SFAS No. 141 "Business Combinations" ("SFAS 141") the Company allocates the purchase price of operating properties to land, building, tenant improvements, deferred lease cost for the origination costs of the in-place leases and to intangibles for the value of the above or below market leases. The Company amortizes the value allocated to the in-place leases over the remaining lease term. The value allocated to the above or below market leases are amortized over the remaining lease term as an adjustment to rental income. Investments in and Advances to Unconsolidated Ventures The Company has various investments in unconsolidated ventures. In circumstances where the Company has a non-controlling interest but are deemed to be able to exert influence over the affairs of the enterprise the Company utilizes the equity method of accounting. Under the equity method of accounting, the initial investment is increased each period for additional capital contributions and a proportionate share of the entity's earnings and decreased for cash distributions and a proportionate share of the entity's losses. Management periodically reviews its investments for impairment based on projected cash flows from the venture over the holding period. When any impairment is identified, the investments are written down to recoverable amounts. Financial Instruments Fair Value Measurements Fair value is used to measure many of the Company's financial instruments. In accordance with provisions of SFAS No. 157 "Fair Value Measurements" ("SFAS 157") the fair value of these financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). Fair Value Option In accordance with SFAS No. 159 "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"), the Company had the one-time option to elect fair value on January 1, 2008 for its existing financial assets and liabilities. For all new financial instruments, the Company has the one-time option to elect fair value for these financial assets or liabilities on the election date, as defined in SFAS 159. The changes in the fair value of these instruments are recorded in unrealized gain (loss) on investments and other in the condensed consolidated statements of operations. Available for Sale Securities The Company determines the appropriate classification of its investments in securities at the time of purchase and reevaluates such determination at each balance sheet date in accordance with SFAS "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"). Securities for which the Company does not have the intent or the ability to hold to maturity are classified as available for sale securities. The Company has designated its investments in the equity notes and its non investment grade notes of unconsolidated term debt transactions as available for sale securities as they meet the definition of a debt instrument due to their redemption provisions. These securities are carried at 105

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 2. Summary of Significant Accounting Policies (Continued) estimated fair value with the net unrealized gains or losses reported as a component of accumulated other comprehensive income (loss) in the consolidated statements of stockholders' equity. The Company's available for sale securities that serve as collateral for its term debt transactions, which the Company has elected the fair value option pursuant to SFAS 159, are carried at fair value with the net unrealized gains or losses reported as a component of earnings in the statement of operations. The Company determines the fair value of its available for sale securities pursuant to the guidance in SFAS 157. For additional information regarding unrealized gains and losses due to changes in the fair value of the Company's available for sale securities at December 31, 2008 and 2007, see Note 5. Real Estate Debt Investments Real estate debt investments are intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan origination fees, discounts, repayments, sales of partial interests in loans, and unfunded commitments unless such loan or investment is deemed to be impaired. Discounts and premiums on purchased assets are amortized over the life of the investment using the effective interest method. The origination cost and fees are deferred and amortized using the effective interest method over the life of the related loan investment. The amortization is reflected as an adjustment to interest income. Real Estate Debt Investments Held for Sale Real estate debt investments held for sale are carried at the lower of cost or market value using available market information including sales prices and information obtained through consultation with dealers or other originators of such investments. The Company classifies, as held for sale, real estate debt investments that are actively being syndicated or marketed for sale. Cash and Cash Equivalents The Company considers all highly liquid investments that have remaining maturity dates of three months or less when purchased to be cash equivalents. Cash, including amounts restricted, exceeded the Federal Deposit Insurance Corporation deposit insurance limit of $250,000 per institution at December 31, 2008 and 2007. The Company mitigates its risk by placing cash and cash equivalents with major financial institutions. Restricted Cash Restricted cash consists of escrows for taxes, insurance, leasing costs, capital expenditures, tenant security deposits, payments required under certain lease agreements, escrow deposits collected in connection with whole loan originations and deposits with the trustee related to the consolidating term debt transactions which is primarily proceeds of loan repayments which will be used to reinvest in collateral for the term debt transaction. The Company mitigates its risk by placing restricted cash with major financial institutions. 106

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 2. Summary of Significant Accounting Policies (Continued) Deferred Costs, Net Deferred lease costs consist of fees incurred to initiate and renew operating leases and the FAS 141 purchase price-allocation to in-place lease and lease cost. Lease costs are being amortized using the straight-line method over the terms of the respective leases. Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining financing. These costs are amortized over the term of the financing. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financing transactions, which do not close, are expensed in the period the financing transaction was terminated. Short Sales The Company may sell securities that it does not own ("short sales"). Short sales are typically entered into by the Company as a hedge to offset a future liability or changes in the market value of an asset resulting from changes in interest rates. To complete a short sale, the Company will arrange through a broker to borrow the securities to be delivered to the buyer. The proceeds received by the Company from the short sale are retained by the broker until the Company replaces the borrowed securities. In borrowing the securities to be delivered to the buyer, the Company becomes obligated to replace the securities borrowed at their market price at the time of the replacement, whatever that price may be. A gain, limited to the price at which the Company sold the security short, or a loss, Identified Intangible Assets and Goodwill Upon the acquisition of a business, the Company records intangible assets acquired at their estimated fair value separate and apart from goodwill. The Company amortizes identified intangible assets that are determined to have finite lives based on the period over which the assets are expected to contribute directly or indirectly to the future cash flows of the business acquired. Intangible assets not subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable or its carrying amount exceeds its estimated fair value. Comprehensive Income Comprehensive income or (loss) is recorded in accordance with the provisions of SFAS No. 130, "Reporting Comprehensive income" ("SFAS 130"). SFAS 130 establishes standards for reporting comprehensive income and its components in the financial statements. Comprehensive income (loss), is comprised of net income, as presented in the consolidated statements of operations, adjusted for changes in unrealized gains or losses on available for sale securities and changes in the fair value of derivative financial instruments accounted for as cash flow hedges. Underwriting Commissions and Costs Underwriting commissions and direct costs incurred in connection with the Company's public offering are reflected as a reduction of additional paid-in-capital. 107

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 2. Summary of Significant Accounting Policies (Continued) Revenue Recognition Rental income from leases is recognized on a straight-line basis over the noncancelable term of the respective leases. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in unbilled rent receivable in the accompanying consolidated balance sheets. Tenant reimbursement income is recognized in the period in which the related expense is incurred. Rental revenue, which is based upon a percentage of the sales recorded by the Company's tenants is recognized in the period such sales were earned by the respective tenants. Interest income from the Company's loan investments is recognized on an accrual basis over the life of the investment using the effective interest method. Additional interest to be collected at the origination of the loan or the payoff of the loan is recognized over the term of the loan as an adjustment to yield. Interest income from available for sale securities and held for trading is recognized on the accrual basis over the life of the investment on a yield-to-maturity basis. In connection with its investment in the equity notes, the Company recognizes interest income on these investments pursuant to Emerging Issues Task Force ("EITF") 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets." Interest income is recognized on an estimated effective yield to maturity basis. Accordingly, on a quarterly basis, the Company calculates a revised yield on the current amortized cost of the investment and a current estimate of cash flows based upon actual and estimated prepayment and credit loss experience. The revised yield is then applied prospectively to recognize interest income. Advisory fee income from both third parties and affiliates is recognized on the accrual basis as services are rendered and the fee income is contractually earned in accordance with the respective agreements. Fees from affiliated ventures accounted for under the equity method, are eliminated against the related equity in earnings in such affiliated ventures to the extent of the Company's ownership. Incentive income is related to performance where the Company is entitled to a promoted interest (i.e., the distribution of a disproportionate allocation of cash flow) after other members have obtained a specified return threshold and return of capital. The Company follows Method 1 of EITF Topic D-96 for recording such incentive income. Under Method 1 of EITF Topic D-96, no incentive income is recorded until all contingencies have been eliminated. Credit Losses, Impairment and Allowance for Doubtful Accounts The Company assesses whether unrealized losses on the change in fair value on their available for sale securities reflect a decline in value which is other than temporary in accordance with EITF 03-1. If it is determined the decline in value is other than temporary the impaired securities are written down through earnings to their fair values. Significant judgment of management is required in this analysis, which includes, but is not limited to, making assumptions regarding the collectability of the principal and interest, net of related expenses, on the underlying collateral. 108

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 2. Summary of Significant Accounting Policies (Continued) Allowances for real estate debt investment and corporate loan losses are established based upon a periodic review of the investments. Income recognition is generally suspended for loans at the earlier of the date at which payments become 90 days past due or when, in the opinion of management, a full recovery of income and principal becomes doubtful. Income recognition is resumed when the suspended loan becomes contractually current and performance is demonstrated to be resumed. In performing this review, management considers the estimated net recoverable value of the loan as well as other factors, including the fair market value of any collateral, the amount and the status

Processed and formatted by SEC Watch - Visit SECWatch.com

of any senior debt, the prospects for the borrower and the economic situation of the region where the borrower does business. Because this determination is based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized from the loan investments may differ materially from the carrying value at the balance sheet date. The Company reviews long-lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Upon determination that impairment exists, the related asset is written down through earnings to its estimated fair value. Allowance for doubtful accounts for tenant receivables are established based on periodic review of aged receivables resulting from estimated losses due to the inability of its tenants to make required rent and other payments contractually due. Additionally, the Company establishes, on a current basis, an allowance for future tenant credit losses on billed and unbilled rents receivable based upon an evaluation of the collectability of such amounts. Rent Expense Rent expense is recorded on a straight-line basis over the term of the respective leases. The excess of rent expense incurred on a straightline basis over rent expense, as it becomes payable according to the terms of the lease, is recorded as rent payable and is included in other liabilities in the consolidated balance sheets. Income Taxes The Company has elected to be treated as a REIT under Internal Revenue Code Sections 856 through 859 and intends to remain so qualified. As a REIT, the Company generally is not subject to Federal income tax. To maintain its qualification as a REIT, the Company must distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to Federal income tax on its taxable income at regular corporate rates. The Company may also be subject to certain state, local and franchise taxes. Under certain circumstances, Federal income and excise taxes may be due on its undistributed taxable income. Pursuant to amendments to the Code that became effective January 1, 2001, the Company has elected or may elect to treat certain of its existing or newly created corporate subsidiaries as taxable REIT subsidiaries (each a "TRS"). In general, a TRS of the Company may perform non-customary services for tenants of the Company, hold assets that the Company cannot hold directly and generally may engage in any real estate or non-real estate related business. A TRS is generally subject to regular corporate income tax. The Company has established several TRSs in jurisdictions for which no taxes 109

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 2. Summary of Significant Accounting Policies (Continued)

are assessed on corporate earnings. However, the Company must include earnings from these TRSs currently. The Company adopted the provisions of FASB Interpretation No. 48 ("Fin 48"), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 ("FAS No. 109") on January 1, 2007. As a result of the implementation of Fin 48, the Company recognized no material adjustments regarding its tax accounting treatment. The Company expects to recognize interest and penalties related to uncertain tax positions, if any, as income tax expense, which is included in general and administrative expense. Derivatives and Hedging Activities In the normal course of business, the Company uses a variety of derivative instruments to manage, or hedge interest rate risk. The Company recognizes derivatives as either assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. The fair value adjustments of each period will affect the consolidated financial statements of the Company differently depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. The Company generally enters into cash flow hedges and must designate them at the time of entering into the derivative. The derivatives entered into by the Company are intended to qualify as hedges under accounting principles generally accepted in the United States, unless specifically stated otherwise. Toward this end, the terms of hedges are matched closely to the terms of hedged items. The Company assesses the effectiveness of the cash flow hedges both at inception and on an on-going basis and determines whether the hedge is highly effective in offsetting changes in cash flows of the hedged item. The Company records the effective portion of changes in the estimated fair value in accumulated other comprehensive income (loss) and subsequently reclassifies the related amount of accumulated other comprehensive income (loss) to earnings when the hedging relationship is terminated. If it is determined that a derivative has ceased to be a highly effective hedge, the Company will discontinue hedge accounting for such transaction. With respect to derivative instruments that have not been designated as hedges, or are hedges on debt that is remeasured at fair value pursuant to SFAS 159, any net payments under, or fluctuations in the fair value of, such derivatives are recognized currently in income. The Company's basis swaps have been designated as non-hedge derivatives. The Company's derivative financial instruments contain credit risk to the extent that its bank counterparties may be unable to meet the terms of the agreements. The Company minimizes such risk by limiting its counterparties to major financial institutions with good credit ratings. In addition, the potential risk of loss with any one party resulting from this type of credit risk is monitored. Stock Based Compensation The Company has adopted the fair value method of accounting prescribed in SFAS No. 123R "Accounting for Stock Based Compensation" ("SFAS 123R") (as amended by SFAS No. 148) for its equity based compensation awards. SFAS 123R requires an estimate of the fair value of the equity award at the time of grant rather than the intrinsic value method. All fixed equity based awards to employees and directors, which have no vesting conditions other than time of service, will be amortized 110

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 2. Summary of Significant Accounting Policies (Continued) to compensation expense over the award's vesting period based on the fair value of the award at the date of grant. Foreign Currency Translation The Company's functional currency of its euro-dominated investment is the US dollar. Non-monetary assets and liabilities are translated at historical rates and monetary assets and liabilities are translated at the exchange rates in effect at the end of the reporting period. Statement of operation accounts are translated at the average rates for the reporting period. Any gains and losses from the translation of foreign currency to US dollars are included in the statement of operations. Since the Company's foreign currency Euro-dominated investment is 100% financed with Euro-dominated debt any foreign currency translation gains or losses would be a result of a timing difference of the interest income received and the debt payment. Earnings Per Share The Company's basic earnings per share ("EPS") is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding. For purposes of calculating earnings per share, the Company considered all unvested restricted stock which participates in the dividends of the Company to be outstanding. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted to common stock, where such exercise or conversion would result in a lower EPS amount. This also includes units of limited partnership interest in the Operating Partnership. The dilutive effects of units of limited partnership interest and their equivalents are computed using the "treasury stock" method. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. Recently Issued Pronouncements In December 2007, the FASB issued SFAS 141(R), "Business Combinations" (SFAS 141(R)). This Statement replaces SFAS 141, "Business Combinations", and requires an acquirer to recognize the assets acquired, the liabilities assumed, including those arising from contractual contingencies, any contingent consideration, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the statement. SFAS 141(R) also requires the acquirer in a business combination achieved in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the noncontrolling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with SFAS 141(R)). In addition, SFAS 141(R)'s requirement to measure the noncontrolling interest in the acquiree at fair value will result in recognizing the goodwill attributable to the noncontrolling interest in addition to that attributable to the acquirer. SFAS 141(R) amends SFAS No. 109, "Accounting for Income Taxes", to require the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. It also amends SFAS 142, "Goodwill and Other Intangible Assets", to, among other things, provide guidance on the impairment testing of acquired research and development 111

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 2. Summary of Significant Accounting Policies (Continued) intangible assets and assets that the acquirer intends not to use. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently evaluating the potential impact that the adoption of SFAS 141(R) could have on its financial statements. In December 2007, the FASB issued SFAS 160, "Noncontrolling Interests in Consolidated Financial Statements" ("SFAS 160"). SFAS 160 amends Accounting Research Bulletin 51, "Consolidated Financial Statements", to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 also changes the way the consolidated income statement is presented by requiring consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. SFAS 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated and requires expanded disclosures in the consolidated financial statements that clearly identify and distinguish between the interests of the parent owners and the interests of the noncontrolling owners of a subsidiary. SFAS 160 is effective for fiscal periods, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company is currently evaluating the potential impact that the adoption of SFAS 160 could have on its financial statements. In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities—An Amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 expands the disclosure requirements for derivative instruments and hedging activities. SFAS 161 specifically requires entities to provide enhanced disclosures addressing the following: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. SFAS 161 will be effective for the Company on January 1, 2009. The Company is currently evaluating the potential impact that the adoption of SFAS 161 could have on its financial statements. In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles in the United States for nongovernmental entities. SFAS 162 is effective 60 days following approval by the U.S. Securities and Exchange Commission ("SEC") of the Public Company Accounting Oversight Board's amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles". The adoption of SFAS 162 did not have a material impact on the Company's financial statements. In May 2008, the FASB issued FASB Staff Position APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1 applies to convertible debt instruments that, by their stated terms, may be 112

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 2. Summary of Significant Accounting Policies (Continued)

settled in cash (or other assets) upon conversion, including partial cash settlement of the conversion option. FSP APB 14-1 requires bifurcation of the instrument into a debt component that is initially recorded at fair value and an equity component. The difference between the fair value of the debt component and the initial proceeds from issuance of the instrument is recorded as a component of equity. The liability component of the debt instrument is accreted to par using the effective yield method; accretion is reported as a component of interest expense. The equity component is not subsequently re-valued as long as it continues to qualify for equity treatment. This practice marks a significant change from the current accounting practice for convertible debt instruments in the scope of FSP APB 14-1. Current practice does not require separation of the liability and equity components of such instruments. Separately accounting for these instruments' liability and equity components will result in the recording of more non-cash interest cost over the life of the convertible debt instrument, because of an initial debt discount. Additionally, FSP APB 14-1 precludes the use of the fair value option pursuant to SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities." FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The Company intends to adopt FSP APB 14-1 effective January 1, 2009 and apply its provisions retrospectively to all periods presented in its financial statements. The Company has determined that FSP APB 14-1 will result in the Company recognizing additional non-cash interest expense of approximately $0.8 million, $2.8 million and $3.6 million in its 2007, 2008 and 2009 statements of operations, respectively. The 2008 increase in non-cash interest expense will be offset by a $5.0 million capitalization of financing fees which were expensed upon the election of the fair value option on the convertible debt instruments. In October 2008, the FASB issued Staff Position No. FAS 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active" ("FSP 157-3"). FSP 157-3 clarifies the application of SFAS 157, which the Company adopted as of January 1, 2008, in cases where a market is not active. The Company has considered the guidance provided by FSP 157-3 in its determination of estimated fair values as of December 31, 2008, and the impact was not material. In December 2008, the FASB issued Staff Position No. FAS 140-4 and FIN 46(R)-8, "Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities" ("FSP FAS 140-4 and FIN 46(R)-8"). FSP FAS 140-4 and FIN 46(R)-8 increases disclosure requirements for public companies and is effective for reporting periods (interim and annual) that end after December 15, 2008. The purpose of this FSP is to promptly improve disclosures by public entities and enterprises until the pending amendments to FASB Statement No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"("SFAS 140"), and FASB Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities" ("FIN 46(R)") , are finalized and approved by the Board. The FSP amends SFAS 140 to require public entities to provide additional disclosures about transferors' continuing involvements with transferred financial. It also amends FIN 46(R) to require public enterprises, including sponsors that have a variable interest in a variable interest entity, to provide additional disclosures about their involvement with variable interest entities. This pronouncement is related to disclosure only and will not have an impact on the Company's consolidated financial position, results of operations or cash flows. 113

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 3. Fair Value of Financial Instruments The Company adopted the provisions of SFAS 157 and 159 effective as of January 1, 2008 and elected to apply the fair value option to the following financial assets and liabilities existing at the time of adoption: •

Available for sale securities that serve as collateral for the Company's term debt transactions;

•

N-Star IV, VI, VII and VIII bonds payable;

•

Liabilities to subsidiary trusts issuing preferred securities; and

•

7.25% exchangeable senior notes.

During the second quarter 2008, the Company elected the fair value option for its 11.50% exchangeable senior notes issued in May 2008 and its equity investment in its corporate lending business. The Company has elected the fair value option for the above financial instruments for the purpose of enhancing the transparency of its financial condition. Fair Value Measurements SFAS 157 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. In addition, SFAS 157 requires an issuer to incorporate changes in its own credit spreads when determining the fair value of its liabilities. Fair Value Hierarchy In accordance with SFAS 157, the Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities recorded on the condensed consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market (examples include active exchange-traded equity securities, listed derivatives, most U.S. government and agency securities, and certain other sovereign government obligations). Level 2. Financial assets and liabilities whose values are based on the following: a)

Quoted prices for similar assets or liabilities in active markets (for example, restricted stock);

b)

Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently); 114

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 3. Fair Value of Financial Instruments (Continued) c)

Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including interest rate and currency swaps); and

d)

Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability (for example, certain mortgage loans).

Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include private equity investments, beneficial interest in securitizations and long-dated or complex derivatives, including certain foreign exchange options and longdated options on gas and power). As required by SFAS 157, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2008 by level within the fair value hierarchy (in thousands): Asse ts and Liabilitie s at Fair Value Le ve l 1 Le ve l 2 Le ve l 3 Total

Assets: Available for sale securities: CMBS Real estate term debt—N-Star(1) Real estate term debt—Third party REIT debt Term debt equity—N-Star Trust preferred securities Derivative asset Corporate lending investment Total assets

$

$

Liabilities: Exchangeable senior notes N-Star IV,VI, VII and VIII bonds payable(1) Liability to subsidiary trusts issuing preferred securities Derivative liability Total liabilities

(1)

$

$

— — — — — — — — —

$ 75,901 — — 44,336 — — 9,318 — $129,555

$ 48,693 7,040 1,322 600 38,764 4,488 — 47,999 $148,906

$124,594 7,040 1,322 44,936 38,764 4,488 9,318 47,999 $278,461

— — — — —

$112,576 — — 87,220 $199,796

$ — 468,638 69,617 — $538,255

$112,576 $468,638 69,617 87,220 $738,051

Markets have become relatively inactive for these securities and as a result the balances have been transferred from Level 2 to Level 3. 115

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 3. Fair Value of Financial Instruments (Continued) As of December 31, 2008, the Company did not have any assets or liabilities measured at fair value on a non-recurring basis. The following table presents additional information about the Company's available for sale securities, liabilities to subsidiary trusts issuing preferred securities and corporate lending investment which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value (in thousands): Fair Value Measurements Using Significant Unobservable Inputs (Level 3):

Beginning balance: Total transfers into Level 3 Purchases, sales, issuance and settlements, net Total losses (realized or unrealized): Included in earnings Included in other comprehensive loss Total gains (realized or unrealized): Included in earnings Included in other comprehensive loss Ending balance The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the reporting date

Available for sale se cu ritie s

C orporate le n ding inve stm e n t

$ 57,129 125,208 13,982

$

—

N-Star Bon ds Payable

$

Liability to su bsidiary tru sts issu ing pre fe rre d se cu ritie s

77,992

— 1,138,919 —

$

168,454

85,900 9,512

29,993 —

— —

— —

— — $ 100,907

$

— — 47,999

$

670,281 — 468,638

$

97,215 — 69,617

$ 85,900

$

29,993

$

670,281

$

97,215

(1,622)

Fair Value Option SFAS 159 provides a fair value option election that allows companies to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and liabilities. Changes in fair value for assets and liabilities for which the election is made will be recognized in earnings as they occur. SFAS 159 permits the fair value option election on an instrument by instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. 116

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 3. Fair Value of Financial Instruments (Continued) The following table sets forth the Company's financial instruments for which the fair value option was elected:

Processed and formatted by SEC Watch - Visit SECWatch.com Finan cial Instru m e n ts, at Fair Valu e

Assets: Available for sale securities: CMBS Real estate term debt—N-Star Real estate term debt—Third party REIT debt Trust preferred securities Corporate lending investment Total assets Liabilities:(1) Exchangeable senior notes N-Star IV,VI, VII and VIII bonds payable Liability to subsidiary trusts issuing preferred securities Total liabilities

(1)

De ce m be r 31, 2008

De ce m be r 31, 2007

$

$

$

124,595 5,236 1,322 44,936 4,488 47,999 228,576

$

112,576 468,638 69,617 650,831

$

342,353 18,507 12,159 80,292 12,264 — 465,575

$

172,500 1,654,185 286,258 2,112,943

Liabilities are carried at historical amortized cost as of December 31, 2007.

The following table presents a summary of existing eligible financial assets and financial liabilities for which the fair value option was elected on January 1, 2008 and the cumulative-effect adjustment to retained earnings recorded in connection with the initial adoption of SFAS 159.

C arrying Value at Janu ary 1, 2008

Assets: Available for sale securities(1) $ 465,575 Deferred costs and intangible assets, net(2) 126,677 Liabilities: Exchangeable senior notes 172,500 N-Star IV, VI, VII and VIII bonds payable 1,654,185 Liability to subsidiary trusts issuing preferred securities 286,258 Cumulative gain upon the adoption of SFAS 159

Tran sition Adjustm e n t to Re tain e d Earn ings (Gain)/Loss

C arrying Value at Janu ary 1, 2008 (Afte r adoption of S FAS 159)

$

$

90,966 34,607

(26,824) (196,209) (117,804) $ (215,264)

465,575 92,070 145,676 1,457,976 168,454

(1)

Prior to January 1, 2008, available for sale securities were carried at fair value with the change in fair value recorded in other comprehensive income. Accordingly, the election of the fair value option for these instruments did not change their carrying value and resulted in a reclassification from accumulated other comprehensive income to retained earnings.

(2)

Represents the write-off of $34.6 million of deferred financing costs associated with exchangeable senior notes, N-Star bonds payable and liability to subsidiary trusts issuing preferred securities. 117

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 3. Fair Value of Financial Instruments (Continued) The following table presents the difference between fair values and the aggregate contractual amounts of available for sale securities and liabilities, for which the fair value option has been elected:

Assets: Available for sale securities: CMBS Real estate term debt—N-Star Real estate term debt—Third party REIT debt Trust preferred securities Total assets Liabilities: Exchangeable Senior Notes N-Star IV,VI, VII and VIII bonds payable Liability to subsidiary trusts issuing preferred securities Total Liabilities

Fair Value at De ce m be r 31, 2008

Am ou n t Du e Upon Maturity

Diffe re n ce

$

$

124,595 5,236 1,322 44,936 4,488 180,577

$ 497,130 38,443 16,576 84,183 15,000 $ 651,332

$ (372,535) (33,207) (15,254) (39,247) (10,512) $ (470,755)

$

112,576 468,638 69,617 650,831

240,800 1,608,445 280,133 $2,129,378

(128,224) (1,139,807) (210,516) $(1,478,547)

At December 31, 2008, the basis in our corporate lending investment was $78.0 million. We have elected the fair market value option pursuant to SFAS 159 for this investment which is accounted for under the equity method of accounting. The fair market value of our investment at December 31, 2008 was $48.0 million. For the year ended December 31, 2008, the Company recognized a net gain of $752.3 million as the result of the change in fair value of financial assets and liabilities for which the fair value option was elected, which is recorded as unrealized gain (loss) on investments and other in the Company's condensed consolidated statement of operations. The impact of changes in instrument-specific credit spreads on exchangeable senior notes, N-Star bonds payable, liability to subsidiary trusts issuing preferred securities and derivatives for which the fair value option was elected was a net gain of $1.2 billion for the year ended December 31, 2008. The Company attributes changes in the fair value of floating rate liabilities to changes in instrument-specific credit spreads. For fixed rate liabilities, the firm allocates changes in fair value between interest rate-related changes and credit spread-related changes based on changes in interest rates. 118

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 4. Operating Real Estate At December 31, 2008 and 2007, operating real estate, net consists of the following: De ce m be r 31, 2008

Land Buildings and improvements Leasehold interests Tenant improvements Furniture and fixtures Allowance for operating real estate impairment Capital leases Less: Accumulated depreciation Operating real estate, net

$

$

De ce m be r 31, 2007

160,838 $ 973,826 18,876 37,517 5,965 (5,580) 3,027 1,194,469 67,469 1,127,000 $

157,371 945,760 26,117 38,681 1,623 — 3,028 1,172,580 38,444 1,134,136

Depreciation expense amounted to approximately $31.4 million and $24.0 million for the year ended December 31, 2008 and 2007, respectively, of which a portion is included in income from discontinued operations for the year ended December 31, 2007. In addition to the amounts included in the above table, approximately $85.6 million and $88.1 million of real estate acquisition costs as of December 31, 2008 and 2007, respectively, are classified as deferred lease costs. See Note 10 for additional information. Acquisitions—2008 Wakefield Joint Venture Acquisitions In January 2008, the Wakefield joint venture acquired a portfolio of three skilled nursing facilities totaling 40,369 square feet located in Ohio and Wisconsin, for $4.2 million. The properties are net leased to a single tenant under a lease that expires in December 2017. The acquisition was purchased with cash. Acquisitions—2007 In February 2007, the Company purchased a 178,213 square foot office property located in Milpitas, CA for $30.0 million. The property is net leased for ten years from the date of acquisition. The Company financed the acquisition with a $23.3 million non-recourse first mortgage, which bears a fixed interest rate of 5.95% and matures on March 6, 2017, and the balance in cash. In March 2007, the Company purchased a 165,000 square foot office property located in Fort Mill, SC for $34.2 million. The property is net leased with a remaining lease term of 13.6 years from the date of acquisition. The Company financed the acquisition with a $27.7 million nonrecourse first mortgage, which bears a fixed interest rate of 5.63% and a mezzanine loan of $3.4 million, which bears a fixed interest rate of 6.21%, and the balance in cash. Both loans mature on April 6, 2017. In June 2007, the Company purchased a 609,000 square foot distribution warehouse located in Reading, PA for $28.1 million. The Company assumed a $14.5 million non-recourse mortgage, which 119

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 4. Operating Real Estate (Continued)

bears a fixed interest rate of 5.58% and matures on January 1, 2015 and a $5.0 million mortgage, which bears a fixed interest rate of 6.00% and matures on January 1, 2015. The balance of the acquisition was paid in cash. In November 2007, the Company purchased a 199,112 square foot office property located in Columbus, OH for $33.6 million. The property is net leased with a remaining lease term of ten years from the date of acquisition. The Company financed the acquisition with a $24.1 million non-recourse first mortgage, which bears a fixed interest rate of 6.48% and matures on December 6, 2017, and the balance in cash. Wakefield Joint Venture Acquisitions The Wakefield joint venture made the following acquisitions during 2007: A $101.0 million acquisition of a portfolio of 18 assisted living facilities on 15 campuses totaling 372,349 square feet located throughout Wisconsin in January 2007. The properties are net leased to a single tenant under a lease that expires in January 2017. The portfolio was financed with 15 non-recourse first mortgages totaling $75.0 million, which bear a fixed interest rate of 6.39% and mature in February 2017, and the balance in cash. A $214.9 million acquisition of a portfolio of 28 assisted living facilities totaling 1,063,387 square feet located in California, Georgia, Illinois, Nebraska, Ohio, Oklahoma, Tennessee and Texas, in January 2007. The properties are net leased to a single tenant under a lease that expires in January 2017. The portfolio was financed with a non-recourse first mortgage totaling $160.0 million, which bears a fixed interest rate of 6.49% and matures in January 2017, and the balance in cash. A $10.5 million acquisition of two assisted living facilities totaling 72,786 square feet located in Illinois, in January 2007. The properties are net leased to a single tenant under a lease that expires in January 2017. The acquisition was financed with a $7.9 million non-recourse first mortgage, which bears a fixed interest rate of 6.59%, and matures in January 2017, and the balance in cash. A $11.0 million acquisition of a skilled nursing facility totaling 67,706 square feet located in Kentucky, in February 2007. The property is net leased to a single tenant under a lease that expires in January 2022 and contains three 5-year extension options. The property was financed with a $7.7 million non-recourse first mortgage, which bears a fixed interest rate of 7.12%, and matures in August 2010, and the balance in cash. A $7.6 million acquisition of a skilled nursing facility and an assisted nursing facility totaling 83,626 square feet located in North Carolina, in April 2007. The properties are each net leased to a single tenant with a lease expiration of April 2022. In August 2007, the Wakefield joint venture secured a $6.5 million non-recourse first mortgage on the two properties, which bears a fixed interest rate of 7.32% and matures in August, 2012. A $4.7 million acquisition of a medical office building totaling 26,552 square feet located in Texas, in May 2007. The property is net leased to two tenants with leases expiring in December 2013 and August 2011. The property was financed with a $3.4 million non-recourse first mortgage, which bears a fixed interest rate of 5.89% and matures in May 2017, and the balance in cash. 120

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 4. Operating Real Estate (Continued) A $27.4 million acquisition of a portfolio of four assisted living facilities totaling 78,990 square feet located in Ohio, in June 2007. The properties are net leased to a single tenant under a lease that expires January 2017. The portfolio was financed with four non-recourse first mortgages totaling $8.3 million, which bear fixed interest rates ranging from 5.45% to 6.65% and mature in February 2037, February 2038, June 2037 and October 2038. The balance of the acquisition was paid in cash. A $153.5 million acquisition of a portfolio of 28 skilled nursing and assisted nursing facilities totaling 1,000,532 square feet located in Indiana, in June 2007. The properties are net leased to a single tenant under a lease that expires in June 2017 and contains two 5-year extension options. The property was financed with a $116.0 million non-recourse first mortgage, which bears a fixed interest rate of 7.07% and matures in June 2012, and the balance in cash. A $15.2 million acquisition of a skilled nursing facility and leasehold interest totaling 104,744 square feet located in California, in August 2007. The properties are net leased to a single tenant under a lease that expires in August 2021. The properties were financed with a $11.4 million non-recourse first mortgage, which bears an interest rate of 30-day LIBOR plus 2.00% and matures in September 2010, and the balance in cash. The Wakefield joint venture entered into an interest rate swap agreement which fixes the interest rate at 6.78% for three years. A $32.5 million acquisition of a portfolio of six assisted living facilities totaling 153,888 square feet located in North Carolina, in October 2007. The properties are net leased to a single tenant under a lease that expires in October 2022. The portfolio was financed with a five-year mortgage totaling $17.5 million, which bears a fixed interest rate of 6.98% and matures in October 2012, and the balance in cash. A $12.7 million acquisition of an assisted living facility totaling 81,810 square feet located in Kansas, in December 2007. The property is net leased to a single tenant under a lease that expires in December 2019 and contains two 5-year extension options. The property was financed with a $9.2 million non-recourse first mortgage, which bears a fixed interest rate of 5.66%, and matures in August 2010, and the balance in cash. Dispositions—2007 In April 2007, the Wakefield joint venture sold two properties. The Mountainside Manor property located in Dallas, PA was sold for $1.0 million, representing a gain on sale of approximately $0.1 million. The sale was 100% financed by Wakefield and accordingly the gain on sale is being deferred and recognized under the installment method in accordance with FAS 66 "Accounting for Sales of Real Estate". The Pennswood Manor property located in Scranton, PA, was sold for $0.8 million. 121

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 4. Operating Real Estate (Continued) Discontinued Operations There were no discontinued operations for the year ended December 31, 2008. The following table summarizes income from discontinued operations and related gain on sale of discontinued operations, net of minority interest, for the years ended December 31, 2007 and 2006:

Revenue: Rental and escalation income Interest and other Total revenue Expenses: Real estate property operating expenses General and administrative expenses Interest expense Depreciation and amortization Total expenses Income (loss) from discontinued operations Gain (loss) on disposition of discontinued operations Income (loss) from discontinued operations before minority interest Minority interest Income (loss) from discontinued operations, net of minority interest

For th e Ye ar En de d De ce m be r 31, 2007

For th e Ye ar En de d De ce m be r 31, 2006

$

$

750 1 751

— 1 20 31 52 (14) (45) (59) 3 (56) $

42 1 159 183 385 366 515 881 (130) 751

$

38 — 38

Chatsworth Property On September 25, 2008, JPMorgan Chase & Co. ("JPMorgan") announced that it had acquired substantially all of the assets and liabilities of Washington Mutual Bank, FA ("WaMu") from the Federal Deposit Insurance Corp. JPMorgan is entitled to a 90-day period from the WaMu acquisition date to decide whether they will accept or reject the terms of the lease. During the third quarter 2008, the Company added its net leased asset comprised of three office buildings totaling 257,000 square feet located in Chatsworth, CA and 100% leased to WaMu to its watch list. As of December 31, 2008, the buildings had a combined $57.0 million net book value and were financed with a non-recourse $43.0 million first mortgage loan. The assets are also financed with a $9.3 million mezzanine loan which is collateral for one of the Company's securities term financings. The Company's potential loss if the lease is rejected would be the value of the Company's mezzanine loan and residual equity interest. On February 5, 2009 the Company became aware that JPMorgan intends to vacate the properties by March 23, 2009. As a result, the Company took a $5.6 million impairment charge to these properties as of December 31, 2008. The Company is evaluating its options regarding this investment, which could include transferring its ownership in the properties to the first mortgage lender. 122

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 5. Available for Sale Securities The following is a summary of the Company's available for sale securities at December 31, 2008:

(1)

De ce m be r 31, 2008

C arrying Value

CMBS Real estate term debt—N-Star Real estate term debt—Third party REIT debt Term debt equity—N-Star Trust preferred securities Total

$ 444,790 50,680 16,156 82,753 70,532 15,000 $ 679,911

S FAS 159 Tran sition Adjustm e n t

Losse s in Accum u late d O CI

$

$

$

(64,442) (17,616) (3,896) (2,276) — (2,736) (90,966)

$

Un re aliz e d Loss on Inve stm e n ts

Estim ate d Fair Value (1)

— $ (255,754) $ 124,594 (12,633) (13,391) 7,040 — (10,938) 1,322 — (35,542) 44,935 (31,768) — 38,764 — (7,776) 4,488 (44,401) $ (323,401) $ 221,143

Approximately $144.2 million of these investments serve as collateral for the Company's only consolidated securities term debt transaction and the balance is financed under other borrowing facilities. At December 31, 2008, the maturities of the available for sale securities ranged from two to 44 years.

During the year ended December 31, 2008, proceeds from the sale and redemption of available for sale securities was $9.1 million. The realized gain on sale was $0.3 million. The following is a summary of the Company's available for sale securities at December 31, 2007:

(1)

De ce m be r 31, 2007

C arrying Value

CMBS Real estate term debt REIT debt Term debt equity Corporate CLO Trust preferred securities Total

$ 419,835 52,178 82,568 67,825 50,697 15,000 $ 688,103

Gain s in Accum u late d O CI

Losse s in Accum u late d O CI

$

$

$

987 — — — — — 987

$

Estim ate d Fair Value (1)

(73,253) $ 347,569 (21,512) 30,666 (2,276) 80,292 (22,960) 44,865 (16,831) 33,866 (2,736) 12,264 (139,568) $ 549,522

Approximately $405.0 million of these investments serve as collateral for the Company's only consolidated securities term debt transaction and the balance is financed under other borrowing facilities. At December 31, 2007, the maturities of the debt securities available for sale ranged from 52 days to 45 years.

During the year ended December 31, 2007, proceeds from the sale and redemption of available for sale securities was $136.9 million. The realized gain on the sale was $1.4 of which $1.0 was the unrealized gain which was included in other comprehensive income. 123

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 6. Real Estate Debt Investments

Processed and formatted by SEC Watch - Visit SECWatch.com

At December 31, 2008 and 2007, the Company held the following real estate debt investments:

De ce m be r 31, 2008

C arrying Value (1)

Whole loans, floating rate $1,048,310 Whole loans, fixed rate 96,252 Subordinate mortgage interests, floating rate 200,556 Subordinate mortgage interests, fixed rate 24,349 Mezzanine loans, floating rate 463,765 Mezzanine loan, fixed rate 191,438 Other loans—floating 16,609 Other loans—fixed 6,191 Total/Weighted average $2,047,470

(1)

51.2% 4.7 9.8 1.2 22.6 9.4 0.8 0.3 100.0%

Ave rage Fixe d Rate

—% 7.58 — 7.51 — 11.65 — 5.53 9.99%

Ave rage S pre ad O ve r LIBO R

2.89% — 6.42 — 4.43 — 1.60 — 3.70%

Nu m be r of Inve stm e n ts

52 8 13 2 15 15 2 1 108

Approximately $1.3 billion of these investments serve as collateral for the Company's term debt transaction notes of its three commercial real estate debt term debt transactions and the balance is financed under other borrowing facilities. The Company has future funding commitments, which are subject to certain conditions that borrowers must meet to qualify for such fundings, totaling $271.0 million related to these investments. The Company expects that a minimum of $133.9 million of these future fundings will be funded within the Company's existing term debt transactions and require no additional capital from the Company. Based upon currently approved advance rates on the Company's credit and term debt facilities and assuming that all loans that have future fundings meet the terms to qualify for such funding, the Company's equity requirement would be approximately $94.5 million.

De ce m be r 31, 2007

C arrying Value (1)

Whole loans, floating rate $1,082,399 Whole loans, fixed rate 80,371 Subordinate mortgage interests, floating rate 134,322 Subordinate mortgage interests, fixed rate 24,025 Mezzanine loans, floating rate 505,227 Mezzanine loan, fixed rate 157,092 Other loans—floating 16,653 Other loans—fixed 6,933 Total/Weighted average $2,007,022

(1)

Allocation by Inve stm e n t Type

Allocation by Inve stm e n t Type

53.9% 4.0 6.7 1.2 25.3 7.8 0.8 0.3 100.0%

Ave rage Fixe d Rate

—% 10.17 — 7.54 — 11.16 — 5.53 10.39%

Ave rage S pre ad O ve r LIBO R

3.09% — 3.72 — 4.59 — 1.60 — 3.57%

Nu m be r of Inve stm e n ts

59 10 11 2 16 16 2 1 117

Approximately $1.4 billion of these investments serve as collateral for the Company's term debt transaction notes of its three commercial real estate debt term debt transactions and the balance is financed under other borrowing facilities. The Company has future funding commitments, which 124

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 6. Real Estate Debt Investments (Continued) are subject to certain conditions that borrowers must meet to qualify for such fundings, totaling $564.5 million related to these investments, of which a minimum of $284.1 million will be funded within the Company's existing term debt transactions and require no additional capital from the Company. As of December 31, 2008, all loans, with the exception of a whole loan having a principal balance of $21.4 million and a maturity date of October 1, 2008, representing approximately 1.0% of the Company's total commercial real estate debt investments, were current on principal and interest payments in accordance with the terms of the loan agreement. The Company's maximum exposure to loss related to this whole loan would be equal to the outstanding principal balance. As of December 31, 2008, the Company has $11.2 million of credit loss reserves relating to its loans. Contractual maturities of real estate debt investments at December 31, 2008 are as follows: Initial Maturity(1)

Ye ars En ding De ce m be r 31:

2009 2010 2011 2012 2013 Thereafter Total

(1)

$

830,132 638,675 213,185 200,385 — 191,169 $ 2,073,546

Maturity Inclu ding Exte n sions

$ 128,592 324,044 543,218 703,499 183,024 191,169 $2,073,546

The year ending December 31, 2009, contains a whole loan with an initial maturity of October 1, 2008 and a principal balance of $21.4 million that remains outstanding as of December 31, 2008.

Actual maturities may differ from contractual maturities because certain borrowers have the right to prepay with or without prepayment penalties. The contractual amounts differ from the carrying amounts due to unamortized origination fees and costs and unamortized premiums and discounts being reported as part of the carrying amount of the investment. Maturity Including Extensions assumes that all loans with extension options will qualify for extension at initial maturity according to the conditions stipulated in the related loan agreements. 7. Corporate Loan Investments At December 31, 2008, the Company held no corporate debt investments as a result of the recapitalization and deconsolidation of the Monroe joint venture. See Note 2 for additional information. 125

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 7. Corporate Loan Investments (Continued) At December 31, 2007, the Company held the following corporate debt investments:

(1)

De ce m be r 31, 2007

C arrying Value (1)

First lien note Second lien note Total/Weighted average

$ 421,973 35,166 $ 457,139

Allocation by Inve stm e n t Type

92.3% 7.7 100.0%

Ave rage S pre ad O ve r LIBO R/Prim e

2.96% 6.02 3.19%

Nu m be r of Inve stm e n ts

100 8 108

Approximately $366.8 million and $90.3 million of these investments serve as collateral for our MC Facility and our MC VFCC Facility, respectively, and the Company has future funding commitments totaling $14.3 million related to these investments.

8. Investments in and Advances to Unconsolidated/Uncombined Ventures The Company has non-controlling, unconsolidated/uncombined ownership interests in entities that are accounted for using the equity method. Capital contributions, distributions, and profits and losses of the real estate entities are allocated in accordance with the terms of the applicable partnership and limited liability company agreements. Such allocations may differ from the stated percentage interests, if any, in such entities as a result of preferred returns and allocation formulas as described in such agreements. CS/Federal Venture In February 2006, the Company, through a joint venture with an institutional investor, acquired a portfolio of three adjacent class A office/flex buildings located in Colorado Springs, Colorado for $54.3 million. The joint venture financed the transaction with two non-recourse, first mortgage loans totaling $38.0 million and the balance in cash. The loans mature on February 11, 2016 and bear fixed interest rates of 5.51% and 5.46%. The Company contributed $8.4 million for a 50% interest in the joint venture and incurred $0.3 million in costs related to its acquisition, which are capitalized to the investment account. These costs will be amortized over the useful lives of the assets held by the joint venture. The Company accounts for its investment under the equity method of accounting. At December 31, 2008 and December 31, 2007, the Company had an investment in CS/Federal of approximately $7.3 million and $7.8 million, respectively. The Company recognized equity in earnings of $0.5 million for each of the years ended December 31, 2008 and December 31, 2007. Monroe Capital Management Advisors, LLC In March 2007, the Company entered into a joint venture with Monroe Management, a Chicago-based firm, and acquired a 49.9% noncontrolling interest in Monroe Management. Monroe Management originated, structured and syndicated middle-market corporate loans for Monroe Capital and provided asset management services. On May 7, 2008, the Company terminated its joint venture with Monroe Management upon the completion of the recapitalization of Monroe Capital. See Note 1 for additional information. 126

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 8. Investments in and Advances to Unconsolidated/Uncombined Ventures (Continued) G-NRF, LTD On May 7, 2008, the Company completed a recapitalization of Monroe Capital, its middle-market corporate lending platform. Upon completion of the recapitalization transaction, the new investor became the controlling manager of the assets and the Company deconsolidated the joint venture. The Company currently uses the equity method of accounting to account for the recapitalized joint venture and has elected the fair value option under SFAS 159 for its equity investment. As of December 31, 2008, the fair market value of the Company's investment in the corporate lending venture was $48.0 million. For the period from May 8, 2008 to December 31, 2008, the Company recognized equity in earnings of $2.2 million and an unrealized loss of $30.0 million related to the fair value adjustment on its equity investment. See Note 2 for additional information. NorthStar Realty Finance Trusts The Company owns all of the common stock of NorthStar Realty Finance Trusts I through VIII (collectively, the "Trusts"). The Trusts were formed to issue preferred securities. Under the provisions of FIN 46(R)-6, the Company determined that the holders of the trust preferred securities were the primary beneficiaries of the Trusts. As a result, the Company did not consolidate the Trusts and has accounted for the investment in the common stock of the Trusts under the equity method of accounting. At December 31, 2008 and December 31, 2007, the Company had an investment in the Trusts of approximately $3.7 million. NorthStar Real Estate Securities Opportunity Fund In July 2007, the Company closed on $109.0 million of equity capital for its Securities Fund, an investment vehicle in which the Company conducts most of its real estate securities investment business. The Company is the manager and general partner of the Securities Fund. The Company receives base management fees ranging from 1.0% to 2.0% per annum on third-party capital and is entitled to annual incentive management fees ranging from 20% to 25% of the increase in the Securities Fund's net asset value in excess of an 8.0% per annum return. Base and incentive fees vary depending on the investor capital lockup periods. During 2008, the Company invested an additional $20.0 million in the Securities Fund and sold 67% of its N-Star IX advisory fee income stream to the Securities Fund for $8.8 million. The Securities Fund owns all of the equity in the N-Star IX term financing but the Company retained the advisory fees when N-Star IX was sold to the Securities Fund at its inception. The Company recognized $4.8 million of advisory fee income from the sale and deferred the remaining $4.0 million, which represented the Company's ownership interest in the Securities Fund. The deferred advisory fee income will be recognized into income as the fees are earned. For the year ended December 31, 2008, the Company recognized $0.2 million in additional income from the amortization of deferred advisory fee income. During the third quarter 2008, the Securities Fund made a claim against Lehman Brothers for $6.8 million (plus damages) to recover cash collateral held by Lehman Brothers and recorded a reserve of $3.4 million against the $6.8 million cash collateral receivable. 127

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 8. Investments in and Advances to Unconsolidated/Uncombined Ventures (Continued) At December 31, 2008, the Company had invested a total of $51.2 million in the Securities Fund and the carrying value of its investment was $29.3 million, representing a 53.1% interest. For the year ended December 31, 2008 and 2007 the Company recognized equity in losses of $12.4 million and $9.1 million, respectively. The Company also earned $0.5 million and $0.4 million in management fees from the Securities Fund for the year ended December 31, 2008 and 2007, respectively. LandCap Investment On October 5, 2007, the Company entered into a joint venture with Whitehall Street Global Real Estate Limited Partnership 2007, to form LandCap Partners, which is referred to as LandCap. LandCap was established to opportunistically invest in single family residential land through land loans, lot option agreements and select land purchases. The venture is managed by professionals who have extensive experience in the single family housing sector. The Company has sole discretion with respect to funding its portion of any investment decisions relating to LandCap and accounts for its investment under the equity method of accounting. At December 31, 2008 the Company's investment in LandCap is carried at $12.9 million. For the year ended December 31, 2008 the Company made contributions to LandCap of $16.9 million and recognized a loss $3.3 million which consisted primarily of general and administrative expenses for the year. At December 31, 2008, LandCap has made investments totaling $39.1 million. In addition, the Company advanced approximately $3.8 million under a loan agreement to LandCap, which bears interest at a fixed rate of 12% and was included in other assets in the condensed consolidated balance sheets. Reconciliation between the operating data for all unconsolidated/uncombined ventures and equity in earnings is as follows:

For th e Ye ar En de d De ce m be r 31, 2008

Net income Other partners' share of income Fee income basis difference Joint venture equity write-off Elimination entries Earnings from unconsolidated/uncombined ventures

$

$

Th e C om pany For th e Ye ar En de d De ce m be r 31, 2007

(51,469) $ 37,198 1,263 811 279 (11,918) $

For th e Ye ar En de d De ce m be r 31, 2006

(33,657) $ 24,489 (1,263) — (1,253) (11,684) $

1,413 (981) — — — 432

128

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 8. Investments in and Advances to Unconsolidated/Uncombined Ventures (Continued) Reconciliation between the Company's investment in unconsolidated entities as of December 31, 2008 and December 31, 2007 is as follows:

Company's equity in unconsolidated entities Elimination entries Purchase price basis difference Investment in and advances to unconsolidated ventures

De ce m be r 31, 2008

De ce m be r 31, 2007

$

$

$

100,899 279 329 101,507

$

32,801 — 342 33,143

The condensed combined balance sheets for the unconsolidated joint ventures at December 31, 2008 and 2007 are as follows:

Processed and formatted by SEC Watch - Visit SECWatch.com 2008

2007

Assets Cash Restricted cash Operating real estate, net Available for sale securities, at fair value Deferred costs, net Other assets Total assets

$ 29,119 537 63,473 373,588 4,269 2,244 $473,230

$ 4,116 353 50,504 133,926 4,846 6,131 $199,876

Liabilities and members' equity Mortgage notes and loans payable Repurchase obligations Other liabilities Members' equity Total liabilities and members' equity

$ 36,886 — 280,780 155,564 $473,230

$ 37,398 51,213 19,965 91,300 $199,876

129

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 8. Investments in and Advances to Unconsolidated/Uncombined Ventures (Continued) The condensed combined statements of operations for the unconsolidated joint ventures for the years ended December 31, 2008, 2007 and 2006 are as follows;

Revenues and other income: Interest income Rental and escalation income Other revenue Total revenue Expenses: Interest expense General and administrative Depreciation and amortization Other expenses Total Expenses Income from operations Unrealized loss on investments Net income

2008

2007

2006

$ 18,292 4,720 267 23,279

$ 8,806 5,046 8,824 22,676

$ 624 4,542 23 5,189

4,542 3,880 1,925 7,752 9,583 41 1,936 1,981 1,810 2,465 2,276 — 16,695 17,720 3,776 6,584 4,956 1,413 (60,661) (38,613) — $(54,077) $(33,657) $1,413

9. Variable Interest Entities The Company has created and manages portfolios of primarily investment grade commercial real estate securities and real estate debt investments, which were financed in term debt transactions. The collateral securities include CMBS, fixed income securities issued by REITs and term debt transactions backed primarily by real estate securities. These securities are primarily investment grade and generally are not insured by the Federal Housing Administration or guaranteed by the Veterans Administration or otherwise guaranteed or insured. The collateral debt investments include whole loans, subordinate mortgage interests, mezzanine loans and other loans. By financing these securities with long-term debt through the issuance of term debt transactions, the Company expects to generate attractive risk-adjusted equity returns and to match the term of its assets and liabilities. Fin 46(R) requires a VIE to be consolidated by its primary beneficiary. The primary beneficiary is the party that absorbs a majority of the VIEs anticipated losses and or a majority of the expected returns. The Company has evaluated its real estate debt investments, liability to subsidiary trusts issuing preferred securities and its investments in each of its eight term debt transaction issuers to determine whether they are VIEs. For each of these investments, the Company has evaluated: (1) the sufficiency of the fair value of the entity's equity investment at risk to absorb losses; (2) whether as a group the holders of the equity investment at risk have: (a) the direct or indirect ability through voting rights to make decisions about the entity's significant activities; (b) the obligation to absorb the expected losses of the entity and their obligations are not protected directly or indirectly; and (c) the right to receive the expected residual return of the entity and their rights are not capped; (3) whether the voting rights of these investors are proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected returns of their equity, or both; and (4) whether substantially all of the 130

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 9. Variable Interest Entities (Continued)

entity's activities involve or are conducted on behalf of an investor that has disproportionately fewer voting rights. FASB Staff Position No. FIN 46(R)-6, Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R) ("FSP FIN 46(R)-6") addresses how a reporting enterprise should determine the variability to be considered and provides guidance in applying Fin 46(R). As of December 31, 2007, the Company identified interests in 17 entities which were determined to be VIEs under FIN 46(R)-6. Based on management's analysis, the Company is not the primary beneficiary of 13 of the identified VIEs since it does not absorb a majority of the expected residual losses, or is entitled to a majority of the expected residual returns. Accordingly, these VIEs are not consolidated into the Company's financial statements as of December 31, 2008 or 2007. See Note 6 and 8 for additional information. Term Debt Transactions The Company has interests in eight term debt transactions, whose term notes are primarily collateralized by investment grade real estate securities or real estate debt investments. The Company generally purchases the preferred equity or the income notes of each term debt transaction, which are the equity securities of the term debt issuances, and, with the exception of N-Star I, all of the below investment grade term debt notes of each term debt transaction. In addition, the Company earns a fee of 0.35% of the outstanding principal balance of the assets backing each of these term debt issuances as an annual collateral management fee. The Company's interests in each of the term debt transactions accounted for as a single debt security available for sale pursuant to EITF 99-20. Consolidated Term Debt Transactions N-Star IV, VI, VII and VIII are consolidated term debt transactions in accordance with the guidance provided in FSP FIN 46(R)-6. 131

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 9. Variable Interest Entities (Continued) The following tables describe certain terms of the collateral for and the notes issued by N-Star IV, N-Star VI, N-Star VII and N-Star VIII as follows for the year ended December 31, 2008 and 2007: C ollate ral—De ce m be r 31, 2008 Te rm Note s—De ce m be r 31, 2008 W e ighte d W e ighte d W e ighte d Ave rage Ave rage Ave rage Par Inte re st Expe cte d Inte re st Date Value of Rate at Life O u tstan ding Rate at S tate d C lose d C ollate ral 12/31/08 (ye ars) Te rm Note s(1) 12/31/08 Maturity

Issu an ce

N-Star IV N-Star VI N-Star VII N-Star VIII Total

(1)

6/14/2005 $ 346,996 3/17/2006 385,251 6/22/2006 563,771 12/6/2006 717,705 $2,013,723

1.71 $ 2.11 7.38 2.05 3.49 $

292,500 292,700 499,200 524,045 1,608,445

1.08% 7/1/2040 2.45 6/1/2041 1.74 6/22/2051 2.41 2/1/2041 1.97%

Includes only notes held by third parties. C ollate ral—De ce m be r 31, 2007 Te rm Note s—De ce m be r 31, 2007 W e ighte d W e ighte d W e ighte d Ave rage Ave rage Ave rage Par Inte re st Expe cte d Inte re st Date Value of Rate at Life O u tstan ding Rate at S tate d C lose d C ollate ral 12/31/07 (ye ars) Te rm Note s(1) 12/31/07 Maturity

Issu an ce

N-Star IV N-Star VI N-Star VII N-Star VIII Total

(1)

6.93% 7.26 5.05 7.42 6.64%

6/14/2005 $ 373,276 3/17/2006 341,244 6/22/2006 537,774 12/6/2006 668,306 $1,920,600

8.81% 7.93 6.30 9.25 8.09%

1.89 $ 2.55 8.12 2.54 3.98 $

300,000 310,500 510,810 532,885 1,654,195

5.49% 7/1/2040 5.54 6/1/2041 5.13 6/22/2051 5.81 2/1/2041 5.49%

Includes only notes held by third parties. Unconsolidated term debt transactions N-Star I, II, III and V are unconsolidated term debt transactions in accordance with the provisions of FIN 46(R). 132

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 9. Variable Interest Entities (Continued) The following tables describe certain terms of the collateral for and the notes issued by N-Star I, N-Star II, N-Star III and N-Star V as follows for the year ended December 31, 2008 and 2007:

Issu an ce

C ollate ral—De ce m be r 31, W e ighte d Ave rage Par Inte re st Date Value of Rate at C lose d C ollate ral 12/31/08

N-Star I(2) N-Star II N-Star III N-Star V Total

8/21/03 $ 299,316 7/01/04 331,242 3/10/05 410,188 9/22/05 499,745 $1,540,491

(1)

Includes only notes held by third parties.

(2)

The Company has an 83.3% interest.

6.60% 6.17 5.70 5.52 5.92%

Issu an ce

C ollate ral—De ce m be r 31, W e ighte d Ave rage Par Inte re st Date Value of Rate at C lose d C ollate ral 12/31/08

N-Star I(2) N-Star II N-Star III N-Star V Total

8/21/03 $ 320,583 7/01/04 335,301 3/10/05 404,772 9/22/05 495,971 $1,556,627

(1)

Includes only notes held by third parties.

(2)

The Company has an 83.3% interest.

2008 Te rm Note s—De ce m be r 31, 2008 W e ighte d W e ighte d Ave rage Ave rage Expe cte d Inte re st Life O u tstan ding Rate at S tate d (ye ars) Te rm Note s(1) 12/31/08 Maturity

4.16 $ 4.77 4.11 6.23 4.95 $

278,000 295,098 358,556 456,319 1,387,973

6.37%8/01/2038 5.51 6/01/2039 4.88 6/01/2040 4.58 9/05/2045 5.23%

2007 Te rm Note s—De ce m be r 31, 2007 W e ighte d W e ighte d Ave rage Ave rage Expe cte d Inte re st Life O u tstan ding Rate at S tate d (ye ars) Te rm Note s(1) 12/31/07 Maturity

6.58% 6.24 6.30 5.87 6.21%

4.64 $ 4.73 5.20 7.09 5.59 $

301,406 306,110 358,892 456,319 1,422,727

6.24%8/01/2038 5.75 6/01/2039 5.84 6/01/2040 5.07 9/05/2045 5.66%

The Company has identified one real estate debt investment as a variable interest in a variable interest entity ("VIE") in accordance with the provisions of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, ("Fin 46(R)") and has determined that the Company is not the primary beneficiary of this VIE and as such the VIE should not be consolidated in the Company's consolidated financial statements. The Company's maximum exposure to loss would not exceed the carrying amount of its investment of $26.8 million. For all other investments, the Company has determined that these investments are not VIEs and, as such, the Company has continued to account for all real estate debt investments as loans. 133

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 10. Deferred Costs and Intangible Assets, Net Deferred costs and intangible assets as of December 31, 2008 and 2007 consisted of the following:

Processed and formatted by SEC Watch - Visit SECWatch.com De ce m be r 31, 2008

Deferred lease costs Deferred loan costs Intangible assets Pending deal costs

$

Less accumulated amortization Deferred costs and intangible assets, net

$

De ce m be r 31, 2007

85,630 $ 16,873 839 17 103,359 (31,426) 71,933 $

88,067 62,225 4,272 277 154,841 (28,164) 126,677

Deferred lease cost includes the allocation of a portion of the purchase price, in accordance with SFAS 141, to lease origination costs associated with the in-place leases. For the year ended December 31, 2008 and 2007, approximately $0.3 million and $86.8 million included in deferred lease cost was the allocation of the purchase price to deferred lease cost. 11. Borrowings The following table summarizes the Company's outstanding borrowings as of December 31, 2008 and December 31, 2007: Maxim u m Initial Maturity S tate d Inclu ding Maturity Exte n sions C re dit Facilitie s JP Facility MC Facility(1) MC Facility VFCC(1)

Inte re st Rate

8/8/2009 8/8/2010 LIBOR + .80% to 1.80% $ 150,000 3/31/2008 3/31/2008 LIBOR + 0.75% — 7/29/2008 7/29/2010 Commercial P aper Rate + 0.75% —

T otal Credit Facilities Te rm Loan s WA T erm Loan(2) Euro—note LB T erm Loan

Maxim u m Am ou n t Available

11/6/2009 11/6/2010 11/6/2009 11/6/2010 2/9/2009 2/9/2012

LIBOR + 2.00% 3 month Euribor + 2.0% LIBOR + 1.50%

T otal Credit Facilities & T erm Loans

134

C on tractu al Balan ce at De ce m be r 31, 2008

C on tractu al Balan ce at De ce m be r 31, 2007

$

$

44,881 — —

55,936 374,459 71,037

150,000

44,881

501,432

466,248 103,526 24,238

276,143 103,526 24,238

308,588 108,346 —

$ 744,012

448,788

918,366

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 11. Borrowings (Continued) Maxim u m Initial Maturity S tate d Inclu ding Maturity Exte n sions Mortgage n ote s payable (non -re cou rse ) Chatsworth Salt Lake City EDS Executive Center Green P ond Indianapolis Wakefield GE Wakefield—Park National Wakefield—GE—WLK Wakefield—GE—T usc & Harmony Wakefield—Harmony FNMA Wakefield—Grove City Wakefield—Lancaster Wakefield—Marysville Wakefield—Washington Wakefield—Miller Merril Wakefield—ARL Mob Wachovia Wakefield—Ascend Colonial Wakefield—Colonial Dova Wakefield—Colonial 6 Alfs Wakefield—St Francis Aurora DSG Keene Fort Wayne P ortland Milpitas Fort Mill Reading Reading Alliance

5/1/2015 9/1/2012 10/8/2015 1/1/2016 4/11/2016 2/1/2017 8/30/2010 1/11/2014 1/11/2017 1/11/2017 2/1/2017 2/1/2038 6/1/2037 6/1/2037 10/1/2038 6/30/2012 5/11/2017 5/31/2012 8/31/2012 11/1/2012 9/31/2010 7/11/2016 10/11/2016 2/1/2016 1/1/2015 6/17/2014 3/6/2017 4/6/2017 1/1/2015 1/1/2015 12/6/2017

Me z z an ine loan payable (non -re cou rse ) Chatsworth 5/1/2014 Fort Mill 4/6/2017 Exch an ge able S e n ior Note s(3) 6/15/2027 Exch an ge able S e n ior Note s ("NNN Note s")(3) 6/15/2013

135

C on tractu al Balan ce at De ce m be r 31, 2008

C on tractu al Balan ce at De ce m be r 31, 2007

5.65% 5.16% 5.37% 5.85% 5.68% 6.06% 6.93% 5.94% 6.49% 6.59% 6.39% 5.45% 6.40% 6.40% 6.65% 7.07% 5.89% 7.52% 7.32% 6.98% LIBOR + 2.00% 6.22% 6.17% 5.85% 6.41% 7.34% 5.95% 5.63% 5.58% 6.00% 6.48%

42,923 15,862 47,698 51,480 17,341 28,472 67,269 33,300 160,000 7,875 75,000 1,862 2,605 1,673 1,975 116,000 3,412 6,500 6,500 23,329 11,400 33,329 34,237 6,790 3,480 4,825 22,548 27,700 14,153 5,000 23,787

43,219 16,231 48,371 51,480 17,480 28,600 67,586 33,300 160,000 7,875 75,000 1,887 2,636 1,693 1,995 116,000 3,412 6,500 6,500 19,653 11,400 33,500 34,648 6,882 3,555 4,984 22,959 27,700 14,387 5,000 24,032

6.64% 6.21% 7.25% 11.50%

9,310 2,985 160,800 80,000

10,692 3,208 172,500 —

Inte re st Rate

Maxim u m Am ou n t Available

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 11. Borrowings (Continued)

Re pu rchase obligation s

Maxim u m Initial Maturity S tate d Inclu ding Maturity Exte n sions Varies

Bon ds payable (3) N-Star IV

C on tractu al Balan ce at De ce m be r 31, 2008 176

C on tractu al Balan ce at De ce m be r 31, 2007 1,864

292,500

300,000

292,700

310,500

499,200

510,800

524,045

532,885

41,240 25,780 41,238 50,100

41,240 25,780 41,238 50,100

30,100

30,100

25,100

25,100

31,475

37,600

LIBOR + 0.62% (average spread) 3 month LIBOR + 0.56% (average spread) LIBOR + 0.36% (average spread) LIBOR + 0.57% (average spread)

7/1/2040 N-Star VI 6/1/2041 N-Star VII 6/22/2051 N-Star VIII 2/1/2041 Liability to subsidiary tru sts issuing pre fe rre d se cu ritie s(3)(4) T rust I T rust II T rust III T rust IV T rust V

Inte re st Rate LIBOR varies

Maxim u m Am ou n t Available

3/30/2035 6/30/2035 1/30/2036 6/30/2036 3 9/30/2036

T rust VI

3 12/30/2036

T rust VII

3 4/30/2037

T rust VIII

3 7/30/2037

8.15% 7.74% 7.81% 7.95% month LIBOR 2.70% month LIBOR 2.90% month LIBOR 2.50% month LIBOR 2.70%

35,100 $

3,488,962

35,100 $

3,945,538

(1)

Refer to Note 1 for details on the termination of these facilities.

(2)

T he Company had an additional $190.1 million of availability under the revolving component of the term loan.

(3)

Contractual amounts due may differ from the carrying value on the condensed consolidated balance sheets due to the fair value accounting option under SFAS 159. See Note 3

(4)

T he liability to subsidiary trusts for T rusts I, II, III and IV have a fixed interest rate for the first ten years after which the interest rate will float and reset quarterly at rates ranging from LIBOR plus 2.70% to 3.25%. T he Company entered into interest rate swap agreements on T rusts V, VI, VII and VIII which fix the interest rates for 10 years at 8.16%, 8.02%, 7.60% and 8.29%, respectively.

136

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 11. Borrowings (Continued) Scheduled principal payment requirements on the Company's borrowings based on initial maturity dates are as follows as of December 31, 2008:

Total

2009 2010 2011 2012 2013 Thereafter Total

Liability to S u bsidiary Tru sts Mortgage an d S e cu re d Issu ing Exch an ge able Me z z an ine C re dit Te rm Pre fe rre d S e n ior Re pu rchase Bon ds Loan s Facilitie s Loan (1) S e cu ritie s(2) Note s(2) O bligation s Payable (1)

$ 459,634 $ 96,768 14,368 328,471 92,613 2,497,108 $3,488,962 $

10,670 $ 44,881 $403,907 $ 96,768 — — 14,368 — — 167,671 — — 12,613 — — 608,530 — — 910,620 $ 44,881 $403,907 $

— $ — — — — 280,133 280,133 $

— $ — — 160,800 80,000 — 240,800 $

176 $ — — — — — — — — — — 1,608,445 176 $1,608,445

(1)

$386.0 million of the secured term loan balance may be extended for one year and the remaining balance of $24.2 million may be extended for three years at the Company's option, subject to certain conditions.

(2)

Scheduled principal payments may differ from the carrying value on the condensed consolidated balance sheets due to the fair value accounting option under SFAS 159. See Note 3. $160.8 million of the Company's 7.25% exchangeable senior notes have a final maturity date of June 15, 2027. The above table reflects the holders repurchase rights which may require the Company to repurchase the notes on June 15, 2012. At December 31, 2008, the Company was in compliance with all covenants under its borrowings. Debt Repurchases

During 2008, the Company repurchased approximately $111.4 million of its bonds, which consisted of $23.2 million of Class J, BB rated notes, $19.2 million of Class B, AA rated notes, $14.5 million of Class C, single A rated notes, $10.7 million of Class H, BBB rated notes, $13.0 million of Class G, AAA rated notes, $4.0 million of Class D, BBB rated notes, $5.0 million of Class A2, AAA rated notes, $3.0 million of Class DFL, BBB rated notes and $1.0 million of Class E, single A rated notes of its various N-Star bonds payable, $11.7 million of its 7.25% exchangeable senior notes and $6.1 million of its liability to subsidiary trusts issuing preferred securities for a total of $49.8 million. The Company recorded a realized gain of $36.5 million in connection with the repurchase of its notes. These repurchases also represented a $61.6 million discount to the par value of the debt. Exchangeable Senior Notes In June 2007, the Company issued $172.5 million of 7.25% exchangeable senior notes (the "Notes") which are due in 2027. The Notes were offered in accordance with Rule 144A under the 137

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 11. Borrowings (Continued) Securities Act of 1933, as amended. The Notes pay interest semi-annually on June 15 and December 15, at a rate of 7.25% per annum, and mature on June 15, 2027. The Notes have an initial exchange rate representing an exchange price of $16.89 per share of the Company's common stock. The initial exchange rate is subject to adjustment under certain circumstances. The Notes are senior unsecured obligations of the Company's operating partnership and may be exchangeable upon the occurrence of specified events, and at any time on or after March 15, 2027, and prior to the close of business on the second business day immediately preceding the maturity date, into cash or a combination of cash and shares of the Company's common stock, if any, at the Company's option. The Notes are redeemable, at the Company's option, on and after June 15, 2014. The Company may be required to repurchase the Notes on June 15, 2012, 2014, 2017 and 2022, and upon the occurrence of certain designated events. The net proceeds from the offering were approximately $167.5 million, after deducting fees and expenses. The proceeds of the offering were used to repay certain of the Company's existing indebtedness, to make additional investments and for general corporate purposes. In May 2008, NRFC NNN Holdings, LLC ("Triple Net Holdings"), a wholly-owned subsidiary of the Company issued $80.0 million of 11.50% exchangeable senior notes (the "NNN Notes") due in 2013. The NNN Notes were offered in accordance with Rule 144A under the Securities Act of 1933, as amended. The NNN Notes pay interest semi-annually on June 15 and December 15, at a rate of 11.50% per annum, and mature on June 15, 2013. The NNN Notes have an initial exchange rate representing an exchange price of $12.00 per share of the Company's common stock, subject to adjustment under certain circumstances. The NNN Notes are senior unsecured obligations of Triple Net Holdings and may be exchangeable upon the occurrence of specified events, and at any time on or after March 15, 2013, and prior to the close of business on the second business day immediately preceding the maturity date, into cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock, if any, at the Company's option. The NNN Notes are redeemable, at the Company's option, on and after June 15, 2011. The Company may be required to repurchase the NNN Notes upon the occurrence of certain events. The net proceeds from the offering were approximately $71.4 million, after deducting a $4.6 million security deposit representing one semi-annual interest payment, and fees and expenses. The Company has elected the SFAS 159 fair value option for the Notes and the NNN Notes. Changes in fair value of the Notes and the NNN Notes will be recognized in earnings as they occur. The Company adopted the provisions of FSP APB 14-1 on January 1, 2009. As a result, the Company's exchangeable senior notes will no longer be eligible for the fair value option under SFAS 159. The exchangeable senior notes will be carried at the discounted value as determined in accordance with FSP APB 14-1. Unsecured Revolving Line of Credit On May 28, 2008, the Company voluntarily terminated the Revolving Credit Agreement, dated November 3, 2006 with KeyBanc Capital Markets and Bank of America, N.A. (the "Credit Agreement") in order to permit the issuance of the NNN Notes, given certain restrictive covenants set forth in the Credit Agreement. The Credit Agreement had a November 2009 expiration and no amounts were outstanding under the Credit Agreement at the time of termination. 138

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 11. Borrowings (Continued) Secured Credit Facilities In August 2007, the Company entered into a new $350.0 million Master Repurchase Agreement (the "JP Facility") with a major financial institution. Advance rates under the JP Facility range from 65% to 97% of the value of the collateral for which the advance is to be made. Amounts borrowed under the JP Facility bear interest at spreads of 0.05% to 1.75% over one-month LIBOR, depending on the type of collateral for which the amount is borrowed. The JP Facility has a maximum term of three years. On October 8, 2008, the Company and a subsidiary of its entered into Amendment No. 1 (the "Amendment") to the Master Repurchase Agreement (as amended, the "Facility") with JPMorgan. The Facility had approximately $50.4 million outstanding on the amendment date and such amounts bear interest at spreads of 1.25% to 1.80% over one-month LIBOR. Advance rates for the assets currently financed under the Facility range from 55% to 80% of the value of the collateral for which the advance is made. Interest rates and advance rates on future borrowings under the Facility will be determined by JPMorgan. Pursuant to the Amendment, the maximum amount outstanding under the Facility shall not exceed $150 million and we have agreed to guaranty the outstanding amount under the Facility. The term of the Facility will expire on August 8, 2010, subject to renewal by JPMorgan on August 8, 2009. Secured Term Loan In March 2007, the Company entered into Euro denominated note purchase agreement with a major financial institution ("Euro Note"), to finance a note collateralized by a €75.0 million participation in a junior mezzanine loan that bears interest at three month EURIBOR plus 3.75%. The Company borrowed approximately €75.0 million under the note purchase agreement. The loan bears interest at three month EURIBOR plus 1.50%. The note purchase agreement is coterminous with the underlying mezzanine loan scheduled to mature on July 8, 2011. In November 2007, the Company terminated its secured credit facility and entered into a new term loan agreement (the "Term Loan Agreement", and together with the modified Euro Note, the "Term Facility") with a major financial institution, which provides for approximately $600 million of term loan capacity. The proceeds under the Term Facility were partially used to repay approximately $450 million outstanding under the WA Facilities, terminating these facilities. The Term Loan Agreement also provides for up to $300 million of revolving term loan capacity as portions of the outstanding balance under the Term Loan Agreement are repaid. The Term Facility initially bears interest at LIBOR plus 2.00% and has an initial two-year term which the Company has the option to extend for an additional one year period, subject to certain conditions. Additionally, the Company entered into a Limited Guaranty Agreement in connection with the Term Facility. In June 2008, a wholly owned subsidiary of the Company entered into a $24.2 million term loan agreement with an investment bank (the "LB Term Loan"). The collateral for the LB Term Loan is a $44.0 million mezzanine loan position and the Company has guaranteed 50% of the outstanding term debt. The LB Term Loan matures in February 2010, has two one-year automatic term extensions and bears interest at a spread of 1.50% over one-month LIBOR. Both the LB Term Loan and the mezzanine loan collateral have three one-year extension options. The LB Term Loan contains certain 139

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 11. Borrowings (Continued)

covenants including, among others, financial covenants of a minimum tangible net worth and a minimum debt-to-equity ratio. Liability to Subsidiary Trusts Issuing Preferred Securities In March 2007, a wholly owned subsidiary of the Company, NorthStar Realty Finance Trust VII, completed a private placement of $37.5 million of trust preferred securities. The sole assets of the trust consist of a like amount of junior subordinate notes issued by the Company. The trust preferred securities and the notes have a 30-year term, ending April 30, 2037, and bear interest at a floating rate of threemonth LIBOR plus 2.50%. The Company has entered into an interest rate swap agreement, which fixed the interest rate for ten years at 7.60%. In June 2007, a wholly owned subsidiary of the Company, NorthStar Realty Finance Trust VIII, completed a private placement of $35.0 million of trust preferred securities. The sole assets of the trust consist of a like amount of junior subordinate notes issued by the Company. The trust preferred securities and the notes have a 30-year term, ending July 30, 2037, and bear interest at a floating rate of threemonth LIBOR plus 2.70%. The Company has entered into an interest rate swap agreement, which fixed the interest rate for ten years at 8.29%. The Company may redeem the notes, in whole or in part, for cash, at par, after five years. To the extent the Company redeems notes, the Trusts are required to redeem a corresponding amount of trust preferred securities. The ability of the Trusts to pay dividends depends on the receipt of interest payments on the notes. The Company has the right, pursuant to certain qualifications and covenants, to defer payments of interest on the notes for up to six consecutive quarters. If payment of interest on the notes is deferred, the Trust will defer the quarterly distributions on the trust preferred securities for a corresponding period. Additional interest accrues on deferred payments at the annual rate payable on the notes, compounded quarterly. Repurchase Obligations The Company had $0.2 million and $1.9 million of repurchase agreements which are collateralized by a security with a face value of $8.0 million and $13.0 million of floating rate securities at December 31, 2008 and 2007, respectively. 140

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 12. Commitments and Contingencies Obligations Under Capital Leases and Operating Lease Agreements The Company is the lessee of two locations under capital leases, seven ground leases under operating real estate, of which five are paid directly by the tenants, and three corporate offices that are located in New York City, Los Angeles and Dallas. The following is a schedule of minimum future rental payments under these contractual lease obligations as of December 31, 2008:

Processed and formatted by SEC Watch - Visit SECWatch.com Ye ars En ding De ce m be r 31:

2009 2010 2011 2012 2013 Thereafter Total minimum lease payments Less: Amounts representing interest Future minimum lease payments

$ 6,110 6,124 6,061 5,904 5,962 62,886 93,047 12,096 $80,951

Under one of the capital leases, the Company also pays rent equal to 15% of the minimum rental income received from the sub-tenant. The Company recognized $3.1 million, $2.7 million and $2.0 million in rental expense for its three corporate offices for the years ended December 31, 2008, 2007 and 2006, respectively. 13. Rental Income Under Operating Leases Rental income from real estate is derived from the leasing and sub-leasing of space to commercial tenants. The leases are for fixed terms of varying length and provide for annual rentals and expense reimbursements to be paid in monthly installments. The following is a schedule of future minimum rental income under non-cancelable leases at December 31, 2008: Ye ars En ding De ce m be r 31:

2009 2010 2011 2012 2013 Thereafter

$106,452 104,770 106,066 102,311 101,923 338,627 $860,149

Included in rental income is percentage rent of $585, $529 and $513 for the year ended December 31, 2008, 2007 and 2006, respectively. 141

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 14. Related Party Transactions Advisory Fees The Company has agreements with each of N-Star I, N-Star II, N-Star III, N-Star V and N-Star IX to perform certain advisory services. During the second quarter 2008, the Company sold 67% of its advisory fee income stream, pursuant to its agreement with N-Star IX, to the Securities Fund for $8.8 million. Advisory and management fee income—related parties for the year ended December 31, 2008 includes $4.9 million of additional income as a result of the sale. The Company has deferred the remaining $3.8 million, which represents the Company's ownership interest in the Securities Fund. The deferred advisory fee income will be recognized into income as the fees are earned. The Company earned total fees on these agreements of approximately $12.0 million and $7.2 million for the year ended December 31, 2008 and 2007, respectively. The Company has an agreement with the Securities Fund to receive base management fees ranging from 1.0% to 2.0% per year on thirdparty capital. For the year ended December 31, 2008 and 2007, the Company earned $0.5 million and $0.4 million in management fees, respectively. Asset Management Fees The Company entered into a management agreement in April 2006 with Wakefield Capital Management Inc. to perform certain management services. Wakefield Capital Management Inc. is owned by the partners who own Chain Bridge. The Company incurred $1.3 million and $3.0 million in management fees for the year ended December 31, 2008 and 2007, respectively, which are recorded in asset management fees-related parties in the condensed consolidated statement of operations. The Company entered into a management agreement in March 2007 with Monroe Management to perform certain management services. On May 7, 2008, the Company terminated its management agreement with Monroe Management, as described in Note 1. The Company incurred $3.4 million in management fees for the year ended December 31, 2008, and $3.0 million in management fees for the year ended December 31, 2007, which are recorded in asset management fees-related parties in the condensed consolidated statement of operations. Legacy Fund In September 2008, the Company and a major financial institution, as co-lenders, amended an existing loan agreement with a subsidiary of Legacy Partners Realty Fund I, LLC (the "Legacy Fund"), as borrower, to extend the loan maturity in exchange for an extension fee, a partial principal repayment of the loan and a guaranty by the borrower of certain additional obligations. One of the Company's directors, Preston Butcher, is the chairman of the Board of Directors and chief executive officer and owns a significant interest in Legacy Partners Commercial, LLC, which indirectly owns an equity interest in, and owns the manager of, the Legacy Fund. The loan is included in real estate debt investments in the consolidated balance sheets. Hard Rock Hotel Loan In August 2008, the Company purchased from Credit Suisse ("CS"), a $30.0 million junior participation in the financing provided by CS in connection with the acquisition of 11.05 acres of land immediately adjacent to the Hard Rock Hotel and Casino in Las Vegas by a joint venture between DLJ 142

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 14. Related Party Transactions (Continued)

Merchant Banking Partners and the Morgans Hotel Group, or Morgans, which is the minority interest in the joint venture. David Hamamoto, the Company's president and chief executive officer, is the chairman of the board of Morgans. The loan is included in real estate debt investments in the consolidated balance sheets. 15. Fair Value of Financial Instruments The following disclosures of estimated fair value were determined by management, using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. As of December 31, 2008 and 2007, cash equivalents, accounts receivable, accounts payable, repurchase agreements with major banks and securities firms and the master repurchase agreement balances reasonably approximate their fair values due to the short-term maturities of these items. The warehouse deposits available for sale securities and securities sold, not yet purchased are carried on the balance sheet at their estimated fair value. For the real estate debt investments the fair value of the fixed and floating rate investments was approximated comparing yields at which the investments are held to estimated yields at which loans originated with similar credit risks or market yields at which a third party might require to purchase the investment by discounting future cash flows at such market yields. Prices were calculated to the "worst" assuming fully extended maturities regardless of if structural or economic tests required to achieve such extended maturities. For the year ended December 31, 2008 the fair market value was $1.7 billion with a gross carrying amount of $2.1 billion. For the year ended December 31, 2007 the fair market value of the fixed rate real estate debt investments was $341.3 million with a carrying amount of $332.1 million. For fixed rate mortgage loans payable the Company uses rates currently available to them with similar terms and remaining maturities to estimate their fair value. For the year ended December 31, 2008 the fair market value was $934.3 million with a carrying amount of $910.6million. For the year ended December 31, 2007 the fair market value was $918.8 million with a carrying amount of $912.4 million. Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 2008 and 2007. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein. 16. Equity Based Compensation Omnibus Stock Incentive Plan On September 14, 2004, the Board of Directors of the Company adopted the NorthStar Realty Finance Corp. 2004 Omnibus Stock Incentive Plan (the "Stock Incentive Plan"). The Stock Incentive Plan provides for the issuance of stock-based incentive awards, including incentive stock options, non-qualified stock options, and stock appreciation rights, shares of common stock of the Company, 143

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 16. Equity Based Compensation (Continued)

including restricted shares, and other equity-based awards, including OP Units which are structured as profits interests ("LTIP Units") or any combination of the foregoing. The eligible participants in the Stock Incentive Plan include directors, officers and employees of the Company and, prior to October 29, 2005, employees pursuant to the shared facilities and services agreement. An aggregate of 8,933,038 shares of common stock of the Company are currently reserved and authorized for issuance under the Stock Incentive Plan, subject to equitable adjustment upon the occurrence of certain corporate events. As of December 31, 2008, the Company has issued an aggregate of 8,283,510 LTIP Units, net of forfeitures of 60,198 LTIP Units. An aggregate of 655,063 LTIP Units were converted to commons stock and 374,020 shares of common stock were issued pursuant to the Stock Incentive Plan. Of the 8,283,510 LTIP Units, so long as the recipient continues to be an eligible recipient, 5,016,112 will vest to the individual recipient at a rate of one-twelfth of the total amount granted as of the end of each quarter, beginning with the first quarter after the date of grant ended either January 29, April 29, July 29, or October 29 for the three-year vesting period, 2,252,437 will vest over 16 consecutive quarters with the first quarter being January 29, 2008, 701,058 will cliff vest on December 31, 2010, and 170,801 are subject to no vesting requirements. The Company accelerated the vesting of 143,102 LTIP Units as part of the termination benefits provided to employees. In addition, the LTIP Unit holders are entitled to dividends on the entire grant beginning on the date of the grant. The Company has recognized compensation expense of $21.3 million, $10.7 million and $4.5 million for the three years ended December 31, 2008, respectively. As of December 31, 2008, there were approximately 5,198,950 unvested LTIP Units and 55,520 LTIP Units were forfeited during the period. The related compensation expense to be recognized over the remaining vesting period of the Omnibus Incentive Plan LTIP grants is $39.8 million, provided there are no forfeitures. Long-Term Incentive Bonus Plan On September 14, 2004, the Board of Directors of the Company adopted the NorthStar Realty Finance Corp. 2004 Long-Term Incentive Bonus Plan (the "Incentive Bonus Plan"), in order to retain and provide incentive to officers and certain key employees of the Company, among others. Up to 2.5% of the Company's total capitalization as of consummation of the IPO is available to be paid under the Incentive Bonus Plan in cash, shares of common stock of the Company or other share-based form at the discretion of the compensation committee of the Company's Board of Directors, if certain return hurdles are met. An aggregate of 698,142 shares of common stock of the Company were reserved and authorized for issuance under the Incentive Bonus Plan, subject to equitable adjustment upon the occurrence of certain corporate events. All units under the plan were allocated to employees of the Company. The Company's compensation committee established the return hurdle for these performance periods as an annual return on paid in capital as defined in the plan, equal to or greater than 12.5%. The Company achieved the performance hurdles for both performance periods in 2006 and 2007 and all units reserved under this plan were granted to each of the participants that was an employee at the conclusion of the last performance period in November 2007. The Company has recognized, in the condensed consolidated financial statements, $2.2 million and $2.1 million in compensation expense for the years ending December 31, 2007 and 2006, respectively. 144

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 16. Equity Based Compensation (Continued) Employee Outperformance Plan In connection with the employment agreement of the Company's head of its real estate securities business, he was eligible to receive incentive compensation equal to 15% of the annual net profits from the Company's real estate securities business in excess of a 12% return on invested capital (the annual bonus participation amount). In April 2008, the Company's head of its real estate securities business left the Company. As a result, his employment agreement with the Company was terminated effective April 11, 2008. He was not entitled to any severance, bonus or other payments or awards as a result of his departure. However, pursuant to his Outperformance Bonus Plan, he is deemed to have a vested interest in, and may continue to receive the following: (i) 20% of the bonus participation amount relating to fee streams and securities investments that were made in the 12 months prior to April 11, 2008; (ii) 40% of the bonus participation amount relating to fee streams and securities investments that were made more than 12 months and less than 24 months prior to April 11, 2008; (iii) 60% of the bonus participation amount relating to fee streams and securities investments that were made more than 24 months and less than 36 months prior to April 11, 2008; (iv) 80% of the bonus participation amount relating to fee streams and securities investments that were made more than 36 months and less than 48 months prior to April 11, 2008; and (v) 100% of the bonus participation amount relating to fee streams and securities investments that were made more than 48 months prior to April 11, 2008. The Company has recorded no compensation expense under this plan for the year ended December 31, 2008, and $1.2 million and $0.8 million for the years ending December 31, 2007 and 2006, respectively. 2006 Outperformance Plan In January 2006, the Compensation Committee of the Board of Directors approved the NorthStar Realty Finance Corp. 2006 Outperformance Plan (the "2006 Outperformance Plan"), a long-term compensation program to further align the interests of the Company's stockholders and management. Under the 2006 Outperformance Plan, award recipients would share in a "performance pool" if the Company's total return to stockholders for the period from January 1, 2006 (measured based on the average closing price of the Company's common stock for the 20 trading days prior to January 1, 2006) to December 31, 2008 exceeded a cumulative total return to stockholders of 30%, including both share price appreciation and dividends paid. The size of the pool would be 10% of the outperformance amount in excess of the 30% benchmark, subject to a maximum dilution cap equal to $40 million, exclusive of accrued dividends. Each employee's award under the 2006 Outperformance Plan was designated as a specified percentage of the aggregate performance pool. The Company did not meet the cumulative return hurdles under the plan. The Company recorded the compensation expense for the 2006 Outperformance Plan in accordance with SFAS 123 (R) "Stock Based Compensation." The fair value of the 2006 Outperformance Plan on the date of adoption was determined by the Company to be $4.1 million. In connection with its determination, the Company retained a firm that had experience in appraising similar plans and considered such appraisal in its determination of the fair value of the 2006 Outperformance Plan. Based on the vesting periods under the plan, the Company amortized 50% of the value into compensation expense over the first three years of the plan and will amortize 25% of the fair value in each of the years four and five. The Company recorded 145

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 16. Equity Based Compensation (Continued)

compensation expense of $1.1 million for each of the three years ended December 31, 2008, 2007 and 2006, respectively. The status of all of the LTIP grants as December 31, 2008 and 2007 is as follows: De ce m be r 31, 2008 W e ighte d LTIP Ave rage Grants Grant Price

Balance at beginning of year(1) Granted Converted to common stock Forfeited Ending balance(2)

5,484 3,533 (895) (55) 8,067

$

$

11.47 7.26 9.51 9.42 9.86

De ce m be r 31, 2007 W e ighte d LTIP Ave rage Grants Grant Price

1,683 3,826 (20) (5) 5,484

$

$

9.44 12.25 9.0 16.48 11.47

(1)

Reflects balance at January 1, 2008 and January 1, 2007 for the periods ended December 31, 2008 and 2007, respectively.

(2)

Reflects balance at December 31, 2008 and 2007, respectively.

17. Stockholders' Equity Common Stock In April 2007, the Company implemented a Dividend Reinvestment and Stock Purchase Plan, or the Plan, pursuant to which it registered with the Securities and Exchange Commission and reserved for issuance 15,000,000 shares of its common stock. Under the terms of the Plan, stockholders who participate in the Plan may purchase shares of the Company's common stock directly from it, in cash investments up to $10,000. At the Company's sole discretion, it may accept optional cash investments in excess of $10,000 per month, which may qualify for a discount from the market price of 0% to 5%. Plan participants may also automatically reinvest all or a portion of their dividends for additional shares of the Company's stock. The Company expects to use the proceeds from any dividend reinvestments or stock purchases for general corporate purposes. For the year ended December 31, 2007, the Company issued a total of approximately 330,297 common shares for a gross sales price of approximately $3.8 million. For the year ended December 31, 2008, the Company issued a total of approximately 181,593 common shares for a gross sales price of approximately $1.1 million. In May 2007, the Company issued 25,088 shares of common stock with a fair value at the date of grant of $0.3 million to its Board of Directors as part of their annual grants. In May 2008, the Company issued 37,812 shares of common stock with a fair value at the date of grant of $0.4 million to its Board of Directors as part of their annual grants. In May 2008, the Company entered into an equity distribution agreement with Wachovia Capital Markets, LLC ("Wachovia"). In accordance with the terms of the agreement, the Company may offer and sell up to 10,000,000 shares of its common stock from time to time through Wachovia. Wachovia will receive a commission from the Company of up to 2.5% of the gross sales price of all shares sold through it under the equity distribution agreement. For the year ended December 31, 2008, the 146

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 17. Stockholders' Equity (Continued)

Company sold a total of 114,100 shares of common stock related to its equity distribution agreement with Wachovia raising net proceeds of approximately $0.9 million. For the year ended December 31, 2008, the Company issued a total of 235,183 shares of common stock related to employee compensation arrangements and employee separation agreements. Stock Repurchase Program On October 8, 2008, the Company's Board of Directors authorized a stock repurchase program of up to 10,000,000 shares of our outstanding common stock, or approximately 16% of its outstanding common stock. Stock repurchases under this program will be made from time to time through the open market or in privately negotiated transactions. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. For the year ended December 31, 2008, the Company repurchased a total of approximately 475,051 common shares for approximately $1.4 million. Preferred Stock In February 2007, the Company completed a public offering of 6,200,000 shares of 8.25% Series B Cumulative Redeemable Preferred Stock at a price of $25.00 per share and generated net proceeds of approximately $150.0 million. In May 2007, the Company completed a public offering of an additional 1,400,000 shares of 8.25% Series B Cumulative Redeemable Preferred Stock at a price of $25.00 per share which increased the number of Series B shares outstanding to 7,600,000 and generated additional net proceeds of approximately $33.5 million bringing total net proceeds from the sale of Series B preferred stock to approximately $183.5 million. Dividends On January 26, 2006, the Company declared a cash dividend of $0.27 per share of common stock. The dividend was paid on February 10, 2006 to the shareholders of record as of the close of business on February 3, 2006. On April 12, 2006, the Company declared a cash dividend of $0.30 per share of common stock. The dividend was paid on April 26, 2006 to the shareholders of record as of the close of business on April 19, 2006. On July 25, 2006, the Company declared a cash dividend of $0.30 per share of common stock. The dividend was paid on August 11, 2006 to the shareholders of record as of the close of business on August 4, 2006. On October 24, 2006, the Company declared a cash dividend of $0.34 per share of common stock. The dividend was paid on November 15, 2006 to the shareholders of record as of the close of business on November 6, 2006. 147

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 17. Stockholders' Equity (Continued) On January 23, 2007, the Company declared a cash dividend of $0.35 per share of common stock and $0.54688 per share of Series A preferred stock. The dividends were paid on February 15, 2007 to the stockholders of record as of the close of business on February 5, 2007. On April 25, 2007, the Company declared a cash dividend of $0.36 per share of common stock, $0.54688 per share of Series A preferred stock and $0.55573 per share of Series B preferred stock. The dividends were paid on May 15, 2007 to the stockholders of record as of the

Processed and formatted by SEC Watch - Visit SECWatch.com

close of business on May 7, 2007. On July 24, 2007, the Company declared a cash dividend of $0.36 per share of common stock, $0.54688 per share of Series A preferred stock and $0.51563 per share of Series B preferred stock. The dividends were paid on August 15, 2007 to the stockholders of record as of the close of business on August 7, 2007. On October 23, 2007, the Company declared a cash dividend of $0.36 per share of common stock, $0.54688 per share of Series A preferred stock and $0.51563 per share of Series B preferred stock. The dividends were paid on November 15, 2007 to the stockholders of record as of the close of business on November 7, 2007. On January 22, 2008, the Company declared a cash dividend of $0.36 per share of common stock, $0.54688 per share of Series A preferred stock and $0.51563 per share of Series B preferred stock. The dividends were paid on February 15, 2008 to stockholders of record as of the close of business on February 5, 2008. On April 22, 2008, the Company declared a cash dividend of $0.36 per share of common stock, $0.54688 per share of Series A preferred stock and $0.51563 per share of Series B preferred stock. The dividends were paid on May 15, 2008 to the stockholders of record as of the close of business on May 5, 2008. On July 22, 2008, the Company declared a cash dividend of $0.36 per share of common stock, $0.54688 per share of Series A preferred stock and $0.51563 per share of Series B preferred stock. The dividends were paid on August 15, 2008 to the stockholders of record as of the close of business on August 5, 2008. On October 8, 2008, the Company declared a cash dividend of $0.36 per share of common stock. On October 21, 2008, the Company declared a cash dividend of $0.54688 per share of Series A preferred stock and $0.51563 per share of Series B preferred stock. The dividends were paid on November 14, 2008 to the stockholders of record as of the close of business on November 4, 2008. 148

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 17. Stockholders' Equity (Continued) Earnings Per Share Earnings per share for the years ended December 31, 2008, 2007 and 2006 is computed as follows (in thousands): 2008

2007

2006

$31,303

$37,205

2,699 $34,002

5,072 $42,277

63,136

61,511

39,636

7,001 $ 70,137

3,576 65,087

5,328 44,964

Numerator (Income) Basic Earnings Net income available to common stockholders $698,741 Effect of dilutive securities Income allocated to minority interest 77,484 Dilutive net income available to stockholders $776,255 Denominator (Weighted Average Shares) Basic Earnings: Shares available to common stockholders Effect of dilutive securities: OP/LTIP units Dilutive Shares 18. Minority Interest Operating Partnership

Minority interest represents the aggregate limited partnership interests or OP Units in the Operating Partnership held by limited partners (the "Unit Holders"). Income allocated to the minority interest is based on the Unit Holders ownership percentage of the Operating Partnership. The ownership percentage is determined by dividing the numbers of OP Units held by the Unit Holders by the total OP Units outstanding. The issuance of additional shares of beneficial interest (the "Common Shares" or "Share") or OP Units changes the percentage ownership of both the Unit Holders and the Company. Since a unit is generally redeemable for cash or Shares at the option of the Company, it is deemed to be equivalent to a Share. Therefore, such transactions are treated as capital transactions and result in an allocation between shareholders' equity and minority interest in the accompanying condensed consolidated balance sheet to account for the change in the ownership of the underlying equity in the Operating Partnership. As of December 31, 2008 and December 31, 2007, minority interest related to the aggregate limited partnership units of 8,067,211 and 5,683,118, represented an 11.37% and 8.43% interest in the Operating Partnership, respectively. Joint Ventures In May 2006, the Company formed the Wakefield joint venture with Chain Bridge. On July 9, 2008, Wakefield sold a $100 million convertible preferred membership interest to Inland American Real Estate Trust, Inc. The joint venture is consolidated in the condensed consolidated financial statements and Inland American's and Chain Bridge's capital are treated as minority interests. Income allocated to 149

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 18. Minority Interest (Continued)

minority interest for the year ended December 31, 2008 and December 31, 2007 was $4.6 million and $0.2 million, respectively. In March 2007, the Company formed a joint venture with Monroe. On May 7, 2008, the Company completed a recapitalization of Monroe Capital, its middle-market corporate lending venture. Upon completion of the recapitalization transaction, the Company deconsolidated the venture. Monroe Capital's equity is no longer a component of minority interest. Loss allocated to minority interest prior to the recapitalization of Monroe Capital was $0.3 million. 19. Risk Management and Derivative Activities Derivatives The Company uses derivatives primarily to manage interest rate risk exposure. These derivatives are typically in the form of interest rate swap agreements and the primary objective is to minimize interest rate risks associated with the Company's investment and financing activities. The counterparties of these arrangements are major financial institutions with which the Company may also have other financial relationships. The Company is exposed to credit risk in the event of non-performance by these counterparties and it monitors their financial condition; however, the Company currently does not anticipate that any of the counterparties will fail to meet their obligations because of their high credit ratings and financial support from the U.S. Government. For the year ended December 31, 2008, the Company's counterparties hold $30.2 million cash margin as collateral against its swap contracts. In January 2008, the Company adopted SFAS 159 and elected the fair value option for its bonds payable and its liability to subsidiary trusts issuing preferred securities. Under SFAS 159, the changes in fair value of these financial instruments are now recorded in earnings. As a result of this election, the interest rate swap agreements associated with these debt instruments no longer qualify for hedge accounting, in accordance with SFAS 133 "Derivatives and Hedging Activity", since the underlying debt is remeasured with changes in the fair value recorded in earnings. The unrealized gains or losses accumulated in other comprehensive income, related to these interest rate swaps, will be reclassified into earning over the shorter of either the life of the swap or the associated debt with current mark-to-market unrealized gains or losses recorded in earnings. For the year ended December 31, 2008, the Company recorded, in earnings, a mark-to-market unrealized gain of $15.0 million reclassification from accumulated other comprehensive income for the non-qualifying interest rate swaps. 150

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 19. Risk Management and Derivative Activities (Continued) The following tables summarize the Company's derivative financial instruments as of December 31, 2008 and 2007: De ce m be r 31, 2008

Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Basis Swap Interest rate swap Basis Swap Basis Swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Reverse interest rate swap Reverse interest rate swap Interest rate swap Total / weighted average

Notional Value

$

5,100 6,160 3,290 2,842 5,492 3,465 4,000 15,000 34,000 3,765 3,567 5,957 23,300 2,686 20,000 12,750 7,700 14,000 201,255 323,505 5,000 15,000 9,873 3,000 60,000 16,200 49,404 30,000 25,000 37,500 35,000 250,000 250,000 11,400 $1,495,211 151

S trik e Rate

4.18% 4.29 4.80 5.04 4.76 4.41 4.66 5.08 5.07 4.98 4.98 5.06 4.99 5.02 5.05 5.06 5.30 5.03 1.53 5.53 3.08 3.33 4.81 4.89 5.52 5.52 5.63 5.46 5.12 5.10 5.59 3.03 3.02 4.78 4.03

Expiration Date

12/2010 8/2012 12/2013 8/2018 3/2013 3/2010 11/2015 5/2016 5/2017 7/2015 6/2015 8/2015 12/2012 2/2016 6/2013 8/2017 5/2010 10/2015 3/2015 6/2018 12/2015 6/2018 8/2014 6/2015 6/2016 6/2018 7/2016 9/2016 9/2016 4/2017 7/2017 10/2009 10/2009 9/2010

Fair Value

$

(291) (552) (435) (627) (642) (142) (536) (2,903) (7,109) (284) (272) (447) (1,875) (155) (1,652) (814) (356) (1,134) (16) (32,398) 2 28 (830) (255) (5,291) (991) (3,872) (6,517) (4,841) (7,504) (3,793) 4,648 4,641 (687) $(77,902)

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 19. Risk Management and Derivative Activities (Continued)

De ce m be r 31, 2007

Notional Value

Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Basis Swap Basis Swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Total / weighted average

$ 5,100 6,160 3,290 2,842 5,492 3,465 4,000 15,000 34,000 3,765 3,567 5,957 23,300 2,686 20,000 12,750 7,700 14,000 323,505 5,000 15,000 9,873 3,000 60,000 16,200 49,404 13,200 49,150 30,000 25,000 37,500 35,000 11,400 $856,307

S trik e Rate

Expiration Date

4.18% 4.29 4.80 5.04 4.76 4.41 4.66 5.08 5.07 4.98 4.98 5.06 4.99 5.02 5.05 5.06 5.30 5.03 5.53 6.36 6.61 4.81 4.89 5.52 5.52 5.63 5.06 4.88 5.46 5.12 5.10 5.59 4.78 5.35

12/2010 8/2012 12/2013 8/2018 3/2013 3/2010 11/2015 5/2016 5/2017 7/2015 6/2015 8/2015 12/2012 2/2016 6/2013 8/2017 5/2010 10/2015 6/2018 12/2015 6/2018 8/2014 6/2015 6/2016 6/2018 7/2016 2/2008 3/2008 9/2016 9/2016 4/2017 7/2017 9/2010

Fair Value

$

(53) (64) (102) (101) (165) (52) (83) (738) (1,614) (146) (140) (231) (979) (86) (841) (488) (268) (621) (23,468) (17) (49) (293) (99) (4,855) (1,349) (3,905) (5) (15) (2,206) (1,219) (1,749) (2,964) (315) $(49,280)

152

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 19. Risk Management and Derivative Activities (Continued) Credit Risk Concentrations Concentrations of credit risk arise when a number of borrowers, tenants or issuers related to the Company's investments are engaged in similar business activities or located in the same geographic location to be similarly affected by changes in economic conditions. The

Processed and formatted by SEC Watch - Visit SECWatch.com

Company monitors its portfolio to identify potential concentrations of credit risks. The Company has no one borrower or one tenant that generates 10% or more of its total revenue. However, approximately 29.0% of the Company's rental and escalation revenue for the year ended December 31, 2008 is generated from two tenants in the Company's healthcare net lease portfolio. The Company believes the remainder of its net lease portfolio is reasonably well diversified and does not contain any unusual concentration of credit risks. 20. Off Balance Sheet Arrangements Equity Notes of Collateralized Loan Obligations In December 2006, the Company acquired 40% of the residual equity interests in a collateralized loan obligation ("CLO") originated by Monroe Capital, LLC, a specialty finance company, for $16.7 million. The CLO includes collateral of approximately $400 million backed primarily by first lien senior secured loans. The Company also acquired a 12.5% and 33.5% residual equity interest in two third party CLOs. The Company determined the CLOs to be variable interest entities under FIN 46(R)-6 and that it was not the primary beneficiary; therefore, the financial statements of the CLOs were not consolidated into the condensed consolidated financial statements of the Company. On May 7, 2008, the Company completed a recapitalization of Monroe Capital, its middle-market corporate lending venture and contributed its CLO equity interests into the recapitalized entity. See Note 1 for additional information. 21. Quarterly Financial Information (Unaudited) The tables below reflect the Company's selected quarterly information for the Company for the years ended December 31, 2008, 2007 and 2006.

De ce m be r 31, 2008

Total revenue $ 86,219 Income from continuing operations before minority interests 325,351 Income from continuing operations 290,136 Net income available to common stockholders 284,905 Net income per share—basic/diluted 4.51 Weighted-average shares outstanding basic 63,160,947 diluted 70,422,832 153

Th re e Mon ths En de d S e pte m be r 30, Ju n e 30, 2008 2008 (un au dite d)

$

$

93,540 268,588 238,764 233,533 3.72 62,825,383 70,229,958

$

$

March 31, 2008

93,016 $ (15,968) (13,308) (18,539) (0.30) $

62,708,688 70,192,538

99,729 223,793 200,504 195,273 3.14

62,243,736 69,589,079

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 21. Quarterly Financial Information (Unaudited) (Continued)

De ce m be r 31, 2007

Total revenue $ 110,921 Income from continuing operations before minority interests 11,628 Income from continuing operations 10,532 Net income available to common stockholders 5,301 Net income per share—basic/diluted $ 0.08 Weighted-average shares outstanding basic 61,696,568 diluted 67,062,284

De ce m be r 31, 2006

Total revenue $ 66,333 Income from continuing operations before minority interests 15,273 Income from continuing operations 14,774 Net income available to common stockholders 14,420 Net income per share—basic/diluted $ 0.29 Weighted-average shares outstanding basic 50,010,028 diluted 54,109,492

Th re e Mon ths En de d S e pte m be r 30, Ju n e 30, 2007 2007 (un au dite d)

$

$

112,678 14,813 13,918 8,687 0.14 61,629,938 64,659,852

$

$

107,460 16,646 15,731 10,965 0.18

61,378,154 64,419,056

Th re e Mon ths En de d S e pte m be r 30, Ju n e 30, 2006 2006 (un au dite d)

$

$

58,264 10,773 9,533 9,674 0.23 42,513,172 48,068,996

$

$

39,113 6,011 5,160 5,244 0.15

34,980,352 40,744,276

March 31, 2007

$

$

84,254 8,087 7,711 6,350 0.10

61,329,675 64,126,691

March 31, 2006

$

$

31,770 8,821 7,423 7,866 0.25

30,556,586 36,323,517

22. Segment Reporting The Company's real estate debt segment is focused on originating, structuring and acquiring senior and subordinate debt investments secured primarily by commercial real estate properties. The Company generates revenues from this segment by earning interest income from its debt investments and its operating expenses consist primarily of interest costs from financing the assets. This segment generates income from operations by earning a positive spread between the yield on its assets and the interest cost of its debt. The Company evaluates performance and allocates resources to this segment based upon its contribution to income from continuing operations. The Company's real estate securities segment is focused on investing in a wide range of commercial real estate debt securities, including CMBS, REIT unsecured debt, credit tenant loans and unsecured subordinate securities of commercial real estate companies. The Company generates revenues from this segment by earning interest income and advisory fees from owning and managing these investments. Its operating expenses consist primarily of interest costs from financing its securities. The segment generates income from operations by earning advisory fees and a positive spread between the yield on its assets and the interest cost of its debt. 154

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 22. Segment Reporting (Continued) The Company's operating real estate segment is focused on acquiring commercial real estate facilities located throughout the U.S. that are primarily leased under long-term triple-net leases to corporate tenants. Triple-net leases generally require the lessee to pay all costs of operating the facility, including taxes and insurance and maintenance of the facility. The Company's net-leased facilities are currently located in New York, Ohio, California, Utah, Pennsylvania, New Jersey, Indiana, Illinois, New Hampshire, Massachusetts, Kansas, Maine, South Carolina, Michigan, Colorado, North Carolina, Florida, Washington, Oregon, Wisconsin, Georgia, Oklahoma, Nebraska, Tennessee, Texas and Kentucky. Revenues from these assets are generated from rental income received from lessees of the facilities, and operating expenses, which include interest costs related to financing the assets, operating expenses, real estate taxes, insurance, ground rent and repairs and maintenance. The segment generates income from operations by leasing these facilities at a higher rate than the costs of owning and financing the assets. The Company's joint venture (Wakefield Capital LLC) is an operating real estate segment is focused on senior living facilities located throughout the U.S. that are primarily leased under long-term triple-net leases. Triple-net leases generally require the lessee to pay all costs of operating the facility, including taxes and insurance and maintenance of the facility. The Company's net-leased facilities are currently located in Ohio, California, Indiana, Illinois, Kentucky, Kansas, North Carolina, Florida, Washington, Oregon, Wisconsin, Georgia, Oklahoma, Nebraska, Tennessee and Texas. Revenues from these assets are generated from rental income received from lessees of the facilities. The primary operating expense is interest costs related to financing the assets, The segment generates income from operations by leasing these facilities at a higher rate than the costs of owning and financing the assets. On May 7, 2008, the Company completed a recapitalization of its middle-market corporate lending venture. Upon completion of the recapitalization transaction, the Company deconsolidated the venture and now uses the equity method of accounting for the investment. As a result, and as of May 7, 2008, the corporate loan segment is no longer a reportable segment of the Company. Its current investment is included in corporate. 155

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 22. Segment Reporting (Continued) The following table summarizes segment reporting for the years ended December 31, 2008 and 2007 (in thousands): He alth care C orporate Re al Estate O pe ratin g Re al Estate Re al Estate Inve stm e n ts C on solidate d De bt Re al Estate S e cu ritie s Join t Ve n ture an d O the r(1) Total

Total revenues for the year ended December 31, 2008 December 31, 2007 Income (loss) from continuing operations before minority interest for the year ended December 31, 2008 December 31, 2007 Net income (loss) for the year ended December 31, 2008 December 31, 2007 Total assets as of December 31, 2008 December 31, 2007

(1)

$ 171,792 $ $ 204,056 $

60,551 $ 47,893 $

62,524 $ 78,962 $

703,097 76,951

(5,784) (8,545)

7,639 15,538

632,913 76,951

(5,207) (8,543)

6,876 15,538

$ 2,266,115 $ 515,577 $ 259,326 $ $ 2,307,922 $ 534,661 $ 620,769 $

64,909 $ 51,176 $

12,728 $ 33,226 $

372,504 415,313

38 3,933

96,774 (36,703)

801,764 51,174

(4,881) 3,649

89,965 (39,759)

719,666 47,836

732,513 $ 731,796 $

162,495 $ 3,936,026 597,634 $ 4,792,782

Includes corporate level interest income, interest expense, other investments and general & administrative expenses. 156

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Amounts in Thousands, Except per Share Data) 23. Supplemental Disclosure of Non-Cash Investing and Financing Activities A summary of non-cash investing and financing activities for the years ended December 31, 2008, 2007 and 2006 is presented below: 2008

The acquisition of available for sale securities with warehouse deposit Real estate debt investment pay-down due from servicer Write-off of deferred financing cost in connection with FAS 159 implementation Initial mark-to-market adjustment in connection with FAS 159 implementation Elimination of available for sale securities due to acquisition of consolidated liabilities Reduction of mortgage notes and loans payable due to acquisition of consolidated asset and release of mortgage escrow Elimination of bonds payable due to acquisition of consolidated assets Allocation of purchase price of operating real estate to deferred cost Minority interest buy-out Contribution of book value of assets to unconsolidated joint venture Reclassification of prior-year construction in progress Write-off of deferred lease cost, tenant improvements and below market lease adjustments related to lease termination Application of tenant security deposit to receivable Assignment of minority interest to joint venture Write-off of deferred cost and straight-line rents in connection with disposition of operating real estate Write-off of intangible in connection with the sale of joint venture interest Assumption of loan in connection with acquisition of operating real estate Deed in lieu of foreclosure of operating real estate

2007

— — 34,605 (340,835) —

(21,898) (33,842) — — (5,390)

— — (272) (1,566) 112,097 (4,409)

1,485 (7,250) (33,755) — — —

(3,456) 1,990 — — — — —

— — — 27 — (19,499) (7,525)

2006

(7,045) — — — — — — — — — — — — (15,081) 609 339 — —

24. Subsequent Events (Unaudited) On January 20, 2009, the Company declared a cash dividend of $0.54688 per share of Series A preferred stock and $0.51563 per share of Series B preferred stock. The dividends were paid on February 16, 2009 to the stockholders of record as of the close of business on February 6, 2009. On January 20, 2009, the Company declared a dividend of $0.25 per share of common stock. The dividends are payable on February 27, 2009 to the stockholders of record as of January 28, 2009. The common stock dividends will be paid in a combination of 40% cash and 60% common stock. From January 1, 2009 to February 24, 2009 the Company repurchased approximately $40.0 million of its 7.25% exchangeable senior notes for $17.7 million. The Company will record a realized gain of $22.0 million in connection with the repurchase of its notes. 157

Table of Contents NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION As of December 31, 2008 (Amounts in Thousands, Except per Share Data)

Processed and formatted by SEC Watch - Visit SECWatch.com

C olum n A

Location 987 Eighth Avenue, NY, NY 36 West 34 Street, NY, NY 701 Seventh Avenue, NY, NY Los Angeles, CA Salt Lake Cit, UT Auburn Hills, MI Rancho Cordova, CA Camp Hill, P A Springdale, OH Springdale, OH Springdale, OH Rockaway, NJ Indianapolis, IN Albemarle, NC Blountstown, FL Brevard, NC Roxboro, NC Charlotte, NC East Arlington, T X Elk P ark, NC Windsor House, NC Yanceyville, NC Wichita, KS Edenton, NC Haysville, NC Clemmons, NC Grove City Franklin, WI Denmark, WI Green Bay, WI Kenosha, WI Madison, WI Manitowoc, WI Mcfarland, WI Racine, WI

C olum n C Initial C ost

C olum n B

C olum n D C ost C apitaliz e d S u bse qu e n t To Acquisition

C olum n E Gross Am ou n t at W h ich C arrie d at C lose of Pe riod

Bu ildings & Bu ildings & Im prove m e n ts Lan d Im prove m e n ts

En cu m bran ce s

Lan d

—

—

2,645

—

—

—

4,440

11

— 52,231 15,863 11,447 10,970 25,279 19,208 16,586 15,686 17,341 28,472 2,275 3,702 1,725 3,284 2,500 3,413 3,000 3,000 5,000 9,135 3,000 3,000 3,250 1,862 6,366 1,219 3,173 4,130 4,275 5,017 3,833 10,050

— 5,837 672 2,980 3,060 5,900 3,030 2,470 1,500 6,118 1,670 267 378 145 262 350 3,619 250 991 259 2,282 306 157 337 613 872 241 638 697 764 811 703 1,609

3,246 55,030 19,739 8,607 9,360 19,510 20,469 17,821 17,690 15,664 32,306 2,646 5,069 2,100 3,251 2,826 842 4,215 3,935 7,155 10,418 4,142 4,291 2,876 6,813 3,903 1,668 3,508 4,679 4,485 5,008 4,793 10,359

— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —

158

C olum n F

Lan d

Bu ildings & Im prove m e n ts

—

—

2,645

2,645

882

1,763

65

11

4,505

4,516

1,106

3,410

— 5,837 672 2,980 3,060 5,900 3,030 2,470 1,500 6,118 1,670 267 378 145 262 350 3,619 250 991 259 2,282 306 157 337 613 872 241 638 697 764 811 703 1,609

3,246 49,450 20,003 8,607 9,360 19,510 22,461 17,821 17,690 15,692 32,306 2,880 5,069 2,367 3,257 3,244 842 4,215 4,000 7,292 10,430 4,212 4,309 4,454 6,899 3,903 1,668 3,508 4,679 4,485 5,008 4,793 10,359

3,246 55,286 20,675 11,587 12,420 25,410 25,491 20,291 19,190 21,810 33,976 3,147 5,447 2,512 3,519 3,594 4,461 4,465 4,991 7,551 12,712 4,518 4,466 4,791 7,512 4,775 1,909 4,146 5,376 5,249 5,819 5,496 11,968

2,294 6,531 2,419 1,295 1,106 2,663 2,100 1,815 1,801 1,331 2,487 152 312 120 213 172 34 127 120 218 271 126 130 134 268 191 82 172 229 220 245 235 507

952 48,755 18,256 10,292 11,314 22,747 23,391 18,476 17,389 20,479 31,489 2,995 5,135 2,392 3,306 3,422 4,427 4,338 4,871 7,333 12,441 4,392 4,336 4,657 7,244 4,584 1,827 3,974 5,147 5,029 5,574 5,261 11,461

— (5,580) 264 — — — 1,992 — — 28 — 234 — 267 6 418 — — 65 137 12 70 18 1,578 86 — — — — — — — —

Total

Accum u late d De pre ciation

Total

A

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) As of December 31, 2008 (Amounts in Thousands, Except per Share Data)

C olum n A

Location Menomonmee, WI Sheboygan, WI Stevens P oint, WI Stoughton, WI Wausau, WI T wo Rivers, WI Wisconsin Rapids, WI Lancaster, OH Marysville, OH Indianapolis, IN Castletown, IN Chesterfield, IN Columbia City, IN Dunkirk, IN Fort Wayne, IN Hartford City, IN Hobart, IN Huntington, IN LaGrange, IN LaGrange, IN Middletown,IN Mooresville, IN P eru, IN P lymouth, IN P ortage, IN Rockport, IN Rushville, IN Rushville, IN Sullivan, IN Sullivan, IN Syracuse, IN T ipton, IN Wasbash, IN Wabash, IN Wakarusa, IN Wakarusa, IN Warsaw, IN Sullivan II Huntington II

C olum n B

En cu m bran ce s 6,075 9,300 8,487 1,686 7,553 2,708 1,129 2,605 1,673 2,251 6,813 4,075 8,079 2,132 4,895 2,096 5,958 4,548 519 5,115 3,424 1,530 6,457 5,278 7,071 1,723 554 4,108 891 4,930 3,514 8,114 3,711 1,308 6,492 10,084 3,658 — —

C olum n C Initial C ost

C olum n D C ost C apitaliz e d S u bse qu e n t To Acquisition

Bu ildings & Bu ildings & Lan d Im prove m e n ts Lan d Im prove m e n ts 1,011 4,837 — — 1,542 10,141 — — 1,837 12,458 — — 349 2,205 — — 498 9,214 — — 1,421 3,281 — — 416 2,868 — — 294 5,938 0 262 2,218 5,017 — 106 210 2,511 — — 677 8,077 — — 815 4,204 — — 1,034 6,390 — — 310 2,299 — — 1,478 4,409 — — 199 1,782 — — 1,835 5,019 — — 526 5,037 — — 47 584 — — 446 5,494 — — 132 4,750 — — 631 4,187 — — 502 7,135 — — 128 5,538 — — 1,438 7,988 — — 253 2,092 — — 62 1,177 — — 310 5,858 — — 102 441 — — 1,794 4,469 — — 125 4,564 — — 1,102 5,155 — 5,670 1,451 4,154 — — 1,060 870 — — 153 7,111 — — 289 13,420 — — 319 3,721 — — 494 — — — 120 — — —

159

C olum n E Gross Am ou n t at W h ich C arrie d at C lose of Pe riod

Bu ildings & Lan d Im prove m e n ts 1,011 4,837 1,542 10,141 1,837 12,458 349 2,205 498 9,214 1,421 3,281 416 2,868 294 6,200 2,218 5,123 210 2,511 677 8,077 815 4,204 1,034 6,390 310 2,299 1,478 4,409 199 1,782 1,835 5,019 526 5,037 47 584 446 5,494 132 4,750 631 4,187 502 7,135 128 5,538 1,438 7,988 253 2,092 62 1,177 310 5,858 102 441 1,794 4,469 125 4,564 1,102 10,825 1,451 4,154 1,060 870 153 7,111 289 13,420 319 3,721 494 — 120 —

C olum n F

Accum u late d Total De pre ciation 5,848 237 11,683 496 14,295 610 2,554 108 9,712 451 4,702 160 3,284 140 6,494 242 7,341 195 2,721 97 8,754 311 5,019 162 7,424 246 2,609 89 5,887 170 1,981 69 6,854 193 5,563 194 631 22 5,940 212 4,882 183 4,818 161 7,637 275 5,666 213 9,426 308 2,345 81 1,239 45 6,168 226 543 17 6,263 172 4,689 176 11,927 237 5,605 160 1,930 33 7,264 274 13,709 517 4,040 143 494 — 120 —

Total 5,611 11,187 13,685 2,446 9,261 4,542 3,144 6,252 7,146 2,624 8,443 4,857 7,178 2,520 5,717 1,912 6,661 5,369 609 5,728 4,699 4,657 7,362 5,453 9,118 2,264 1,194 5,942 526 6,091 4,513 11,690 5,445 1,897 6,990 13,192 3,897 494 120

A

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) As of December 31, 2008 (Amounts in Thousands, Except per Share Data)

C olum n A

Location Middletown II Rockport II Warsaw II Raleigh, NC Daly City, CA Daly City, CA Washington Crt Hse, OH Harrisburg, IL Clinton, OK Olney, IL Vandalia, IL P aris, IL Rantoul, IL Robinson, IL Cincinatti, OH Memphis, T N Charleston, IL Caroltton, GA Kingfisher, OK Elk City, OK Olney, IL Effingham, IL Fairfield, IL Fullerton, CA La Vista, NE Mattoon,IL Mattoon, IL Stephenville, T X Fullerton, CA Rockford, IL Effingham, IL Santa Ana, CA Sycamore, IL Oklahoma City, OK Garden Grove, CA Weatherford, OK Mt. Sterling, KY T uscola, IL Burnsville, NC Windsor, NC

C olum n B

En cu m bran ce s — — — 3,250 3,463 7,937 1,974 3,690 1,355 4,243 7,345 6,836 5,639 4,006 11,468 14,681 5,862 2,988 3,994 4,384 2,463 4,617 6,418 7,631 4,296 6,954 5,677 6,187 797 4,961 553 7,934 8,509 4,453 11,228 4,519 7,629 4,185 3,000 —

C olum n C Initial C ost

C olum n D C ost C apitaliz e d S u bse qu e n t To Acquisition

Bu ildings & Bu ildings & Lan d Im prove m e n ts Lan d Im prove m e n ts 52 — — — 366 — — — 77 — — — 156 3,859 — 2,546 3,297 1,377 — 426 — 10,707 — 1,279 341 5,123 13 94 191 5,055 — 3 225 3,512 — 364 109 5,418 — 24 82 7,968 — — 187 6,796 — 6 151 5,376 — 1 219 4,745 — 32 2,052 15,775 — 653 4,770 14,303 — 118 485 6,210 — 1 816 4,225 — 61 128 5,495 — 267 143 6,720 — 365 57 2,896 — 2 340 4,993 — 14 153 7,897 — 11 4,065 8,563 — 124 562 4,965 — 23 227 7,532 — 7 210 6,870 — 4 507 6,458 13 17 1,357 871 — 6 1,101 4,813 — 8 211 1,143 — 3 2,281 7,045 — 131 816 9,896 — 24 757 5,182 3 308 6,960 5,925 — 186 229 5,599 — 326 599 10,001 — 2,419 237 4,728 — 4 521 4,670 — 576 397 — — —

160

C olum n E Gross Am ou n t at W h ich C arrie d at C lose of Pe riod

Bu ildings & Lan d Im prove m e n ts 52 — 366 — 77 — 156 6,405 3,297 1,803 — 11,986 354 5,217 191 5,058 225 3,876 109 5,442 82 7,968 187 6,802 151 5,377 219 4,777 2,052 16,428 4,770 14,421 485 6,211 816 4,286 128 5,762 143 7,085 57 2,898 340 5,007 153 7,908 4,065 8,687 562 4,988 227 7,539 210 6,874 520 6,475 1,357 877 1,101 4,821 211 1,146 2,281 7,176 816 9,920 760 5,490 6,960 6,111 229 5,925 599 12,420 237 4,732 521 5,246 397 —

C olum n F

Accum u late d Total De pre ciation 52 — 366 — 77 — 6,561 193 5,100 52 11,986 1,092 5,571 200 5,249 247 4,101 200 5,551 268 8,050 390 6,989 333 5,528 263 4,996 234 18,480 814 19,191 706 6,696 303 5,102 213 5,890 284 7,228 358 2,955 142 5,347 246 8,061 387 12,752 428 5,550 245 7,766 369 7,084 336 6,995 317 2,234 43 5,922 236 1,357 56 9,457 355 10,736 486 6,250 271 13,071 316 6,154 296 13,019 484 4,969 248 5,767 147 397 —

Total 52 366 77 6,368 5,048 10,894 5,371 5,002 3,901 5,283 7,660 6,656 5,265 4,762 17,666 18,485 6,393 4,889 5,606 6,870 2,813 5,101 7,674 12,324 5,305 7,397 6,748 6,678 2,191 5,686 1,301 9,102 10,250 5,979 12,755 5,858 12,535 4,721 5,620 397

A

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) As of December 31, 2008 (Amounts in Thousands, Except per Share Data)

C olum n A

Location Cherry Springs, NC Bremerton, NC Sterling, IL Clinton, NC Winter Garden, FL Brevard, NC Black Mountain, NC Hillsboro, OR Wendell, NC Winston-Salem, NC Gastonia, NC Morris, IL Williamston, NC Chenita Group Home Whispering Oaks T win Oaks Living T win Oaks Care Salem Annex Aurora, CO North Attleboro, MA Bloomingdale, IL Concord Holdings, NH Melville, NY Millbury, MA Wichita, KS Keene, NH Fort Wayne, IN P ortland, ME Milpitas, CA Columbus, OH Fort Mill, SC Reading, PA

C olum n B

En cu m bran ce s 2,772 6,720 2,009 2,324 4,930 2,087 4,873 33,300 2,332 3,507 1,839 6,951 3,179 — — — — — 33,329 4,725 5,753 8,404 4,463 4,744 6,149 6,791 3,479 4,824 22,548 23,788 30,685 19,153 — $

C olum n D C ost C apitaliz e d S u bse qu e n t To Acquisition

C olum n C Initial C ost

C olum n E Gross Am ou n t at W h ich C arrie d at C lose of Pe riod

Bu ildings & Bu ildings & Lan d Im prove m e n ts Lan d Im prove m e n ts 164 3,215 — 279 964 8,156 — 115 129 5,603 — 597 283 5,084 — 253 1,693 5,805 — 2,666 328 2,532 — 28 468 5,786 — — 3,954 39,193 — 41 212 2,279 — 615 1,269 6,349 — 736 345 1,392 — 105 568 8,509 — 411 265 2,925 — 5 73 249 — — 244 1,359 — — 58 1,027 — — 42 747 — — 11 90 — — 2,650 35,786 24 — — 5,445 — — — 5,810 — — 2,145 9,216 — — — 3,187 — — — 5,994 — — 1,325 5,584 — — 3,033 5,919 — — — 3,642 — — — 6,687 — — 16,800 8,847 — — 4,375 29,181 — 89 3,300 31,554 — — 3,225 21,792 — — — — — —

910,620 $160,773

$

1,011,560

$ 64

$

Bu ildings & Lan d Im prove m e n ts 164 3,494 964 8,271 129 6,200 283 5,337 1,693 8,471 328 2,560 468 5,786 3,954 39,234 212 2,894 1,269 7,085 345 1,497 568 8,920 265 2,930 73 249 244 1,359 58 1,027 42 747 11 90 2,674 35,786 — 5,445 — 5,810 2,145 9,216 — 3,187 — 5,994 1,325 5,584 3,033 5,919 — 3,642 — 6,687 16,800 8,847 4,375 29,270 3,300 31,554 3,225 21,792 — —

22,072 $160,837

$

Accum u late d Total De pre ciation 3,658 208 9,235 437 6,329 420 5,620 361 10,164 425 2,888 166 6,254 356 43,188 2,002 3,106 160 8,354 449 1,842 92 9,488 571 3,195 192 322 6 1,603 33 1,085 26 789 18 102 2 38,460 2,376 5,445 377 5,810 404 11,361 651 3,187 249 5,994 372 6,909 373 8,952 406 3,642 272 6,687 667 25,647 669 33,645 991 34,854 1,609 25,017 840 — —

1,033,632 $1,194,469

161

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION (Amounts in Thousands, Except per Share Data) The changes in real estate for the year ended December 31, 2008, December 31, 2007 and December 31, 2006 are as follows: 2008

Balance at beginning of period Property acquisitions Improvements Impairments Assets held for sale Retirements/disposals Balance at end of period

2007

2006

$1,172,580 $ 483,045 $205,708 3,989 688,766 286,919 24,698 2,429 26 (5,580) — — — — — (1,218) (1,660) (9,608) $1,194,469 $1,172,580 $483,045

C olum n

$

67,469 $

Processed and formatted by SEC Watch - Visit SECWatch.com

The changes in accumulated depreciation, exclusive of amounts relating to equipment, auto and furniture and fixtures, for the period ended December 31, 2008, December 31, 2007 and December 31, 2006 are as follows: 2008

Balance at beginning of period Depreciation for the period Assets held for sale Retirements/disposals Balance at end of period

2007

2006

$38,444 $14,437 $ 7,000 30,243 24,032 9,203 — — — (1,218) (25) (1,766) $67,469 $38,444 $14,437 162

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES SCHEDULE IV—LOANS AND OTHER LENDING INVESTMENTS December 31, 2008 (in thousands)

Type Junior Participation—Float < 3% of total carrying amount

De scription

Inte re st Rate

Final Maturity Date

Pe riodic Paym e n t Te rm s(1)

Prin cipal Am ou n t of Loan s

Prior Lie n s

C arrying Am ou n t Nu m be r of Loan s of Loan s

Office LIBOR + 1.50–7.00 7/9/2010–4/15/2012 Construction 2.23–4.28 4/1/2011–2/22/2013 Land 5.70–22.50 3/1/2009–8/9/2010 Retail 2.40 9/9/2009

I/O I/O I/O I/O

$ 199,704 $ 267,052 148,077 49,000

76,542 $ 56,519 58,462 10,000

76,305 56,164 58,086 10,000

5 3 2 1

Junior Participation—Fixed < 3% of total carrying amount

Office

6.13–8.44

10/1/2015–5/11/2016

I/O

$ 178,837 $

29,000 $

24,349

2

Mezzanine—Fixed*

Office

10.85

6/15/2016

I/O

410,000

63,301

64,379

1

Multifamily Office Healthcare Hotel Land Retail

11.30–18 8.00–15.00 15.00 10.00 11.30–18.00 10.53–17.25

10/1/2011–2/11/2012 4/1/2011–7/10/2016 2/1/2009 12/1/2013 8/1/2009–4/1/2011 4/1/2011–5/1/2017

I/O I/O I/O I/O I/O I/O

221,892 50,537 4,059 50,494 66,882 216,159

63,762 8,165 611 11,134 14,183 37,467

62,371 8,236 611 8,542 10,653 37,646

6 2 1 1 2 2

Hotel Retail

LIBOR + 7.20 3.75

2/9/2012 7/1/2011

I/O I/O

741,205 936,368

88,978 103,526

88,374 102,121

1 1

I/O I/O I/O I/O I/O I/O

68,954 2,459,800 53,148 570,000 149,142 287,311

27,624 122,229 7,704 16,000 61,083 44,000

27,520 121,826 7,705 16,000 61,008 39,213

3 4 1 1 3 1

Mezzanine—Fixed < 3% of total carrying amount

Mezzanine—Float*

Mezzanine—Float < 3% of total carrying amount

Other—Fixed < 3% of total carrying amount Other—Floating < 3% of total carrying amount

Condo Hotel Office Retail Multifamily Various

Other

Multifamily Retail

Whole Loan—Fixed < 3% of total carrying amount Office Industrial Healthcare Whole Loan—Float*

Retail

Whole Loan—Float < 3% of total carrying amount Hotel Industrial Land Multifamily Office

LIBOR + 5.75–8.00 1/9/2011–7/1/2011 2.50–4.50 10/12/2010–5/9/2012 6.36 7/9/2010 1.75 8/9/2010 3.5 4/1/2012 3.33 2/9/2012

5.53

6/25/2018

I/O

—

6,190

6,190

1

LIBOR + 1.50 1.75

3/23/2011 12/16/2010

I/O I/O

— —

10,000 6,609

10,000 6,609

1 1

7.03–9.00 5.07–5.78 9.00

5/1/2011–7/10/2016 6/1/2015–8/1/2015 8/30/2010

I/O P &I I/O

— — —

81,637 12,747 1,830

81,532 12,808 1,913

3 3 2

LIBOR + 2.75%

10/1/2010

I/O

—

72,682

72,230

1

I/O I/O I/O I/O I/O

— — 10,975 — —

104,600 51,085 103,643 338,179 279,320

104,205 50,942 103,205 336,664 276,319

5 4 7 14 17

LIBOR + 2.00–4.00 12/1/2010–12/1/2013 1.65–2.70 6/1/2010–8/1/2012 2.75–5.84 4/1/2009–4/1/2012 1.25–3.25 10/9/2009–10/1/2013 1.95–4.50 2/10/2009–7/1/2012

Processed and formatted by SEC Watch - Visit SECWatch.com Construction Various

3.50–5.65 3.00–3.90

10/1/2009–6/1/2012 2/06/2012–8/1/2012

I/O I/O

Total

*

Represents loans greater than 3% of the total carrying amount which may require individual disclosure

(1)

Interest only, or I/O; Principal and Interest, or P &I.

163

12,230 —

42,826 61,908

42,160 61,584

4 2

$ 7,151,826 $2,073,546 $2,047,470

108

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents

NORTHSTAR REALTY FINANCE CORP. AND SUBSIDIARIES SCHEDULE IV—LOANS AND OTHER LENDING INVESTMENTS 2008

2007

2006

Balance at beginning of period $2,007,022 $1,571,510 $ 681,106 Additions during the year: New loans and additional advances on existing loans 335,618 1,102,671 1,335,614 Acquisition cost and (fees) 122 (9,986) (6,560) Premiums/(Discounts) (3,219) (4,079) (5,730) Amortization of acquisition costs, fees, premiums and discounts 9,928 8,430 2,287 Deductions: Collection of principal 302,001 661,524 435,207 Balance at end of period $2,047,470 $2,007,022 $1,571,510 164

Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. Item 9A. Controls and Procedures Attached as exhibits to this Form 10-K are certifications of the Company's Chief Executive Officer and Chief Financial Officer, which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This "Controls and Procedures" section includes information concerning the controls and procedures evaluation referred to in the certifications. Part II, Item 8 of this Form 10-K sets forth the report of Grant Thornton LLP, our independent registered public accounting firm, regarding its audit of the Company's internal control over financial reporting set forth below in this section. This section should be read in conjunction with the certifications and the Grant Thornton LLP report for a more complete understanding of the topics presented. Disclosure Controls and Procedures The management of the Company established and maintains disclosure controls and procedures that are designed to ensure that material information relating to the Company and its subsidiaries required to be disclosed in the reports that are filed or submitted under the 1934 Act are recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. As of the end of the period covered by this report, the Company's management conducted an evaluation, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures are effective. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company's periodic reports. Internal Control over Financial Reporting (a)

Management's annual report on internal control over financial reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Processed and formatted by SEC Watch - Visit SECWatch.com

165

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company carried out an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2008 based on the "Internal Control—Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based upon this evaluation, management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2008. (b)

Attestation report of the registered public accounting firm.

Our independent registered public accounting firm, Grant Thornton LLP, independently assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2008. Grant Thornton has issued an attestation report, which is included in Part II, Item 8. of this Form 10-K. (c)

Changes in internal control over financial reporting.

There have been no changes in the Company's internal control over financial reporting during the most recent quarter ended December 31, 2008 that have materially affected, or are reasonably likely to affect, internal controls over financial reporting. Inherent Limitations on Effectiveness of Controls The Company's management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Item 9B. Other Information Not applicable. 166

Table of Contents

PART III Item 10. Directors and Executive Officers and Corporate Governance* Certain information relating to our code of business conduct and ethics and code of ethics for senior financial officers (as defined in the code) is included in Part I, Item 1 of this Annual Report on Form 10-K. Item 11. Executive Compensation* Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters* Item 13. Certain Relationships and Related Transactions and Directors Independence* Item 14. Principal Accountant Fees and Services*

*

The information that is required by Items 10, 11, 12, 13 and 14 is incorporated herein by reference from the definitive proxy statement relating to the 2008 Annual Meeting of Stockholders of the Company, which is to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, no later than 120 days after the end of the Company's fiscal year ending December 31, 2008. 167

Table of Contents

PART IV Item 15. Exhibits and Financial Statement Schedules

Processed and formatted by SEC Watch - Visit SECWatch.com

(a) and (c) Financial Statement and Schedules—see Index to Financial Statements and Schedules included in Item 8. (b) Exhibits Exh ibit Nu m be r

De scription of Exh ibit

3.1 Articles of Amendment and Restatement of NorthStar Realty Finance Corp., as filed with the State Department of Assessments and Taxation of Maryland on October 20, 2004 (incorporated by reference to Exhibit 3.1 to the NorthStar Realty Finance Corp. Registration Statement on Form S-11 (File No. 333-114675)) 3.2 Bylaws of NorthStar Realty Finance Corp. (incorporated by reference to Exhibit 3.2 to the NorthStar Realty Finance Corp. Registration Statement on Form S-11 (File No. 333-114675)) 3.3 Amendment No. 1 to the Bylaws of NorthStar Realty Finance Corp. (incorporated by reference to Exhibit 3.3 to the NorthStar Realty Finance Corp. Current Report on Form 8-K filed on April 27, 2005) 3.4 Articles Supplementary Classifying NorthStar Realty Finance Corp.'s 8.75% Series A Preferred Stock, liquidation preference $25.00 per share (incorporated by reference to Exhibit 3.2 to NorthStar Realty Finance Corp.'s Registration Statement on Form 8-A, dated September 14, 2006) 3.5 Articles Supplementary Classifying NorthStar Realty Finance Corp.'s 8.25% Series B Preferred Stock, liquidation preference $25.00 per share (incorporated by reference to Exhibit 3.2 to NorthStar Realty Finance Corp.'s Registration Statement on Form 8-A, dated February 7, 2007) 3.6 Articles Supplementary Classifying and Designating Additional Shares of NorthStar Realty Finance Corp.'s 8.25% Series B Preferred Stock, liquidation preference $25.00 per share (incorporated by reference to Exhibit 3.6 to NorthStar Realty Finance Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007) 10.1 Security Agreement dated as of August 21, 2003, among N-Star Real Estate CDO I Ltd., as Issuer, LaSalle Bank National Association, as trustee, and LaSalle Bank National Association, as collateral agent and as accountholder 10.2 Security Agreement dated as of July 1, 2004, between N-Star Real Estate CDO II Ltd., as Issuer and LaSalle Bank National Association, as trustee and as accountholder 10.3 Agreement of Limited Partnership of NorthStar Realty Finance Limited Partnership, dated as of October 19, 2004, by and among NorthStar Realty Finance Corp., as sole general partner and initial limited partner and the other limited partners a party thereto from time to time (incorporated by reference to Exhibit 10.1 to the NorthStar Realty Finance Corp. Quarterly Report on Form 10-Q for the quarter ended September 30, 2004) 10.4 NorthStar Realty Finance Corp. 2004 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.9 to the NorthStar Realty Finance Corp. Quarterly Report on Form 10-Q for the quarter ended September 30, 2004) 10.5 LTIP Unit Vesting Agreement under the NorthStar Realty Finance Corp. 2004 Omnibus Stock Incentive Plan among NorthStar Realty Finance Corp., NorthStar Realty Finance Limited Partnership and NRF Employee, LLC (incorporated by reference to Exhibit 10.10 to the NorthStar Realty Finance Corp. Quarterly Report on Form 10-Q for the quarter ended September 30, 2004) 168

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Exh ibit Nu m be r

De scription of Exh ibit

10.6 Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.7(a) to the NorthStar Realty Finance Corp. Registration Statement on Form S-11 (File No. 333-114675)) 10.7 NorthStar Realty Finance Corp. 2004 Long-Term Incentive Bonus Plan (incorporated by reference to Exhibit 10.13 to the NorthStar Realty Finance Corp. Quarterly Report on Form 10-Q for the quarter ended September 30, 2004) 10.8 Form of Notification under NorthStar Realty Finance Corp. 2004 Long-Term Incentive Bonus Plan (incorporated by reference to Exhibit 10.14 to the NorthStar Realty Finance Corp. Quarterly Report on Form 10-Q for the quarter ended September 30, 2004) 10.9 Form of Indemnification Agreement for directors and officers of NorthStar Realty Finance Corp. (incorporated by reference to Exhibit 10.15 to the NorthStar Realty Finance Corp. Registration Statement on Form S-11 (File No. 333-114675)) 10.10 Indenture dated as of March 10, 2005, among N-Star Real Estate CDO III Ltd., as Issuer, N-Star Real Estate CDO III Corp., as CoIssuer and Wells Fargo Bank, National Association, as trustee 10.11 Indenture dated as of June 14, 2005, among N-Star REL CDO IV Ltd., as Issuer, N-Star REL CDO IV Corp., as Co-Issuer, NS Advisors, LLC, as advancing agent and Wells Fargo Bank, National Association, as trustee 10.12 Indenture dated as of September 22, 2005, among N-Star Real Estate CDO V Ltd., as Issuer, N-Star Real Estate CDO V Corp., as CoIssuer and LaSalle Bank National Association, as trustee 10.13 Junior Subordinated Indenture, dated as of March 10, 2006, between NorthStar Realty Finance Limited Partnership, NorthStar Realty Finance Corp. and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 10.31 to NorthStar Realty Finance Corp.'s Annual Report on Form 10-K for the year ended December 31, 2005) 10.14 Amended and Restated Trust Agreement, dated as of March 10, 2006, between NorthStar Realty Finance Limited Partnership, as depositor, NorthStar Realty Finance Corp., a guarantor, Wilmington Trust Company, as property trustee and Delaware trustee and Andrew Richardson, David Hamamoto and Richard McCready, each as administrative trustees (incorporated by reference to Exhibit 10.32 to NorthStar Realty Finance Corp.'s Annual Report on Form 10-K for the year ended December 31, 2005) 10.15 Amendment No. 1 to Agreement of Limited Partnership of NorthStar Realty Finance Limited Partnership, dated as of March 14, 2006, by and among NorthStar Realty Finance Corp., as sole general partner and initial limited partner and the other limited partners a party thereto from time to time (incorporated by reference to Exhibit 10.34 to NorthStar Realty Finance Corp.'s Annual Report on Form 10-K for the year ended December 31, 2005) 10.16 Indenture dated as of March 17, 2006, among N-Star REL CDO VI Ltd., as Issuer, N-Star REL CDO VI LLC, as Co-Issuer, NS Advisors, LLC, as advancing agent and Wells Fargo Bank, National Association, as trustee 10.17 Indenture dated as of June 22, 2006, between N-Star Real Estate CDO VII Ltd., as Issuer, and LaSalle Bank National Association, as trustee 10.18 Junior Subordinated Indenture, dated as of August 1, 2006, between NorthStar Realty Finance Limited Partnership, NorthStar Realty Finance Corp. and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 10.39 to NorthStar Realty Finance Corp.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006) 169

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Exh ibit Nu m be r

De scription of Exh ibit

10.19 Amended and Restated Trust Agreement, dated as of August 1, 2006, between NorthStar Realty Finance Limited Partnership, as depositor, NorthStar Realty Finance Corp., a guarantor, Wilmington Trust Company, as property trustee and Delaware trustee and David Hamamoto, Andrew Richardson and Richard McCready, each as administrative trustees (incorporated by reference to Exhibit 10.40 to NorthStar Realty Finance Corp.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006) 10.20 Second Amendment to the Agreement of Limited Partnership of NorthStar Realty Finance Limited Partnership, dated as of September 14, 2006 (incorporated by reference to Exhibit 3.2 to the NorthStar Realty Finance Corp. Current Report on Form 8-K filed September 14, 2006) 10.21 Junior Subordinated Indenture, dated as of October 6, 2006, between NorthStar Realty Finance Limited Partnership, NorthStar Realty Finance Corp. and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 10.42 to the NorthStar Realty Finance Corp. Quarterly Report on Form 10-Q for the quarter ended September 30, 2006) 10.22 Amended and Restated Trust Agreement, dated as of October 6, 2006, between NorthStar Realty Finance Limited Partnership, as depositor, NorthStar Realty Finance Corp., a guarantor, Wilmington Trust Company, as property trustee and Delaware trustee and David Hamamoto, Andrew Richardson and Richard McCready, each as administrative trustees (incorporated by reference to Exhibit 10.43 to the NorthStar Realty Finance Corp. Quarterly Report on Form 10-Q for the quarter ended September 30, 2006) 10.23 Indenture dated as of December 7, 2006, among N-Star REL CDO VIII Ltd., as Issuer, N-Star REL CDO VIII LLC, as Co-Issuer, NS Advisors, LLC, as advancing agent and Wells Fargo Bank, National Association, as trustee 10.24 Third Amendment to the Agreement of Limited Partnership of NorthStar Realty Finance Limited Partnership, dated as of February 7, 2007 (incorporated by reference to Exhibit 3.2 to the NorthStar Realty Finance Corp. Current Report on Form 8-K filed February 9, 2007) 10.25 Indenture dated as of February 28, 2007, between N-Star Real Estate CDO IX Ltd., as Issuer, and LaSalle Bank National Association, as trustee 10.26 Junior Subordinated Indenture, dated as of March 30, 2007, between NorthStar Realty Finance Limited Partnership, NorthStar Realty Finance Corp. and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 10.46 to NorthStar Realty Finance Corp.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007) 10.27 Amended and Restated Trust Agreement, dated as of March 30, 2007, between NorthStar Realty Finance Limited Partnership, as depositor, NorthStar Realty Finance Corp., a guarantor, Wilmington Trust Company, as property trustee and Delaware trustee and David Hamamoto, Andrew Richardson and Richard McCready, each as administrative trustees (incorporated by reference to Exhibit 10.47 to NorthStar Realty Finance Corp.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007) 10.28 Amendment No. 1 to NorthStar Realty Finance Corp. 2004 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 99.2 to the NorthStar Realty Finance Corp. Post-Effective Amendment No. 2 to Form S-8 filed on April 13, 2007) 10.29 Amendment No. 2 to NorthStar Realty Finance Corp. 2004 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 99.3 to the NorthStar Realty Finance Corp. Post-Effective Amendment No. 3 to Form S-8 filed on June 6, 2007) 10.30 Fourth Amendment to the Agreement of Limited Partnership of NorthStar Realty Finance Limited Partnership, dated as of May 24, 2007 (incorporated by reference to Exhibit 3.3 to the NorthStar Realty Finance Corp. Current Report on Form 8-K filed May 29, 2007) 170

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Exh ibit Nu m be r

De scription of Exh ibit

10.31 Junior Subordinated Indenture, dated as of June 7, 2007, between NorthStar Realty Finance Limited Partnership, NorthStar Realty Finance Corp. and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 10.52 to NorthStar Realty Finance Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007) 10.32 Amended and Restated Trust Agreement, dated as of June 7, 2007, between NorthStar Realty Finance Limited Partnership, as depositor, NorthStar Realty Finance Corp., a guarantor, Wilmington Trust Company, as property trustee and Delaware trustee and David Hamamoto, Andrew Richardson and Richard McCready, each as administrative trustees (incorporated by reference to Exhibit 10.53 to NorthStar Realty Finance Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007) 10.33 Registration Rights Agreement relating to the 7.25% Exchangeable Senior Notes due 2027 of NorthStar Realty Finance Limited Partnership, dated June 18, 2007 (incorporated by reference to Exhibit 4.2 to the NorthStar Realty Finance Corp. Registration Statement on Form S-3 (File No. 333-146679)) 10.34 Indenture dated as of June 18, 2007, between NorthStar Realty Finance Limited Partnership, as Issuer, NorthStar Realty Finance Corp., as Guarantor, and Wilmington Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 to the NorthStar Realty Finance Corp. Current Report on Form 8-K filed on June 22, 2007) 10.35 Master Repurchase Agreement, dated as of August 8, 2007, by and among NRFC JP Holdings, LLC and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.56 to NorthStar Realty Finance Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007) 10.36 Executive Employment and Non-Competition Agreement, dated as of October 4, 2007, between the Company and David T. Hamamoto (incorporated by reference to Exhibit 99.1 to the NorthStar Realty Finance Corp. Current Report on Form 8-K filed October 5, 2007) 10.37 Executive Employment and Non-Competition Agreement, dated as of October 4, 2007, between the Company and Andrew C. Richardson (incorporated by reference to Exhibit 99.2 to the NorthStar Realty Finance Corp. Current Report on Form 8-K filed October 5, 2007) 10.38 Executive Employment and Non-Competition Agreement, dated as of October 4, 2007, between the Company and Daniel R. Gilbert (incorporated by reference to Exhibit 99.3 to the NorthStar Realty Finance Corp. Current Report on Form 8-K filed October 5, 2007) 10.39 Executive Employment and Non-Competition Agreement, dated as of October 4, 2007, between the Company and Richard J. McCready (incorporated by reference to Exhibit 99.4 to the NorthStar Realty Finance Corp. Current Report on Form 8-K filed October 5, 2007) 10.40 Credit Agreement, dated as of November 6, 2007, by and among NRFC WA Holdings, LLC, NRFC WA Holdings II, LLC, NRFC WA Holdings VII, LLC, NRFC WA Holdings X, LLC, NRFC WA Holdings XII, LLC, NorthStar Realty Finance Corp., NorthStar Realty Finance L.P. and Wachovia Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.53 to NorthStar Realty Finance Corp.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007) 10.41 Limited Guaranty Agreement, dated as of November 6, 2007, by and among NorthStar Realty Finance Corp., NorthStar Realty Finance Limited Partnership and Wachovia Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.54 to NorthStar Realty Finance Corp.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007) 171

Processed and formatted by SEC Watch - Visit SECWatch.com

Table of Contents Exh ibit Nu m be r

De scription of Exh ibit

10.42 Registration Rights Agreement relating to the 11.50% Exchangeable Senior Notes due 2013 of NRFC NNN Holdings, LLC, dated May 28, 2008 (incorporated by reference to Exhibit 4.2 to the NorthStar Realty Finance Corp. Registration Statement on Form S-3 (File No. 333-152545)) 10.43 Indenture dated as of May 28, 2008, among NRFC NNN Holdings, LLC, as Issuer, NorthStar Realty Finance Corp., NorthStar Realty Finance Limited Partnership, and NRFC Sub-REIT Corp., as Guarantors, and Wilmington Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 to the NorthStar Realty Finance Corp. Current Report on Form 8-K filed on May 28, 2008) 10.44 Fifth Amendment to the Agreement of Limited Partnership of NorthStar Realty Finance Limited Partnership, dated as of May 29, 2008 (incorporated by reference to Exhibit 10.37 to NorthStar Realty Finance Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008) 10.45 Amendment No. 1 to Master Repurchase Agreement, dated as of October 7, 2008, by and among NRFC JP Holdings, LLC, and JP Morgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.37 to NorthStar Realty Finance Corp.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008) 10.46 Amended and Restated Guarantee Agreement, dated as of October 7, 2008, made by NorthStar Realty Finance Corp., in favor of JP Morgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.38 to NorthStar Realty Finance Corp.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008) 12.1 Computation of Ratio of Earnings to Fixed Charges 21.1 Significant Subsidiaries of the Registrant 23.1 Consent of Grant Thornton LLP 31.1 Certification by the Chief Executive Officer pursuant to 17 CFR 240.13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification by the Chief Financial Officer pursuant to 17 CFR 240.13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification by the Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification by the Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 172

Table of Contents

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on February 25, 2009. NORTHSTAR REALTY FINANCE CORP. By: /s/ DAVID T. HAMAMOTO

Name: David T. Hamamoto Title: Chairman and Chief Executive Officer

POWER OF ATTORNEY

Processed and formatted by SEC Watch - Visit SECWatch.com

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Andrew C. Richardson and Albert Tylis and each of them severally, his true and lawful attorney-in-fact with power of substitution and re-substitution to sign in his name, place and stead, in any and all capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange Commission in connection with this Annual Report on Form 10-K and any and all amendments hereto, as fully for all intents and purposes as he might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each acting alone, and his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below on behalf of the Registrant in the capacities and on the dates indicated. S ignature

/s/ DAVID T. HAMAMOTO

Title

Date

Chairman and Chief Executive Officer February 25, 2009 (Principal Executive Officer)

David T. Hamamoto /s/ ANDREW C. RICHARDSON

Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

February 25, 2009

Chief Accounting Officer (Principal Accounting Officer)

February 25, 2009

Director

February 25, 2009

Director

February 25, 2009

Director

February 25, 2009

Director

February 25, 2009

Director

February 25, 2009

Andrew C. Richardson /s/ LISA MEYER

Lisa Meyer /s/ PRESTON BUTCHER

Preston Butcher /s/ JUDITH A. HANNAWAY

Judith A. Hannaway /s/ WESLEY D. MINAMI

Wesley D. Minami /s/ LOUIS J. PAGLIA

Louis J. Paglia /s/ FRANK V. SICA

Frank V. Sica 173

Processed and formatted by SEC Watch - Visit SECWatch.com

Exhibit 10.1 Execution Copy

SECURITY AGREEMENT dated as of August 21, 2003 among N-STAR REAL ESTATE CDO I LTD, as Issuer, LASALLE BANK NATIONAL ASSOCIATION, as Trustee, and LASALLE BANK NATIONAL ASSOCIATION, as Collateral Agent and as Accountholder

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS Page

ARTICLE I Section 1.01. Section 1.02. Section 1.03. Section 1.04.

DEFINITIONS Definitions Assumptions as to Collateral Debt Securities Generic Terms Times

1 1 2 3 3

ARTICLE II Section 2.01. Section 2.02. Section 2.03. Section 2.04. Section 2.05.

THE COLLATERAL Security Interests Creation of Security Interest; Transfer of Control Termination of Security Interests Priority of Payments Representations Regarding Collateral

3 3 7 7 7 7

ARTICLE III Section 3.01. Section 3.02.

CLOSING DATE ACTIONS Closing Date Requirements Closing Date Actions

9 9 9

ARTICLE IV Section 4.01. Section 4.02. Section 4.03. Section 4.04. Section 4.05. Section 4.06. Section 4.07. Section 4.08. Section 4.09. Section 4.10. Section 4.11. Section 4.12.

ACCOUNTS, ACCOUNTINGS AND RELEASES Collection of Money Collection Account Interest Reserve Account Expense Reserve Account Collateral Account Reports by Collateral Agent Accountings Release of Securities Reports by Independent Accountants Reports to Rating Agencies Notices of Noteworthy Events Amendments to the Transaction Documents

10 10 10 11 12 14 14 15 21 22 22 22 23

ARTICLE V Section 5.01. Section 5.02.

PRIORITY OF PAYMENTS Disbursements of Money from Collection Account Additional Provisions

23 23 28

ARTICLE VI Section 6.01. Section 6.02.

SALE OF COLLATERAL DEBT SECURITIES Sale of Collateral Debt Securities Conditions Applicable to all Transactions

29 29 29

i

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) Page

ARTICLE VII Section 7.01.

SUBORDINATION Subordination

30 30

ARTICLE VIII Section 8.01. Section 8.02. Section 8.03.

HEDGE AGREEMENTS, INITIAL HEDGE AGREEMENT Hedge Agreement Provisions Initial Hedge Agreement Acknowledgement of Custodian

33 33 36 36

ARTICLE IX Section 9.01. Section 9.02. Section 9.03. Section 9.04. Section 9.05. Section 9.06. Section 9.07. Section 9.08. Section 9.09. Section 9.10. Section 9.11.

THE COLLATERAL AGENT Appointment and Powers Performance of Duties Reliance Upon Documents Eligibility of Collateral Agent Successor Collateral Agent Indemnification Compensation and Reimbursement Representations and Warranties of the Collateral Agent Accounts Waiver of Setoffs Provision of Information

37 37 37 38 39 39 40 40 41 41 41 42

ARTICLE X Section 10.01. Section 10.02. Section 10.03.

COVENANTS OF THE ISSUER Preservation of Collateral Opinions as to Collateral Non-Interference; etc.

42 42 42 43

ARTICLE XI Section 11.01. Section 11.02. Section 11.03. Section 11.04. Section 11.05. Section 11.06. Section 11.07. Section 11.08. Section 11.09. Section 11.10. Section 11.11.

MISCELLANEOUS Amendments Notices Severability Term of This Agreement Assignments Non-Petition Agreement Trial by Jury Waived Governing Law Consents to Jurisdiction Service of Process Time of Essence

43 43 44 45 45 45 45 46 46 46 46 47 ii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) Page

Section 11.12. Section 11.13. Section 11.14. Section 11.15. Section 11.16. Section 11.17. Section 11.18. ANNEX A ANNEX B ANNEX C SCHEDULE A SCHEDULE B SCHEDULE C SCHEDULE D SCHEDULE E SCHEDULE F SCHEDULE G SCHEDULE H SCHEDULE I SCHEDULE J SCHEDULE K SCHEDULE L SCHEDULE M SCHEDULE N SCHEDULE O

Counterparts Integration Headings Limited Recourse Payments in Accordance with the Priority of Payments Collateral Agent and Its Affiliates Judgment Currency Steps Required For Delivery Glossary of Certain Defined Terms Specified Types Collateral Debt Securities as of the Closing Date Moody’s Recovery Rate Matrix Fitch Recovery Rate Matrix S&P Recovery Rate Matrix Auction Procedures Diversity Score Fitch Sectors and Subsectors S&P Industry Classification Group S&P Structured Finance Sectors S&P Notching Criteria I S&P Notching Criteria II Moody’s Notching Criteria Moody’s Industry Classification Groups Fitch Report Fitch Industry Classification Groups iii

47 47 47 47 47 47 48 Annex A-l Annex B-l Annex C-l Schedule A-l Schedule B-l Schedule C-l Schedule D-l Schedule E-l Schedule F-l Schedule G-l Schedule H-l Schedule I-l Schedule J-l Schedule K-l Schedule L-l Schedule M-l Schedule N-l Schedule O-l

Processed and formatted by SEC Watch - Visit SECWatch.com

This SECURITY AGREEMENT (as amended from time to time, this “Agreement”) is made as of August 21, 2003 by and among N-Star Real Estate CDO I Ltd, a company incorporated under the laws of the Cayman Islands, as issuer (the “Issuer”), LaSalle Bank National Association, a national banking association, as trustee under the Trust Deed (in such capacity, the “Trustee”), as collateral agent for and on behalf of the Secured Parties (in such capacity, the “Collateral Agent”) and as securities intermediary and depositary bank (in such capacity, the “Accountholder”). RECITALS 1. The Issuer intends to purchase for investment Collateral Debt Securities primarily consisting of CMBS Securities and REIT Debt Securities. 2. In order to obtain funds for its purchases of the Collateral Debt Securities, the Issuer together with N-Star Real Estate CDO I Corp., a company organized under the laws of the State of Delaware (the “Co-Issuer”, and together with the Issuer, the “CoIssuers”), intend to issue on the date hereof (a) U.S.$250,000,000 aggregate principal amount of Class A-1 Floating Rate Senior Notes Due 2038, (b) U.S.$45,000,000 aggregate principal amount of Class A-2A Floating Rate Senior Notes Due 2038, (c) U.S.$15,000,000 aggregate principal amount of Class A-2B Fixed Rate Senior Notes Due 2038, (d) U.S.$15,000,000 aggregate principal amount of Class B-1 Floating Rate Senior Subordinate Notes Due 2038, (e) U.S.$10,000,000 aggregate principal amount of Class B-2 Floating Rate Senior Subordinate Notes Due 2038, (f) U.S.$5,000,000 aggregate principal amount of Class C-lA Floating Rate Subordinate Notes Due 2038, (g) U.S.$5,000,000 aggregate principal amount of Class C-1B Fixed Rate Subordinate Notes Due 2038, (h) U.S.$24,000,000 aggregate principal amount of Class C-2 Fixed Rate Subordinate Notes Due 2038, (i) U.S.$10,000,000 aggregate principal amount of Class D-1A Floating Rate Subordinate Notes Due 2038 and (j) U.S.$4,000,000 aggregate principal amount of Class D-1B Fixed Rate Subordinate Notes Due 2038 pursuant to the Trust Deed, and the Issuer intends to issue on the date hereof 19,000 Preferred Shares pursuant to the Articles. 3. In order to provide security for the performance by each of the Co-Issuers of all of their obligations to pay to the Secured Parties amounts payable in respect of such Notes in accordance with their terms and the terms of the Note Agency Agreement, the Trust Deed and the other Transaction Documents, the Issuer has agreed to Grant to the Collateral Agent, on behalf and for the benefit of the Secured Parties, a security interest in the Collateral in the manner set forth in this Agreement. AGREEMENTS In consideration of the premises and of the agreements herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each of the Issuer, the Trustee, the Collateral Agent and the Accountholder hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Capitalized terms used herein and not defined herein shall have the meanings set forth in the Glossary of Certain Defined Terms attached as Annex B hereto (the “Glossary”).

Processed and formatted by SEC Watch - Visit SECWatch.com

Section 1.02.

Assumptions as to Collateral Debt Securities.

(a) In connection with all calculations required to be made pursuant to this Agreement with respect to Scheduled Distributions on any Collateral Debt Security, or any payments on any other assets included in the Collateral, and with respect to the income that can be earned on Scheduled Distributions on such Collateral Debt Securities and on any other amounts that may be received for deposit in the Collection Account, the provisions set forth in this Section 1.02 shall be applied. (b) All calculations by or on behalf of the Trustee or the Issuer with respect to Scheduled Distributions on the Collateral Debt Securities shall be made on the basis of information as to the terms of each such Collateral Debt Security and upon report of payments, if any, received on such Collateral Debt Security that are furnished by or on behalf of the issuer of such Collateral Debt Security and, to the extent they are not manifestly in error, such information or report may be conclusively relied upon in making such calculations. (c) Each Scheduled Distribution receivable with respect to a Collateral Debt Security shall be assumed to be received on the applicable Due Date, and each such Scheduled Distribution shall be assumed to be immediately deposited in the Collection Account and, except as otherwise specified, to earn interest at the Assumed Investment Rate; provided, however, that if the nominal due date for any payment on any Collateral Debt Security or Eligible Investment occurs on a day during a Due Period that is not a business day under the applicable Underlying Instrument and as a result such payment is paid and received in the following Due Period, then such payment shall be deemed to have been received during the Due Period in which such nominal due date falls if such payment is timely made in accordance with the related Underlying Instrument. All such funds shall be assumed to continue to earn interest until the date on which they are required to be available in the Collection Account for transfer to the Note Payment Account and application, in accordance with the terms hereof, of the Notes and of the Trust Deed, to payments on the Notes or other amounts payable pursuant to this Agreement. (d) For accounting and reporting purposes only, for each Collateral Debt Security that bears interest based on a floating rate index, all calculations involving such floating rate index for the then-current period shall be assumed to be equal to the thencurrent rate as had been set in accordance with the terms of the Collateral Debt Security and all calculations involving such floating rate index for future periods shall be assumed to be equal to the applicable floating rate on the relevant Measurement Date. (e) For purposes of calculating the Class A Interest Coverage Ratio, the Class B Interest Coverage Ratio, the Class C Interest Coverage Ratio and the Class D Interest Coverage Ratio, the expected interest income on floating rate Collateral Debt Securities and the expected interest payable on the Notes will be calculated using the then-current interest rates applicable thereto and expected interest earned on the Eligible Investments will be calculated using the then-current interest rate applicable thereto. (f) With respect to any Collateral Debt Security as to which any interest or other payment thereon is subject to withholding tax of any relevant jurisdiction, each Scheduled Distribution thereon shall, for purposes of the Coverage 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 shall be assumed to be made net of any such uncompensated withholding tax based upon withholding tax rates in effect on such date of determination. 2

Processed and formatted by SEC Watch - Visit SECWatch.com

(g) Unless otherwise provided herein, test calculations that evaluate to a percentage shall be rounded to the nearest ten-thousandth and test calculations that evaluate to a number or decimal will be rounded to the nearest one-hundredth. Section 1.03. Generic Terms. The terms “hereof”, “herein” or “hereunder”, unless otherwise modified by more specific reference, shall refer to this Agreement in its entirety. Unless otherwise indicated in context, the terms “Article”, “Section”, “Appendix”, “Exhibit” or “Annex” shall refer to an Article or Section of, or Appendix, Exhibit or Annex to, this Agreement. The definition of a term shall include the singular, the plural, the past, the present, the future, the active and the passive forms of such term. The words “include”, “including” and “included” shall be illustrative and shall not imply any limitation or exclusion unless the context clearly indicates otherwise. Section 1.04.

Times. All times referred to herein shall be to times in The City of New York, unless otherwise expressly stated

herein. ARTICLE II THE COLLATERAL Section 2.01.

Security Interests.

(a) Grant to the Collateral Agent on behalf and for the benefit of the Secured Parties. In order to secure the full and punctual payment, and the performance by the Issuer, of all of the Issuer’s obligations with respect to the Notes, this Agreement, the Note Agency Agreement, the Trust Deed and each Hedge Agreement and to secure the performance of all obligations of the Issuer under this Agreement and the other Transaction Documents in favor of (i) the Trustee for itself and on behalf of the Noteholders, (ii) the Collateral Advisor and (iii) each Hedge Counterparty (collectively, the “Secured Parties”), the Issuer hereby Grants to the Collateral Agent on behalf and for the benefit of the Secured Parties, as their respective interests may appear, subject to the provisions of this Agreement, a continuing first priority Lien on, and first priority security interest in, all of its right, title and interest in, to and under all of the assets of the Issuer, whether now owned and existing or hereafter acquired or arising and wherever located, but excluding all of the Issuer’s right, title and interest in and to (A) the Ordinary Shares Account and any amounts on deposit therein, which will equal the sum of $2,000, representing (1) the paid up share capital of the Issuer resulting from the issuance of the Ordinary Shares ($1,000) under the Articles and (2) the fee paid to the Issuer for issuing the Notes ($1,000) and (B) the Preferred Share Distribution Account and any amounts on deposit therein (all non-excluded assets being collectively referred to as the “Collateral”); provided that the Collateral shall include, without limitation, the following: (i) the Collateral Account, including all Collateral Debt Securities (listed, as of the Closing Date, in Schedule A) which the Issuer causes to be delivered to the Collateral Agent for the benefit and on behalf of the Secured Parties (directly or through a Securities Intermediary or bailee) and all payments thereon or with respect thereto, and all Collateral Debt Securities that are delivered to the Collateral Agent in the future pursuant to the terms hereof and all payments thereon or with respect thereto; (ii) the Note Payment Account, the Interest Reserve Account, the Expense Reserve Account, the Hedge Termination Receipts Account, the Hedge Replacement Account and the Collection Account (collectively with the Collateral Account, the “Accounts”); 3

Processed and formatted by SEC Watch - Visit SECWatch.com

(iii) Eligible Investments purchased with funds on deposit in any Account and all funds on deposit in any Account and all income from the investments of funds in any Account; (iv) Securities Intermediary or bailee);

all Cash or Money delivered to the Collateral Agent for the benefit of the Trustee (directly or through a

(v) all the Issuer’s rights under each Hedge Agreement (including any collateral pledged for the benefit of the Issuer thereunder) and all payments thereunder or with respect thereto; (vi)

all the Issuer’s rights under the Collateral Advisory Agreement and the Collateral Administration

Agreement; (vii) all Securities, Security Entitlements, Instruments, Money and Investment Property and other property of any type or nature in which the Issuer has an interest, including any part thereof which consists of General Intangibles; and (viii) all proceeds, accessions, profits, income, substitutions and replacements, whether voluntary or involuntary, of and to any property in which the Issuer has granted such security interest. Such Grants are made, however, in trust to secure the Notes equally and ratably without prejudice, priority or distinction, except as expressly provided in this Agreement, between any Note and any other Note by reason of difference in time of issuance or otherwise, and to secure in accordance with the priorities set forth in this Agreement (i) the payment of all amounts due on the Notes in accordance with their terms, (ii) the payment of all other sums payable under this Agreement and all amounts payable to the Collateral Advisor under the Collateral Advisory Agreement and each Hedge Counterparty under a Hedge Agreement and (iii) compliance with the provisions of this Agreement, the Collateral Advisory Agreement and each Hedge Agreement, all as provided in this Agreement. The Collateral Agent, on behalf of the Secured Parties, acknowledges such Grant, accepts the trusts hereunder and agrees to perform the duties herein in accordance with the provisions hereof. (b) Priorities. The Issuer intends, and the Collateral Agent agrees, that the security interests in the Collateral securing the Issuer’s obligations with respect to the Notes and performance of all its obligations under this Agreement in favor of the Collateral Agent for the benefit of the Secured Parties shall rank pari passu with each other, shall be prior to all other Liens in respect of the Collateral, subject to the terms of this Agreement, and shall be subject to the Priority of Payments. The Issuer shall take all actions necessary to obtain and maintain, in favor of the Collateral Agent for the benefit of the Secured Parties, a first priority Lien on and a first priority perfected security interest in the Collateral, subject to no other Liens. (c) Holding of Collateral. The Collateral Agent, for the benefit and on behalf of the Secured Parties, acknowledges the Grant of the security interests under this Agreement in accordance with the provisions of this Agreement. The Collateral in the form of Securities, Security Entitlements, Instruments and Money shall be held by the Accountholder for the Collateral Agent for the benefit and on behalf of the Secured Parties pursuant to the Account Control Agreement and the Accountholder shall comply with any instruction given by the Collateral Agent. If so directed in writing by the Issuer, the Collateral Agent shall, and in any event shall cause the Accountholder to, hold, and perfect the security interest in, the Collateral. Except as provided herein, no Collateral may be withdrawn from the Accounts. 4

Processed and formatted by SEC Watch - Visit SECWatch.com

(d) Delivery of Portfolio Collateral. Collateral Debt Securities acquired prior to or on the Closing Date shall be delivered by, or at the direction of, the Issuer to the Collateral Agent on or before the Closing Date in accordance with Annex A hereto, and the Collateral Debt Securities which the Issuer has on or before the Closing Date committed to purchase but which will not have settled on or before the Closing Date shall be delivered by, or at the direction of, the Issuer to the Collateral Agent when acquired in accordance with Annex A hereto. The Issuer shall Grant pursuant to Section 2.01(a) all of the Issuer’s right, title and interest in and to the Collateral Debt Securities and deliver the Collateral Debt Securities in accordance with the requirements set forth in Annex A hereto in order to perfect a first priority security interest in favor of the Collateral Agent on behalf and for the benefit of the Secured Parties. If any such Collateral Debt Securities are held through the Accountholder, delivery shall be deemed to have occurred upon receipt of evidence satisfactory to the Collateral Agent that such Collateral Debt Securities have been credited to the Collateral Account in accordance with Annex A hereto. (e) Financing Statements. The Issuer shall cause a UCC financing statement describing the Collateral and naming the Issuer as debtor and the Collateral Agent as secured party to be filed, by or on behalf of the Issuer, in the District of Columbia within ten (10) Business Days of the Closing Date. The Issuer shall take all actions necessary to maintain the effectiveness of such financing statement and shall notify the Collateral Agent in writing not less than thirty (30) days prior to any change in the Issuer’s name, identity, corporate structure, jurisdiction of incorporation or jurisdiction of its chief executive office. The Issuer hereby authorizes the Collateral Agent to, and the Collateral Agent shall upon receipt of an Opinion of Counsel as to the necessity of such filing, file such additional financing statement or any other financing statement, amendment, assignment or continuation statement that the Issuer shall deem necessary or advisable in connection with the security interest Granted hereunder, including, without limitation, financing statements describing the Collateral. The Issuer agrees that it will from time to time cause to be filed financing statements and continuation statements required to be made, it being understood that the Collateral Agent shall be entitled to rely upon an Opinion of Counsel as to the need to file such financing statements and continuation statements, the dates by which such filings are required to be made and the jurisdictions in which such filings are required to be made. The Issuer shall not without the written consent of the Collateral Agent (which consent shall not be unreasonably withheld or delayed) authorize the filing of any financing statements naming it as debtor other than financing statements in favor of the Collateral Agent. (f) Pledge Notices. Concurrently with the execution and delivery by the Issuer of the Transaction Documents, the Issuer shall deliver to each of the Accountholder, the Collateral Agent, the Trustee, each Paying Agent, each Hedge Counterparty and the Collateral Advisor, a notice in form and substance satisfactory to the Collateral Agent informing such Persons of the Collateral Agent’s charge over, and security interest in, the Hedge Agreements and all of the Issuer’s right, title and interest in, to and under the Collateral Advisory Agreement and the Collateral Administration Agreement. Each Hedge Counterparty shall, by entering into such agreement, acknowledge that the Lien of this Agreement extends to such agreement. (g) No Transfer of Duties. The security interests are Granted as security only and shall not (i) transfer or in any way affect or modify, or relieve the Issuer from any obligation to perform or satisfy, any term, covenant, condition or agreement to be performed or satisfied by the Issuer under or in connection with this Agreement or any other Transaction Document to which it is a party or (ii) impose any obligation on the Trustee, the Collateral Agent, the Collateral Advisor or the Accountholder to perform or observe any such term, covenant, condition or agreement or impose any liability on the Trustee, the Collateral Agent, the Collateral Advisor or the Accountholder for any act or omission on the part of the Issuer relative thereto or for any breach of any representation or warranty on the part of the Issuer contained therein or made in connection therewith. 5

Processed and formatted by SEC Watch - Visit SECWatch.com

(h) Representative of Noteholders Only; Agent for All Other Secured Parties. With respect to the security interests created hereunder, the pledge of any item of Collateral to the Collateral Agent is made to the Collateral Agent (i) for the benefit of the Trustee as representative of the Noteholders and (ii) as agent for each of the other Secured Parties; in furtherance of the foregoing, the possession by the Collateral Agent of any item of Collateral, the endorsement to or registration in the name of the Collateral Agent of any item of Collateral (including as entitlement holder of the Collateral Account) are all undertaken by the Collateral Agent for the benefit of the Trustee as representative of the Noteholders and as agent for each of the other Secured Parties. The Collateral Agent shall have no fiduciary duties to any Hedge Counterparty or the Collateral Advisor; provided that the foregoing shall not limit any of the express obligations of the Collateral Agent under this Agreement. (i) The Issuer hereby agrees, and hereby undertakes to obtain the agreement of the Collateral Advisor, in the Collateral Advisory Agreement to the following: (i) The Collateral Advisor consents to, and agrees to perform, the provisions of this Agreement and the other Transaction Documents applicable to the Collateral Advisor. (ii) The Collateral Advisor acknowledges that the Issuer is assigning all of its right, title and interest in, to and under the Collateral Advisory Agreement to the Collateral Agent on behalf and for the benefit of the Secured Parties, and the Collateral Advisor agrees that all of the representations, covenants and agreements made by the Collateral Advisor in the Collateral Advisory Agreement are also for the benefit of the Secured Parties. (iii) Neither the Issuer nor the Collateral Advisor will enter into any agreement amending, modifying or terminating the Collateral Advisory Agreement (other than in respect of an amendment or modification of the type that may be made to this Agreement and the Trust Deed without Noteholder consent) or selecting or consenting to a successor collateral advisor, without prior written notice to the Requisite Noteholders and Rating Agency Confirmation. (iv) Except as otherwise set forth in the Collateral Advisory Agreement, the Collateral Advisor shall continue to serve as Collateral Advisor under the Collateral Advisory Agreement notwithstanding that the Collateral Advisor shall not have received amounts due it under the Collateral Advisory Agreement because sufficient funds were not then available to pay such amounts and the Collateral Advisor agrees not to cause the filing of a petition in bankruptcy against the Issuer for the non-payment to the Collateral Advisor until the later of (A) payment in full of all Notes issued under the Trust Deed and the payment of the amounts, if any, to the Preferred Share Fiscal and Paying Agent for payment of dividends and other distributions on the Preferred Shares pursuant to the Preferred Share Documents, in accordance with the Priority of Payments plus ten (10) days following such payment, and (B) the expiration of a period equal to the applicable preference period under any applicable bankruptcy law; provided that nothing in this clause (B) shall preclude, or be deemed to estop, the Collateral Advisor (1) from taking any action prior to the expiration of the ten (10) days following such payment or, if longer, the applicable preference period then in effect, in (x) any case or proceeding voluntarily filed or commenced by the Issuer or the Co-Issuer, as the case may be, or (y) any involuntary insolvency proceeding filed or commenced against the Issuer or the Co-Issuer, as the case may be, by a Person other than the Collateral Advisor or (2) from commencing against the Issuer or the Co-Issuer or any properties of the Issuer or the CoIssuer any legal action that is not a bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceeding; and provided, further, that the obligations of the Issuer hereunder shall be payable solely from the Collateral in accordance with the Priority of Payments. (j) Collateral Agent as Attorney-In-Fact. Without imposing any obligations on the Collateral Agent with respect thereto (other than as set forth in this Agreement), the Issuer hereby 6

Processed and formatted by SEC Watch - Visit SECWatch.com

appoints the Collateral Agent as its attorney-in-fact for the specific purpose of filing any financing statements and continuation statements with respect to the security interests provided for herein. Section 2.02. Creation of Security Interest; Transfer of Control. The Issuer hereby agrees to (a) create in each item of Collateral in favor of the Collateral Agent on behalf and for the benefit of the Secured Parties a first priority Lien on the Collateral Granted pursuant to Section 2.01(a) and (b) give Control over each item of the Collateral constituting a Financial Asset to the Collateral Agent. The obligation in the preceding sentence shall be an obligation of the Issuer and not an obligation of the Collateral Agent or the Accountholder. All procedures regarding the transfer, relinquishment or maintenance of Control by the Collateral Agent over the Collateral shall be governed by the Account Control Agreement and Annex A hereto. The parties hereto agree that, following the occurrence of any Event of Default, the Trustee shall be entitled to give all instructions to the Collateral Agent on behalf of the Secured Parties as described in Section 9.01. Section 2.03. Termination of Security Interests. On the Final Termination Date, the security interests and the rights, remedies, powers, duties, authority and obligations conferred upon the Collateral Agent for the benefit and on behalf of the Secured Parties and the Accountholder pursuant to this Agreement shall terminate and be of no further force and effect and all rights, remedies, powers, duties, authority and obligations of each of the Collateral Agent, the Accountholder and the Trustee with respect to the Collateral shall be automatically released in favor of the Issuer; provided, however, that each of the Collateral Agent, the Accountholder and the Trustee, if requested in writing by the Issuer, shall execute and deliver such instruments of release in favor of the Issuer as the Issuer may reasonably request to effectuate such release, and any such instruments so executed and delivered shall be fully binding on each of the Trustee, the Collateral Agent and the Accountholder. Section 2.04. Priority of Payments. All amounts received in respect of the Collateral (whether by payments or by sale or other disposition) that are available for distribution shall be distributed in accordance with the Priority of Payments set forth herein. Section 2.05. Representations Regarding Collateral. The Issuer, as of the date hereof (and, as of the date of each acquisition of any Collateral), represents and warrants to the following: (a) This Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in the Collateral in favor of the Collateral Agent on behalf and for the benefit of the Secured Parties, which security interest is prior to all other Liens and security interests, and is enforceable as such as against creditors of and purchasers from the Issuer and, upon delivery of the Collateral Debt Securities in accordance with the requirements set forth in Annex A hereto and filing of the appropriate financing statements in the appropriate filing offices, the Lien and security interest created by this Agreement shall be a perfected first priority security interest in favor of the Collateral Agent for the benefit of the Secured Parties. (b) The Issuer owns and has good and marketable title to the Collateral free and clear of any Liens, claims, encumbrances or defects of any nature whatsoever except for those which are being released on the Closing Date or on the date of purchase by the Issuer or those created pursuant to or contemplated under this Agreement and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on any Collateral Debt Security prior to the first payment date and owed by the Issuer to the seller of such Collateral Debt Security. (c) The Issuer has acquired its ownership in each such Collateral Debt Security, or will acquire in the case of any Collateral Debt Securities which the Issuer has on or before the Closing 7

Processed and formatted by SEC Watch - Visit SECWatch.com

Date committed to purchase but which will not have settled on or before the Closing Date, in good faith without notice of any adverse claim, except as described in paragraph (b) above. (d) The Issuer (i) has delivered each such Collateral Debt Security, or will deliver any Collateral Debt Securities which the Issuer has on or before the Closing Date committed to purchase but which will not have settled on or before the Closing Date, to the Collateral Agent in accordance with Annex A hereto and (ii) has not assigned, pledged, sold, granted a security interest in or otherwise encumbered any interest in such Collateral Debt Security other than interests Granted pursuant to this Agreement; (e)

The Issuer has full right to Grant all security interests Granted herein.

(f) All Collateral is comprised of either “securities”, “instruments”, “tangible chattel paper”, “accounts”, “security entitlements” or “general intangibles”, in each case as defined in the applicable UCC. (g)

Each of the Accounts, and all subaccounts thereof, constitute Securities Accounts.

(h) All items of the Collateral that constitute Security Entitlements have been and will have been credited to one of the Securities Accounts. The securities intermediary for each of the Accounts has agreed to treat all assets credited to the Securities Accounts as financial assets under the applicable UCC. (i) Other than the security interest Granted to the Collateral Agent on behalf and for the benefit of the Secured Parties pursuant to this Agreement, the Issuer has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Collateral. The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer that include a description of collateral covering the Collateral other than any financing statement relating to the security interest Granted to the Collateral Agent on behalf and for the benefit of the Secured Parties hereunder or that has been terminated. The Issuer is not aware of any judgment, Pension Benefit Guarantee Corp. lien or tax lien filings against it. (j) The Issuer has caused or will have caused, within ten (10) days of the Closing Date, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Collateral Granted to the Collateral Agent on behalf and for the benefit of the Secured Parties hereunder that constitutes chattel paper, instruments, accounts, securities entitlements or general intangibles under the applicable UCC, if any. (k) The Collateral Agent or the Accountholder has in its possession all original copies of the instruments that constitute or evidence the Collateral, if any. The instruments, loan agreements and leases that constitute or evidence the Collateral do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Collateral Agent on behalf and for the benefit of the Secured Parties. All financing statements filed or to be filed against the Issuer in favor of the Collateral Agent on behalf and for the benefit of the Secured Parties in connection herewith describing the Collateral contain a statement to the following effect: “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Collateral Agent on behalf and for the benefit of (A) the Trustee, for the benefit of the Noteholders, (B) the Collateral Advisor and (C) each Hedge Counterparty.” 8

(l) The authoritative copy of any chattel paper that constitutes or evidences the Collateral, if any, has been communicated to the Trustee and has no marks or notations indicating that it has been pledged, assigned or otherwise conveyed to any Person other than the Collateral Agent on behalf and for the benefit of the Secured Parties. (m) The Issuer has received or will receive all consents and approvals required by the terms of the underlying loan agreement, indenture or other underlying documentation, if any, relating to the Collateral to the transfer to the Collateral Agent on behalf and for the benefit of the Secured Parties of its interest and rights in the Collateral hereunder. (n) The Issuer has delivered to the Trustee a fully executed agreement pursuant to which the Collateral Agent and the Accountholder have agreed to comply with all instructions originated by the Trustee relating to the Accounts without further consent by the Issuer. (o) None of the Issuer Accounts is in the name of any person other than the Issuer or the Collateral Agent, held on behalf and for the benefit of the Secured Parties. The Issuer has not consented to the Collateral Agent or to the Accountholder maintaining any of the Issuer Accounts to comply with entitlement orders or instructions of any Person other than the Trustee. (p) Notwithstanding any other provision of this Agreement or any other related Transaction Document, the representations in this Section 2.05 shall be continuing and deemed to be updated on any day a new item of Collateral is acquired, and remain in full force and effect until such time as all obligations under this Agreement, the Trust Deed, the Note Agency Agreement and the Notes have been finally and fully paid and performed. (q) The parties to this Agreement (i) shall not, without obtaining a Rating Agency Confirmation, waive any of the representations in this Section 2.05; (ii) shall provide each of the Rating Agencies with prompt written notice of any breach of the

Processed and formatted by SEC Watch - Visit SECWatch.com

representations contained in this Section 2.05 upon becoming aware thereof; and (iii) shall not, without obtaining a Rating Agency Confirmation (as determined after any adjustment or withdrawal of the ratings following notice of such breach), waive a breach of any of the representations in this Section 2.05. ARTICLE III CLOSING DATE ACTIONS Section 3.01. Closing Date Requirements. The Issuer hereby represents and warrants to the Collateral Agent on behalf and for the benefit of the Secured Parties that as of the Closing Date it will have acquired Collateral Debt Securities and Eligible Investments in an aggregate Principal Balance representing at least U.S.$402.1 million. Section 3.02. Closing Date Actions. Within fifteen (15) Business Days after the Closing Date, (i) the Issuer, or the Collateral Advisor on the Issuer’s behalf, shall be required to obtain and deliver to the Trustee an accountants’ certificate from the Independent Accountants of national reputation (a) confirming the information with respect to each Collateral Debt Security set forth on Schedule A hereto, as of the Closing Date and the information provided by the Issuer with respect to every other asset included in the Collateral, by reference to such sources as will be specified therein, (b) certifying as of the Closing Date the procedures applied and the associated findings with respect to the Coverage Tests and (c) the procedures undertaken by them to review data and computations relating to the foregoing statement, (ii) the Trustee shall be required to run the S&P CDO Monitor and (iii) the Trustee will be required to report the S&P scenario default and break-even default rate for each Class of Notes. 9

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE IV ACCOUNTS, ACCOUNTINGS AND RELEASES Section 4.01. Collection of Money. The Accounts established by the Collateral Agent pursuant to Section 8.01 and this Article IV may include any number of sub-accounts requested by the Collateral Advisor for convenience in administering Collateral Debt Securities. In addition, all Cash deposited in the Accounts established pursuant to this Article IV shall be invested in Eligible Investments in accordance with the procedures set forth in this Article IV and any restrictions applicable to such Accounts. Section 4.02.

Collection Account.

(a) The Collateral Agent shall, prior to the Closing Date, establish a single, segregated trust account in the United States which shall be designated as the “Collection Account”, which shall be held in the name of the Collateral Agent for the benefit and on behalf of the Secured Parties and over which the Collateral Agent shall have exclusive Control and the sole right of withdrawal, into which the Collateral Agent shall from time to time deposit, in addition to the deposits required pursuant to Sections 4.03(d) and 4.04(d), (i) all distributions on the Collateral Debt Securities and (ii) all proceeds received from the disposition of any Collateral Debt Securities (unless simultaneously reinvested in Eligible Investments) and (iii) all Collections. Funds in the Collection Account shall not be commingled with any other Money. The Collateral Agent shall give to the Issuer, the Collateral Advisor and the Trustee prompt notice if the Collection Account or any funds on deposit therein, or otherwise to the credit thereof, shall become subject to any writ, order, judgment, warranty of attachment, execution or similar process. The Issuer shall not have any legal, equitable or beneficial interest in the Collection Account other than in accordance with the Priority of Payments. In addition, (x) the Issuer may, but under no circumstances shall be required to, deposit or cause to be deposited from time to time such Moneys in the Collection Account as it deems, in its sole discretion, to be advisable and by notice to the Collateral Agent and (y) the Collateral Advisor may designate such Money to be treated as Collateral Principal Collections or Collateral Interest Collections hereunder at its discretion. All Money deposited from time to time in the Collection Account pursuant to this Agreement shall be held by the Collateral Agent as part of the Collateral and shall be applied in accordance with the terms hereof and to the purposes herein provided. The Collection Account shall remain at all times with a financial institution having a long-term debt rating of at least “BBB+” by S&P, at least “Baal” by Moody’s and, at least “BBB+” by Fitch and a short-term debt rating of at least “A-1” by S&P, at least “P-1” by Moody’s and, at least “F-1” by Fitch. (b) All Distributions, any deposit required pursuant to Section 4.02(c) and any net proceeds from the sale or disposition of a Collateral Debt Security received by the Collateral Agent shall be immediately deposited into the Collection Account. All such property, together with any securities in which funds included in such property are or will be invested or reinvested during the term of this Agreement, and any income or other gain realized from such investments, shall be held by the Collateral Agent in the Collection Account as part of the Collateral subject to disbursement and withdrawal as provided in this Section 4.02. By Issuer Order (which may be in the form of standing instructions), the Issuer (or the Collateral Advisor on behalf of the Issuer) may at any time direct the Collateral Agent to, and upon receipt of such Issuer Order the Collateral Agent shall, invest all funds received into the Collection Account during a Due Period, and amounts received in prior Due Periods and retained in the Collection Account, as so directed in Eligible Investments maturing no later than the Business Day immediately preceding the next Payment Date. The Collateral Agent shall, within one (1) Business Day after receipt of any Distribution or other proceeds which is not Cash, so notify the Issuer and the Issuer (or the Collateral Advisor on behalf of the Issuer) shall, within thirty (30) Business Days after receipt of 10

Processed and formatted by SEC Watch - Visit SECWatch.com

such notice from the Collateral Agent, sell such Distribution or other proceeds for Cash in an arm’s-length transaction to a Person which is not an Affiliate (other than a Permitted Affiliate, subject to the Investment Advisers Act) of the Issuer or the Collateral Advisor and deposit the proceeds thereof in the Collection Account for investment pursuant to this Section 4.02; provided, however, that the Issuer (or the Collateral Advisor on behalf of the Issuer) need not sell such Distributions or other proceeds if it delivers an Officer’s certificate to the Collateral Agent certifying that such Distributions or other proceeds constitute Collateral Debt Securities or Eligible Investments. (c) If, prior to the occurrence of an Event of Default, the Issuer shall not have given any investment directions pursuant to Section 4.02(b), the Collateral Agent shall seek instructions from the Collateral Advisor within three (3) Business Days after transfer of such funds to the Collection Account. If the Collateral Agent does not thereupon receive written instructions from the Issuer (or the Collateral Advisor on behalf of the Issuer) within thirty (30) Business Days after transfer of such funds to the Collection Account, it shall invest and reinvest the funds held in the Collection Account, as fully as practicable, but only in one or more Eligible Investments described in clause (iii) of the definition of Eligible Investments of its selection maturing no later than the Business Day immediately preceding the next Payment Date. If, after the occurrence of an Event of Default, the Issuer shall not have given investment directions to the Collateral Agent pursuant to Section 4.02(b) for three (3) consecutive days, the Collateral Agent shall invest and reinvest such Money as fully as practicable in Eligible Investments as described in clause (iii) of the definition of Eligible Investments of its selection maturing not later than the Business Day immediately preceding the next Payment Date. All interest and other income from such investments shall be deposited in the Collection Account, any gain realized from such investments shall be credited to the Collection Account and any loss resulting from such investments shall be charged to the Collection Account. The Collateral Agent shall not in any way be held liable by reason of any insufficiency of such Collection Account resulting from any loss relating to any such Eligible Investment, except with respect to investments in obligations of the Collateral Agent or any Affiliate thereof. (d) Collateral Principal Collections and Sale Proceeds shall be used to redeem the Notes in accordance with the Priority of Payments in an amount equal to the lesser of (i) the Collateral Principal Collections and (ii) the amount of Available Funds remaining in the Collection Account. Section 4.03.

Interest Reserve Account.

(a) The Collateral Agent shall, prior to the Closing Date, establish a single, segregated trust account which shall be designated as the “Interest Reserve Account”, which shall be held in the name of the Collateral Agent for the benefit and on behalf of the Secured Parties and over which the Collateral Agent shall have exclusive Control and the sole right of withdrawal, into which the Collateral Agent shall deposit on each Payment Date, the Interest Reserve Amount, if any, in accordance with Section 5.01(a)(vii). Funds in the Interest Reserve Account shall not be commingled with any other Money. The Collateral Agent shall give to the Issuer, the Collateral Advisor and the Trustee prompt notice if the Interest Reserve Account or any funds on deposit therein, or otherwise to the credit of the Interest Reserve Account, shall become subject to any writ, order, judgment, warranty of attachment, execution or similar process. All Money deposited from time to time in the Interest Reserve Account pursuant to this Agreement shall be held by the Collateral Agent as part of the Collateral and shall be applied in accordance with the terms hereof and to the purposes herein provided. The Issuer shall not have any legal, equitable or beneficial interest in the Interest Reserve Account other than in accordance with the Priority of Payments. The Interest Reserve Account shall remain at all times with a financial institution having a long-term debt rating of at least “BBB+” by S&P, at least “Baa1” by Moody’s and, at least “BBB+” by Fitch and a short-term debt rating of at least “A-1” by S&P, at least “P-1” by Moody’s and, at least “F-1” by Fitch. 11

Processed and formatted by SEC Watch - Visit SECWatch.com

(b) Any deposit required pursuant to Section 4.03(c) shall be immediately deposited into the Interest Reserve Account. All such property, together with any securities in which funds included in such property are or will be invested or reinvested during the term of this Agreement, and any income or other gain realized from such investments, shall be held by the Collateral Agent in the Interest Reserve Account as part of the Collateral subject to disbursement and withdrawal as provided in this Section 4.03. By Issuer Order (which may be in the form of standing instructions), the Issuer (or the Collateral Advisor on behalf of the Issuer) may at any time direct the Collateral Agent to, and upon receipt of such Issuer Order the Collateral Agent shall, invest all funds received into the Interest Reserve Account during a Due Period, and amounts received in prior Due Periods and retained in the Interest Reserve Account, as so directed in Eligible Investments maturing no later than the Business Day immediately preceding the next Payment Date. The Collateral Agent shall, within one (1) Business Day after receipt of any Distribution or other proceeds which is not Cash, so notify the Issuer and the Issuer (or the Collateral Advisor on behalf of the Issuer) shall, within thirty (30) Business Days after receipt of such notice from the Collateral Agent, sell such Distribution or other proceeds for Cash in an arm’s-length transaction to a Person which is not an Affiliate (other than a Permitted Affiliate, subject to the Investment Advisers Act) of the Issuer or the Collateral Advisor and deposit the proceeds thereof in the Interest Reserve Account for investment pursuant to this Section 4.03; provided, however, that the Issuer (or the Collateral Advisor on behalf of the Issuer) need not sell such Distributions or other proceeds if it delivers an Officer’s certificate to the Collateral Agent certifying that such Distributions or other proceeds constitute Collateral Debt Securities or Eligible Investments. (c) If, prior to the occurrence of an Event of Default, the Issuer (or the Collateral Advisor on behalf of the Issuer) shall not have given any investment directions pursuant to Section 4.03(b), the Collateral Agent shall seek instructions from the Collateral Advisor within three (3) Business Days after transfer of such funds to the Interest Reserve Account. If the Collateral Agent does not thereupon receive written instructions from the Issuer (or the Collateral Advisor on behalf of the Issuer) within thirty (30) Business Days after transfer of such funds to the Interest Reserve Account, it shall invest and reinvest the funds held in the Interest Reserve Account, as fully as practicable, but only in one or more Eligible Investments in clause (iii) of the definition of Eligible Investments of its selection maturing no later than the Business Day immediately preceding the next Payment Date. If, after the occurrence of an Event of Default, the Issuer (or the Collateral Advisor on behalf of the Issuer) shall not have given investment directions to the Collateral Agent pursuant to Section 4.03(b) for three (3) consecutive days, the Collateral Agent shall invest and reinvest such Money as fully as practicable in Eligible Investments as described in clause (iii) of the definition of Eligible Investments of its selection maturing not later than the Business Day immediately preceding the next Payment Date. All interest and other income from such investments shall be deposited in the Interest Reserve Account, any gain realized from such investments shall be credited to the Interest Reserve Account and any loss resulting from such investments shall be charged to the Interest Reserve Account. The Collateral Agent shall not in any way be held liable by reason of any insufficiency of such Interest Reserve Account resulting from any loss relating to any such Eligible Investment, except with respect to investments in obligations of the Collateral Agent or any Affiliate thereof. (d) On the Business Day prior to each Payment Date, the Collateral Agent shall deposit into the Collection Account the balance of the Interest Reserve Account (including reinvestment income) for distribution in accordance with the Priority of Payments on the related Payment Date. Section 4.04.

Expense Reserve Account.

(a) The Collateral Agent shall, prior to the Closing Date, establish a single, segregated trust account which shall be designated as the “Expense Reserve Account”, which shall be held in the name of the Collateral Agent for the benefit and on behalf of the Secured Parties and over 12

Processed and formatted by SEC Watch - Visit SECWatch.com

which the Collateral Agent shall have exclusive Control and the sole right of withdrawal, into which the Collateral Agent shall deposit, on the Closing Date, an amount equal to U.S.$25,000 and, on each Payment Date, an amount in accordance with Section 5.01(a)(i). Funds in the Expense Reserve Account shall not be commingled with any other Money. The Collateral Agent shall give to the Issuer, the Collateral Advisor and the Trustee prompt notice if the Expense Reserve Account or any funds on deposit therein, or otherwise to the credit of the Expense Reserve Account, shall become subject to any writ, order, judgment, warranty of attachment, execution or similar process. All Money deposited from time to time in the Expense Reserve Account pursuant to this Agreement shall be held by the Collateral Agent as part of the Collateral and shall be applied in accordance with the terms hereof and to the purposes herein provided. The Issuer shall not have any legal, equitable or beneficial interest in the Expense Reserve Account other than in accordance with this Agreement. The Expense Reserve Account shall remain at all times with a financial institution having a long-term debt rating of at least “BBB+” by S&P, at least “Baal” by Moody’s and, at least “BBB+” by Fitch and a short-term debt rating of at least “A-1” by S&P, at least “P-1” by Moody’s and, at least “F-1” by Fitch. (b) Any deposit required pursuant to Section 4.04(c) shall be immediately deposited into the Expense Reserve Account. All such property, together with any securities in which funds included in such property are or will be invested or reinvested during the term of this Agreement, and any income or other gain realized from such investments, shall be held by the Collateral Agent in the Expense Reserve Account as part of the Collateral subject to disbursement and withdrawal as provided in this Section 4.04. By Issuer Order (which may be in the form of standing instructions), the Issuer (or the Collateral Advisor on behalf of the Issuer) may at any time direct the Collateral Agent to, and upon receipt of such Issuer Order the Collateral Agent shall, invest all funds received into the Expense Reserve Account during a Due Period, and amounts received in prior Due Periods and retained in the Expense Reserve Account, as so directed in Eligible Investments maturing not later than the second (2nd) Business Day immediately preceding the next Payment Date unless such Eligible Investments are investments of the type described in clause (i) or (iii) of the definition of “Eligible Investments”, in which event such Eligible Investments may mature on the Business Day immediately preceding such Payment Date. The Collateral Agent shall, within one (1) Business Day after receipt of any Distribution or other proceeds which is not Cash, so notify the Issuer and the Issuer (or the Collateral Advisor on behalf of the Issuer) shall, within thirty (30) Business Days after receipt of such notice from the Collateral Agent, sell such Distribution or other proceeds for Cash in an arm’s-length transaction to a Person that is not an Affiliate (other than a Permitted Affiliate, subject to the Investment Advisers Act) of the Issuer or the Collateral Advisor and deposit the proceeds thereof in the Expense Reserve Account for investment pursuant to this Section 4.04; provided, however, that the Issuer (or the Collateral Advisor on behalf of the Issuer) need not sell such Distributions or other proceeds if it delivers an Officer’s certificate to the Collateral Agent certifying that such Distributions or other proceeds constitute Collateral Debt Securities or Eligible Investments. (c) If, prior to the occurrence of an Event of Default, the Issuer shall not have given any investment directions pursuant to Section 4.04(b), the Collateral Agent shall seek instructions from the Collateral Advisor within three (3) Business Days after transfer of such funds to the Expense Reserve Account. If the Collateral Agent does not thereupon receive written instructions from the Issuer (or the Collateral Advisor on behalf of the Issuer) within thirty (30) Business Days after transfer of such funds to the Expense Reserve Account, it shall invest and reinvest the funds held in the Expense Reserve Account, as fully as practicable, but only in Eligible Investments of the type described in clause (iii) of the defmition of “Eligible Investments”, maturing the Business Day immediately preceding such Payment Date. If, after the occurrence of an Event of Default, the Issuer shall not have given investment directions to the Collateral Agent pursuant to Section 4.04(b) for three (3) consecutive days, the Collateral Agent shall invest and reinvest such Money as fully as practicable, but only in Eligible Investments of its selection of the type described in clause (iii) of the definition of “Eligible Investments”, maturing on the 13

Processed and formatted by SEC Watch - Visit SECWatch.com

Business Day immediately preceding such Payment Date. All interest and other income from such investments shall be deposited in the Expense Reserve Account, any gain realized from such investments shall be credited to the Expense Reserve Account and any loss resulting from such investments shall be charged to the Expense Reserve Account. The Collateral Agent shall not in any way be held liable by reason of any insufficiency of such Expense Reserve Account resulting from any loss relating to any such Eligible Investment, except with respect to investments in obligations of the Collateral Agent or any Affiliate thereof. (d) On the Business Day prior to each Payment Date, the Collateral Agent shall deposit into the Collection Account the balance of the Expense Reserve Account (including reinvestment income) for distribution in accordance with the Priority of Payments on the related Payment Date. (e) The Collateral Agent may, from time to time and at any time, withdraw amounts from the Expense Reserve Account to pay accrued and unpaid administrative expenses of the Co-Issuers. All amounts remaining on deposit in the Expense Reserve Account at the time when substantially all of the Issuer’s assets have been sold or otherwise disposed of will be deposited by the Collateral Agent into the Collection Account (including reinvestment income) as Collateral Interest Collections for distribution in accordance with the Priority of Payments on the immediately succeeding Payment Date. Section 4.05. Collateral Account. The Collateral Agent shall, prior to the Closing Date, establish a single, segregated trust account (or a subaccount of the Collection Account) which shall be designated as the “Collateral Account”, which shall be held in the name of the Collateral Agent for the benefit and on behalf of the Secured Parties and over which the Collateral Agent shall have exclusive Control and the sole right of withdrawal. Any and all assets or securities at any time on deposit in, or otherwise to the credit of, the Collateral Account shall be held in trust by the Collateral Agent for the benefit and on behalf of the Secured Parties. The only permitted withdrawals from the Collateral Account shall be in accordance with this Agreement. The Collateral Agent agrees to give the Issuer and the Trustee prompt notice if the Collateral Account or any funds on deposit therein, or otherwise to the credit of the Collateral Account, shall become subject to any writ, order, judgment, warrant of attachment, execution or similar process. The Issuer shall not have any legal, equitable or beneficial interest in the Collateral Account other than in accordance with this Agreement. The Collateral Account shall remain at all times with a financial institution located in the United States having a long-term debt rating of at least “BBB+” by S&P, at least “Baal” by Moody’s and at least “BBB+” by Fitch and a short-term debt rating of at least “A-1” by S&P, at least “P-1” by Moody’s and, at least “F-1” by Fitch. Section 4.06. Reports by Collateral Agent. The Collateral Agent shall supply, in a timely fashion, to the Co-Issuers, the Trustee, each Hedge Counterparty, the Principal Note Paying Agent, the Preferred Share Fiscal and Paying Agent, each Rating Agency (so long as any Notes are rated by such Rating Agency), the Initial Purchasers and the Collateral Advisor any information regularly maintained by the Collateral Agent that each such party may from time to time request with respect to the Collateral Debt Securities, any Hedge Agreement, the Collection Account and the Collateral Account and such other information as is regularly maintained by the Collateral Agent and is reasonably needed to verify information contained in the Note Valuation Report. Additionally, the Collateral Agent shall promptly provide any other information reasonably available to the Collateral Agent by reason of its acting as Collateral Agent hereunder and required to be provided by Section 4.07 or to permit the Collateral Advisor to perform its obligations under the Collateral Advisory Agreement. The Collateral Agent shall forward to the Collateral Advisor copies of all notices and other writings received by it from the issuer of any Collateral Debt Security or from any Clearing Agency with respect to any Collateral Debt Security advising the holders of such security of any rights that the holders might have with respect thereto (including, without limitation, notices of calls and redemptions of securities) as well as all periodic financial reports received from such issuer and Clearing Agencies with respect to such issuer. The 14

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Agent shall also cause the amount of interest paid on the Notes on each Payment Date to be communicated to Euroclear, Clearstream and the Irish Stock Exchange (as long as any of the Notes are listed thereon) on or prior to such Payment Date. Section 4.07.

Accountings.

(a) Payment Date Accounting; Note Valuation Reports. The Collateral Agent on behalf of the Issuer shall prepare or cause to be prepared an accounting (the “Note Valuation Report”), determined as of each Determination Date, and make available or cause to be made available on its website, initially located at www.cdotrustee.net and deliver by e-mail to S&P and otherwise upon request, the Note Valuation Report, after the reconciliation process described in this Section 4.07(a), to the Collateral Advisor, the Trustee, the Principal Note Paying Agent, the Preferred Share Fiscal and Paying Agent, each Hedge Counterparty, if any, each Rating Agency (so long as any Notes are rated by such Rating Agency), the Initial Purchasers and the Depositary (accompanied by a request that it be transmitted to the Holders of Notes on the books of the Depositary) by no later than the close of business on the Business Day preceding the related Payment Date. The Collateral Advisor shall provide any information reasonably requested by the Issuer or on the Issuer’s behalf for preparation of the Note Valuation Report in accordance with this Section 4.07(a). Upon receipt of each Note Valuation Report, the Trustee, in the name and at the expense of the Co-Issuers, shall notify the Irish Paying Agent, so long as any Notes are listed thereon, of the aggregate principal amount of the Notes of each Class after giving effect to the principal payments, if any, on the next Payment Date. The Note Valuation Report shall contain the following information: (i)

a calculation in reasonable detail necessary to determine compliance with each of the Coverage Tests;

(ii)

the estimated remaining average life (on each asset and on an aggregate basis) of all Collateral Debt

Securities; (iii) the Applicable Periodic Interest Rate in respect of each Class of Notes and the amount of Periodic Interest payable to the Holders of the Notes for such Payment Date (in the aggregate and by Class); (iv)

the amount (if any) payable to each Hedge Counterparty pursuant to the related Hedge Agreement;

(v)

the amount (if any) payable by each Hedge Counterparty pursuant to the related Hedge Agreement;

(vi)

the Aggregate Fees and Expenses payable on the next Payment Date on an itemized basis;

(vii)

the Aggregate Fees and Expenses paid during a period of twelve (12) months ending on the next Payment

(viii)

for the Collection Account:

Date on an itemized basis;

(A)

the Balance on deposit in the Collection Account at the end of the related Due Period; 15

Processed and formatted by SEC Watch - Visit SECWatch.com

(B) the amounts payable from the Collection Account pursuant to each priority in the Priority of Payments on the next Payment Date; and (C) be made on such Payment Date; (ix)

the Balance remaining in the Collection Account immediately after all payments and deposits to

for the Interest Reserve Account: (A)

the Balance on deposit in the Interest Reserve Account at the end of the related Due Period;

(B)

the amount payable from the Interest Reserve Account pursuant to the Priority of Payments on

(C)

the Interest Reserve Amount to be paid into the Interest Reserve Account on the next Payment

the next Payment Date;

Date; and (D) the Balance remaining in the Interest Reserve Account immediately after all payments and deposits to be made on such Payment Date; (x)

for the Expense Reserve Account, (A)

the amount to be paid into the Expense Reserve Account on the next Payment Date; and

(B) the Balance remaining in the Expense Reserve Account immediately after all payments and deposits to be made on such Payment Date; (xi) the Hedge Receipt Amount or the Hedge Payment Amount for the related Payment Date, and for each Hedge Agreement, the outstanding notional amount of such Hedge Agreement and the amounts, if any, scheduled to be received or paid, as the case may be, by the Issuer pursuant to such Hedge Agreement for the related Payment Date, separately stating the portion payable under the Priority of Payments; (xii)

the amount of Excess Funds to be paid to the Holders of the Preferred Shares on the related Payment

(xiii)

the amount of the Senior Collateral Advisory Fee and the amount of the Subordinate Collateral Advisory

Date;

Fee; (xiv) the amount of the Deferred Subordinate Collateral Advisory Fee (including the amounts of the Monitoring Fee and the Senior Structuring Fee); (xv)

any information required to be included in a Monthly Report as set forth in Section 4.07(b);

(xvi) such other information as the Collateral Advisor, the Initial Purchasers, the Trustee, S&P, Moody’s or any Hedge Counterparty may reasonably request; and (xvii) the aggregate principal amount of the Collateral Debt Securities and, with respect to each Collateral Debt Security, the Principal Balance, the annual coupon rate or spread to the relevant floating rate index, the frequency of coupon payments, the amount of principal payments 16

Processed and formatted by SEC Watch - Visit SECWatch.com

received, the maturity date, the Weighted Average Life, the issuer, the country in which the issuer is incorporated or organized, the Weighted Average Fixed Rate Coupon, the Weighted Average Spread, the Moody’s Industry Classification Weighted Average Group, the S&P Industry Classification Group, the Fitch Industry Classification Group, the S&P Recovery Rate for each Class of Notes, the Fitch Sector Score, the Moody’s Recovery Rate, the Moody’s Diversity Score, the Moody’s Weighted Average Recovery Rate, the Fitch Weighted Average Recovery Rate for each class of Notes, the Fitch Weighted Average Rating Factor, the Weighted Average Moody’s Rating Factor, the Moody’s Rating, the S&P Rating and the Fitch Rating of such Collateral Debt Security (provided that if any Moody’s Rating, S&P Rating or Fitch Rating for any Collateral Debt Security is set forth in any Note Valuation Report and such rating is an “estimated” or “shadow” rating, such rating shall be identified as “estimated” or “shadow rated”, shall be disclosed with an asterisk in the place of the applicable estimated or shadow rating and shall include the date as of which such rating was first provided by Moody’s, S&P or Fitch, as the case may be, to the Issuer). Upon receipt of each Note Valuation Report, the Trustee and the Collateral Advisor shall compare the information contained therein to the information contained in their respective records with respect to the Collateral and shall, within two (2) Business Days after receipt of such Note Valuation Report, notify each of the Issuer, each Hedge Counterparty, the Collateral Advisor, the Trustee, Moody’s and S&P if the information contained in the Note Valuation Report does not conform to the information maintained by the Trustee or the Collateral Advisor as applicable, with respect to the Collateral, and detail any discrepancies. In the event that any discrepancy exists, the Trustee and the Issuer, or the Collateral Advisor shall attempt to promptly resolve the discrepancy. If such discrepancy cannot be promptly resolved, the Trustee shall within five (5) Business Days after discovery of such discrepancy cause the Independent Accountants of national reputation to review such Note Valuation Report and the Trustee’s and the Collateral Advisor’s records to determine the cause of such discrepancy. If such review reveals an error in the Note Valuation Report or the Trustee’s or the Collateral Advisor’s records, the Note Valuation Report or Trustee’s and the Collateral Advisor’s records, as the case may be, shall be revised accordingly and, as so revised, shall be utilized in making further calculations. (b) Monthly Report. Not later than the fifth (5th) Business Day after the last Business Day of each month (excluding the months in which a Payment Date occurs), commencing in October, 2003, the Issuer shall compile and make available, or cause to be compiled and made available on the Trustee’s website initially located at www.cdotrurstee.net and to be delivered by e-mail to S&P and otherwise upon request, to the Trustee, each Hedge Counterparty, the Collateral Advisor, the Preferred Share Fiscal and Paying Agent, the Initial Purchasers and each Rating Agency (so long as any Notes are rated by such Rating Agency), and, upon written request, accompanied by a note owner certificate, to any Holder of a Note, a monthly report (the “Monthly Report”), which shall contain the following information and instructions with respect to the Collateral Debt Securities (individually and collectively), determined as of the last Business Day of such month: (i) the aggregate principal amount of the Collateral Debt Securities and, with respect to each Collateral Debt Security, the Principal Balance, the annual coupon rate or spread to the relevant floating rate index, the frequency of coupon payments, the amount of principal payments received, the maturity date, the Weighted Average Life, the issuer, the country in which the issuer is incorporated or organized, the Weighted Average Fixed Rate Coupon, the Weighted Average Spread, the Moody’s Industry Classification Group, the S&P Industry Classification Group, the Fitch Industry Classification Group, the S&P Recovery Rate, the Fitch Sector Score, the Moody’s Recovery Rate, the S&P Weighted Average Recovery Rate for each Class of Notes, the Moody’s Weighted Average Recovery Rate, the Fitch Weighted Average Recovery Rate, the Fitch Weighted Average Rating Factor, the Weighted Average Moody’s Rating Factor, the Moody’s Rating, the S&P Rating and the Fitch Rating of such Collateral Debt Security (provided that if any Moody’s Rating, S&P Rating or Fitch Rating for 17

Processed and formatted by SEC Watch - Visit SECWatch.com

any Collateral Debt Security is set forth in any Monthly Report and such rating is an “estimated” or “shadow” rating, such rating shall be identified as “estimated” or “shadow rated”, shall be disclosed with an asterisk in the place of the applicable estimated or shadow rating and shall include the date as of which such rating was first provided by Moody’s, S&P or Fitch, as the case may be, to the Issuer); (ii) the Principal Balance, the annual interest rate, the maturity date, the Moody’s Rating, the S&P Rating, the Fitch Rating and the issuer of each Eligible Investment included in the Collateral; (iii) the nature, source and amount of any Collections in the Collection Account, including Collections received since the date of the later of the last Monthly Report and the last Note Valuation Report; (iv)

the Principal Balance and identity of each Collateral Debt Security that was released for sale indicating the

reason for such sale; (v) the identity and Principal Balance of each Collateral Debt Security that became a Defaulted Security, an Equity Security, a Written Down Security, a Withholding Tax Security, a Deferred Interest PIK Bond or, except with respect to Defaulted Securities, a Collateral Debt Security whose Moody’s Rating has been reduced below “Ba3” since the later to occur of the last Monthly Report and the last Note Valuation Report, and the identity and Principal Balance of each Collateral Debt Security that was a Defaulted Security, an Equity Security, a Written Down Security, a Withholding Tax Security or a Deferred Interest PIK Bond or, except with respect to Defaulted Securities, a Collateral Debt Security whose Moody’s Rating was below “Ba3” as of the last Monthly Report or the last Note Valuation Report and that remains a Defaulted Security, an Equity Security, a Written Down Security, a Deferred Interest PIK Bond or a Collateral Debt Security (other than a Defaulted Security) with a Moody’s Rating below “Ba3” and the Market Value of each Defaulted Security; (vi) the purchase price of each Pledged Security Granted and the sale price of each Pledged Security subject to a sale since the date of the later of the last Monthly Report and the last Note Valuation Report; and whether such Pledged Security is a Collateral Debt Security, an Eligible Investment or proceeds in the Collection Account; (vii) the calculation showing compliance with each of the Coverage Tests and the Collateral Quality Tests (including, with respect to the S&P CDO Monitor Test, the weighted average rating, the default measure, variability measure and correlation measure, the scenario loss rate and/or such other information required to be computed with respect to the S&P CDO Monitor Test), accompanied by a list setting forth the applicable maximum or minimum value, percentage or ratio which must be maintained pursuant to this Agreement with respect to each of the Coverage Tests and a list setting forth the results of the calculation of each of the Coverage Tests with respect to the Collateral Debt Securities; provided that each Monthly Report shall provide that the foregoing calculations are reflected for informational purposes only and are not binding upon the Issuer; (viii) the identity of each Collateral Debt Security that was upgraded or downgraded or placed on watch for upgrade or downgrade by any Rating Agency since the date of the later of the last Monthly Report and the last Note Valuation Report; provided that the identity of each Collateral Debt Security that was upgraded or downgraded for purposes of this clause (viii) shall not be obtained from Bloomberg Financial Markets On-Line Data Retrieval Service or a similar service and must be obtained from information provided directly by the Rating Agencies; (ix)

the amount of Purchased Accrued Interest; 18

Processed and formatted by SEC Watch - Visit SECWatch.com

(x) a description of any transactions with the Collateral Advisor, the Issuer, the Collateral Administrator and the Collateral Agent and any Affiliates thereof; (xi) the Class A-1 Note Break-Even Loss Rate, the Class A-2 Note Break-Even Loss Rate, the Class B-1 Note Break-Even Loss Rate, the Class B-2 Note Break-Even Loss Rate, the Class C-1 Note Break-Even Loss Rate, the Class C-2 Note Break-Even Loss Rate and the Class D Note Break-Even Loss Rate; (xii) the Class A-1 Note Loss Differential, the Class A-2 Note Loss Differential, the Class B-1 Note Loss Differential, the Class B-2 Note Loss Differential, the Class C-1 Note Loss Differential, the Class C-2 Note Loss Differential and the Class D Note Loss Differential; (xiii) the Class A-1 Note Scenario Default Rate, the Class A-2 Note Scenario Default Rate, the Class B-1 Note Scenario Default Rate, the Class B-2 Note Scenario Default Rate, the Class C-1 Note Scenario Default Rate, the Class C-2 Note Scenario Default Rate and the Class D Note Scenario Default Rate; and (xiv)

such other information as the Trustee, S&P or the Initial Purchasers may reasonably request.

Upon receipt of each Monthly Report, the Trustee and the Collateral Advisor shall compare the information contained therein to the information contained in their respective records with respect to the Collateral and shall, within two (2) Business Days after receipt of such Monthly Report, notify each of the Issuer, each Hedge Counterparty and the Collateral Advisor if the information contained in the Monthly Report does not conform to the information maintained by the Trustee or the Collateral Advisor with respect to the Collateral, and detail any discrepancies. In the event that any discrepancy exists, the Trustee and the Issuer, or the Collateral Advisor on behalf of the Issuer, shall attempt to promptly resolve the discrepancy. If such discrepancy cannot be promptly resolved, the Trustee shall within five (5) Business Days after discovery of such discrepancy cause the Independent Accountants of national reputation to review such Monthly Report and the Trustee’s or the Collateral Agent’s records to determine the cause of such discrepancy. If such review reveals an error in the Monthly Report or the Trustee’s or the Collateral Agent’s records, the Monthly Report or Trustee’s or the Collateral Agent’s records, as the case may be, shall be revised accordingly and, as so revised, shall be utilized in making further calculations. Subject to the terms of this Agreement, the Collateral Agent shall rely on the information supplied to it by the Collateral Advisor in relation to the preparation of the Monthly Report and shall not be liable for the accuracy or completeness of such information. (c) Each Note Valuation Report or Monthly Report sent to any Holder or beneficial owner of any Note or Preferred Share shall contain, or be accompanied by, the following notice: “The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and the Co-Issuers have not been registered under the United States Investment Company Act of 1940, as amended (the “1940 Act”). Each Holder of the Notes, other than those Holders that are not “U.S. persons” (“U.S. Person”) within the meaning of Regulation S (“Regulation S”) under the Securities Act and have acquired their Notes outside the United States pursuant to Regulation S, is required to be (i) a “qualified institutional buyer” as defined in Rule 144A under the Securities Act 19

Processed and formatted by SEC Watch - Visit SECWatch.com

(“Qualified Institutional Buyer”) and (ii) a “qualified purchaser” (“Qualified Purchaser”) within the meaning of Section 2(a)(51) of the 1940 Act that can make all of the representations in the Trust Deed and the Note Agency Agreement applicable to a holder that is a U.S. Person. The beneficial interest in the Notes may only be transferred to a transferee that is a Qualified Institutional Buyer and a Qualified Purchaser that can make all of the representations in the Trust Deed and the Note Agency Agreement applicable to a holder that is a U.S. Person, except that in the case of any such transfer in reliance on Regulation S, only to a transferee that is not a U.S. Person. The Issuer has the right to compel any Holder that does not meet the qualifications and the transfer restrictions set forth in the Trust Deed and the Note Agency Agreement to sell its interest in the Notes, or may sell such interest on behalf of such owner, pursuant to the Trust Deed and the Note Agency Agreement.” (d) Additional Reporting Requirements. The Collateral Advisor on behalf of the Issuer shall provide or cause to be provided to Fitch the current portfolio of all Collateral Debt Securities in electronic and modifiable form with the fields listed in Schedule N, no later than the Fifteenth (15th) day of each month. For all Collateral Debt Securities which are not rated by Fitch, the Issuer shall provide, or cause to be provided to, Fitch with the following: (i) within thirty (30) days of the Closing Date, the offering memoranda and the most recent remittance reports for such Collateral Debt Securities held by the Issuer as of the Closing Date; and (ii)

ongoing remittance reports for such Collateral Debt Securities within ten (10) days of receipt of the

remittance report. The information referenced above shall be sent via e-mail to [email protected] or hardcopy to Fitch Ratings, One State Street Plaza, New York, New York 10004, Attention: Credit Products Surveillance – Additional Reporting. (e) Payment Date Instructions. The Issuer (or the Collateral Advisor on behalf of the Issuer) shall by Issuer Order instruct the Collateral Agent to withdraw on the related Payment Date from the Collection Account, and to pay or transfer, the amounts set forth in such Note Valuation Report in the manner specified in, and in accordance with, the Priority of Payments. The Issuer will be deemed to have given such instructions upon the Collateral Advisor’s approval of the Note Valuation Report. (f) Redemption Date Instructions. Not later than five (5) Business Days after receiving an Issuer Request (executed by the Issuer or the Collateral Advisor on behalf of the Issuer) requesting information regarding a redemption of the Notes of a Class as of a proposed Redemption Date set forth in such Issuer Request, the Collateral Advisor on behalf of the Issuer shall cause to be computed the following information and the Issuer shall provide such information in a statement made available to the Co-Issuers, the Collateral Advisor, the Trustee, the Initial Hedge Counterparty, the Principal Note Paying Agent, the Preferred Share Fiscal and Paying Agent, and delivered by e-mail to each Rating Agency and, so long as the Notes are listed on the Irish Stock Exchange, the Irish Stock Exchange: (i)

the aggregate principal amount of the Notes of the Class or Classes to be redeemed as of such Redemption Date; 20

(ii) the amount of accrued interest due on such Notes as of the last day of the Periodic Interest Accrual Period immediately preceding such Redemption Date; (iii)

the amount due and payable to the Initial Hedge Counterparty pursuant to the Initial Hedge Agreement;

(iv) the amount due and payable to any other Hedge Counterparty pursuant to the applicable Hedge Agreement (other than the Initial Hedge Agreement); and (v) Section 4.08.

the amount in the Collection Account available for application to the redemption of such Notes.

Release of Securities.

(a) Subject to Article VI, the Issuer (or the Collateral Advisor on behalf of the Issuer) may, by Issuer Order delivered to the Collateral Agent at least two (2) Business Days prior to the settlement date for any sale of a security certifying that the Issuer (or the Collateral Advisor on behalf of the Issuer) has determined that a Collateral Debt Security has become a Credit Risk Security (which certification shall contain a short statement of the reason for such determination), a Withholding Tax Security, a Written Down Security, a Defaulted Security or an Equity Security and, in each case, that the Issuer (or the Collateral Advisor on behalf of the Issuer) has directed the Collateral Agent to sell such security pursuant to Section 6.01(a), direct the Collateral Agent to release such security and, upon receipt of such Issuer Order, the Collateral Agent shall release any such security from the Lien of this Agreement and deliver any such security, if in physical form, duly endorsed to the broker or purchaser designated in such Issuer Order or, if such security is a Clearing Corporation Security, cause an appropriate transfer thereof to be made, in each case against receipt of the sales price therefor as set forth in such Issuer Order; provided, however, that the Collateral Agent may deliver any such security in physical form for examination in accordance with street delivery custom.

Processed and formatted by SEC Watch - Visit SECWatch.com

(b) If no Event of Default has occurred and is continuing and subject to Article VI, the Issuer (or the Collateral Advisor on behalf of the Issuer) may, by Issuer Order delivered to the Collateral Agent at least two (2) Business Days prior to the date set for redemption or payment in full of a Collateral Debt Security and certifying that such security is being redeemed or paid in full, direct the Collateral Agent, or at the Collateral Agent’s instructions, the Accountholder, to release any such security from the Lien of this Agreement and deliver such security, if in physical form, duly endorsed, or, if such security is a Clearing Corporation Security, to cause it to be presented to the appropriate paying agent therefor on or before the date set for redemption or payment, in each case against receipt of the redemption price or payment in full thereof. (c) If no Event of Default has occurred and is continuing and subject to Article VI, the Issuer (or the Collateral Advisor on behalf of the Issuer) may, by Issuer Order delivered to the Collateral Agent at least two (2) Business Days prior to the date set for an exchange, tender or sale, certifying that a Collateral Debt Security is subject to an Offer and setting forth in reasonable detail the procedure for response to such Offer, direct the Collateral Agent or, at the Collateral Agent’s instructions, the Accountholder, to release any such security from the Lien of this Agreement and deliver such security, if in physical form, duly endorsed, or, if such security is a Clearing Corporation Security, to cause it to be delivered, in accordance with such Issuer Order, in each case against receipt of payment therefor. 21

Processed and formatted by SEC Watch - Visit SECWatch.com

(d) The Collateral Agent shall, upon receipt of an Issuer Order at such time as there are no Notes Outstanding and all obligations of the Co-Issuers to the Secured Parties have been satisfied, release the Collateral from the Lien of this Agreement. Section 4.09.

Reports by Independent Accountants.

(a) On the Closing Date, the Issuer (or the Collateral Advisor on behalf of the Issuer) shall appoint a firm of Independent certified public accountants of recognized international reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Agreement. Upon any removal of or resignation by such firm, the Issuer (or the Collateral Advisor on behalf of the Issuer) shall promptly appoint by Issuer Order delivered to the Collateral Agent, the Trustee, each Hedge Counterparty and each Rating Agency, a successor thereto that shall also be a firm of Independent certified public accountants of recognized international reputation. If the Issuer (or the Collateral Advisor on behalf of the Issuer ) shall fail to appoint a successor to a firm of Independent certified public accountants which has resigned within thirty (30) days after such resignation, the Issuer (or the Collateral Advisor on behalf of the Issuer ) shall promptly notify each of the Trustee and each Hedge Counterparty of such failure. If the Issuer (or the Collateral Advisor on behalf of the Issuer ) shall not have appointed a successor within ten (10) days thereafter, the Collateral Agent shall promptly appoint a successor firm of Independent certified public accountants of recognized international reputation. The fees of such Independent certified public accountants and its successor shall be payable by the Issuer in accordance with the Priority of Payments. Any engagement letter appointing such Independent certified accountants shall contain appropriate limited recourse and non-petition language as against the Issuer equivalent to that contained in this Agreement. (b) No later than five (5) Business Days after the Closing Date, the Issuer shall deliver to each Rating Agency an agreed upon procedures letter from an Independent certified public accountant appointed by the Issuer in relation to the Issuer’s compliance with its obligations under this Agreement and the Trust Deed. On the Closing Date, the Issuer shall cause such Independent certified public accountant to deliver to each Rating Agency a report containing (i) a statement that the agreed upon procedures have been completed and (ii) such accountant’s findings with respect to the Issuer’s compliance with its obligations under this Agreement and the Trust Deed. All expenses relating to the engagement of Independent certified public accountants for the performance of services set forth in this Section 4.09(b) shall be borne by the Issuer. Section 4.10. Reports to Rating Agencies. In addition to the information and reports specifically required to be provided to S&P, Moody’s and Fitch pursuant to the terms of this Agreement, the Issuer (or the Collateral Advisor on behalf of the Issuer) shall provide S&P, Moody’s and Fitch with all information or reports delivered to the Collateral Agent and the Trustee hereunder, and such additional information as any Rating Agency may from time to time reasonably request in order to maintain its then- current rating of the Notes and the Issuer determines in its reasonable discretion may be obtained and provided without unreasonable burden or expense. The Issuer (or the Collateral Advisor on behalf of the Issuer) shall promptly notify the Trustee in writing if the rating on any Class of Notes has been, or it is known by the Issuer that such rating will be, changed or withdrawn. Upon receipt of such notice, the Trustee, in the name and at the expense of the CoIssuers, shall notify the Irish Paying Agent, so long as any Notes are listed thereon, of any reduction or withdrawal in the rating of such Notes. Section 4.11. Notices of Noteworthy Events. The Issuer shall provide each Rating Agency notice of the following events: (a) removal of the Collateral Advisor pursuant to the terms of the Collateral Advisory Agreement, the Collateral Agent pursuant to the terms of this Agreement and the Trustee pursuant to the terms of the Trust Deed, (b) appointment of any successor investment adviser pursuant to the terms of the Collateral Advisory Agreement, any successor collateral agent pursuant to the 22

Processed and formatted by SEC Watch - Visit SECWatch.com

terms of this Agreement and any successor trustee pursuant to the terms of the Trust Deed, (c) any delegation of duties by the Collateral Advisor under the Collateral Advisory Agreement, by the Collateral Agent under this Agreement and by the Trustee under the Trust Deed, (d) any modification of, or amendment to, the organizational documents of the Issuer and the Co-Issuer, (e) any other event of a similar nature as set forth in clauses (a), (b), (c) and (d) of this Section 4.11, (f) any redemption of any Class of Notes and (g) any termination of any party to a Transaction Document. Section 4.12. Amendments to the Transaction Documents. The Issuer shall only consent to any modification of any Transaction Document in accordance with the amendment provisions of such Transaction Document and shall only consent to a modification of any organizational document of the Issuer or the Co-Issuer after it has received a Rating Agency Confirmation with respect to such modification of such organizational document. The Issuer shall not amend this Agreement or any related defined terms in the Glossary pursuant to Section 11.01 until after it has received Rating Agency Confirmation with respect to such amendment. ARTICLE V PRIORITY OF PAYMENTS Section 5.01.

Disbursements of Money from Collection Account.

(a) On any Payment Date that is not a Redemption Date, in accordance with a Note Valuation Report prepared by the Collateral Advisor as of the last day of the Due Period preceding such Payment Date, Collateral Interest Collections, and Collateral Principal Collections, to the extent of Available Funds in the Collection Account, shall be applied by the Collateral Agent in the following order of priority (the “Priority of Payments”); provided, however, that with respect to clauses (i) through (xxiv) (excluding clause (xx)) below, such application shall be made, first, from Collateral Interest Collections and then, except for clause (vii) and (xxiv), to the extent Collateral Interest Collections are not sufficient for such payments, from Collateral Principal Collections (subject to any limitations described herein): (i) to pay, in the following order, (A) taxes and filing fees and registration fees (including, without limitation, annual return fees) payable by the Co-Issuers, if any; and then (B) the amount of any due and unpaid Trustee Fee and then (C) the amount of any due and unpaid Trustee Expenses, Collateral Agent Expenses and Collateral Administrator Expenses and the amount of any due and unpaid expenses of the Preferred Share Fiscal and Paying Agent and then the amount of any due and unpaid expenses of the Administrator and any Administrative Expenses, including amounts payable to the Collateral Advisor under the Collateral Advisory Agreement; and then (D) to deposit to the Expense Reserve Account the amount needed to bring the amount on deposit therein to U.S.$25,000 (unless the Collateral Advisor directs that a lesser amount be deposited to the Expense Reserve Account); provided that the cumulative amount paid under (C) and (D) (excluding any Administrative Expenses due or accrued with respect to the actions taken on or prior to the Closing Date and accounting fees that the Trustee is required to pay (other than certain accountants’ fees related to annual reviews) and fees the Trustee pays in connection with any Events of Default and any default of the Collateral Debt Securities) may not exceed U.S.$215,000 in the aggregate in any consecutive 12-month period; (ii) to pay the Senior Collateral Advisory Fee with respect to such Payment Date and any Senior Collateral Advisory Fee with respect to a previous Payment Date that was not paid on a previous Payment Date; 23

Processed and formatted by SEC Watch - Visit SECWatch.com

(iii) to pay any Hedge Counterparty any amounts due to such Hedge Counterparty under any Hedge Agreement, not including any termination payments payable under clause (xxi) below; (iv)

to pay Periodic Interest on the Class A-1 Notes (including Defaulted Interest and any interest thereon);

(v) to pay, pari passu, Periodic Interest on the Class A-2A Notes and the Class A-2B Notes (including Defaulted Interest and any interest thereon); (vi) if either of the Class A Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal of the Class A-1 Notes then Outstanding until such Class A Coverage Test is satisfied as of such Calculation Date or until the Class A-1 Notes are paid in full, and then to pay, pari passu, principal of the Class A-2A Notes and the Class A-2B Notes then Outstanding until such Class A Coverage Test is satisfied as of such Calculation Date or until the Class A-2 Notes are paid in full; provided that for purposes of determining if the Class A Principal Coverage Test is satisfied, the denominator of the Class A Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Class A Notes to be made pursuant to this clause (vi); provided, further, that for purposes of determining if the Class A Principal Coverage Test is satisfied, the numerator of the Class A Principal Coverage Ratio shall be calculated after giving effect to (A) any Collateral Principal Collections to be applied pursuant to clauses (i) through (v) above and (B) any Collateral Principal Collections to be applied pursuant to this clause (vi); (vii) to pay, from Collateral Interest Collections (if any), an amount equal to the Interest Reserve Amount for deposit into the Interest Reserve Account; (viii) to pay Periodic Interest on the Class B-1 Notes, based on the amount of interest due on the Class B-1 Notes (including, any Defaulted Interest on the Class B-1 Notes and any interest thereon); (ix) to pay Periodic Interest on the Class B-2 Notes, based on the amount of interest due on the Class B-2 Notes (including, if no Class A Notes or Class B-1 Notes are Outstanding, any Defaulted Interest on the Class B-2 Notes and any interest thereon); (x) if either of the Class B Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal (including any Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount) of the most senior Class of Notes then Outstanding until such Class B Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class B Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class B Coverage Test is satisfied or until the Class B-1 Notes and then the Class B-2 Notes, in that order, are paid in full; provided that for purposes of determining if the Class B Principal Coverage Test is satisfied, the denominator of the Class B Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to clause (vi) above and pursuant to this clause (x) on the related Payment Date; provided, further, that for purposes of determining if the Class B Principal Coverage Test is satisfied, the numerator of the Class B Principal Coverage Ratio shall be calculated after giving effect to (A) any Collateral Principal Collections to be applied pursuant to clauses (i) through (ix) above (excluding clause (vii)) and (B) any Collateral Principal Collections to be applied to the Notes pursuant to this clause (x) on the related Payment Date; and provided, 24

Processed and formatted by SEC Watch - Visit SECWatch.com

further, that with respect to the Class B-2 Notes, payment of principal not constituting Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any, for the Class B-2 Notes; (xi)

to pay the Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(xii) to pay, pari passu, Periodic Interest on the Class C-1A Notes and the Class C-1B Notes, based on the amount of interest due on the Class C-1 Notes (including, if no Class A Notes or Class B Notes are Outstanding, any Defaulted Interest on the Class C-1 Notes and any interest thereon); (xiii) to pay Periodic Interest on the Class C-2 Notes, based on the amount of interest due on the Class C-2 Notes (including, if no Class A Notes, Class B Notes or Class C-1 Notes are Outstanding, any Defaulted Interest on the Class C-2 Notes and any interest thereon); (xiv) if either of the Class C Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal (including any Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount or Class C Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class C Coverage Test is satisfied or until the Class C-1 Notes and then the Class C-2 Notes, in that order, are paid in full; provided that for purposes of determining if the Class C Principal Coverage Test is satisfied, the denominator of the Class C Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes pursuant to clauses (vi) and .(x) above and pursuant to this clause (xiv) on the related Payment Date; provided, further, that for purposes of determining if the Class C Principal Coverage Test is satisfied, the numerator of the Class C Principal Coverage Ratio shall be calculated after giving effect to (A) any Collateral Principal Collections to be applied pursuant to clauses (i) through (xiii) above (excluding clause (vii) and (B) any Collateral Principal Collections to be applied to the Notes pursuant to this clause (xiv) on the related Payment Date; and provided, further, that with respect to (A) the Class B-2 Notes, payment of principal not constituting the Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; (B) the Class C-1 Notes, payment of principal not constituting the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (C) the Class C-2 Notes, payment of principal not constituting the Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; (xv)

to pay the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(xvi)

to pay the Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; 25

Processed and formatted by SEC Watch - Visit SECWatch.com

(xvii) to pay, pari passu, Periodic Interest on the Class D-1A Notes and the Class D-1B Notes, based on the amount of interest due on the Class D Notes (including, if no Class A Notes, Class B Notes or Class C Notes are Outstanding, any Defaulted Interest on the Class D Notes and any interest thereon); (xviii) if either of the Class D Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal (including any Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount, Class C Cumulative Applicable Periodic Interest Shortfall Amount or Class D Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class D Principal Coverage Test is satisfied or until the Class D Notes are paid in full; provided that for purposes of determining if the Class D Principal Coverage Test is satisfied, the denominator of the Class D Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes pursuant to clauses (vi), (x) and (xiv) above and pursuant to this clause (xviii) on the related Payment Date; provided, further, that for purposes of determining if the Class D Principal Coverage Test is satisfied, the numerator of the Class D Principal Coverage Ratio shall be calculated after giving effect to (A) any Collateral Principal Collections to be applied pursuant to clauses (i) through (xvii) above (excluding clause (vii)) and (B) any Collateral Principal Collections to be applied to the Notes pursuant to this clause (xviii) on the related Payment Date; and provided, further, that with respect to (A) the Class B-2 Notes, payment of principal not constituting the Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; (B) the Class C-1 Notes, payment of principal not constituting the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any; (C) the Class C-2 Notes, payment of principal not constituting the Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (D) the Class D Notes, payment of principal not constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any; (xix)

to pay the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(xx) to pay, in the following order, (A) the principal of the Class A-1 Notes until paid in full, and then (B) pari passu, the principal of the Class A-2A Notes and the Class A-2B Notes until paid in full, and then (C) the principal of the Class B-1 Notes until paid in full, and then (D) the principal of the Class B-2 Notes until paid in full, and then (E) pari passu, the principal of the Class C-lA Notes and the Class C-1B Notes until paid in full, and then (F) the principal of the Class C-2 Notes until paid in full, and then (G) pari passu, the principal of the Class D-1A Notes and the Class D-1B Notes until paid in full; provided that the foregoing items (A) through (G) shall be payable in an aggregate amount equal on any Payment Date to the lesser of (1) the amount of Collateral Principal Collections received during the related Due Period and (2) the amount of Available Funds then remaining in the Collection Account; (xxi) to pay termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, if such termination occurred solely as the result 26

Processed and formatted by SEC Watch - Visit SECWatch.com

of an event of default or a termination event with respect to the Hedge Counterparty as Defaulting Party or sole Affected Party, as the case may be; (xxii) to pay, in the following order, (A) any due and unpaid Trustee Fee, Trustee Expenses, Collateral Agent Expenses and Collateral Administrator Expenses, Preferred Share Fiscal and Paying Agent Expenses or Administrative Expenses, including amounts payable to the Collateral Advisor under the Collateral Advisory Agreement, in each case, in the same order of priority as provided in clause (i) above and to the extent not previously paid in full under clause (i) above, and (B) on a pro rata basis, any due and unpaid expenses and other liabilities of the Co-Issuers to the extent not previously paid under clause (i) above, in each case, whether as a result of an amount limitation imposed thereunder or otherwise; (xxiii) to pay the Subordinate Collateral Advisory Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Advisory Fee with respect to a previous Payment Date that was not paid on a previous Payment Date; (xxiv) after the Payment Date occurring in August 2015, to pay from remaining Collateral Interest Collections on any Payment Date the principal on the Class D Notes, until paid in full, then the principal on the Class C-2 Notes, until paid in full, then the principal of the Class C-1 Notes, until paid in full, then the principal on the Class B-2 Notes, until paid in full, then the principal on the Class B-1 Notes, until paid in full, then the principal on the Class A-2 Notes until paid in full and then the principal on the Class A-1 Notes until paid in full; and (xxv) all Excess Funds to the Preferred Share Fiscal and Paying Agent, on behalf of the Issuer for the payment of dividends or distributions on the Preferred Shares in accordance with the Preferred Share Documents. (b) Notwithstanding the foregoing, on any Redemption Date or Auction Call Redemption Date, the Collateral Agent shall pay, from the Collection Account, in the following order: (i) the amounts set forth in clauses (i), (ii) and (iii) of the Priority of Payments, (ii) the Redemption Price of each Class of Notes in accordance with the Priority of Payments and (iii) the amounts set forth in clauses (xxi) through (xxv) of the Priority of Payments. (c) Notwithstanding Section 5.01(a), if an acceleration of maturity has occurred and is continuing in connection with an Event of Default, on the date or dates determined by the Trustee, the Trustee shall pay, from all collections from, and proceeds of the sale or liquidation of, the Collateral, in the following order: (i) amounts corresponding to the amounts set forth in clauses (i), (ii) and (iii) of the Priority of Payments, (ii) the Periodic Interest on the Class A-1 Notes and then on the Class A-2 Notes (including any Defaulted Interest on such Class A Notes) and then principal on the Class A-1 Notes until paid in full and then principal on the Class A-2 Notes until paid in full, (iii) the Periodic Interest on the Class B-1 Notes (including any Defaulted Interest on the Class B-1 Notes) and then principal on the Class B-1 Notes until paid in full, (iv) the Periodic Interest on the Class B-2 Notes (including any Defaulted Interest on the Class B-2 Notes) and then principal on the Class B-2 Notes (including Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full, (v) the Periodic Interest on the Class C-1 Notes (including any Defaulted Interest on the Class C-1 Notes) and then principal on the Class C-1 Notes (including Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full, (vi) the Periodic Interest on the Class C-2 Notes (including any Defaulted Interest on the Class C-2 Notes) and then principal on the Class C-2 Notes (including Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full, (vii) the Periodic Interest on the Class D Notes (including any Defaulted Interest on the Class D Notes) and then principal on the Class D Notes (including Class D Cumulative Applicable Periodic Interest Shortfall Amount, if 27

Processed and formatted by SEC Watch - Visit SECWatch.com

any) until paid in full, (viii) amounts corresponding to the amounts set forth in clauses (xxi) through (xxiii) of the Priority of Payments and (viii) any remaining amounts to the Preferred Share Fiscal and Paying Agent, for payment of dividends or distributions on the Preferred Shares. Section 5.02.

Additional Provisions.

(a) (1) On the applicable Stated Maturity Date of the Notes, the Issuer (or the Collateral Advisor acting pursuant to the Collateral Advisory Agreement on behalf of the Issuer) shall direct the Collateral Agent in writing to (and the Collateral Agent shall, in the manner so directed by the Collateral Advisor on behalf of the Issuer) liquidate any remaining Collateral Debt Securities and any Hedge Agreements (for value on the applicable Stated Maturity Date of the Notes) and deposit the proceeds thereof, if any, in the Collection Account. On the applicable Stated Maturity Date of the Notes, all net proceeds from such liquidation and all available Cash, after the payment of the amounts referred to in clauses (i) through (xxiii) of the Priority of Payments in the order set forth therein, shall be distributed to the Holders of the Preferred Shares, whereupon all of the Preferred Shares will be redeemed pursuant to the Issuer’s Articles. (2) Upon any Redemption or Auction Call Redemption, the Issuer (or the Collateral Advisor acting pursuant to the Collateral Advisory Agreement on behalf of the Issuer) shall direct the Collateral Agent in writing to (and the Collateral Agent shall, in the manner so directed by the Collateral Advisor) liquidate any remaining Collateral Debt Securities and any Hedge Agreements (for value on the date of such Redemption or Auction Call Redemption, as the case may be) and deposit the proceeds thereof, if any, in the Collection Account. (b) If on any Payment Date the amount available in the Collection Account from amounts received in the related Due Period is insufficient to make the full amount of the disbursements required by the statements furnished by the Issuer pursuant to Section 4.07(a), the Collateral Agent shall make the disbursements called for in the order and according to the Priority of Payments set forth under Section 5.01(a), subject to Section 7.01, to the extent funds are available therefor. (c) In the event that any Hedge Counterparty defaults in the payment of its obligations to the Issuer under the relevant Hedge Agreement on any date when such amount was due and payable, the Collateral Agent shall make a demand on such Hedge Counterparty or any guarantor, if applicable, demanding payment by 12:30 p.m. on the Business Day following such date. The Collateral Agent shall give notice to the Collateral Advisor, S&P and the Trustee and the Trustee shall deliver such notice to the Noteholders upon the continuing failure by such Hedge Counterparty to perform its obligations during the same Business Day following a demand made by the Collateral Agent on such Hedge Counterparty, and shall take such action with respect to such continuing failure directed to be taken by the Trustee. (d) Notwithstanding any provision to the contrary contained herein, the provisions of Articles II and VII and the other provisions hereof are subject to the Priority of Payments specified in this Article V, and, in the event of any inconsistency between the provisions of Article II, Article VII or the other provisions hereof and the Priority of Payments, the Priority of Payments will control. (e) As a condition to the payment of principal and interest on any Note without U.S. federal back-up withholding, the Issuer shall require the delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor 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 Internal Revenue Service Form W-8BEN (or applicable successor 28

Processed and formatted by SEC Watch - Visit SECWatch.com

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) from each Noteholder. ARTICLE VI SALE OF COLLATERAL DEBT SECURITIES Section 6.01.

Sale of Collateral Debt Securities.

(a) Subject to the satisfaction of the conditions specified in Section 4.08 as applicable, if the Collateral Advisor, on behalf of the Issuer, pursuant to this Section 6.01 and Section 6.02, shall direct the Collateral Agent to sell any Defaulted Security, Equity Security, Credit Risk Security, Written Down Security or Withholding Tax Security, the Collateral Agent shall sell in the manner directed by the Collateral Advisor, any Defaulted Security, Equity Security, Credit Risk Security, Written Down Security or Withholding Tax Security. (b) A Defaulted Security, a Credit Risk Security, a Written Down Security, a Withholding Tax Security or an Equity Security may be sold at any time. In addition, if a Collateral Debt Security that is a Defaulted Security is not sold within one year of such Collateral Debt Security becoming a Defaulted Security, the Collateral Advisor, on behalf of the Issuer, shall use its best efforts to effect the sale of such Collateral Debt Security on such later date as such Collateral Debt Security may first be sold in accordance with its terms and with applicable law; provided, however, that the Collateral Advisor may hold Defaulted Securities up to three (3) years after such securities become Defaulted Securities as long as the total amount of such securities does not exceed 5% of the CDS Principal Balance and any amount over such 5% limit shall be sold within one (1) year. (c) Any Equity Security must be sold within ninety (90) days after receipt and any Equity Security which constitutes Margin Stock must be sold within forty-five (45) days after receipt. Notwithstanding the foregoing, Equity Securities that are received upon the exercise of convertible bonds must be sold within five (5) Business Days of receipt (or within five (5) Business Days of such later date as such Equity Security may first be sold in accordance with its terms and applicable law). (d) In the event of a Redemption or Auction Call Redemption, the Collateral Advisor shall direct the Collateral Agent to sell Collateral Debt Securities without regard to the foregoing limitations; provided that the Sale Proceeds therefrom and other amounts available therefor will be at least sufficient to pay certain expenses, including all amounts due under any Hedge Agreements, and redeem in whole the Notes at the applicable Redemption Prices; and provided, further, that such Sale Proceeds are used to make such a Redemption or Auction Call Redemption. (e) The Collateral Advisor shall sell any Collateral Debt Security pursuant to this Section 6.01 only at a price that, in its judgment, is not substantially less than the market value of such Collateral Debt Security at the time of such sale. Section 6.02.

Conditions Applicable to all Transactions.

(a) Any transaction effected under this Article VI shall be conducted on an arm’s-length basis, and, if effected with a Person affiliated with the Collateral Advisor, the Issuer or the Collateral Agent, shall be effected in a primary or secondary market transaction on terms as favorable to the Issuer as would be the case if such Person were not so affiliated; provided, however, that after the Closing Date, the Collateral Advisor and its Affiliates may, as principals or for their own accounts, sell Collateral Debt Securities or enter into any Hedge Agreements with the Issuer if and to the extent such 29

Processed and formatted by SEC Watch - Visit SECWatch.com

transactions comply with the Investment Advisers Act; provided, further, that the Collateral Advisor may, on behalf of the Issuer, sell Collateral Debt Securities or enter into Hedge Agreements with other entities for which it, or an Affiliate, acts as an investment advisor; provided, further, that the Collateral Advisor will be permitted to acquire an obligation on behalf of the Issuer to be included in the Collateral from its Permitted Affiliates as principal or as agent or to sell an obligation to its Permitted Affiliates as principal or agent subject to the Investment Advisers Act; and provided, further, that the Collateral Advisor may acquire an obligation on behalf of the Issuer to be included in the Collateral from itself or from any of its Affiliates that are not Permitted Affiliates, or from funds or accounts for which the Collateral Advisor or any of its Affiliates acts as investment adviser or sell an obligation on behalf of the Issuer to itself, or to any of its Affiliates that are not Permitted Affiliates or to funds or accounts for which the Collateral Advisor or any of its Affiliates acts as an investment adviser; provided, however, that any such acquisition or disposition must be approved by the board of directors of the Issuer. Notwithstanding the foregoing, prior to selling any Collateral Debt Securities to any Person affiliated with the Collateral Advisor (other than a Permitted Affiliate), the Collateral Advisor shall use its reasonable efforts to solicit bids from two non-affiliated Persons; provided that transactions with Permitted Affiliates shall be conducted as arm’s-length transactions; and provided, further, that in the event that the Collateral Advisor is unable, in its good faith determination, to obtain two bids from non-affiliated Persons, the Collateral Advisor shall use its reasonable efforts to solicit bids from a non-affiliated Person; and provided, further, that in the event that the Collateral Advisor in its good faith determination is unable to obtain a bid from a non-affiliated Person, it shall use its reasonable efforts to obtain an appraisal from a non-affiliated Person; and provided, further, that such Collateral Debt Securities shall be sold to such Person affiliated with the Collateral Advisor at the highest of the bids or the appraisal value so obtained. ARTICLE VII SUBORDINATION Section 7.01.

Subordination.

(a) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Class A-2 Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the C-2 Notes and the Class D Notes and the Holders of the Preferred Shares and the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class A-1 Notes that the Class A-2 Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Preferred Shares, the Ordinary Shares and the Issuer’s rights in and to the Collateral (the “Class A1 Subordinate Interests”) shall be subordinate and junior to the Class A-1 Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class A-1 Notes, to the extent set forth in Section 5.01(c), shall be paid in full in Cash or, to the extent that the Holders of 662/3% of the outstanding principal amount of the Class A-1 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Class A-1 Subordinate Interests. The Holders of the Class A-2 Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes and the Class D Notes have agreed in the Trust Deed, the Holders of the Preferred Shares have agreed in the Preferred Share Fiscal and Paying Agency Agreement and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class A-1 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Class A-2 Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Preferred Shares and 30

the Ordinary Shares or hereunder until the payment in full of the Class A-1 Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands. (b) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes and the Preferred Shares and the holders of the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class A-2 Notes that the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Preferred Shares, the Ordinary Shares and the Issuer’s rights in and to the Collateral (the “Class A-2 Subordinate Interests”) shall be subordinate and junior to the Class A-2 Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class A-2 Notes shall be paid in full in Cash or, to the extent 662/3% of the outstanding principal amount of the Class A-2 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Class A-2 Subordinate Interests. The Holders of the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes and the Class D Notes have agreed in the Trust Deed, the Holders of the Preferred Shares have agreed in the Preferred Share Fiscal and Paying Agency Agreement and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class A-2 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Preferred Shares and the Ordinary Shares or hereunder until the payment in full of the Class A-2 Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands.

Processed and formatted by SEC Watch - Visit SECWatch.com

(c) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes and the Preferred Shares and the holders of the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class B-1 Notes that the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Preferred Shares, the Ordinary Shares and the Issuer’s rights in and to the Collateral (the “Class B-1 Subordinate Interests”) shall be subordinate and junior to the Class B-1 Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class B-1 Notes shall be paid in full in Cash or, to the extent 662/3% of the outstanding principal amount of the Class B-1 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Class B-1 Subordinate Interests. The Holders of the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes and the Class D Notes have agreed in the Trust Deed, the Holders of the Preferred Shares have agreed in the Preferred Share Fiscal and Paying Agency Agreement and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class B-1 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Preferred Shares and the Ordinary Shares or hereunder until the payment in full of the Class B-1 Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands. (d) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Class C-1 Notes, the Class C-2 31

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes, the Class D Notes and the Preferred Shares and the holders of the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class B-2 Notes that the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Preferred Shares, the Ordinary Shares and the Issuer’s rights in and to the Collateral (the “Class B-2 Subordinate Interests”) shall be subordinate and junior to the Class B-2 Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class B-2 Notes shall be paid in full in Cash or, to the extent 662/3% of the outstanding principal amount of the Class B-2 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Class B-2 Subordinate Interests. The Holders of the Class C-1 Notes, the Class C-2 Notes and the Class D Notes have agreed in the Trust Deed, the Holders of the Preferred Shares have agreed in the Preferred Share Fiscal and Paying Agency Agreement and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class B-2 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Preferred Shares and the Ordinary Shares or hereunder until the payment in full of the Class B-2 Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands. (e) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Class C-2 Notes, the Class D Notes and the Preferred Shares and the holders of the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class C-1 Notes that the Class C-2 Notes, the Class D Notes, the Preferred Shares, the Ordinary Shares and the Issuer’s rights in and to the Collateral (the “Class C-1 Subordinate Interests”) shall be subordinate and junior to the Class C-1 Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class C-1 Notes shall be paid in full in Cash or, to the extent 662/3% of the outstanding principal amount of the Class C-1 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Class C-1 Subordinate Interests. The Holders of the Class C-2 Notes and the Class D Notes have agreed in the Trust Deed, the Holders of the Preferred Shares have agreed in the Preferred Share Fiscal and Paying Agency Agreement and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class C-1 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Class C-2 Notes, the Class D Notes, the Preferred Shares and the Ordinary Shares or hereunder until the payment in full of the Class C-1 Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands. (f) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Class D Notes and the Preferred Shares and the holders of the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class C-2 Notes that the Class D Notes, the Preferred Shares, the Ordinary Shares and the Issuer’s rights in and to the Collateral (the “Class C-2 Subordinate Interests”) shall be subordinate and junior to the Class C-2 Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class C-2 Notes shall be paid in full in Cash or, to the extent 662/3% of the outstanding principal amount of the Class C-2 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Class C-2 Subordinate Interests. The Holders of the 32

Processed and formatted by SEC Watch - Visit SECWatch.com

Class D Notes have agreed in the Trust Deed, the Holders of the Preferred Shares have agreed in the Preferred Share Fiscal and Paying Agency Agreement and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class C-2 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Class D Notes, the Preferred Shares and the Ordinary Shares or hereunder until the payment in full of the Class C-2 Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands. (g) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Preferred Shares and the holders of the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class D Notes that the Preferred Shares, the Ordinary Shares and the Issuer’s rights in and to the Collateral (the “Class D Subordinate Interests”) shall be subordinate and junior to the Class D Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class D Notes shall be paid in full in Cash or, to the extent 662/3% of the outstanding principal amount of the Class D Notes consent, other than in Cash, before any further payment or distribution is made on account of the Class D Subordinate Interests. The Holders of the Preferred Shares have agreed in the Preferred Share Fiscal and Paying Agency Agreement and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class D Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Preferred Shares and the Ordinary Shares or hereunder until the payment in full of the Class D Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands. (h) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer and the Holders of the Notes agree for the benefit of any Hedge Counterparty that the Notes and the Issuer’s rights in and to the Collateral (the “Hedge Counterparty Subordinate Interests”) shall be subordinate and junior to the rights of any Hedge Counterparty with respect to payments to be made to any Hedge Counterparty pursuant to a Hedge Agreement to the extent and in the manner set forth in Section 5.01(a) and as hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with Condition 13 (Events of Default), including as a result of an Event of Default specified in clause (g) or (h) of Condition 13 (Events of Default), all amounts payable to any Hedge Counterparty pursuant to Section 5.01(a)(iii) shall be paid in Cash or, to the extent any Hedge Counterparty consents, other than in Cash, before any further payment or distribution is made on account of the Hedge Counterparty Subordinate Interests. ARTICLE VIII HEDGE AGREEMENTS, INITIAL HEDGE AGREEMENT Section 8.01. (a)

Hedge Agreement Provisions. [Intentionally Omitted.]

(b) The Issuer may from time to time enter into one or more other Hedge Agreements (other than the Initial Hedge Agreement), with respect to which Rating Agency Confirmation from each Rating Agency shall have been obtained. The Issuer (or the Collateral Advisor on behalf of the 33

Processed and formatted by SEC Watch - Visit SECWatch.com

Issuer) may, from time to time, enter into, subject to the remainder of this Section 8.01, one or more replacement Hedge Agreements in the event that any Hedge Agreement is terminated prior to its scheduled expiration, and the Collateral Agent may release funds in the Collection Account in accordance with the Priority of Payments for such purpose; provided, however, that such released funds shall not exceed the amount of any termination payment received in respect of a terminated Hedge Agreement; and provided, further, that Rating Agency Confirmation shall have been received. The notional amounts of the Hedge Agreements may be reduced from time to time by the Issuer; provided that Rating Agency Confirmation shall have been received. The Collateral Advisor shall not cause the occurrence of a Notional Balance Reduction (as defined in the Hedge Agreements) unless a Rating Agency Confirmation shall have been received. At least five (5) Business Days before the effective date of any amendment to a Hedge Agreement, the Issuer (or the Collateral Advisor on behalf of the Issuer) shall provide each Rating Agency with a copy of such amendment. The Issuer shall obtain Rating Agency Confirmation from Fitch, S&P and Moody’s prior to entering into any such amendment. (c) In the event of any early termination of a Hedge Agreement with respect to which the Hedge Counterparty is the sole Defaulting Party or Affected Party (as defined in the Hedge Agreements), (i) any termination payment paid by the Hedge Counterparty to the Issuer will be deposited in a single, segregated account held in the United States in the name of the Collateral Agent (the “Hedge Termination Receipts Account”) for the benefit of the Collateral Agent for and on behalf of the Trustee for and on behalf of the Noteholders (other than the Hedge Counterparty) under this Agreement and (ii) any Hedge Replacement Proceeds received from a replacement counterparty will be deposited in a single, segregated account held in the United States in the name of the Collateral Agent (the “Hedge Replacement Account”) for the benefit of the Hedge Counterparty under the terminated Hedge Agreement. (d) The Collateral Advisor will use its best efforts to cause the Issuer, promptly following the early termination of a Hedge Agreement (other than on a Redemption Date) and to the extent possible through application of funds available in the Hedge Termination Receipts Account and the Hedge Replacement Account, to enter into a replacement hedge agreement (a “Replacement Hedge”); provided that Rating Agency Confirmation has been received. (i) If (A) the funds available in the Hedge Termination Receipts Account exceed the costs of entering into a Replacement Hedge, (B) the Collateral Advisor determines not to replace the terminated Hedge Agreement and Rating Agency Confirmation is received or (C) the termination is occurring on a Redemption Date, then amounts in the Hedge Termination Receipts Account (after providing for the costs of entering into a Replacement Hedge, if any) shall become part of Collateral Principal Collections and be distributed in accordance with the Priority of Payments on the next following Payment Date (or on such Redemption Date, in the event that the Notes are optionally redeemed thereon). (ii) If the termination of the applicable Hedge Agreement occurred as a result of a credit rating failure described in Section 8.01(f) in respect of such Hedge Counterparty and a Hedge Shortfall Amount exists, the Collateral Agent shall demand that the applicable Hedge Counterparty pay to the Issuer such Hedge Shortfall Amount, and upon receipt such payment shall become part of Collateral Principal Collections. If the termination of the applicable Hedge Agreement occurred for any other reason, the Hedge Shortfall Amount shall become part of the Hedge Payment Amount to be paid in accordance with the Priority of Payments on the next following Payment Date (or on such Redemption Date, in the event that the Notes are optionally redeemed thereon). (e) The amounts in the Hedge Replacement Account will be applied directly to the payment of Defaulted Hedge Termination Payments, if any, payable by the Issuer to the Hedge 34

Processed and formatted by SEC Watch - Visit SECWatch.com

Counterparty. To the extent not fully paid from Hedge Replacement Proceeds, a Defaulted Hedge Termination Payment shall be payable to the Hedge Counterparty on the next Payment Date in accordance with the Priority of Payments. To the extent that the funds available in the Hedge Replacement Account exceed any such Defaulted Hedge Termination Payments (or if there are no Defaulted Hedge Termination Payments), the amounts in the Hedge Replacement Account shall become part of Collateral Principal Collections and shall be transferred to the Note Payment Account and distributed in accordance with the Priority of Payments on the following Payment Date. (f) The Collateral Agent shall, upon receiving written notice from the Collateral Advisor of the exposure calculated under the Credit Support Annex (as defined below) to the Hedge Agreement, make a demand to the Hedge Counterparty and its credit support provider, if applicable, for securities having a value under such Credit Support Annex equal to the required credit support amount. If at any time the short-term rating of the Hedge Counterparty or its guarantor from Moody’s is lower than “P-1” or is “P1” and has been placed on and is remaining on credit watch with negative implications by Moody’s or the long-term rating of the Hedge Counterparty or its guarantor from Moody’s is lower than “Al” or is “Al” and has been placed on and is remaining on credit watch with negative implications by Moody’s or, if no short-term rating is available, the long-term rating of the Hedge Counterparty or its guarantor from Moody’s is withdrawn, suspended or downgraded below “Aa3” or is “Aa3” and has been placed on and is remaining on credit watch with negative implications by Moody’s, or the short-term rating of the Hedge Counterparty or its guarantor from Fitch is lower than “F-1” or the long-term rating of the Hedge Counterparty or its guarantor from Fitch is lower than “A” (each, a “Collateralization Event”), the Issuer and the Hedge Counterparty shall amend the Hedge Agreement, solely at the expense of the Hedge Counterparty, by incorporating provisions in the form of the ISDA Credit Support Annex attached as an annex to the Hedge Agreement (the “Credit Support Annex”) which shall require that the Hedge Counterparty maintain collateral sufficient to prevent a downgrade or withdrawal by Moody’s or Fitch, as the case may be (as confirmed at such time by Moody’s or Fitch, as the case may be, in writing), of its then-current rating on the Notes; provided that if the Hedge Counterparty has not within five (5) days following a Collateralization Event incorporated the Credit Support Annex and provided sufficient collateral, a Substitution Event (as defined below) shall be deemed to have occurred and the Hedge Counterparty shall be required to take the remedial action specified thereunder. In the event that (i) so long as any Notes are Outstanding and rated by S&P, the short-term rating of the Hedge Counterparty or its guarantor from S&P is withdrawn, suspended or downgraded below “A-1” or, if no short-term rating is available, the long-term rating of the Hedge Counterparty or its guarantor from S&P is withdrawn, suspended or downgraded below “A+”, (ii) so long as any Notes are Outstanding and rated by Fitch, the short-term rating of the Hedge Counterparty or its guarantor from Fitch is withdrawn, suspended or downgraded below “F-1” or, if no short-term rating is available, the long-term rating of the Hedge Counterparty or its guarantor from Fitch is withdrawn, suspended or downgraded below “A” or (iii) the short-term rating of the Hedge Counterparty or its guarantor from Moody’s is “P-2” or lower or the long-term rating of the Hedge Counterparty or its guarantor from Moody’s is “A3” or lower or, if no shortterm rating is available, the long-term rating of the Hedge Counterparty or its guarantor from Moody’s is “A2” or lower (each, a “Substitution Event”), the Hedge Counterparty will be required, within thirty (30) days following such Substitution Event, while it continues in good faith to search for an eligible Substitute Party (as defined below), to assign its rights and obligations under the Hedge Agreement at no cost to the Issuer to a party (the “Substitute Party”) selected by the Hedge Counterparty (i) whose short-term rating by Moody’s is not lower than “P-1” and is not “P-1” and has been placed on and is remaining on credit watch with negative implications and whose long-term rating by Moody’s is not lower than “Al” or is not “Al” and has been placed on and is remaining on credit watch with negative implications by Moody’s or, if no short-term rating is available, whose long-term rating by Moody’s is at least “Aa3” and is not “Aa3” or has been placed on and is remaining on credit watch with negative implications by Moody’s, (ii) whose short-term rating by S&P is 35

Processed and formatted by SEC Watch - Visit SECWatch.com

not lower than “A-1” or, if no short-term rating is available, whose long-term rating by S&P is not lower than “A+” and who is not on credit watch with negative implications by S&P and (iii) whose short-term rating by Fitch is not lower than “F-1” or, if no short-term rating is available, whose long-term rating by Fitch is not lower than “A” and who is not on credit watch with negative implications by Fitch, and with respect to which each Rating Agency has confirmed in writing that its then-current ratings on any Class of Notes rated by such Rating Agency will not be adversely affected; provided that such right shall be subject to the assumption by the Substitute Party of all of the Hedge Counterparty’s obligations under the Hedge Agreement pursuant to an agreement satisfactory to the Issuer. If the Hedge Counterparty fails to assign its rights and obligations under the Hedge Agreement to a Substitute Party within thirty (30) days following such Substitution Event, the Hedge Counterparty and the Issuer shall, on or before such thirtieth (30th) day, have amended the Hedge Agreement, solely at the expense of the Hedge Counterparty, to incorporate the Credit Support Annex, which shall require that the Hedge Counterparty pledge and assign to the Trustee collateral consisting of cash and/or eligible investments in an amount sufficient to maintain the then-current rating of the Notes by each Rating Agency (as confirmed in writing by each Rating Agency). Any costs attributable to pledging and assigning any collateral and finding a suitable Substitute Party shall be borne solely by the Hedge Counterparty and nothing in this paragraph shall relieve the Hedge Counterparty from its obligations to assign its rights and obligations under the Hedge Agreement to a Substitute Party in accordance herewith or the terms of the Hedge Agreement. (g) The Issuer (or the Collateral Advisor on behalf of the Issuer) shall enter into Hedge Agreements solely for the purpose of managing interest rate and other risks in connection with the Issuer’s issuance of, and payments on, the Notes and the Issuer’s ownership and disposition of the Collateral Debt Securities. (h) The amounts payable to the Hedge Counterparties shall be limited to the amounts payable under the Priority of Payments and the claims of each Hedge Counterparty (if there is more than one) shall rank equally. (i) The Collateral Advisor and the Rating Agencies shall be notified by the Issuer of any amendments to and modifications of the Hedge Agreements. (j)

Each Hedge Agreement will provide with respect to the Issuer for provisions substantially similar to Sections 10.06

and 10.15. Section 8.02. Initial Hedge Agreement. On or prior to the Closing Date, the Issuer shall enter into an interest rate hedge agreement (the “Initial Hedge Agreement”), dated as of the Closing Date, with the Initial Hedge Counterparty. Under the Initial Hedge Agreement, on each Payment Date, the Issuer will pay an amount equal to the Issuer Initial Hedge Payment Amount and, on the Business Day preceding each of the Payment Dates, the Initial Hedge Counterparty will pay an amount equal to the Initial Hedge Counterparty Payment Amount. Upon receipt of each Initial Hedge Counterparty Payment Amount, such Initial Hedge Counterparty Payment Amount shall be deposited in the Collection Account by the Collateral Agent on the Business Day preceding each of the Payment Dates, commencing on the first Payment Date following the Due Period in which such payments are received. Section 8.03. Acknowledgement of Custodian. Subject to a mutual agreement with respect to a custodial arrangement, LaSalle Bank National Association will act as the custodian of the Issuer under the Initial Hedge Agreement and will comply with the Issuer’s instructions with respect to any collateral posted pursuant to such Initial Hedge Agreement. 36

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE IX THE COLLATERAL AGENT Section 9.01. Appointment and Powers. Subject to the terms and conditions hereof, the Issuer hereby appoints LaSalle Bank National Association as the Collateral Agent and LaSalle Bank National Association hereby accepts such appointment and agrees to act as Collateral Agent for and on behalf of the Secured Parties to maintain custody and possession of the Collateral and to perform the other duties of the Collateral Agent in accordance with the provisions of this Agreement. The Trustee hereby authorizes (and the other Secured Parties shall be deemed to have authorized) the Collateral Agent to take such action on its behalf and to exercise such rights, remedies, powers and privileges hereunder as are specifically authorized to be exercised by the Collateral Agent by the terms hereof, together with such rights, remedies, powers and privileges as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained in this Agreement, if an Event of Default has occurred and is continuing, the Collateral Agent shall act upon and in compliance with written instructions of the Trustee delivered pursuant to and in accordance with this Agreement with respect to any and all matters upon which the Trustee is permitted to act pursuant to this Agreement or the Trust Deed and any such action taken by the Collateral Agent in compliance with any such instruction shall be binding upon all of the Secured Parties. Section 9.02.

Performance of Duties.

(a) The Collateral Agent may perform any of its duties hereunder directly or by or through agents or employees and shall be entitled to consult with counsel and to act in reliance upon the advice of such counsel concerning matters pertaining to the agencies created hereby and its duties hereunder, and shall not be liable for any action taken or omitted to be taken by it in good faith and in reasonable reliance upon and in accordance with the advice of counsel selected by it. The Collateral Agent undertakes to perform only such duties as are expressly set forth herein, and no implied covenants or obligations shall be read into this Agreement against the Collateral Agent. No provision hereof shall be construed to relieve the Collateral Agent from liability to the Trustee or the Issuer for its own gross negligence, bad faith or willful misconduct; provided that (i) the Collateral Agent shall not be liable with respect to any action taken, suffered or omitted by it in good faith (A) reasonably believed by it to be authorized or within the discretion or rights or powers conferred on it by this Agreement or (B) in accordance with any written direction or request of the Issuer or the Collateral Advisor (prior to the occurrence of an Event of Default) or the Trustee (other than those that require the consent of other parties and such consent has been withheld), unless in either case the Collateral Agent was grossly negligent, acted in bad faith or committed willful misconduct in ascertaining the pertinent facts or was grossly negligent, acted in bad faith or committed willful misconduct in determining the requirements imposed by this Agreement or such written direction or request; and (ii) the Collateral Agent shall not be liable for any error of judgment made in good faith by any of its officers or employees, unless the Collateral Agent was grossly negligent, acted in bad faith or committed willful misconduct in ascertaining the pertinent facts or in determining the requirements imposed by this Agreement. Whenever in this Agreement it is provided that the absence of the occurrence and continuation of an Event of Default is a condition precedent to the taking of any action by the Collateral Agent at the request of the Issuer, then notwithstanding that the satisfaction of such condition is a condition precedent to the Issuer’s right to make such request or direction, the Collateral Agent shall not be liable for acting in accordance with such request or direction if it does not have knowledge of the occurrence and continuance of such Event of Default. (b) Anything in this Agreement to the contrary notwithstanding, in no event shall the Collateral Agent be liable under or in connection with this Agreement for indirect, special, incidental, 37

Processed and formatted by SEC Watch - Visit SECWatch.com

punitive or consequential losses or damages of any kind whatsoever, including, but not limited to, lost profits, even if the Collateral Agent has been advised of the possibility thereof and regardless of the form of action in which such damages are sought. (c) In respect of the Collateral credited to and deposited in an account with respect to which the Collateral Agent acts as Accountholder, the Collateral Agent shall act in accordance with the terms of this Agreement and the instructions of the Trustee. (d) The Collateral Agent shall not be required to take notice or be deemed to have notice or knowledge of any Potential Event of Default or Event of Default under the Transaction Documents unless an Authorized Officer of the Collateral Agent shall have received written notice thereof. In the absence of receipt of such notice, the Collateral Agent may conclusively assume that there is no default or event of default under the Transaction Documents. Section 9.03.

Reliance Upon Documents.

(a) In the absence of bad faith on its part, the Collateral Agent (i) may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any note, notice, resolution, consent, certificate, affidavit, letter, telegram, teletype message, statement, order or other document or instrument reasonably believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, (ii) shall not be obligated to make any investigation into facts or matters stated in any such document or instrument and (iii) shall have no liability in acting, or in omitting to act, where such action or omission to act is in reliance upon any statement or opinion contained in any such document or instrument. The Collateral Agent assumes no responsibility for the correctness of the recitals to this Agreement or for the validity, effectiveness, value, sufficiency or enforceability of this Agreement against the other parties hereto, of the other Transaction Documents against the parties thereto or of the other Collateral (or any part thereof) against any parties thereto. The Collateral Agent shall have no responsibility for maintaining the value of the Collateral or ensuring that any Collateral is properly delivered to it; provided that the Collateral Agent shall be responsible for holding the Collateral in accordance with the provisions hereof. The Issuer shall take or cause to be taken all action specified in Annex A hereto or recommended pursuant to any Opinion of Counsel received by the Issuer pursuant to Section 10.02 as may be necessary or appropriate to perfect and protect the security interests Granted hereby. In the event that any item of Collateral is not of the type specified in Annex A hereto, then the Issuer shall take such actions as are necessary to cause such item of Collateral to be subject to a valid perfected security interest in accordance with Section 2.01. (b) Notwithstanding any provision to the contrary contained in Article V, in performing its obligations to transfer amounts and make payments to any Person in accordance with Article V, the Collateral Agent is entitled to rely upon the information furnished to it by the Issuer (or the Collateral Advisor on behalf of the Issuer) pursuant to Article IV. If the Collateral Agent has been given notice that a transfer or payment by the Collateral Agent under Article V is required to be made on a specified date and on such specified date the Collateral Agent shall not have received all information necessary for the making of such transfer or payment, then the Collateral Agent shall promptly give notice to the Issuer, the Collateral Advisor and the Administrator, specifying, to the extent reasonably within the knowledge of the Collateral Agent, such absence of information or any inability to confirm information necessary for the making of such transfer or payment. In the absence of information required to be furnished by the Issuer under Article IV, the Collateral Agent shall act in accordance with written instructions furnished to the Collateral Agent by the Issuer. If the Collateral Agent has been given notice that a transfer or payment by the Collateral Agent under Article V is required to be made on a specified date and on such specified date any information necessary for the making of such transfer or payment is not furnished by the Issuer and instructions necessary for the making of such transfer or payment are not 38

Processed and formatted by SEC Watch - Visit SECWatch.com

received from the Issuer in sufficient time to effect such transfer or payment, then upon notice by the Collateral Agent to the Issuer, the Collateral Agent’s obligations with respect to such transfer or payment shall be suspended and the Collateral Agent shall not be liable for the failure to make such transfer or payment. Notwithstanding the foregoing, the Collateral Agent may carry out transfers and payments of amounts specified in Article V without specific instructions from the Collateral Advisor or the Issuer if the Collateral Agent has actual knowledge of the information required for the making of such transfer and payments. For the avoidance of doubt, the parties hereto confirm that the Collateral Agent shall be entitled to indemnification pursuant to Section 9.06 with respect to any actions taken by it pursuant to the preceding sentence. Section 9.04. Eligibility of Collateral Agent. Any Collateral Agent shall be a bank or trust company (i) having its principal office in Chicago, Illinois, or such other jurisdiction as the Issuer, the Administrator and the Trustee may approve, (ii) having, and maintaining at all times, capital and surplus of at least $200,000,000 (or its equivalent in another currency) as of the effective date of appointment and (iii) that has, and maintains at all times, a long-term unsecured debt rating of at least “Baal” by Moody’s, “BBB+” by S&P and, if rated by Fitch, “BBB+” by Fitch. If at any time the Collateral Agent shall cease to be eligible in accordance with the provisions of this Section 9.04, it shall resign immediately in the manner and with the effect specified in this Article IX. Section 9.05.

Successor Collateral Agent.

(a) Merger. Any Person into which the Collateral Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any Person resulting from any such conversion, merger, consolidation, sale or transfer to which the Collateral Agent is a party, shall (provided that it is otherwise qualified to serve as the Collateral Agent hereunder) be and become a successor collateral agent hereunder and be vested with all of the title to the Collateral and all of the trusts, powers, discretions, immunities, privileges, estates, properties, rights, duties and obligations as was its predecessor without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto or any other Person, anything herein to the contrary notwithstanding. (b) Resignation. The Collateral Agent and any successor collateral agent may at any time resign by giving ninety (90) days’ written notice by registered, certified or express mail to the Trustee, the Issuer and each Rating Agency; provided that such resignation shall take effect only upon the date which is the later of (i) the effective date of the appointment of a successor collateral agent reasonably acceptable to the Trustee and (ii) the acceptance in writing by such successor collateral agent of such appointment and of its obligation to perform its duties hereunder in accordance with the provisions hereof. Notwithstanding the preceding sentence, if on the ninetieth (90th) day after written notice of resignation is given by the resigning Collateral Agent as described above the appointment of a successor collateral agent or temporary successor collateral agent has not yet become effective in accordance herewith, the resigning Collateral Agent may petition a court of competent jurisdiction in The City of New York for the appointment of a successor. (c) Removal. The Collateral Agent may be removed by the Holders of 662/3% of the aggregate principal amount of the Outstanding Notes at any time prior to the Final Termination Date, with or without cause, by an instrument or concurrent instruments in writing delivered to the Collateral Advisor, the Administrator, the Trustee and each Rating Agency. A temporary successor may be removed at any time to allow a successor collateral agent acceptable to the Trustee to be appointed pursuant to Section 9.05(d). Any removal pursuant to the provisions of this Section 9.05(c) shall take effect only upon the date which is the latest of the effective date of the appointment of a successor collateral agent acceptable to the Trustee and the acceptance in writing by such successor collateral agent 39

Processed and formatted by SEC Watch - Visit SECWatch.com

of such appointment and of its obligation to perform its duties hereunder in accordance with the provisions hereof. (d) Acceptance of Successor. The Issuer shall have the sole right to appoint each successor collateral agent, subject only to the requirements set forth in Section 9.04 and to the approval of the Trustee, which approval shall not be unreasonably withheld. If the Issuer and the Trustee shall not have agreed within ten (10) days as to the selection of a successor collateral agent, the Issuer shall have the right to appoint a temporary successor to act as the Collateral Agent; provided that such temporary successor meets the requirements set forth in Section 9.04. If by the ninetieth (90th) day after appointment of such temporary successor collateral agent, the Trustee and the Issuer shall have remained unable to agree as to the selection of a successor collateral agent, such temporary successor shall automatically become the successor collateral agent hereunder. Every temporary or permanent successor collateral agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to the Trustee and the Issuer an instrument in writing accepting such appointment hereunder and the relevant predecessor shall execute, acknowledge and deliver such other documents and instruments as will effectuate such appointment, whereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the trusts, powers, discretions, immunities, privileges, estates, properties, rights, duties and obligations of its predecessors. Section 9.06. Indemnification. The Issuer shall indemnify, defend and hold the Collateral Agent and its directors, officers, employees and agents (collectively with the Collateral Agent, the “Indemnitees”) harmless from and against every loss, liability or expense, including, without limitation, damages, fines, suits, actions, demands, penalties, costs, out-of-pocket or incidental expenses, legal fees and expenses, the allocated costs and expenses of in-house counsel and legal staff and the costs and expenses of defending or preparing to defend against any claim (collectively, “Losses”), that may be imposed on, incurred by, or asserted against, any Indemnitee for or in respect of the Collateral Agent’s (a) execution and delivery of this Agreement, (b) compliance or attempted compliance with or reliance upon any instruction or other direction upon which the Collateral Agent is authorized to rely pursuant to the terms of this Agreement and (c) performance under this Agreement, except in the case of such performance only and with respect to any Indemnitee to the extent that the Loss resulted from such Indemnitee’s gross negligence, willful misconduct, bad faith or default. The obligation of the Issuer under this Section 9.06 shall be subject to the Priority of Payments and shall survive the termination of this Agreement and the resignation or removal of the Collateral Agent. Each of the Issuer and the Trustee agrees that the Collateral Agent shall not be liable as a result of the Collateral Agent’s following, in good faith and in accordance with this Agreement, the written instructions given to it by the Issuer or the Collateral Advisor. None of the Secured Parties shall have any liability under this Section 9.06. In the absence of a written request from the Issuer to return unclaimed funds to the Issuer, the Collateral Agent shall from time to time deliver all unclaimed funds to or as directed by applicable escheat authorities, as determined by the Collateral Agent, in its sole discretion, in accordance with the customary practices and procedures of the Collateral Agent. Any unclaimed funds held by the Collateral Agent pursuant to this Section 9.06 shall be held uninvested and without any liability for interest. Section 9.07. Compensation and Reimbursement. Each of the Co-Issuers agrees (a) to pay to the Collateral Agent from time to time reasonable compensation for all services rendered by it hereunder and (b) to reimburse the Collateral Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Collateral Agent in accordance with any provision of, or carrying out its duties and obligations under, this Agreement (including reasonable compensation and fees and the expenses and disbursements of its agents, any Independent certified public accountants and Independent counsel), except any expense, disbursement or advance as may be attributable to gross negligence, bad faith or willful misconduct on the part of the Collateral Agent. The compensation and reimbursement to 40

the Collateral Agent under this Section 9.07 shall be an Administrative Expense and the obligation of each of the Co-Issuers under this Section 9.07 shall survive the termination of this Agreement and the resignation or removal of the Collateral Agent. None of the Hedge Counterparties, the Principal Note Paying Agent, the other Note Paying Agents, the Preferred Share Fiscal and Paying Agent, the Trustee, the Initial Purchasers, the Placement Agent, the Collateral Advisor and the Noteholders shall have any liability under this Section 9.07. Section 9.08. Representations and Warranties of the Collateral Agent. The Collateral Agent represents and warrants to the Issuer and to the Trustee as follows: (a) Due Organization. The Collateral Agent is a national banking association, duly organized and validly existing under the laws of the United States and is duly authorized and licensed under applicable law to conduct its business as presently conducted (b) Corporate Power. The Collateral Agent has all requisite right, power and authority to execute and deliver this Agreement and to perform all of its duties as Collateral Agent hereunder. (c) Due Authorization. The execution and delivery of this Agreement by the Collateral Agent, and the performance by the Collateral Agent of its duties hereunder, have been duly authorized by all necessary corporate proceedings and no further approvals or filings, including any governmental approvals, are required for the valid execution and delivery by the Collateral Agent, or the performance by the Collateral Agent, of this Agreement. (d) Valid and Binding Agreement. The Collateral Agent has duly executed and delivered this Agreement, and this Agreement constitutes the legal, valid and binding obligation of the Collateral Agent, enforceable against the Collateral Agent in accordance with its terms, except as (i) such enforceability may be limited by bankruptcy, insolvency, reorganization and similar laws relating to or affecting the enforcement of creditors’ rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited

Processed and formatted by SEC Watch - Visit SECWatch.com

by equitable principles of general applicability. Section 9.09. Accounts. Notwithstanding anything else contained herein, the Collateral Agent agrees that with respect to each of the Accounts constituting: (a) a Securities Account, it will cause each Accountholder establishing such Accounts to enter into an agreement whereby each such Accountholder agrees that it will (i) comply with Entitlement Orders (i.e., orders directing the transfer or redemption of any Financial Assets credited to such Accounts) relating to such Account issued by the Collateral Agent without further consent by the Issuer; (ii) credit all Collateral to the applicable Account; (iii) treat each item of property credited to such Account as a Financial Asset; (iv) not enter into any agreement with any other Person relating to any Account pursuant to orders made by such Person; (v) not accept for credit to any Account any Collateral which is registered in the name of, or payable to, any Person other than the Accountholder unless it has been endorsed to such Accountholder or is endorsed in blank and (vi) such Accountholder has agreed that it will waive any right of set-off unrelated to its fees for such account; and (b) a Deposit Account (if any), it will cause each Accountholder establishing such Accounts to enter into an agreement with the depository bank that will provide that (i) the Accountholder is the customer with respect to such Deposit Account; (ii) the Deposit Account is not in the name of any person other than the Accountholder and (iii) the Accountholder has not consented to the depository bank complying with instructions from any person other than the Accountholder. Section 9.10. Waiver of Setoffs. The Collateral Agent hereby expressly waives any and all rights of setoff that the Collateral Agent may otherwise at any time have under applicable law with respect to any Account and agrees that amounts in the Collateral Account, the Collection Account, the 41

Processed and formatted by SEC Watch - Visit SECWatch.com

Hedge Termination Receipt Account or the Hedge Replacement Account and the amounts withdrawn under the Initial Hedge Agreement shall at all times be held and applied in accordance with the provisions of Article V or otherwise as expressly contemplated by this Agreement and the Account Control Agreement. Section 9.11. Provision of Information. Upon written request by the Independent certified public accountants, the Collateral Agent shall provide to such Independent certified public accountants such information contained in the Note Register as is requested by them. ARTICLE X COVENANTS OF THE ISSUER Section 10.01.

Preservation of Collateral.

(a) The Issuer or the Collateral Advisor, on behalf of the Issuer, shall, at its own expense, take, or cause to be taken, such action as is necessary and proper with respect to the Collateral in order to preserve, maintain and service such Collateral and to cause (subject to the rights of the Trustee) (i) the Accountholder to perform its obligations with respect to such Collateral as provided in the Account Control Agreement and (ii) the Collateral Agent to perform its obligations herein. The Issuer will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered such instruments of transfer, or take such other steps or actions as may be necessary, to perfect the security interests Granted hereunder in the Collateral, to ensure that such security interests rank prior to all other Liens and to preserve the priority of such security interests and the validity and enforceability thereof. Upon any delivery or substitution of Collateral, the Issuer shall be obligated to create for the benefit of the Collateral Agent a valid Lien on, and valid and perfected security interest in, the Collateral so delivered in favor of the Collateral Agent and to deliver or transfer Control of such Collateral to the Collateral Agent, free and clear of any other Lien, together with satisfactory assurances thereof, and to pay any reasonable costs incurred by the Trustee, the Collateral Agent, the Issuer (including its agents) or otherwise in connection with such delivery. (b) The Issuer shall defend the Collateral against all claims of any kind or nature of all Persons at any time claiming the same or any interest therein adverse to the interests of the Collateral Agent or the Trustee, and the Issuer shall not cause, permit or suffer to exist any Lien upon the Collateral other than the Liens Granted hereby. (c) The Collateral Agent shall have the right to enforce all rights of the Issuer under the Collateral Advisory Agreement, the Collateral Administration Agreement, the Initial Hedge Agreement and other Hedge Agreements (other than the Initial Hedge Agreement), if any. Section 10.02. Opinions as to Collateral. On each anniversary of the Closing Date, the Issuer shall furnish (at the expense of the Issuer) to the Trustee, each Rating Agency, the Collateral Advisor and the Collateral Agent an Opinion of Counsel stating that either (a) in the opinion of such counsel, such actions have been taken as are necessary to perfect the Lien and security interest of the Collateral Agent, for and on behalf of the Secured Parties, with respect to the Collateral including, without limitation, actions with respect to the recording, filing, rerecording and refiling of this Agreement, any supplements and any other requisite documents and with respect to the execution and filing of any financing statements and continuation statements and reciting the details of such action or (b) in the opinion of such counsel, no such action is necessary to maintain such perfected Lien and security interest. Any Opinion of Counsel shall describe each action that will, in the opinion of such counsel, be required to perfect the Lien and security interest of the Collateral Agent, with respect to the Collateral, specified in such Opinion of 42

Processed and formatted by SEC Watch - Visit SECWatch.com

Counsel. Such Opinion of Counsel shall state the procedures with respect to the delivery of Collateral which are sufficient for the creation and maintenance of a perfected, first priority security interest therein in favor of the Collateral Agent and specifying any additional procedures as shall, in the opinion of such counsel, be necessary or appropriate for such creation and maintenance. Section 10.03. Non-Interference; etc. The Issuer shall not (a) waive, amend, modify or alter any of its rights or obligations under the Collateral Advisory Agreement or any Hedge Agreement without the prior written consent of each of the Trustee and the Collateral Agent, acting at the direction of a majority of the Holders of the Notes, and unless Rating Agency Confirmation from S&P has been received; (b) fail to pay any tax, assessment, charge or fee levied or assessed against the Collateral, or to defend any action, if such failure to pay or defend may adversely affect the priority or enforceability of the Issuer’s right, title or interest in and to the Collateral or the Collateral Agent’s Lien on, and security interest in, the Collateral; (c) except as provided in clause (d) below, directly or indirectly avail itself of any right, benefit, power, authority or remedy conferred on it pursuant to the provisions of any Assigned Document, whether through action or inaction, except as may be expressly directed from time to time by the Trustee and the Collateral Agent or (d) take any action, or fail to take any action, if such action or failure to take action will interfere with the enforcement of any rights under the Collateral Advisory Agreement and each Hedge Agreement. ARTICLE XI MISCELLANEOUS Section 11.01.

Amendments.

(a) Subject to Section 4.12 and Clause 7.3 of the Trust Deed, this Agreement may be amended, changed, modified or altered only by written instrument or written instruments signed by the Collateral Agent, the Trustee, the Accountholder and the Issuer and upon receipt of Rating Agency Confirmation; provided that to the extent that such amendment, change, modification or alteration of this Agreement would have (i) an adverse effect (as evidenced by an Opinion of Counsel) on the Preferred Shareholders, the Issuer shall not consent to any such amendment, change, modification or alteration of this Agreement without the approval of the Holders of a majority of the Outstanding Preferred Shares in accordance with the Articles and (ii) a material adverse effect (as evidenced by an Opinion of Counsel) on the obligations of the Collateral Advisor, the Issuer shall not consent to any such amendment, change, modification or alteration of this Agreement without the approval of the Collateral Advisor; provided, further, that subject to the terms hereof, the consent of the Trustee, the Collateral Agent, the Accountholder and the Preferred Share Fiscal and Paying Agent shall not be unreasonably withheld or delayed by any such Person with respect to any amendment which does not adversely affect such Person (or, in the case of the Trustee, the Noteholders or, in the case of the Preferred Share Fiscal and Paying Agent, the Preferred Shareholders); provided, further, that to the extent that such amendment, change, modification or alteration of this Agreement would have a material adverse effect on the rights of any Hedge Counterparty to payments under the Priority of Payments, no such amendment, change, modification or alteration to this Agreement shall become effective without the prior written consent of such Hedge Counterparty. In executing or accepting any amendment, change, modification or alteration of this Agreement as permitted by this Article XI, the Trustee shall be entitled to receive, and (subject to Clause 11.4 of the Trust Deed) shall be fully protected in relying in good faith upon, an Opinion of Counsel stating that the execution or acceptance of such amendment, change, modification or alteration is authorized or permitted by this Agreement and that all conditions precedent thereto have been complied with. The Trustee may, but shall not be obligated to, enter into or accept any such amendment, change, 43

Processed and formatted by SEC Watch - Visit SECWatch.com

modification or alteration which affects the Trustee’s own rights, duties or indemnities under this Agreement or otherwise. (b) This Agreement (including, without limitation, Annex A hereto) may otherwise be amended by the Issuer, with notice to the Rating Agencies and upon receipt of Rating Agency Confirmation from Fitch and S&P, any other party hereto, any Hedge Counterparty, the Preferred Share Fiscal and Paying Agent and the Preferred Shareholders (except as may be specifically provided herein) (i) in order to further effectuate the Grant of or further perfect any Lien or security interest of the Collateral Agent in any item of Collateral, any such amendment that becomes effective as of a specified date after the Closing Date to be accompanied by an Opinion of Counsel to the Issuer and a copy of such amendment and the related Opinion of Counsel shall be provided to the Trustee, (ii) to amend the terms herein for the purpose of facilitating compliance by the Issuer with any more favorable exemption from registration under the Investment Company Act, (iii) upon receipt of Rating Agency Confirmation from Moody’s and S&P, to effect the appointment of a successor Trustee, (iv) upon receipt of Rating Agency Confirmation from Moody’s and S&P, to take any action necessary or advisable to prevent the Issuer, the Collateral Agent, any Note Paying Agent or the Trustee from being subject to withholding or other taxes, fees or assessments or to prevent the Issuer from being treated as engaged in a United States trade or business or otherwise being subjected to United States federal, state or local income tax on a net income tax basis, (v) to correct or amplify the description of any property at any time subject to the Grant and Lien of this Agreement, or to better assure, convey and confirm unto the Trustee any property subject to the Grant and Lien of this Agreement, (vi) upon receipt of Rating Agency Confirmation from Moody’s and S&P, to cure ambiguity or correct or supplement any provision contained in this Agreement which may be defective or inconsistent with any other provision contained in this Agreement or make any modification that is of a formal, minor or technical nature or which is made to correct a manifest error, (vii) upon receipt of Rating Agency Confirmation from Moody’s and S&P, to correct, modify or supplement any provision which is inconsistent with the Final Offering Circular; provided that any such correction, modification or supplement made pursuant to this clause (vii) shall be consistent with the Final Offering Circular and (viii) to make any change required by the Irish Stock Exchange (so long as any of the Notes are listed thereon) in order to permit or maintain the listing of the Notes thereon. (c) The Issuer shall cause the Administrator to give prior notice to each Hedge Counterparty, the Collateral Advisor, the Principal Note Paying Agent, the Preferred Share Fiscal and Paying Agent, the Trustee, the Collateral Agent, the Accountholder and each Rating Agency of any amendment, change, modification or alteration of this Agreement and provide copies of such amendment, change, modification or alteration to the Preferred Share Fiscal and Paying Agent, the Trustee and each Rating Agency. Section 11.02.

Notices.

(a) All notices, certificates, directions, reports or other communications hereunder shall be sufficiently given and shall be deemed given when delivered in writing, either via facsimile or first class mail postage prepaid addressed to the appropriate Notice Address. Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices, certificates, directions, reports or other communications shall be sent. (b) For so long as any of the Securities are listed on the Irish Stock Exchange and the rules of the Irish Stock Exchange so require, notices to the Holders of such Securities (excluding the Note Valuation Reports or the Monthly Reports) shall also be published in the Irish Stock Exchange’s Daily Official List at the expense of the Issuer. 44

Processed and formatted by SEC Watch - Visit SECWatch.com

(c) Upon receipt of notice of an Event of Default and acceleration of indebtedness from the Trustee, the Collateral Agent shall have the right, at the direction of the Trustee, to exercise any and all rights and remedies (i) granted to a secured party by the NY UCC or otherwise allowed by applicable law and (ii) otherwise provided by this Agreement. Upon receipt of notice of an Event of Default from the Trustee, the Collateral Agent shall give prompt notice thereof to the Issuer and the Collateral Advisor. Section 11.03. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. The parties hereto further agree that the holding by any court of competent jurisdiction that any right, power, privilege or remedy pursued by the Trustee hereunder is unavailable or unenforceable shall not affect in any way the ability of the Trustee to pursue any other right, power, privilege or remedy available to it. Section 11.04. Term of This Agreement. This Agreement shall take effect on the Closing Date and shall continue in effect until the Final Termination Date. On the Final Termination Date, this Agreement shall terminate, all obligations of the parties hereunder shall cease and terminate and the Collateral, if any, held hereunder and not to be used or applied in discharge of any obligations of the Issuer in respect of the obligations of the Issuer in respect of the Notes or otherwise under this Agreement shall be released to and in favor of the Issuer; provided that the provisions of Sections 8.06, 8.07, 10.06, 10.07, 10.09 and 10.15 shall survive any termination of this Agreement and the release of the Collateral upon such termination. Notwithstanding the foregoing, if (a) after the termination of this Agreement or (b) at any time or times subsequent to the payment of all or any part of the obligations of the Issuer in respect of the Notes, the Trustee shall be required to repay any amounts previously paid by or on behalf of the Issuer in reduction thereof by virtue of an order of any court having jurisdiction in the premises, including, without limitation, as a result of an adjudication that such amounts constituted preferential payments or fraudulent conveyances, then this Agreement and the obligations of the Issuer hereunder shall be reinstated and the Issuer unconditionally agrees to pay to the Collateral Agent upon demand by the Trustee or the Collateral Agent a sum in cash equal to the amount of any such repayment, together with interest on such amount from the date of such repayment by the Trustee to the date of payment to the Trustee. In all instances, the Collateral Agent shall pay any amount received by it as aforesaid to the Trustee, subject to the Priority of Payments. Section 11.05. Assignments. This Agreement shall be a continuing obligation of the Issuer and shall (a) be binding upon the Issuer and its successors, transferees and assigns and (b) inure to the benefit of and be enforceable by the Trustee, the Collateral Advisor, the Collateral Agent and the Accountholder, and by their respective successors, transferees and assigns. Except as contemplated or provided herein, the Issuer may not assign this Agreement, or delegate any of its duties hereunder, without the prior written consent of the Collateral Agent and the Trustee, and Rating Agency Confirmation from S&P, and any such attempted assignment shall be null and void. Subject to any restrictions on transfer or assignment in any Transaction Document, nothing contained herein shall restrict the Trustee from assigning to any Person any or all of its rights under this Agreement or with respect to any real or personal property or other interests pledged to the Trustee, or in which the Trustee has a Lien or security interest, in connection with the transactions contemplated hereby. Section 11.06. Non-Petition Agreement. Each of the parties hereto covenants and agrees that, so long as any Note is outstanding and for a period of one (1) year plus one (1) day (or, if longer, the applicable preference period then in effect) after payment in full of all amounts payable under or in respect of the Transaction Documents, it will not institute against, or join any other Person in instituting against, the Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation Proceedings, or other Proceedings under any federal or state bankruptcy, insolvency or similar law. Nothing in this 45

Processed and formatted by SEC Watch - Visit SECWatch.com

Section 11.06 shall preclude, or be deemed to estop, any of the parties hereto (a) from taking any action prior to the expiration of the aforementioned one (1) year plus one (1) day period (or, if longer, the applicable preference period then in effect) in (i) any case or proceeding voluntarily filed or commenced by the Issuer or the Co-Issuer or (ii) any involuntary insolvency proceeding filed or commenced by a Person other than any of the parties hereto, or (b) from commencing against the Issuer or the Co-Issuer or any of its properties any legal action which is not a bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceeding. Section 11.07. Trial by Jury Waived. EACH OF THE PARTIES HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER OR THEREUNDER. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER. Section 11.08. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. Section 11.09. Consents to Jurisdiction. Each of the parties hereto irrevocably submits to the jurisdiction of the United States District Court for the Southern District of New York, any court in the State of New York located in the borough of Manhattan in the city and county of New York, and any appellate court from any thereof, in any Proceeding brought against it and related to or in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereunder or thereunder or for recognition or enforcement of any judgment and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such Proceeding may be heard or determined in such New York State court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such Proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. To the extent permitted by applicable law, each of the parties hereto hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such Proceeding, any claim that it is not personally subject to the jurisdiction of such courts, that the Proceeding is brought in an inconvenient forum, that the venue of the Proceeding is improper or that this Agreement or any of the other Transaction Documents or the subject matter hereof may not be litigated in or by such courts. Section 11.10. Service of Process. The Issuer hereby agrees that service of process on the Issuer in any such Proceeding brought in the State of New York may be made upon CT Corporation System (the “Process Agent”) at its offices at 111 Eighth Avenue, 13th Floor, New York, New York 10011 (or such other address as may be specified by the Process Agent from time to time) and the Issuer hereby irrevocably appoints the Process Agent as its authorized agent to accept such service of process and agrees that the failure of the Process Agent to give any notice of any such service shall not impair or affect the validity of such service or any judgment rendered in any Proceeding based thereon. The Issuer hereby agrees that any such service (a) shall be deemed in every respect effective service of process upon 46

Processed and formatted by SEC Watch - Visit SECWatch.com

it in any such Proceeding and (b) shall, to the fullest extent enforceable by applicable law, be taken and held to be valid personal service upon and personal delivery to it. Section 11.11. Time of Essence. All parties hereto agree that time shall be of the essence in respect of the performance by the Issuer and the Collateral Agent of their respective obligations hereunder. Section 11.12. Counterparts. This Agreement may be executed in any number of counterparts by the parties hereto, each of which shall be an original, and all such counterparts shall constitute one and the same instrument. Section 11.13. Integration. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. Section 11.14. Headings. The headings of Articles, Sections and subsections herein are for convenience of reference only and shall not affect the interpretation hereof. Section 11.15. Limited Recourse. Notwithstanding any provisions of this Agreement to the contrary, the payment obligations of the Issuer set forth under this Agreement shall be non-recourse obligations of the Issuer and shall be payable only from the Collateral or the proceeds thereof, whether held by the Collateral Agent or any other Person on behalf of the Issuer. No recourse shall be had for the payment of any amount owing in respect of the Notes appertaining thereto against any officer, director, employee, stockholder, director or incorporator of the Co-Issuers or of any Affiliate of the Co-Issuers, the Collateral Agent, the Trustee, the Collateral Advisor, the Accountholder or any Affiliate of any of the foregoing, in their respective capacities as such, or successors or assigns of any of them for any amounts payable under the Notes or this Agreement. Upon the exhaustion of the Collateral, all further liability of the Co-Issuers shall be extinguished and no further claims shall be made against the Co-Issuers in respect thereof. Section 11.16. Payments in Accordance with the Priority of Payments. Notwithstanding any provision herein to the contrary, the payment of all principal, interest, fees, expenses, indemnities or other amounts payable by or on behalf of the Issuer under this Agreement shall be made in accordance with the Priority of Payments, Section 11.15 and the subordination provisions set forth in this Agreement. In the event that the Issuer fails to pay any amount on the date when due under this Agreement solely by reason of the limitation on the payment of certain expenses set forth under the Priority of Payments under Section 5.01, the Issuer shall not be deemed to have failed to pay such amount (and a default shall not have occurred as the result thereof) for purposes of this Agreement unless it fails to pay such amount on the date (inclusive of any grace periods) on which it is permitted to be paid under the Priority of Payments. Section 11.17. Collateral Agent and Its Affiliates. LaSalle Bank National Association and any of its Affiliates providing services in connection with the transactions contemplated in the Transaction Documents shall have only the duties and responsibilities expressly provided in each capacity and shall not, by virtue of its or any of its Affiliates acting in any other capacity, be deemed to have duties or responsibilities or be deemed to be held to a standard of care other than as expressly provided with respect to each such capacity. LaSalle Bank National Association (or its Affiliates) in its and their various capacities in connection with the transactions contemplated in the Transaction Documents, including as Collateral Agent, may enter into business transactions, including the acquisition of investment securities as contemplated by the Transaction Documents, from which it and/or such Affiliates may derive revenues 47

Processed and formatted by SEC Watch - Visit SECWatch.com

and profits in addition to the fees stated in the various Transaction Documents, without any duty to account therefor. Section 11.18. Judgment Currency. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due under this Agreement in any currency (the “Original Currency”) into another currency (the “Other Currency”), the parties hereto agree, to the fullest extent permitted by law, that the rate of exchange to be used in effecting such conversion shall be that at which, in accordance with normal banking procedures, the party seeking such judgment could purchase the Original Currency with the Other Currency on the Business Day preceding that on which final judgment is given. To the fullest extent permitted by applicable law, the obligations of a party in respect of any such amount due in the Original Currency under this Agreement to another party (the “Recipient”) shall, notwithstanding any judgment in Other Currency, be discharged only to the extent that on the Business Day following receipt by the Recipient of any sum adjudged to be so due in the Other Currency the Recipient may in accordance with normal banking procedures purchase the Original Currency with the Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due to the Recipient in the Original Currency, the party obligated to make such payment agrees, as a separate obligation and notwithstanding any such judgment, to pay to the Recipient the amount of such loss. [SIGNATURES COMMENCE ON NEXT PAGE] 48

Processed and formatted by SEC Watch - Visit SECWatch.com

IN WITNESS WHEREOF, the Issuer, the Collateral Agent, the Accountholder and the Trustee have duly executed this Agreement as of the date first set forth above. ISSUER:

N-STAR REAL ESTATE CDO I LTD Executed as a Deed By:

/s/ Derrie Boggess Name: Derrie Boggess Title: Director

Witness: /s/ Ruth Yates Ruth Yates COLLATERAL AGENT:

LASALLE BANK NATIONAL ASSOCIATION By:

ACCOUNT HOLDER:

LASALLE BANK NATIONAL ASSOCIATION By:

TRUSTEE:

/s/ Lora J. Peloquin Name: Lora J. Peloquin Title: Vice President

/s/ Lora J. Peloquin Name: Lora J. Peloquin Title: Vice President

LASALLE BANK NATIONAL ASSOCIATION By:

/s/ Lora J. Peloquin Name: Lora J. Peloquin Title: Vice President

Exhibit 10.2 EXECUTION COPY SECURITY AGREEMENT dated as of July 1, 2004 between N-STAR REAL ESTATE CDO II LTD., as Issuer, and LaSALLE BANK NATIONAL ASSOCIATION, as Trustee and as Accountholder

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS Page

ARTICLE I DEFINITIONS Section 1.01. Definitions Section 1.02. Assumptions as to Collateral Debt Securities Section 1.03. Generic Terms Section 1.04. Times

2 2 2 3 3

ARTICLE II THE COLLATERAL Section 2.01. Security Interests Section 2.02. Creation of Security Interest; Transfer of Control Section 2.03. Termination of Security Interests Section 2.04. Priority of Payments Section 2.05. Representations Regarding Collateral

3 3 7 7 7 7

ARTICLE III RAMP-UP PERIOD PURCHASES AND EFFECTIVE DATE ACTIONS Section 3.01. Closing Date Requirements Section 3.02. Ramp-Up Period Purchases Section 3.03. Effective Date Actions

9 9 9 10

ARTICLE IV ACCOUNTS, ACCOUNTINGS AND RELEASES Section 4.01. Collection of Money Section 4.02. Collection Account Section 4.03. Interest Reserve Account Section 4.04. Expense Reserve Account Section 4.05. Collateral Account Section 4.06. Reports by Trustee Section 4.07. Accountings Section 4.08. Release of Securities Section 4.09. Reports by Independent Accountants Section 4.10. Reports to Rating Agencies Section 4.11. Notices of Noteworthy Events Section 4.12. Amendments to the Transaction Documents

11 11 11 13 14 15 16 16 21 22 23 23 23

ARTICLE V PRIORITY OF PAYMENTS Section 5.01. Disbursements of Money from Collection Account Section 5.02. Additional Provisions

23 23 28

ARTICLE VI

29

PURCHASE, SALE AND REINVESTMENT OF COLLATERAL DEBT SECURITIES i

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) Page

Section 6.01. Section 6.02. Section 6.03. Section 6.04. Section 6.05.

Sale of Collateral Debt Securities Eligibility Criteria, Ramp-Up Criteria and Replacement Criteria Conditions Applicable to all Transactions Collateral Quality Tests Coverage Tests

29 31 35 36 37

ARTICLE VII SUBORDINATION Section 7.01. Subordination

39 39

ARTICLE VIII HEDGE AGREEMENTS, INITIAL HEDGE AGREEMENT Section 8.01. Hedge Agreement Provisions Section 8.02. Initial Hedge Agreement Section 8.03. Acknowledgement of Custodian

42 42 45 45

ARTICLE IX THE TRUSTEE AND ACCOUNTHOLDER Section 9.01. Appointment and Powers Section 9.02. Performance of Duties Section 9.03. Reliance Upon Documents Section 9.04. [Intentionally Omitted] Section 9.05. [Intentionally Omitted] Section 9.06. Indemnification Section 9.07. Compensation and Reimbursement Section 9.08. [Intentionally Omitted] Section 9.09. Accounts Section 9.10. Waiver of Setoffs Section 9.11. Provision of Information

45 45 45 46 47 45 45 48 48 48 48 49

ARTICLE X COVENANTS OF THE ISSUER Section 10.01. Preservation of Collateral Section 10.02. Opinions as to Collateral Section 10.03. Non-Interference; etc.

49 49 49 50

ARTICLE XI MISCELLANEOUS Section 11.01. Amendments Section 11.02. Notices Section 11.03. Severability Section 11.04. Term of This Agreement Section 11.05. Assignments Section 11.06. Non-Petition Agreement

50 50 51 51 52 52 52 ii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) Page

Section 11.07. Section 11.08. Section 11.09. Section 11.10. Section 11.11. Section 11.12. Section 11.13. Section 11.14. Section 11.15. Section 11.16. Section 11.17. Section 11.18. ANNEX A ANNEX B ANNEX C SCHEDULE A SCHEDULE B SCHEDULE C SCHEDULE D SCHEDULE E SCHEDULE F SCHEDULE G SCHEDULE H SCHEDULE I SCHEDULE J SCHEDULE K SCHEDULE L SCHEDULE M

Trial by Jury Waived Governing Law Consents to Jurisdiction Service of Process Time of Essence Counterparts Integration Headings Limited Recourse Payments in Accordance with the Priority of Payments Trustee and Its Affiliates Judgment Currency

52 53 53 53 53 53 54 54 54 54 54 54

Steps Required For Delivery Glossary of Certain Defined Terms Specified Types Collateral Debt Securities as of the Closing Date Temporary Ramp-Up Securities as of the Closing Date Auction Procedures S&P Recovery Rate Matrix S&P Industry Classification Group S&P Notching Criteria I S&P Notching Criteria II Moody’s Diversity Score Moody’s Recovery Rate Matrix Moody’s Notching Criteria Moody’s Industry Classification Groups Fitch Report Fitch Industry Classification Groups

Annex A-1 Annex B-1 Annex C-1 Schedule A-1 Schedule B-1 Schedule C-1 Schedule D-1 Schedule E-1 Schedule F-1 Schedule G-1 Schedule H-1 Schedule I-1 Schedule J-1 Schedule K-1 Schedule L-1 Schedule M-1

iii

Processed and formatted by SEC Watch - Visit SECWatch.com

This SECURITY AGREEMENT (as amended from time to time, this “Agreement”) is made as of July 1, 2004 by and among N-Star Real Estate CDO II Ltd., a company incorporated under the laws of the Cayman Islands, as issuer (the “Issuer”), LaSalle Bank National Association, a national banking association (“LaSalle”), as trustee under the Trust Deed for and on behalf of the Secured Parties (in such capacity, the “Trustee”), and LaSalle as securities intermediary and depositary bank (in such capacity, the “Accountholder”). RECITALS 1. The Issuer intends to purchase for investment Collateral Debt Securities primarily consisting of CMBS Securities, REIT Debt Securities and Real Estate CDO Securities. 2. In order to obtain funds for its purchases of the Collateral Debt Securities, the Issuer intends to issue on the date hereof (a) U.S.$236,000,000 aggregate principal amount of Class A-1 Floating Rate Senior Notes Due 2039 (the “Class A-1 Notes”), (b) U.S.$42,000,000 aggregate principal amount of Class A-2A Floating Rate Senior Notes Due 2039 (the “Class A-2A Notes”), (c) U.S.$15,000,000 aggregate principal amount of Class A-2B Fixed Rate Senior Notes Due 2039 (the “Class A-2B Notes”, and together with the Class A-2A Notes, the “Class A-2 Notes”, and together with the Class A-1 Notes and the Class A-2A Notes, the “Class A Notes”), (d) U.S.$12,000,000 aggregate principal amount of Class B-1 Floating Rate Senior Subordinate Notes Due 2039 (the “Class B-1 Notes”), (e) U.S.$14,000,000 aggregate principal amount of Class B-2 Floating Rate Senior Subordinate Notes Due 2039 (the “Class B-2 Notes”, and together with the Class B-1 Notes, the “Class B Notes”), (f) U.S.$24,000,000 aggregate principal amount of Class C-1 Floating Rate Subordinate Notes Due 2039 (the “Class C-1 Notes”), (g) U.S.$6,000,000 aggregate principal amount of Class C-2A Floating Rate Subordinate Notes Due 2039 (the “Class C-2A Notes”), (h) U.S.$16,000,000 aggregate principal amount of Class C-2B Fixed Rate Subordinate Notes Due 2039 (the “Class C-2B Notes”, and together with the Class C-2A Notes, the “Class C-2 Notes”, and together with the Class C-1 Notes and the Class C2A Notes, the “Class C Notes”) (i) U.S.$15,000,000 aggregate principal amount of Class D Fixed Rate Subordinate Notes Due 2039 (the “Class D Notes”), and (j) U.S.$20,000,000 aggregate principal amount of Class E Subordinate Income Notes Due 2039 (the “Class E Subordinate Income Notes”) pursuant to the Trust Deed. 3. N-Star Real Estate CDO II Corp., a company organized under the laws of the State of Delaware (the “Co-Issuer”, and together with the Issuer, the “Co-Issuers”) will co-issue the Class A Notes, the Class B Notes and the Class C Notes. The Class D Notes and the Class E Subordinate Income Notes will be obligations of the Issuer only. 4. In order to provide security for the performance by each of the Co-Issuers of all of their obligations to pay to the Secured Parties amounts payable in respect of such Notes in accordance with their terms and the terms of the Note Agency Agreement, the Trust Deed and the other Transaction Documents, the Issuer has agreed to Grant to the Trustee, on behalf and for the benefit of the Secured Parties, a security interest in the Collateral (as defined herein) in the manner set forth in this Agreement. AGREEMENTS In consideration of the premises and of the agreements herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each of the Issuer, the Trustee and the Accountholder hereby agree as follows:

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE I DEFINITIONS Section 1.01. Definitions. Capitalized terms used herein and not defined herein shall have the meanings set forth in the Glossary of Certain Defined Terms attached as Annex B hereto (the “Glossary”). Section 1.02.

Assumptions as to Collateral Debt Securities.

(a) In connection with all calculations required to be made pursuant to this Agreement with respect to Scheduled Distributions on any Collateral Debt Security, or any payments on any other assets included in the Collateral, and with respect to the income that can be earned on Scheduled Distributions on such Collateral Debt Securities and on any other amounts that may be received for deposit in the Collection Account, the provisions set forth in this Section 1.02 shall be applied. (b) All calculations by or on behalf of the Trustee or the Issuer with respect to Scheduled Distributions on the Collateral Debt Securities shall be made on the basis of information as to the terms of each such Collateral Debt Security and upon report of payments, if any, received on such Collateral Debt Security that are furnished by or on behalf of the issuer of such Collateral Debt Security and, to the extent they are not manifestly in error, such information or report may be conclusively relied upon in making such calculations. (c) Each Scheduled Distribution receivable with respect to a Collateral Debt Security shall be assumed to be received on the applicable Due Date, and each such Scheduled Distribution shall be assumed to be immediately deposited in the Collection Account and, except as otherwise specified, to earn interest at the Assumed Investment Rate; provided, however, that if the nominal due date for any payment on any Collateral Debt Security or Eligible Investment occurs on a day during a Due Period that is not a business day under the applicable Underlying Instrument and as a result such payment is paid and received in the following Due Period, then such payment shall be deemed to have been received during the Due Period in which such nominal due date falls if such payment is timely made in accordance with the related Underlying Instrument. All such funds shall be assumed to continue to earn interest until the date on which they are required to be available in the Collection Account for transfer to the Note Payment Account and application, in accordance with the terms hereof, of the Notes and of the Trust Deed, to payments on the Notes or other amounts payable pursuant to this Agreement. (d) For accounting and reporting purposes only, for each Collateral Debt Security that bears interest based on an index, all calculations involving such index for the then-current period shall be assumed to be equal to the then-current rate as had been set in accordance with the terms of the Collateral Debt Security and all calculations involving such floating rate index for future periods shall be assumed to be equal to the applicable floating rate on the relevant Measurement Date. (e) For purposes of calculating the Class A Interest Coverage Ratio, the Class B Interest Coverage Ratio, the Class C Interest Coverage Ratio and the Class D Interest Coverage Ratio, and for purposes of the Replacement Criteria and the Ramp-Up Criteria, the expected interest income on floating rate Collateral Debt Securities and the expected interest payable on the Notes will be calculated using the then-current interest rates applicable thereto and expected interest earned on the Eligible Investments will be calculated using the then-current interest rate applicable thereto. (f) With respect to any Collateral Debt Security as to which any interest or other payment thereon is subject to withholding tax of any relevant jurisdiction, each Scheduled Distribution

2

Processed and formatted by SEC Watch - Visit SECWatch.com

thereon shall, for purposes of the Coverage Tests 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 shall be assumed to be made net of any such uncompensated withholding tax based upon withholding tax rates in effect on such date of determination. (g) Unless otherwise provided herein, test calculations that evaluate to a percentage shall be rounded to the nearest ten-thousandth and test calculations that evaluate to a number or decimal will be rounded to the nearest one-hundredth. (h) All calculations required to be made and all reports which are to be prepared pursuant to this Security Agreement with respect to the Collateral Debt Securities, shall be made on the basis of the date on which the Issuer makes a commitment to purchase or sell an asset (the “trade date”), not the settlement date Section 1.03. Generic Terms. The terms “hereof” , “herein” or “hereunder”, unless otherwise modified by more specific reference, shall refer to this Agreement in its entirety. Unless otherwise indicated in context, the terms “Article”, “Section”, “Appendix”, “Exhibit” or “Annex” shall refer to an Article or Section of, or Appendix, Exhibit or Annex to, this Agreement. The definition of a term shall include the singular, the plural, the past, the present, the future, the active and the passive forms of such term. The words “include”, “including” and “included” shall be illustrative and shall not imply any limitation or exclusion unless the context clearly indicates otherwise. Section 1.04.

Times. All times referred to herein shall be to times in the City of New York, unless otherwise expressly stated

herein. ARTICLE II THE COLLATERAL Section 2.01.

Security Interests.

(a) Grant to the Trustee on behalf and for the benefit of the Secured Parties. In order to secure the full and punctual payment, and the performance by the Issuer, of all of the Issuer’s obligations with respect to the Notes, this Agreement, the Note Agency Agreement, the Trust Deed and each Hedge Agreement and to secure the performance of all obligations of the Issuer under this Agreement and the other Transaction Documents in favor of (i) the Trustee for itself and on behalf of the Noteholders, (ii) the Collateral Advisor and (iii) each Hedge Counterparty (collectively, the “Secured Parties”), the Issuer hereby Grants to the Trustee on behalf and for the benefit of the Secured Parties, as their respective interests may appear, subject to the provisions of this Agreement, a continuing first priority Lien on, and first priority security interest in, all of its right, title and interest in, to and under all of the assets of the Issuer, whether now owned and existing or hereafter acquired or arising and wherever located, but excluding all of the Issuer’s right, title and interest in and to the Ordinary Shares Account and any amounts on deposit therein, which will equal the sum of U.S.$2,000, representing (1) the paid up share capital of the Issuer resulting from the issuance of the Ordinary Shares (U.S.$1,000) under the Articles and (2) the fee paid to the Issuer for issuing the Notes (U.S.$1,000) (all non-excluded assets being collectively referred to as the “Collateral”); provided that the Collateral shall include, without limitation, the following: 3

Processed and formatted by SEC Watch - Visit SECWatch.com

(i) the Collateral Account, including all Collateral Debt Securities (listed, as of the Closing Date, in Schedule A (including Temporary Ramp-Up Securities listed in Schedule B) and, as of the Effective Date, in a schedule to be provided by the Issuer to the Trustee) which the Issuer causes to be delivered to the Trustee for the benefit and on behalf of the Secured Parties (directly or through a Securities Intermediary or bailee) and all payments thereon or with respect thereto, and all Collateral Debt Securities that are delivered to the Trustee in the future pursuant to the terms hereof and all payments thereon or with respect thereto; (ii) the Payment Account, the Interest Reserve Account, the Expense Reserve Account, the Hedge Termination Receipts Account, the Hedge Replacement Account and the Collection Account (collectively with the Collateral Account, the “Accounts”); (iii) Eligible Investments purchased with funds on deposit in any Account and all funds on deposit in any Account and all income from the investments of funds in any Account; (iv)

all Cash or Money delivered to the Trustee for the benefit of the Trustee (directly or through a Securities

Intermediary or bailee); (v) all the Issuer’s rights under each Hedge Agreement (including any collateral pledged for the benefit of the Issuer thereunder) and all payments thereunder or with respect thereto; (vi)

all the Issuer’s rights under the Collateral Advisory Agreement and the Collateral Administration

Agreement; (vii) all Securities, Security Entitlements, Instruments, Money and Investment Property and other property of any type or nature in which the Issuer has an interest, including any part thereof which consists of General Intangibles; and (viii) all proceeds, accessions, profits, income, substitutions and replacements, whether voluntary or involuntary, of and to any property in which the Issuer has granted such security interest. Such Grants are made, however, in trust to secure the Notes equally and ratably without prejudice, priority or distinction, except as expressly provided in this Agreement, between any Note and any other Note by reason of difference in time of issuance or otherwise, and to secure in accordance with the priorities set forth in this Agreement (i) the payment of all amounts due on the Notes in accordance with their terms, (ii) the payment of all other sums payable under this Agreement and all amounts payable to the Collateral Advisor under the Collateral Advisory Agreement and each Hedge Counterparty under a Hedge Agreement and (iii) compliance with the provisions of this Agreement, the Collateral Advisory Agreement and each Hedge Agreement, all as provided in this Agreement. The Trustee, on behalf of the Secured Parties, acknowledges such Grant, accepts the trusts hereunder and agrees to perform the duties herein in accordance with the provisions hereof. (b) Priorities. The Issuer intends, and the Trustee agrees, that the security interests in the Collateral securing the Issuer’s obligations with respect to the Notes and performance of all its obligations under this Agreement in favor of the Trustee for the benefit of the Secured Parties shall rank pari passu with each other, shall be prior to all other Liens in respect of the Collateral, subject to the terms of this Agreement, and shall be subject to the Priority of Payments. The Issuer shall take all actions necessary to obtain and maintain, in favor of the Trustee for the benefit of the Secured Parties, a first priority Lien on and a first priority perfected security interest in the Collateral, subject to no other Liens. 4

Processed and formatted by SEC Watch - Visit SECWatch.com

(c) Holding of Collateral. The Trustee, for the benefit and on behalf of the Secured Parties, acknowledges the Grant of the security interests under this Agreement in accordance with the provisions of this Agreement. The Collateral in the form of Securities, Security Entitlements, Instruments and Money shall be held by the Accountholder for the Trustee for the benefit and on behalf of the Secured Parties pursuant to the Account Control Agreement and the Accountholder shall comply with any instruction given by the Trustee. If so directed in writing by the Issuer, the Trustee shall, and in any event shall cause the Accountholder to, hold and perfect the security interest in the Collateral. Except as provided herein, no Collateral may be withdrawn from the Accounts. (d) Delivery of Portfolio Collateral. Collateral Debt Securities acquired prior to or on the Closing Date shall be delivered by, or at the direction of, the Issuer to the Trustee on or before the Closing Date in accordance with Annex A hereto, and the Collateral Debt Securities which the Issuer has on or before the Closing Date committed to purchase but which will not have settled on or before the Closing Date, and any additional Collateral Debt Securities or Substitute Collateral Debt Securities acquired by the Issuer after the Closing Date, shall be delivered by, or at the direction of, the Issuer to the Trustee when acquired in accordance with Annex A hereto. The Issuer shall Grant pursuant to Section 2.01(a) all of the Issuer’s right, title and interest in and to the Collateral Debt Securities and deliver the Collateral Debt Securities in accordance with the requirements set forth in Annex A hereto in order to perfect a first priority security interest in favor of the Trustee on behalf and for the benefit of the Secured Parties. If any such Collateral Debt Securities are held through the Accountholder, delivery shall be deemed to have occurred upon receipt of evidence satisfactory to the Trustee that such Collateral Debt Securities have been credited to the Collateral Account in accordance with Annex A hereto. (e) Financing Statements. The Issuer shall cause a UCC financing statement describing the Collateral and naming the Issuer as debtor and the Trustee as secured party to be filed, by or on behalf of the Issuer, in the District of Columbia within ten (10) Business Days of the Closing Date. The Issuer shall take all actions necessary to maintain the effectiveness of such financing statement and shall notify the Trustee in writing not less than thirty (30) days prior to any change in the Issuer’s name, identity, corporate structure, jurisdiction of incorporation or jurisdiction of its chief executive office. The Issuer hereby authorizes the Trustee to, and the Trustee shall upon receipt of an Opinion of Counsel as to the necessity of such filing, file such additional financing statement or any other financing statement, amendment, assignment or continuation statement that the Issuer shall deem necessary or advisable in connection with the security interest Granted hereunder, including, without limitation, financing statements describing the Collateral. The Issuer agrees that it will from time to time cause to be filed financing statements and continuation statements required to be made, it being understood that the Trustee shall be entitled to rely upon an Opinion of Counsel as to the need to file such financing statements and continuation statements, the dates by which such filings are required to be made and the jurisdictions in which such filings are required to be made. The Issuer shall not without the written consent of the Trustee (which consent shall not be unreasonably withheld or delayed) authorize the filing of any financing statements naming it as debtor other than financing statements in favor of the Trustee. (f) Pledge Notices. Concurrently with the execution and delivery by the Issuer of the Transaction Documents, the Issuer shall deliver to each of the Accountholder, Trustee, each Paying Agent, each Hedge Counterparty and the Collateral Advisor, a notice in form and substance satisfactory to the Trustee informing such Persons of the Trustee’s charge over, and security interest in, the Hedge Agreements and all of the Issuer’s right, title and interest in, to and under the Collateral Advisory Agreement and the Collateral Administration Agreement. Each Hedge Counterparty shall, by entering into such agreement, acknowledge that the Lien of this Agreement extends to such agreement. (g) No Transfer of Duties. The security interests are Granted as security only and shall not (i) transfer or in any way affect or modify, or relieve the Issuer from any obligation to perform 5

Processed and formatted by SEC Watch - Visit SECWatch.com

or satisfy, any term, covenant, condition or agreement to be performed or satisfied by the Issuer under or in connection with this Agreement or any other Transaction Document to which it is a party or (ii) impose any obligation on the Trustee, the Collateral Advisor or the Accountholder to perform or observe any such term, covenant, condition or agreement or impose any liability on the Trustee, the Collateral Advisor or the Accountholder for any act or omission on the part of the Issuer relative thereto or for any breach of any representation or warranty on the part of the Issuer contained therein or made in connection therewith. (h) Representative of Noteholders Only; Agent for All Other Secured Parties. With respect to the security interests created hereunder, the pledge of any item of Collateral to the Trustee is made to the Trustee (i) for the benefit of itself as representative of the Noteholders and (ii) as agent for each of the other Secured Parties; in furtherance of the foregoing, the possession by the Trustee of any item of Collateral, the endorsement to or registration in the name of the Trustee of any item of Collateral (including as entitlement holder of the Collateral Account) are all undertaken by the Trustee for the benefit of itself as representative of the Noteholders and as agent for each of the other Secured Parties. The Trustee shall have no fiduciary duties to any Hedge Counterparty or the Collateral Advisor; provided that the foregoing shall not limit any of the express obligations of the Trustee under this Agreement. (i) The Issuer hereby agrees, and hereby undertakes to obtain the agreement of the Collateral Advisor, in the Collateral Advisory Agreement to the following: (i) The Collateral Advisor consents to, and agrees to perform, the provisions of this Agreement and the other Transaction Documents applicable to the Collateral Advisor. (ii) The Collateral Advisor acknowledges that the Issuer is assigning all of its right, title and interest in, to and under the Collateral Advisory Agreement to the Trustee on behalf and for the benefit of the Secured Parties, and the Collateral Advisor agrees that all of the representations, covenants and agreements made by the Collateral Advisor in the Collateral Advisory Agreement are also for the benefit of the Secured Parties. (iii) Neither the Issuer nor the Collateral Advisor will enter into any agreement amending, modifying or terminating the Collateral Advisory Agreement (other than in respect of an amendment or modification of the type that may be made to this Agreement and the Trust Deed without Noteholder consent) or selecting or consenting to a successor collateral advisor, without prior written notice to the Requisite Noteholders and Rating Agency Confirmation. (iv) Except as otherwise set forth in the Collateral Advisory Agreement, the Collateral Advisor shall continue to serve as Collateral Advisor under the Collateral Advisory Agreement notwithstanding that the Collateral Advisor shall not have received amounts due it under the Collateral Advisory Agreement because sufficient funds were not then available to pay such amounts and the Collateral Advisor agrees not to cause the filing of a petition in bankruptcy against the Issuer for the non-payment to the Collateral Advisor until the later of (A) payment in full of all Notes issued under the Trust Deed, in accordance with the Priority of Payments plus ten (10) days following such payment, and (B) the expiration of a period equal to the applicable preference period under any applicable bankruptcy law; provided that nothing in this clause (B) shall preclude, or be deemed to estop, the Collateral Advisor (1) from taking any action prior to the expiration of the ten (10) days following such payment or, if longer, the applicable preference period then in effect, in (x) any case or proceeding voluntarily filed or commenced by the Issuer or the Co-Issuer, as the case may be, or (y) any involuntary insolvency proceeding filed or commenced against the Issuer or the Co-Issuer, as the case may be, by a Person other than the Collateral Advisor or (2) from commencing against the Issuer or the Co-Issuer or any properties of the Issuer or the Co-Issuer any legal action that is not a bankruptcy, reorganization, arrangement, 6

Processed and formatted by SEC Watch - Visit SECWatch.com

insolvency, moratorium or liquidation proceeding; and provided, further, that the obligations of the Issuer hereunder shall be payable solely from the Collateral in accordance with the Priority of Payments. (j) Trustee as Attorney-In-Fact. Without imposing any obligations on the Trustee with respect thereto (other than as set forth in this Agreement), the Issuer hereby appoints the Trustee as its attorney-in-fact for the specific purpose of filing any financing statements and continuation statements with respect to the security interests provided for herein. Section 2.02. Creation of Security Interest: Transfer of Control. The Issuer hereby agrees to (a) create in each item of Collateral in favor of the Trustee on behalf and for the benefit of the Secured Parties a first priority Lien on the Collateral Granted pursuant to Section 2.01(a) and (b) give Control over each item of the Collateral constituting a Financial Asset to the Trustee. The obligation in the preceding sentence shall be an obligation of the Issuer and not an obligation of the Trustee or the Accountholder. All procedures regarding the transfer, relinquishment or maintenance of Control by the Trustee over the Collateral shall be governed by the Account Control Agreement and Annex A hereto. The parties hereto agree that, following the occurrence of any Event of Default, the Trustee shall be entitled to take all appropriate actions on behalf of the Secured Parties as described in Section 9.01. Section 2.03. Termination of Security Interests. On the Final Termination Date, the security interests and the rights, remedies, powers, duties, authority and obligations conferred upon the Trustee for the benefit and on behalf of the Secured Parties and the Accountholder pursuant to this Agreement shall terminate and be of no further force and effect and all rights, remedies, powers, duties, authority and obligations of the Trustee and the Accountholder with respect to the Collateral shall be automatically released in favor of the Issuer; provided, however, that each of the Trustee and the Accountholder, if requested in writing by the Issuer, shall execute and deliver such instruments of release in favor of the Issuer as the Issuer may reasonably request to effectuate such release, and any such instruments so executed and delivered shall be fully binding on each of the Trustee and the Accountholder. Section 2.04. Priority of Payments. All amounts received in respect of the Collateral (whether by payments or by sale or other disposition) that are available for distribution shall be distributed in accordance with the Priority of Payments set forth herein. Section 2.05. Representations Regarding Collateral. The Issuer, as of the date hereof (and, as of the date of each acquisition of any Collateral), represents and warrants to the following: (a) This Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in the Collateral in favor of the Trustee on behalf and for the benefit of the Secured Parties, which security interest is prior to all other Liens and security interests, and is enforceable as such as against creditors of and purchasers from the Issuer and, upon delivery of the Collateral Debt Securities in accordance with the requirements set forth in Annex A hereto and filing of the appropriate financing statements in the appropriate filing offices, the Lien and security interest created by this Agreement shall be a perfected first priority security interest in favor of the Trustee for the benefit of the Secured Parties. (b) The Issuer owns and has good and marketable title to the Collateral free and clear of any Liens, claims, encumbrances or defects of any nature whatsoever except for those which are being released on the Closing Date or on the date of purchase by the Issuer or those created pursuant to or contemplated under this Agreement and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on any Collateral Debt Security prior to the first payment date and owed by the Issuer to the seller of such Collateral Debt Security. 7

(c) The Issuer has acquired its ownership in each such Collateral Debt Security, or will acquire in the case of any Collateral Debt Securities which the Issuer has on or before the Closing Date committed to purchase but which will not have settled on or before the Closing Date or any additional Collateral Debt Securities or Substitute Collateral Debt Securities acquired by the Issuer after the Closing Date, in good faith without notice of any adverse claim, except as described in paragraph (b) above. (d) The Issuer (i) has delivered each such Collateral Debt Security, or will deliver any Collateral Debt Securities which the Issuer has on or before the Closing Date committed to purchase but which will not have settled on or before the Closing Date or any additional Collateral Debt Securities or Substitute Collateral Debt Securities acquired by the Issuer after the Closing Date, to the Trustee in accordance with Annex A hereto and (ii) has not assigned, pledged, sold, Granted a security interest in or otherwise encumbered any interest in such Collateral Debt Security other than interests Granted pursuant to this Agreement; (e)

The Issuer has full right to Grant all security interests Granted herein.

(f) All Collateral is comprised of either “securities”, “instruments”, “tangible chattel paper”, “accounts”, “security entitlements” or “general intangibles”, in each case as defined in the applicable UCC. (g)

Each of the Accounts, and all subaccounts thereof, constitute Securities Accounts.

(h) All items of the Collateral that constitute Security Entitlements have been and will have been credited to one of the Securities Accounts. The securities intermediary for each of the Accounts has agreed to treat all assets credited to the Securities Accounts as financial assets under the applicable UCC.

Processed and formatted by SEC Watch - Visit SECWatch.com

(i) Other than the security interest Granted to the Trustee on behalf and for the benefit of the Secured Parties pursuant to this Agreement, the Issuer has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Collateral. The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer that include a description of collateral covering the Collateral other than any financing statement relating to the security interest Granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder or that has been terminated. The Issuer is not aware of any judgment, Pension Benefit Guarantee Corporation lien or tax lien filings against it. (j) The Issuer has caused or will have caused, within ten (10) days of the Closing Date, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Collateral Granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder that constitutes chattel paper, instruments, accounts, securities entitlements or general intangibles under the applicable UCC, if any. (k) The Trustee or the Accountholder has in its possession all original copies of the instruments that constitute or evidence the Collateral, if any. The instruments, loan agreements and leases that constitute or evidence the Collateral do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties. All financing statements filed or to be filed against the Issuer in favor of the Trustee on behalf and for the benefit of the Secured Parties in connection herewith describing the Collateral contain a statement to the following effect: “A purchase of or security interest in any collateral 8

Processed and formatted by SEC Watch - Visit SECWatch.com

described in this financing statement will violate the rights of the Trustee on behalf and for the benefit of (A) itself and for the benefit of the Noteholders, (B) the Collateral Advisor and (C) each Hedge Counterparty.” (1) The authoritative copy of any chattel paper that constitutes or evidences the Collateral, if any, has been communicated to the Trustee and has no marks or notations indicating that it has been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties. (m) The Issuer has received or will receive all consents and approvals required by the terms of the underlying loan agreement, indenture or other underlying documentation, if any, relating to the Collateral to the transfer to the Trustee on behalf and for the benefit of the Secured Parties of its interest and rights in the Collateral hereunder. (n) The Issuer, the Accountholder and the Trustee have entered into the Account Control Agreement pursuant to which the Accountholder has agreed to comply with all instructions originated by the Trustee relating to the Accounts without further consent by the Issuer. (o) None of the Accounts is in the name of any person other than the Trustee, held on behalf and for the benefit of the Secured Parties. The Issuer has not consented to the Trustee or the Accountholder maintaining any of the Accounts to comply with entitlement orders or instructions of any Person other than the Trustee. (p) Notwithstanding any other provision of this Agreement or any other related Transaction Document, the representations in this Section 2.05 shall be continuing and deemed to be updated on any day a new item of Collateral is acquired, and remain in full force and effect until such time as all obligations under this Agreement, the Trust Deed, the Note Agency Agreement and the Notes have been finally and fully paid and performed. (q) The parties to this Agreement (i) shall not, without obtaining a Rating Agency Confirmation, waive any of the representations in this Section 2.05; (ii) shall provide each of the Rating Agencies with prompt written notice of any breach of the representations contained in this Section 2.05 upon becoming aware thereof; and (iii) shall not, without obtaining a Rating Agency Confirmation (as determined after any adjustment or withdrawal of the ratings following notice of such breach), waive a breach of any of the representations in this Section 2.05. ARTICLE III RAMP-UP PERIOD PURCHASES AND EFFECTIVE DATE ACTIONS Section 3.01. Closing Date Requirements. The Issuer hereby represents and warrants to the Trustee on behalf and for the benefit of the Secured Parties that as of the Closing Date (i) it will comply with the Collateral Quality Tests and the Coverage Tests and (ii) it will have acquired Collateral Debt Securities in an aggregate Principal Balance representing at least U.S.$350,000,000 million. Section 3.02.

Ramp-Up Period Purchases.

(a) Any portion of the net proceeds of the issuance of the Notes that are not applied to pay for (or reserved to pay for) the purchase of all Collateral Debt Securities on the Closing Date and the Issuer’s organizational expenses and expenses related to the issuance of the Notes will be deposited in the Collection Account on the Closing Date for the purchase of additional Collateral Debt Securities 9

Processed and formatted by SEC Watch - Visit SECWatch.com

during the Ramp-Up Period. The Issuer is required to use reasonable efforts to purchase, or to enter into binding agreements to purchase, Collateral Debt Securities such that the aggregate Principal Balance of all Collateral Debt Securities purchased by the Issuer by the end of the Ramp-Up Period is at least U.S.$400 million. Any portion of the net proceeds of the issuance of the Notes that are not applied to the purchase of Collateral Debt Securities on the Closing Date or during the Ramp-Up Period, shall be Collateral Principal Collections and shall be applied by the Issuer to the making of payments on the Notes, subject to and in accordance with the Priority of Payments, on the Payment Date immediately following the Effective Date. (b) During the Ramp-Up Period, subject to the requirements of Article VI, the Issuer is required to use reasonable efforts to purchase Collateral Debt Securities that, at the time of purchase will each satisfy the Ramp-Up Criteria, and as of the end of the Ramp-Up Period, will, in the aggregate (with all Collateral Debt Securities previously acquired by the Issuer), satisfy the Collateral Quality Tests and the Coverage Tests. (c) The Issuer hereby covenants to the Trustee, on behalf and for the benefit of the Secured Parties, that during the Ramp-Up Period, it will not invest in any additional Collateral Debt Securities unless such additional Collateral Debt Security satisfies the Ramp-Up Criteria and unless such acquisition will not result in the failure to satisfy the Coverage Tests. Section 3.03.

Effective Date Actions.

(a) The Issuer (or the Collateral Advisor on behalf of the Issuer) shall cause to be delivered to the Trustee on the Effective Date an amended schedule of Collateral Debt Securities listing all Collateral Debt Securities Granted to the Trustee pursuant to Section 2.01 on or before the Effective Date, which schedule shall supersede any prior schedule of Collateral Debt Securities delivered to the Trustee. In addition, on the Effective Date and on each Calculation Date thereafter, the Trustee shall be required to provide to S&P the Electronic Default Model Input File; provided that the Trustee shall not disclose any S&P confidential private credit assessments used in preparing the Electronic Default Model Input File to any third party. (b) In the case of an Effective Date specified in clause (i) or (ii) of the definition of “Effective Date,” the Issuer (or the Collateral Advisor on behalf of the Issuer) shall request each Rating Agency rating a Class of Notes to confirm in writing, within thirty (30) Business Days after such Effective Date, or such later date as such Rating Agency may determine, that it has not reduced or withdrawn the rating it assigned to such Class of Notes on the Closing Date. In the event of a Ratings Confirmation Failure, on the next and succeeding Payment Dates, the Issuer is required to pay principal, to the extent of Available Funds in the Collection Account and subject to the Priority of Payments, on the Class A-1 Notes, the Class A-2 Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes and the Class D Notes, in that order, in the amounts necessary for each Rating Agency to confirm its respective ratings of the Notes assigned on the Closing Date or until each Class of Notes is paid in full. Such request by the Issuer to the Rating Agencies shall be accompanied by an accountant’s certificate as provided in Section 3.03(c). (c) Within fifteen (15) Business Days after the Effective Date, (i) the Issuer, or the Collateral Advisor on the Issuer’s behalf, shall be required to obtain and deliver to the Trustee an accountants’ certificate from the Independent Accountants (A) confirming the information with respect to each Collateral Debt Security set forth on the amended schedule of Collateral Debt Securities delivered pursuant to Section 3.03(a) as of the end of the Ramp-Up Period, and the information provided by the Issuer with respect to every other asset included in the Collateral, by reference to such sources as will be specified therein, (B) certifying as of the end of the Ramp-Up Period the procedures applied and the 10

Processed and formatted by SEC Watch - Visit SECWatch.com

associated findings with respect to (1) the Coverage Tests and (2) the Collateral Quality Tests and (C) specifying the procedures undertaken by them to review data and computations relating to the foregoing statement, (ii) the Trustee shall be required to run the S&P CDO Monitor and report to S&P whether or not the S&P CDO Monitor Test has been satisfied and (iii) the Trustee will be required to report the S&P scenario default and break-even default rate for each Class of Notes. ARTICLE IV ACCOUNTS, ACCOUNTINGS AND RELEASES Section 4.01. Collection of Money. The Accounts established by the Trustee pursuant to Section 8.01 and this Article IV may include any number of sub-accounts requested by the Collateral Advisor for convenience in administering Collateral Debt Securities. In addition, all Cash deposited in the Accounts established pursuant to this Article IV shall be invested in Eligible Investments in accordance with the procedures set forth in this Article IV and any restrictions applicable to such Accounts. Section 4.02.

Collection Account.

(a) The Trustee shall, prior to the Closing Date, establish a single, segregated trust account in the United States which shall be designated as the “Collection Account”, which shall be held in the name of the Trustee for the benefit and on behalf of the Secured Parties and over which the Trustee shall have exclusive Control and the sole right of withdrawal, into which the Trustee shall from time to time deposit, in addition to the deposits required pursuant to Section 4.04(d), (i) all distributions on the Collateral Debt Securities and (ii) all proceeds received from the disposition of any Collateral Debt Securities (unless simultaneously reinvested in additional Collateral Debt Securities or Substitute Collateral Debt Securities, subject to the Replacement Criteria (other than with respect to proceeds received from the disposition of any Temporary Ramp-Up Securities), or in Eligible Investments) and (iii) all Collections. Funds in the Collection Account shall not be commingled with any other Money. The Trustee shall give to the Issuer and the Collateral Advisor prompt notice if the Collection Account or any funds on deposit therein, or otherwise to the credit thereof, shall become subject to any writ, order, judgment, warranty of attachment, execution or similar process. The Issuer shall not have any legal, equitable or beneficial interest in the Collection Account other than in accordance with the Priority of Payments. In addition, (x) the Issuer may, but under no circumstances shall be required to, deposit or cause to be deposited from time to time such Moneys in the Collection Account as it deems, in its sole discretion, to be advisable and by notice to the Trustee and (y) the Collateral Advisor may designate such Money to be treated as Collateral Principal Collections or Collateral Interest Collections hereunder at its discretion. All Money deposited from time to time in the Collection Account pursuant to this Agreement shall be held by the Trustee as part of the Collateral and shall be applied in accordance with the terms hereof and to the purposes herein provided. The Collection Account shall remain at all times with a financial institution having a long-term debt rating of at least “BBB+” by S&P, at least “Baal” by Moody’s and, at least “BBB+” by Fitch and a short-term debt rating of at least “A-1” by S&P, at least “P-1” by Moody’s and, at least “F-1” by Fitch. (b) All Distributions, any deposit required pursuant to Section 4.02(c) and any net proceeds from the sale or disposition of a Collateral Debt Security received by the Trustee shall be immediately deposited into the Collection Account. All such property, together with any securities in which funds included in such property are or will be invested or reinvested during the term of this Agreement, and any income or other gain realized from such investments, shall be held by the Trustee in the Collection Account as part of the Collateral subject to disbursement and withdrawal as provided in this Section 4.02. By Issuer Order (which may be in the form of standing instructions), the Issuer (or the 11

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Advisor on behalf of the Issuer) may at any time direct the Trustee to, and upon receipt of such Issuer Order the Trustee shall, invest all funds received into the Collection Account during a Due Period, and amounts received in prior Due Periods and retained in the Collection Account, as so directed in Eligible Investments maturing no later than the Business Day immediately preceding the next Payment Date. The Trustee shall, within one (1) Business Day after receipt of any Distribution or other proceeds which is not Cash, so notify the Issuer and the Issuer (or the Collateral Advisor on behalf of the Issuer) shall, within thirty (30) Business Days after receipt of such notice from the Trustee, sell such Distribution or other proceeds for Cash in an arm’s-length transaction to a Person which is not an Affiliate (other than a Permitted Affiliate, subject to the Investment Advisers Act) of the Issuer or the Collateral Advisor and deposit the proceeds thereof in the Collection Account for investment pursuant to this Section 4.02; provided, however, that the Issuer (or the Collateral Advisor on behalf of the Issuer) need not sell such Distributions or other proceeds if it delivers an Officer’s certificate to the Trustee certifying that such Distributions or other proceeds constitute Collateral Debt Securities or Eligible Investments. (c) If, prior to the occurrence of an Event of Default, the Issuer shall not have given any investment directions pursuant to Section 4.02(b), the Trustee shall seek instructions from the Collateral Advisor within three (3) Business Days after transfer of such funds to the Collection Account. If the Trustee does not thereupon receive written instructions from the Issuer (or the Collateral Advisor on behalf of the Issuer) within thirty (30) Business Days after transfer of such funds to the Collection Account, it shall invest and reinvest the funds held in the Collection Account, as fully as practicable, but only in one or more Eligible Investments described in clause (iii) of the definition of Eligible Investments of its selection maturing no later than the Business Day immediately preceding the next Payment Date. If, after the occurrence of an Event of Default, the Issuer shall not have given investment directions to the Trustee pursuant to Section 4.02(b) for three (3) consecutive days, the Trustee shall invest and reinvest such Money as fully as practicable in Eligible Investments as described in clause (iii) of the definition of Eligible Investments of its selection maturing not later than the Business Day immediately preceding the next Payment Date. All interest and other income from such investments shall be deposited in the Collection Account, any gain realized from such investments shall be credited to the Collection Account and any loss resulting from such investments shall be charged to the Collection Account. The Trustee shall not in any way be held liable by reason of any insufficiency of such Collection Account resulting from any loss relating to any such Eligible Investment, except with respect to investments in obligations of the Trustee or any Affiliate thereof. (d) Upon Issuer Order executed by the Issuer (or the Collateral Advisor on behalf of the Issuer) and subject to the requirements of Section 3.02, between the Closing Date and the close of business on the Effective Date only, all or a portion of any deposit and any reinvestment income thereon shall be released from the Collection Account and applied by the Trustee in accordance with such Issuer Order in payment for Collateral Debt Securities purchased in accordance with Section 3.02 and Granted to the Trustee for and on behalf of the Secured Parties. (e) During the Ramp-Up Period, the Collateral Advisor may reinvest Collateral Principal Collections (including Sale Proceeds) in Substitute Collateral Debt Securities as permitted under and in accordance with the requirements of Article VI or temporarily reinvest such amounts in Eligible Investments pursuant to Section 4.02(b) pending reinvestment in Substitute Collateral Debt Securities. After the Ramp-Up Period, the Collateral Advisor may reinvest Prepaid Collateral Principal Collections in Substitute Collateral Principal Collections as permitted under and in accordance with the requirements of Article VI or temporarily reinvest such amounts as Eligible Investments pursuant to Section 4.02(b) pending reinvestment in Substitute Collateral Debt Securities. If the Collateral Advisor does not reinvest such Collateral Principal Collections (including Sale Proceeds) in accordance with the requirements of Article VI, such amounts shall be used to redeem the Notes in accordance with the Priority of Payments 12

Processed and formatted by SEC Watch - Visit SECWatch.com

in an amount equal to the lesser of (i) the Collateral Principal Collections and (ii) the amount of Available Funds remaining in the Collection Account. Section 4.03.

Interest Reserve Account.

(a) The Trustee shall, prior to the Closing Date, establish a single, segregated trust account which shall be designated as the “Interest Reserve Account”, which shall be held in the name of the Trustee for the benefit and on behalf of the Secured Parties and over which the Trustee shall have exclusive Control and the sole right of withdrawal, into which the Trustee shall deposit on each Payment Date, the Interest Reserve Amount, if any, in accordance with Section 5.01(a)(ix). Funds in the Interest Reserve Account shall not be commingled with any other Money. The Trustee shall give to the Issuer and the Collateral Advisor prompt notice if the Interest Reserve Account or any funds on deposit therein, or otherwise to the credit of the Interest Reserve Account, shall become subject to any writ, order, judgment, warranty of attachment, execution or similar process. All Money deposited from time to time in the Interest Reserve Account pursuant to this Agreement shall be held by the Trustee as part of the Collateral and shall be applied in accordance with the terms hereof and to the purposes herein provided. The Issuer shall not have any legal, equitable or beneficial interest in the Interest Reserve Account other than in accordance with the Priority of Payments. The Interest Reserve Account shall remain at all times with a financial institution having a long-term debt rating of at least “BBB+” by S&P, at least “Baal” by Moody’s and, at least “BBB+” by Fitch and a short-term debt rating of at least “A-1” by S&P, at least “P-1” by Moody’s and, at least “F-1” by Fitch. (b) Any deposit required pursuant to Section 4.03(c) shall be immediately deposited into the Interest Reserve Account. All such property, together with any securities in which funds included in such property are or will be invested or reinvested during the term of this Agreement, and any income or other gain realized from such investments, shall be held by the Trustee in the Interest Reserve Account as part of the Collateral subject to disbursement and withdrawal as provided in this Section 4.03. By Issuer Order (which may be in the form of standing instructions), the Issuer (or the Collateral Advisor on behalf of the Issuer) may at any time direct the Trustee to, and upon receipt of such Issuer Order the Trustee shall, invest all funds received into the Interest Reserve Account during a Due Period, and amounts received in prior Due Periods and retained in the Interest Reserve Account, as so directed in Eligible Investments maturing no later than the Business Day immediately preceding the next Payment Date. The Trustee shall, within one (1) Business Day after receipt of any Distribution or other proceeds which is not Cash, so notify the Issuer and the Issuer (or the Collateral Advisor on behalf of the Issuer) shall, within thirty (30) Business Days after receipt of such notice from the Trustee, sell such Distribution or other proceeds for Cash in an arm’s-length transaction to a Person which is not an Affiliate (other than a Permitted Affiliate, subject to the Investment Advisers Act) of the Issuer or the Collateral Advisor and deposit the proceeds thereof in the Interest Reserve Account for investment pursuant to this Section 4.03; provided, however, that the Issuer (or the Collateral Advisor on behalf of the Issuer) need not sell such Distributions or other proceeds if it delivers an Officer’s certificate to the Trustee certifying that such Distributions or other proceeds constitute Collateral Debt Securities or Eligible Investments. (c) If, prior to the occurrence of an Event of Default, the Issuer (or the Collateral Advisor on behalf of the Issuer) shall not have given any investment directions pursuant to Section 4.03(b), the Trustee shall seek instructions from the Collateral Advisor within three (3) Business Days after transfer of such funds to the Interest Reserve Account. If the Trustee does not thereupon receive written instructions from the Issuer (or the Collateral Advisor on behalf of the Issuer) within three (3) Business Days after transfer of such funds to the Interest Reserve Account, it shall invest and reinvest the funds held in the Interest Reserve Account, as fully as practicable, but only in one or more Eligible Investments in clause (iii) of the definition of Eligible Investments of its selection maturing no later than the Business Day immediately preceding the next Payment Date. If, after the occurrence of an Event of 13

Processed and formatted by SEC Watch - Visit SECWatch.com

Default, the Issuer (or the Collateral Advisor on behalf of the Issuer) shall not have given investment directions to the Trustee pursuant to Section 4.03(b) for three (3) consecutive days, the Trustee shall invest and reinvest such Money as fully as practicable in Eligible Investments as described in clause (iii) of the definition of Eligible Investments of its selection maturing not later than the Business Day immediately preceding the next Payment Date. All interest and other income from such investments shall be deposited in the Interest Reserve Account, any gain realized from such investments shall be credited to the Interest Reserve Account and any loss resulting from such investments shall be charged to the Interest Reserve Account. The Trustee shall not in any way be held liable by reason of any insufficiency of such Interest Reserve Account resulting from any loss relating to any such Eligible Investment, except with respect to investments in obligations of the Trustee or any Affiliate thereof. (d) On the Business Day immediately preceding each Payment Date, the Trustee shall deposit into the Collection Account the balance of the Interest Reserve Account for distribution in accordance with the Priority of Payments on the related Payment Date. Section 4.04.

Expense Reserve Account.

(a) The Trustee shall, prior to the Closing Date, establish a single, segregated trust account which shall be designated as the “Expense Reserve Account”, which shall be held in the name of the Trustee for the benefit and on behalf of the Secured Parties and over which the Trustee shall have exclusive Control and the sole right of withdrawal, into which the Trustee shall deposit, on the Closing Date, an amount equal to U.S.$25,000 and, on each Payment Date, an amount in accordance with Section 5.01(a)(i). Funds in the Expense Reserve Account shall not be commingled with any other Money. The Trustee shall give to the Issuer and the Collateral Advisor prompt notice if the Expense Reserve Account or any funds on deposit therein, or otherwise to the credit of the Expense Reserve Account, shall become subject to any writ, order, judgment, warranty of attachment, execution or similar process. All Money deposited from time to time in the Expense Reserve Account pursuant to this Agreement shall be held by the Trustee as part of the Collateral and shall be applied in accordance with the terms hereof and to the purposes herein provided. The Issuer shall not have any legal, equitable or beneficial interest in the Expense Reserve Account other than in accordance with this Agreement. The Expense Reserve Account shall remain at all times with a financial institution having a long-term debt rating of at least “BBB+” by S&P, at least “Baal” by Moody’s and, at least “BBB+” by Fitch and a short-term debt rating of at least “Al”- by S&P, at least “P-1” by Moody’s and, at least “F-1” by Fitch. (b) Any deposit required pursuant to Section 4.04(c) shall be immediately deposited into the Expense Reserve Account. All such property, together with any securities in which funds included in such property are or will be invested or reinvested during the term of this Agreement, and any income or other gain realized from such investments, shall be held by the Trustee in the Expense Reserve Account as part of the Collateral subject to disbursement and withdrawal as provided in this Section 4.04. By Issuer Order (which may be in the form of standing instructions), the Issuer (or the Collateral Advisor on behalf of the Issuer) may at any time direct the Trustee to, and upon receipt of such Issuer Order the Trustee shall, invest all funds received into the Expense Reserve Account during a Due Period, and amounts received in prior Due Periods and retained in the Expense Reserve Account, as so directed in Eligible Investments maturing not later than the second (2nd) Business Day immediately preceding the next Payment Date unless such Eligible Investments are investments of the type described in clause (i) or (iii) of the definition of “Eligible Investments”, in which event such Eligible Investments may mature on the Business Day immediately preceding such Payment Date. The Trustee shall, within one (1) Business Day after receipt of any Distribution or other proceeds which is not Cash, so notify the Issuer and the Issuer (or the Collateral Advisor on behalf of the Issuer) shall, within thirty (30) Business Days after receipt of such notice from the Trustee, sell such Distribution or other proceeds for Cash in an arm’s-length transaction to a Person that is not an Affiliate (other than a Permitted Affiliate, subject to the 14

Processed and formatted by SEC Watch - Visit SECWatch.com

Investment Advisers Act) of the Issuer or the Collateral Advisor and deposit the proceeds thereof in the Expense Reserve Account for investment pursuant to this Section 4.04; provided, however, that the Issuer (or the Collateral Advisor on behalf of the Issuer) need not sell such Distributions or other proceeds if it delivers an Officer’s certificate to the Trustee certifying that such Distributions or other proceeds constitute Collateral Debt Securities or Eligible Investments. (c) If, prior to the occurrence of an Event of Default, the Issuer shall not have given any investment directions pursuant to Section 4.04(b), the Trustee shall seek instructions from the Collateral Advisor within three (3) Business Days after transfer of such funds to the Expense Reserve Account. If the Trustee does not thereupon receive written instructions from the Issuer (or the Collateral Advisor on behalf of the Issuer) within thirty (30) Business Days after transfer of such funds to the Expense Reserve Account, it shall invest and reinvest the funds held in the Expense Reserve Account, as fully as practicable, but only in Eligible Investments of the type described in clause (iii) of the definition of “Eligible Investments”, maturing the Business Day immediately preceding such Payment Date. If, after the occurrence of an Event of Default, the Issuer shall not have given investment directions to the Trustee pursuant to Section 4.04(b) for three (3) consecutive days, the Trustee shall invest and reinvest such Money as fully as practicable, but only in Eligible Investments of its selection of the type described in clause (iii) of the definition of “Eligible Investments”, maturing on the Business Day immediately preceding such Payment Date. All interest and other income from such investments shall be deposited in the Expense Reserve Account, any gain realized from such investments shall be credited to the Expense Reserve Account and any loss resulting from such investments shall be charged to the Expense Reserve Account. The Trustee shall not in any way be held liable by reason of any insufficiency of such Expense Reserve Account resulting from any loss relating to any such Eligible Investment, except with respect to investments in obligations of the Trustee or any Affiliate thereof. (d) On the Business Day prior to each Payment Date, the Trustee shall deposit into the Collection Account the balance of the Expense Reserve Account (including reinvestment income) for distribution in accordance with the Priority of Payments on the related Payment Date. (e) The Trustee may, from time to time and at any time, withdraw amounts from the Expense Reserve Account to pay accrued and unpaid administrative expenses of the Co-Issuers. All amounts remaining on deposit in the Expense Reserve Account at the time when substantially all of the Issuer’s assets have been sold or otherwise disposed of will be deposited by the Trustee into the Collection Account (including reinvestment income) as Collateral Interest Collections for distribution in accordance with the Priority of Payments on the immediately succeeding Payment Date. Section 4.05. Collateral Account. The Trustee shall, prior to the Closing Date, establish a single, segregated trust account (or a subaccount of the Collection Account) which shall be designated as the “Collateral Account”, which shall be held in the name of the Trustee for the benefit and on behalf of the Secured Parties and over which the Trustee shall have exclusive Control and the sole right of withdrawal. Any and all assets or securities at any time on deposit in, or otherwise to the credit of, the Collateral Account shall be held in trust by the Trustee for the benefit and on behalf of the Secured Parties. The only permitted withdrawals from the Collateral Account shall be in accordance with this Agreement. The Trustee agrees to give the Issuer prompt notice if the Collateral Account or any funds on deposit therein, or otherwise to the credit of the Collateral Account, shall become subject to any writ, order, judgment, warrant of attachment, execution or similar process. The Issuer shall not have any legal, equitable or beneficial interest in the Collateral Account other than in accordance with this Agreement. The Collateral Account shall remain at all times with a financial institution located in the United States having a long-term debt rating of at least “BBB+” by S&P, at least “Baal” by Moody’s and at least “BBB+” by Fitch and a short-term debt rating of at least “A-1” by S&P, at least “P-1” by Moody’s and, at least “F-1” by Fitch. 15

Processed and formatted by SEC Watch - Visit SECWatch.com

Section 4.06. Reports by Trustee. The Trustee shall supply, in a timely fashion, to the Co-Issuers, each Hedge Counterparty, the Principal Paying Agent, each Rating Agency (so long as any Notes are rated by such Rating Agency), the Initial Purchasers and the Collateral Advisor any information regularly maintained by the Trustee that each such party may from time to time request with respect to the Collateral Debt Securities, any Hedge Agreement, the Collection Account and the Collateral Account and such other information as is regularly maintained by the Trustee and is reasonably needed to verify information contained in the Note Report. Additionally, the Trustee shall promptly provide any other information reasonably available to the Trustee by reason of its acting as Trustee hereunder and required to be provided by Section 4.07 or to permit the Collateral Advisor to perform its obligations under the Collateral Advisory Agreement. The Trustee shall forward to the Collateral Advisor copies of all notices and other writings received by it from the issuer of any Collateral Debt Security or from any Clearing Agency with respect to any Collateral Debt Security advising the holders of such security of any rights that the holders might have with respect thereto (including, without limitation, notices of calls and redemptions of securities) as well as all periodic financial reports received from such issuer and Clearing Agencies with respect to such issuer. The Trustee shall also cause the amount of interest paid on the Notes on each Payment Date to be communicated to Euroclear, Clearstream and the Irish Stock Exchange (as long as any of the Notes are listed thereon) on or prior to such Payment Date. Section 4.07.

Accountings.

(a) Payment Date Accounting: Note Reports. Commencing on the Payment Date in September 2004, not later than the Business Day prior to each Payment Date and after the reconciliation process described in this Section 4.07(a), the Issuer (or the Collateral Administrator on its behalf) shall make available on the Collateral Administrator’s website, initially located at www.cdotrustee.net and deliver by electronic mail to S&P and otherwise upon request, an account of the amounts that will be paid in accordance with the Priority of Payments (each, a “Payment Report”). Each Payment Report shall be delivered to the Collateral Advisor, the Trustee, the Principal Paying Agent, each Hedge Counterparty, if any, each Rating Agency (so long as any notes are rated by such Rating Agency), the Initial Purchasers and the Depository (accompanied by a request that it be transmitted to the Holders of Notes on the books of the Depository). Not later than the close of business on each Payment Date commencing on the Payment Date in September 2004, the Collateral Administrator (on behalf of the Issuer) shall make available on the Collateral Administrator’s website, initially located at www.cdotrustee.net and deliver by email to S&P and otherwise upon request, an accounting (each, a “Note Report”), determined as of the preceding Calculation Date, and deliver the Note Reports, after the reconciliation process described in this Section 4.07(a), to the Collateral Advisor, the Issuer, the Trustee, the Principal Paying Agent, each Hedge Counterparty and the Depository (accompanied by a request that it be transmitted to the Holders of Notes on the books of the Depository). The Collateral Advisor shall provide any information reasonably requested by or on behalf of the Issuer for preparation of a Payment Report or Note Report in accordance with this Section 4.07(a). Upon receipt of each Payment Report and each Note Report, the Trustee, in the name and at the expense of the Co-Issuers, shall notify the Irish Paying Agent, so long as any Notes are listed thereon, of the aggregate outstanding amount of the Notes of each Class after giving effect to the principal payments, if any, on the next Payment Date. The Note Report shall contain the following information: (i) the calculation showing compliance with each of the Coverage Tests, accompanied by a list setting forth the applicable maximum or minimum value, percentage or ratio which must be maintained pursuant to this Agreement with respect to each of the Coverage Tests and a list setting forth the results of the calculation of each of the Coverage Tests with respect to the Collateral Debt Securities, the calculation showing whether the S&P CDO Monitor Test is satisfied (including the weighted average rating, the default measure, variability measure and correlation measure, the scenario default rate and/or such other information required to be computed with respect to the S&P CDO Monitor 16

Processed and formatted by SEC Watch - Visit SECWatch.com

Test), and the calculation showing the Weighted Average Moody’s Rating Factor, the Fitch Weighted Average Rating Factor, the Weighted Average Fixed Rate Coupon, the Moody’s Diversity Score, the Weighted Average Life, the Moody’s Recovery Rate and the S&P Minimum Average Recovery Rate; (ii)

the estimated remaining average life (on each asset and on an aggregate basis) of all Collateral Debt

Securities; (iii) the Applicable Periodic Interest Rate in respect of each Class of Notes and the amount of Periodic Interest payable to the Holders of the Notes for such Payment Date (in the aggregate and by Class); (iv)

the amount (if any) payable to each Hedge Counterparty pursuant to the related Hedge Agreement;

(v)

the amount (if any) payable by each Hedge Counterparty pursuant to the related Hedge Agreement;

(vi)

the Aggregate Fees and Expenses payable on the next Payment Date on an itemized basis;

(vii)

the Aggregate Fees and Expenses paid during a period of twelve (12) months ending on the next Payment

(viii)

for the Collection Account:

Date on an itemized basis;

(A)

the Balance on deposit in the Collection Account at the end of the related Due Period;

(B) the nature and source of any Collections in the Collection Account, including Collections received since the date of the last Note Report; (C) the amounts payable from the Collection Account pursuant to each priority in the Priority of Payments on the next Payment Date; and (D) be made on such Payment Date; (ix)

the Balance remaining in the Collection Account immediately after all payments and deposits to

for the Interest Reserve Account: (A)

the balance on deposit in the Interest Reserve Account at the end of the related Due Period;

(B)

the amount payable from the Interest Reserve Account pursuant to the Priority of Payments on

(C)

the Interest Reserve Amount to be paid into the Interest Reserve Account on the next Payment

the next Payment Date;

Date; and (D) the Balance remaining in the Interest Reserve Account immediately after all payments and deposits to be made on such Payment Date; (x)

for the Expense Reserve Account, 17

Processed and formatted by SEC Watch - Visit SECWatch.com

(A)

the amount to be paid into the Expense Reserve Account on the next Payment Date; and

(B) the Balance remaining in the Expense Reserve Account immediately after all payments and deposits to be made on such Payment Date; (xi) the Hedge Receipt Amount or the Hedge Payment Amount for the related Payment Date, and for each Hedge Agreement, the outstanding notional amount of such Hedge Agreement and the amounts, if any, scheduled to be received or paid, as the case may be, by the Issuer pursuant to such Hedge Agreement for the related Payment Date, separately stating the portion payable under the Priority of Payments; (xii)

the amount of Excess Funds to be paid to the Holders of the Class E Subordinate Income Notes on the

(xiii)

the amount of the Senior Collateral Advisory Fee and the amount of the Subordinate Collateral Advisory

related Payment Date;

Fee; (xiv) the amount of the Deferred Subordinate Collateral Advisory Fee (including the amounts of the Monitoring Fee and the Senior Structuring Fee); (xv) such other information as the Collateral Advisor, the Initial Purchasers, the Trustee, S&P, Moody’s or any Hedge Counterparty may reasonably request; (xvi) with respect to each Collateral Debt Security, the Principal Balance, the annual coupon rate or spread to the relevant floating rate index, the frequency of coupon payments, the amount of principal payments received, the maturity date, the issuer, the country in which the issuer is incorporated or organized, the Moody’s Industry Classification Group, the S&P Industry Classification Group, the Fitch Industry Classification Group, the S&P Recovery Rate, the Moody’s Recovery Rate, the S&P Weighted Average Recovery Rate for each Class of Notes, the Moody’s Rating, the S&P Rating and the Fitch Rating (provided that if any Moody’s Rating, S&P Rating or Fitch Rating for any Collateral Debt Security is an “estimated” or “shadow” rating, such rating shall be identified as “estimated” or “shadow rated”, shall be disclosed with an asterisk in the place of the applicable estimated or shadow rating and shall include the date as of which such rating was first provided by Moody’s, S&P or Fitch, as the case may be, to the Issuer); (xvii) the Principal Balance, the annual interest rate, the maturity date, the Moody’s Rating, the S&P Rating, the Fitch Rating and the issuer of each Eligible Investment included in the Collateral; (xviii) (A) the identity and Principal Balance of each Collateral Debt Security that became a Credit Risk Security, a Defaulted Security, an Equity Security, a Written Down Security, a Withholding Tax Security, a Deferred Interest PIK Bond or, except with respect to Defaulted Securities, a Collateral Debt Security whose Moody’s Rating has been reduced below “Ba3” since the last Note Report, (B) the date, as provided by the Collateral Advisor, on which any Collateral Debt Security became a Credit Risk Security, a Defaulted Security, an Equity Security, a Written Down Security or a Withholding Tax Security, (C) the date by which the Issuer or the Collateral Advisor is required to declare its intention to sell or to hold such Collateral Debt Security, (D) whether the Collateral Advisor has directed the Issuer to sell or not to sell such Collateral Debt Security, and (E) the date by which any such sale must occur; 18

(xix) the identity of each Collateral Debt Security that was upgraded or downgraded or placed on watch for upgrade or downgrade by any Rating Agency since the date of the last Note Report; provided that the identity of each Collateral Debt Security that was upgraded or downgraded for purposes of this clause 4.07(a)(xix) shall not be obtained from Bloomberg Financial Markets OnLine Data Retrieval Service or a similar service and must be obtained from information provided directly by the Rating Agencies; (xx) the Principal Balance and identity of each Collateral Debt Security that was released for sale indicating the reason for such sale and the amount and identity of each Collateral Debt Security that was Granted since the date of the last Note Report; (xxi) the identity and Principal Balance of each Collateral Debt Security that was a Credit Risk Security, a Defaulted Security, an Equity Security, a Written Down Security, a Withholding Tax Security or a Deferred Interest PIK Bond or, except with respect to Defaulted Securities, a Collateral Debt Security whose Moody’s Rating was below “Ba3” as of the last Note Report and that remains a Credit Risk Security, a Defaulted Security, an Equity Security, a Written Down Security, a Deferred Interest PIK Bond or a Collateral Debt Security (other than a Defaulted Security) with a Moody’s Rating below “Ba3” and the Market Value of each Defaulted Security; (xxii) the purchase price of each Pledged Security Granted and the sale price of each Pledged Security subject to a sale since the date of the last Note Report; and whether such Pledged Security is a Collateral Debt Security, an Eligible Investment or proceeds in the Collection Account; (xxiii)

the amount of Purchased Accrued Interest;

(xxiv)

a description of any transactions with the Collateral Advisor, the Issuer, the Collateral Administrator and

Processed and formatted by SEC Watch - Visit SECWatch.com

the Collateral Agent and any Affiliates thereof; (xxv) the Class A-1 Note Break-Even Default Rate, the Class A-2 Note Break- Even Default Rate, the Class B-1 Note Break-Even Default Rate, the Class B-2 Note Break-Even Default Rate, the Class C-1 Note Break-Even Default Rate, the Class C-2 Note Break-Even Default Rate and the Class D Note Break-Even Default Rate; (xxvi) the Class A-1 Note Default Differential, the Class A-2 Note Default Differential, the Class B-1 Note Default Differential, the Class B-2 Note Default Differential, the Class C-1 Note Default Differential, the Class C-2 Note Default Differential and the Class D Note Default Differential; (xxvii) the Class A-1 Note Scenario Default Rate, the Class A-2 Note Scenario Default Rate, the Class B-1 Note Scenario Default Rate, the Class B-2 Note Scenario Default Rate, the Class C-1 Note Scenario Default Rate, the Class C-2 Note Scenario Default Rate and the Class D Note Scenario Default Rate; and (xxviii) with respect to the Collateral Debt Securities in the aggregate, the aggregate principal amount of the Collateral Debt Securities, the Weighted Average Life, the Weighted Average Fixed Rate Coupon, the Weighted Average Spread, the S&P Weighted Average Recovery Rate for each Class of Notes, the Moody’s Diversity Score, the Moody’s Weighted Average Recovery Rate, the Fitch Weighted Average Rating Factor, the Weighted Average Moody’s Rating Factor. Upon receipt of each Note Report, the Trustee and the Collateral Advisor shall compare the information contained therein to the information contained in their respective records with respect to 19

Processed and formatted by SEC Watch - Visit SECWatch.com

the Collateral and shall, within two (2) Business Days after receipt of such Note Report, notify each of the Issuer, each Hedge Counterparty, the Collateral Advisor, the Trustee, Moody’s and S&P if the information contained in the Note Report does not conform to the information maintained by the Trustee or the Collateral Advisor as applicable, with respect to the Collateral, and detail any discrepancies. In the event that any discrepancy exists, the Trustee and the Issuer, or the Collateral Advisor shall attempt to promptly resolve the discrepancy. If such discrepancy cannot be promptly resolved, the Trustee shall within five (5) Business Days after discovery of such discrepancy cause the Independent Accountants of recognized international reputation to review such Note Report and the Trustee’s and the Collateral Advisor’s records to determine the cause of such discrepancy. If such review reveals an error in the Note Report or the Trustee’s or the Collateral Advisor’s records, the Note Report or Trustee’s and the Collateral Advisor’s records, as the case may be, shall be revised accordingly and, as so revised, shall be utilized in making further calculations. Subject to the terms of this Agreement, the Trustee shall be entitled to rely on the information supplied by the Collateral Advisor in relation to the preparation of the Note Report and shall not be liable for the accuracy or completeness of such information or the lack thereof. (b)

Each Note Report sent to any Holder or beneficial owner of any Note shall contain, or be accompanied by, the

following notice: “The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and the Co-Issuers have not been registered under the United States Investment Company Act of 1940, as amended (the “1940 Act”). Each Holder of the Notes, other than those Holders that are not “U.S. persons” (“U.S. Person”) within the meaning of Regulation S (“Regulation S”) under the Securities Act and have acquired their Notes outside the United States pursuant to Regulation S, is required to be (i) a “qualified institutional buyer” as defined in Rule 144A under the Securities Act (“Qualified Institutional Buyer”) and (ii) a “qualified purchaser” (“Qualified Purchaser”) within the meaning of Section 2(a)(51) of the 1940 Act that can make all of the representations in the Trust Deed and the Note Agency Agreement applicable to a holder that is a U.S. Person. The beneficial interest in the Notes may only be transferred to a transferee that is a Qualified Institutional Buyer and a Qualified Purchaser that can make all of the representations in the Trust Deed and the Note Agency Agreement applicable to a holder that is a U.S. Person, except that in the case of any such transfer in reliance on Regulation S, only to a transferee that is not a U.S. Person. The Issuer has the right to compel any Holder that does not meet the qualifications and the transfer restrictions set forth in the Trust Deed and the Note Agency Agreement to sell its interest in the Notes, or may sell such interest on behalf of such owner, pursuant to the Trust Deed and the Note Agency Agreement.” (c) Additional Reporting Requirements. The Collateral Advisor on behalf of the Issuer shall provide or cause to be provided to Fitch the current portfolio of all Collateral Debt Securities in electronic and modifiable form with the fields listed in Schedule M, no later than the fifteenth (15th) day of each month. For all Collateral Debt Securities which are not rated by Fitch, the Issuer shall provide, or cause to be provided to, Fitch with the following: 20

Processed and formatted by SEC Watch - Visit SECWatch.com

(i) within thirty (30) days of the Closing Date for such Collateral Debt Securities held by the Issuer as of the Closing Date, and within ten (10) Business Days of purchase for all Collateral Debt Securities purchased subsequent to the Closing Date, the prospectus, prospectus supplement, offering circular or offering memoranda, as applicable, and the most recent remittance reports for all such Collateral Debt Securities; and (ii)

ongoing remittance reports for such Collateral Debt Securities within ten (10) days of receipt of the

remittance report. The information referenced above shall be sent via e-mail to [email protected] or hardcopy to Fitch Ratings, One State Street Plaza, New York, New York 10004, Attention: Credit Products Surveillance — Additional Reporting. (d) Payment Date Instructions. The Issuer (or the Collateral Advisor on behalf of the Issuer) shall by Issuer Order instruct the Trustee to withdraw on the related Payment Date from the Collection Account, and to pay or transfer, the amounts set forth in such Note Report in the manner specified in, and in accordance with, the Priority of Payments. The Issuer will be deemed to have given such instructions upon the Collateral Advisor’s approval of the Note Report. (e) Redemption Date Instructions. Not later than five (5) Business Days after receiving an Issuer Request (executed by the Issuer or the Collateral Advisor on behalf of the Issuer) requesting information regarding a redemption of the Notes of a Class as of a proposed Redemption Date set forth in such Issuer Request, the Collateral Advisor on behalf of the Issuer shall cause to be computed the following information and the Issuer shall provide such information in a statement made available to the Co-Issuers, the Collateral Advisor, the Trustee, the Initial Hedge Counterparty, the Principal Paying Agent, and delivered by e-mail to each Rating Agency and, so long as the Notes are listed on the Irish Stock Exchange, the Irish Paying Agent: (i)

the aggregate principal amount of the Notes of the Class or Classes to be redeemed as of such

Redemption Date; (ii) the amount of accrued interest due on such Notes as of the last day of the Periodic Interest Accrual Period immediately preceding such Redemption Date; (iii)

the amount due and payable to the Initial Hedge Counterparty pursuant to the Initial Hedge Agreement;

(iv) the amount due and payable to any other Hedge Counterparty pursuant to the applicable Hedge Agreement (other than the Initial Hedge Agreement); and (v) Section 4.08.

the amount in the Collection Account available for application to the redemption of such Notes.

Release of Securities.

(a) Subject to Article VI, the Issuer (or the Collateral Advisor on behalf of the Issuer) may, by Issuer Order delivered to the Trustee at least two (2) Business Days prior to the settlement date for any sale of a security certifying that (i) the Issuer (or the Collateral Advisor on behalf of the Issuer) has determined that a Collateral Debt Security has become a Credit Risk Security (which certification shall contain a short statement of the reason for such determination), a Withholding Tax Security, a Written Down Security, a Defaulted Security or an Equity Security and, in each case, that the 21

Processed and formatted by SEC Watch - Visit SECWatch.com

Issuer (or the Collateral Advisor on behalf of the Issuer) has directed the Trustee to sell such security pursuant to Section 6.01(a), (ii) the Collateral Advisor on the Issuer’s behalf has directed the Trustee to sell such security pursuant to Section 6.01(b), or (iii) the Collateral Advisor on the Issuer’s behalf has directed the Trustee to sell such security pursuant to Section 6.01(f), direct the Trustee to release such security and, upon receipt of such Issuer Order, the Trustee shall release any such security from the Lien of this Agreement and deliver any such security, if in physical form, duly endorsed to the broker or purchaser designated in such Issuer Order or, if such security is a Clearing Corporation Security, cause an appropriate transfer thereof to be made, in each case against receipt of the sales price therefor as set forth in such Issuer Order; provided, however, that the Trustee may deliver any such security in physical form for examination in accordance with street delivery custom. (b) If no Event of Default has occurred and is continuing and subject to Article VI, the Issuer (or the Collateral Advisor on behalf of the Issuer) may, by Issuer Order delivered to the Trustee at least two (2) Business Days prior to the date set for redemption or payment in full of a Collateral Debt Security and certifying that such security is being redeemed or paid in full, direct the Trustee or at the Trustee’s instructions, the Accountholder to release any such security from the Lien of this Agreement and deliver such security, if in physical form, duly endorsed, or, if such security is a Clearing Corporation Security, to cause it to be presented to the appropriate paying agent therefor on or before the date set for redemption or payment, in each case against receipt of the redemption price or payment in full thereof. (c) If no Event of Default has occurred and is continuing and subject to Article VI, the Issuer (or the Collateral Advisor on behalf of the Issuer) may, by Issuer Order delivered to the Trustee at least two (2) Business Days prior to the date set for an exchange, tender or sale, certifying that a Collateral Debt Security is subject to an Offer and setting forth in reasonable detail the procedure for response to such Offer, direct the Trustee, or at the Trustee’s instructions, the Accountholder to release any such security from the Lien of this Agreement and deliver such security, if in physical form, duly endorsed, or, if such security is a Clearing Corporation Security, to cause it to be delivered, in accordance with such Issuer Order, in each case against receipt of payment therefor. (d) The Trustee shall, upon receipt of an Issuer Order at such time as there are no Notes Outstanding and all obligations of the Co-Issuers to the Secured Parties have been satisfied, release the Collateral from the Lien of this Agreement. Section 4.09.

Reports by Independent Accountants.

(a) On the Closing Date, the Issuer (or the Collateral Advisor on behalf of the Issuer) shall appoint a firm of Independent certified public accountants of recognized international reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Agreement. Upon any removal of or resignation by such firm, the Issuer (or the Collateral Advisor on behalf of the Issuer) shall promptly appoint by Issuer Order delivered to the Trustee, each Hedge Counterparty and each Rating Agency, a successor thereto that shall also be a firm of Independent certified public accountants of recognized international reputation. If the Issuer (or the Collateral Advisor on behalf of the Issuer) shall fail to appoint a successor to a firm of Independent certified public accountants which has resigned within thirty (30) days after such resignation, the Issuer (or the Collateral Advisor on behalf of the Issuer ) shall promptly notify each of the Trustee and each Hedge Counterparty of such failure. If the Issuer (or the Collateral Advisor on behalf of the Issuer ) shall not have appointed a successor within ten (10) days thereafter, the Trustee shall promptly appoint a successor firm of Independent certified public accountants of recognized international reputation. The fees of such Independent certified public accountants and its successor shall be payable by the Issuer in accordance with the Priority of Payments. Any engagement letter appointing such Independent certified accountants 22

Processed and formatted by SEC Watch - Visit SECWatch.com

shall contain appropriate limited recourse and non-petition language as against the Issuer equivalent to that contained in this Agreement. (b) No later than five (5) Business Days after the Closing Date, the Issuer shall deliver to each Rating Agency an agreed upon procedures letter from an Independent certified public accountant appointed by the Issuer in relation to the Issuer’s compliance with its obligations under this Agreement and the Trust Deed. On or before each of the Closing Date and the Effective Date, the Issuer shall cause such Independent certified public accountant to deliver to each Rating Agency a report containing (i) a statement that the agreed upon procedures have been completed and (ii) such accountant’s findings with respect to the Issuer’s compliance with its obligations under this Agreement and the Trust Deed. All expenses relating to the engagement of Independent certified public accountants for the performance of services set forth in this Section 4.09(b) shall be borne by the Issuer. Section 4.10. Reports to Rating Agencies. In addition to the information and reports specifically required to be provided to S&P, Moody’s and Fitch pursuant to the terms of this Agreement, the Issuer (or the Collateral Advisor on behalf of the Issuer) shall provide S&P, Moody’s and Fitch with all information or reports delivered to the Trustee hereunder, and such additional information as any Rating Agency may from time to time reasonably request in order to maintain its then-current rating of the Notes and the Issuer determines in its reasonable discretion may be obtained and provided without unreasonable burden or expense. The Issuer (or the Collateral Advisor on behalf of the Issuer) shall promptly notify the Trustee in writing if the rating on any Class of Notes has been, or it is known by the Issuer that such rating will be, changed or withdrawn. Upon receipt of such notice, the Trustee, in the name and at the expense of the Co-Issuers, shall notify the Irish Paying Agent, so long as any Notes are listed thereon, of any reduction or withdrawal in the rating of such Notes. Section 4.11. Notices of Noteworthy Events. The Issuer shall provide each Rating Agency notice of the following events: (a) removal of the Collateral Advisor pursuant to the terms of the Collateral Advisory Agreement and the Trustee pursuant to the terms of the Trust Deed, (b) appointment of any successor investment adviser pursuant to the terms of the Collateral Advisory Agreement and any successor trustee pursuant to the terms of the Trust Deed, (c) any delegation of duties by the Collateral Advisor under the Collateral Advisory Agreement and by the Trustee under the Trust Deed, (d) any modification of, or amendment to, the organizational documents of the Issuer and the Co-Issuer, (e) any other event of a similar nature as set forth in clauses (a), (b), (c) and (d) of this Section 4.11, (f) any redemption of any Class of Notes and (g) any termination of any party to a Transaction Document. Section 4.12. Amendments to the Transaction Documents. The Issuer shall only consent to any modification of any Transaction Document in accordance with the amendment provisions of such Transaction Document and shall only consent to a modification of any organizational document of the Issuer or the Co-Issuer after it has received a Rating Agency Confirmation with respect to such modification of such organizational document. The Issuer shall not amend this Agreement or any related defined terms in the Glossary pursuant to Section 11.01 until after it has received Rating Agency Confirmation with respect to such amendment. ARTICLE V PRIORITY OF PAYMENTS Section 5.01.

Disbursements of Money from Collection Account.

(a) On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Rated Notes in connection with an 23

Processed and formatted by SEC Watch - Visit SECWatch.com

Event of Default, in accordance with the Payment Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Interest Collections and Collateral Principal Collections, to the extent of Available Funds in the Collection Account, will be applied by the Trustee in the following order of priority (the “Priority of Payments”); provided that with respect to clauses (i) through (xxv) (excluding clause (xxii)) below, such application will be made, first, from Collateral Interest Collections and then, to the extent Collateral Interest Collections are not sufficient for such payments, from Collateral Principal Collections (subject to the limitations described herein); provided, further, that Collateral Principal Collections so applied will exclude (i) Sale Proceeds in connection with the sale of any Temporary Ramp-Up Securities reinvested in Fixed Rate Collateral Debt Securities, or up to U.S.$500,000 of such Sale Proceeds reinvested in other Substitute Collateral Debt Securities, during the Ramp-Up Period and (ii) and aggregate amount, not to exceed 10% of the CDS Principal Balance as of the Effective Date, consisting of (A) Collateral Principal Collections received during the Ramp-Up Period, (B) Prepaid Collateral Principal Collections received on or prior to the third anniversary of the Effective Date and (C) Sale Proceeds in connection with the sale of any Defaulted Securities, Equity Securities, Credit Risk Securities, Written Down Securities and Withholding Tax Securities, in each case that are reinvested in Substitute Collateral Debt Securities in accordance with the Security Agreement during the applicable periods within which any such Collateral Principal Collections and Sale Proceeds are eligible for such reinvestment: (i) to pay, in the following order (a) taxes and filing fees and registration fees (including, without limitation, annual return fees) payable by the Co-Issuers, if any; and then, (b) the amount of any due and unpaid Trustee Fee and, then, the amount of any due and unpaid fees to the Administrator; and then, (c) the amount of any due and unpaid Trustee Expenses and, then, (d) the amount of any due and unpaid fees and expenses of the Rating Agencies, and, then, (e) the amount of any due and unpaid Collateral Administrator Expenses and, then, (f) the amount of any due and unpaid expenses of the Administrator and any due and unpaid Administrative Expenses not included in (c), (d) and (e) above, including amounts payable to the Collateral Advisor under the Collateral Advisory Agreement; and then, (g) to deposit to the Expense Reserve Account the amount needed to bring the amount on deposit therein to U.S.$25,000 (unless the Collateral Advisor directs that a lesser amount be deposited to the Expense Reserve Account); provided that the cumulative amount paid under (c) through (g) (excluding any Administrative Expenses due or accrued with respect to the actions taken on or prior to the Closing Date and accounting fees that the Trustee is required to pay (other than certain accountants’ fees related to annual reviews) and fees the Trustee pays in connection with any Events of Default and any default of the Collateral Debt Securities) may not exceed U.S.$235,000 in the aggregate in any consecutive 12-month period; (ii) to pay the Senior Collateral Advisory Fee with respect to such Payment Date and any Senior Collateral Advisory Fee with respect to a previous Payment Date that was not paid on a previous Payment Date; (iii) to pay any Hedge Counterparty, any amounts due to such Hedge Counterparty under any Hedge Agreement, pro rata, including any termination payments other than any termination payments payable under clause (xxi) below; (iv)

to pay Periodic Interest on the Class A-1 Notes and any Defaulted Interest and any interest thereon;

(v)

to pay Periodic Interest on the Class A-2 Notes and any Defaulted Interest and any interest thereon; 24

Processed and formatted by SEC Watch - Visit SECWatch.com

(vi) if either of the Class A Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal of the Class A-1 Notes then Outstanding until such Class A Coverage Test is satisfied as of such Calculation Date or until the Class A-1 Notes are paid in full, and then to pay principal of the Class A-2 Notes then Outstanding until such Class A Coverage Test is satisfied as of such Calculation Date or until the Class A-2 Notes are paid in full; provided that for purposes of determining if the Class A Principal Coverage Test is satisfied, the denominator of the Class A Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Class A Notes to be made pursuant to this clause (vi); provided, further, that the numerator of the Class A Principal Coverage Ratio shall be calculated after giving effect to (a) any Collateral Principal Collections to be applied pursuant to clauses (i) through (v) above and (b) any Collateral Principal Collections to be applied pursuant to this clause (vi); (vii)

to pay Periodic Interest on the Class B-1 Notes and any Defaulted Interest on the Class B-1 Notes and any

interest thereon; (viii) if a Ratings Confirmation Failure occurs, on each Payment Date commencing with the Payment Date immediately following the Effective Date, to pay principal on the Class A-1 Notes, the Class A-2 Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes and the Class D Notes, in that order, in the amounts necessary for each Rating Agency to confirm its respective ratings of the Notes assigned on the Closing Date or until each Class of Notes is paid in full; (ix) to pay, from Collateral Interest Collections (if any), an amount equal to the Interest Reserve Amount for deposit into the Interest Reserve Account; (x) to pay Periodic Interest on the Class B-2 Notes and, if no Class A Notes and no Class B-1 Notes are Outstanding, any Defaulted Interest on the Class B-2 Notes and any interest thereon; provided that if any Class A Notes or Class B-1 Notes are Outstanding, no Collateral Principal Collections shall be applied pursuant to this clause (x); (xi) if either of the Class B Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount) of the most senior Class of Notes then Outstanding until such Class B Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class B Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class B Coverage Test is satisfied or until the Class B-1 Notes and then the Class B-2 Notes, in that order, are paid in full; provided that for purposes of determining if the Class B Principal Coverage Test is satisfied, the denominator of the Class B Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to clause (vi) above and pursuant to this clause (x) on the related Payment Date; provided, further, that for purposes of determining if the Class B Principal Coverage Test is satisfied, the numerator of the Class B Principal Coverage Ratio shall be calculated after giving effect to (a) any Collateral Principal Collections to be applied pursuant to clauses (i) through (ix) above and (b) any Collateral Principal Collections to be applied to the Notes pursuant to this clause (x) on the related Payment Date; and provided, further, that with respect to the Class B-2 Notes, payment of principal not constituting Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any, for the Class B-2 Notes; 25

Processed and formatted by SEC Watch - Visit SECWatch.com

(xii) to pay the Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; provided that if any Class A Notes or Class B-1 Notes are Outstanding, no Collateral Principal Collections shall be applied pursuant to this clause (xii); (xiii) to pay Periodic Interest on the Class C-1 Notes and, if no Class A Notes and no Class B Notes are Outstanding, any Defaulted Interest on the Class C-1 Notes and any interest thereon; provided that if any Class A Notes or Class B Notes are Outstanding, no Collateral Principal Collections shall be applied pursuant to this clause (xiii); (xiv) to pay Periodic Interest on the Class C-2 Notes and, if no Class A Notes, no Class B Notes and no Class C-1 Notes are Outstanding, any Defaulted Interest on the Class C-2 Notes and any interest thereon; provided that if any Class A Notes, Class B Notes or Class C-1 Notes are Outstanding, no Collateral Principal Collections shall be applied pursuant to this clause (xiv); (xv) if either of the Class C Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount, Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount or Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class C Coverage Test is satisfied or until the Class C-1 Notes and then the Class C-2 Notes, in that order, are paid in full; provided that for purposes of determining if the Class C Principal Coverage Test is satisfied, the denominator of the Class C Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes pursuant to clauses (vi), (vii) and (x) above and pursuant to this clause (xiv) on the related Payment Date; provided, further, that for purposes of determining if the Class C Principal Coverage Test is satisfied, the numerator of the Class C Principal Coverage Ratio shall be calculated after giving effect to (a) any Collateral Principal Collections to be applied pursuant to clauses (i) through (xiii) above and (b) any Collateral Principal Collections to be applied to the Notes pursuant to this clause (xiv) on the related Payment Date; and provided, further, that with respect to (a) the Class B Notes, payment of principal not constituting Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; (b) the Class C-1 Notes, payment of principal not constituting Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (c) the Class C-2 Notes, payment of principal not constituting Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; (xvi) to pay the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any; provided that if any Class A Notes or Class B Notes are Outstanding, no Collateral Principal Collections shall be applied pursuant to this clause (xvi); (xvii) to pay the Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; provided that if any Class A Notes, Class B Notes or Class C-1 Notes are Outstanding, no Collateral Principal Collections shall be applied pursuant to this clause (xvii); (xviii) to pay Periodic Interest on the Class D Notes and, if no Class A Notes, no Class B Notes and no Class C Notes are Outstanding, any Defaulted Interest on the Class D Notes and any interest thereon; provided that if any Class A Notes, Class B Notes or Class C Notes are Outstanding, no Collateral Principal Collections shall be applied pursuant to this clause (xviii); 26

(xix) if either of the Class D Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount, Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount or Class D Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class D Coverage Test is satisfied or until the Class D Notes are paid in full; provided that for purposes of determining if the Class D Principal Coverage Test is satisfied, the denominator of the Class D Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes pursuant to clauses (vi), (vii) (x) and (xiv) above and pursuant to this clause (xviii) on the related Payment Date; provided, further, that for purposes of determining if the Class D Coverage Test is satisfied, the numerator of the Class D Principal Coverage Ratio shall be calculated after giving effect to (a) any Collateral Principal Collections to be applied pursuant to clauses (i) through (xvii) above and (b) any Collateral Principal Collections to be applied to the Notes pursuant to this clause (xviii) on the related Payment Date; and provided, further, that with respect to (a) the Class B-2 Notes, payment of principal not constituting the Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; (b) the Class C-1 Notes, payment of principal not constituting the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any; (c) the Class C-2 Notes, payment of principal not constituting the Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (d) the Class D Notes, payment of principal not constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any; (xx)

to pay the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any; provided that if any

Processed and formatted by SEC Watch - Visit SECWatch.com

Class A Notes, Class B Notes or Class C Notes are Outstanding, no Collateral Principal Collections shall be applied pursuant to this clause (xx); (xxi) to pay, in the following order, (a) the principal of the Class A-1 Notes until paid in full and then (b) the principal of the Class A-2 Notes until paid in full and then (c) the principal of the Class B-1 Notes until paid in full and then (d) the principal of the Class B-2 Notes until paid in full and then (e) the principal of the Class C-1 Notes until paid in full and then (f) the principal of the Class C-2 Notes until paid in full and then (g) the principal of the Class D Notes until paid in full; provided that items (a) through (g) shall be payable in an aggregate amount equal on any Payment Date to the lesser of (1) the amount of Collateral Principal Collections received during the related Due Period and (2) the amount of Available Funds then remaining in the Collection Account; (xxii) to pay termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, pro rata, if such termination occurred solely as the result of an event of default or a termination event with respect to the Hedge Counterparty as Defaulting Party or sole Affected Party, as the case may be; (xxiii) to pay, in the following order, (a) any due and unpaid Trustee Fee, Trustee Expenses and Collateral Administrator Expenses, including amounts payable to the Collateral Advisor under the Collateral Advisory Agreement, in each case, in the same order of priority as provided in clause (i) above and to the extent not paid in full under clause (i) above, and (b) on a pro rata basis, any 27

Processed and formatted by SEC Watch - Visit SECWatch.com

due and unpaid expenses and other liabilities of the Co-Issuers to the extent not paid under clause (i) above, whether as a result of an amount limitation imposed thereunder or otherwise; (xxiv) to pay the Subordinate Collateral Advisory Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Advisory Fee with respect to a previous Payment Date that was not paid on a previous Payment Date; (xxv) after the Payment Date occurring in June 2016, to pay from remaining Collateral Interest Collections on any Payment Date the principal on the Class D Notes, until paid in full, then the principal on the Class C-2 Notes, until paid in full, then the principal of the Class C-1 Notes, until paid in full, then the principal on the Class B-2 Notes, until paid in full, then the principal on the Class B1 Notes, until paid in full, then the principal on the Class A-2 Notes until paid in full and then the principal on the Class A-1 Notes until paid in full; and (xxvi)

all Excess Funds for payment to the Holders of the Class E Subordinate Income Notes.

(b) Notwithstanding the foregoing, on any Redemption Date or Auction Call Redemption Date, the Trustee shall pay, from the Collection Account, in the following order: (i) the amounts set forth in clauses (i), (ii) and (iii) of the Priority of Payments, (ii) the Redemption Price of each Class of Notes in accordance with the Priority of Payments and (iii) the amounts set forth in clauses (xxi) through (xxiv) of the Priority of Payments. (c) Notwithstanding Section 5.01(a), if an acceleration of maturity has occurred and is continuing in connection with an Event of Default, on the date or dates determined by the Trustee, the Trustee shall pay, from all collections from, and proceeds of the sale or liquidation of, the Collateral, in the following order: (i) amounts corresponding to the amounts set forth in clauses (i), (ii) and (iii) of the Priority of Payments, (ii) the Periodic Interest on the Class A-1 Notes and then on the Class A-2 Notes and any Defaulted Interest on such Class A Notes and then principal on the Class A-1 Notes until paid in full and then principal on the Class A-2 Notes until paid in full, (iii) the Periodic Interest on the Class B-1 Notes and any Defaulted Interest on the Class B-1 Notes and then principal on the Class B-1 Notes until paid in full, (iv) the Periodic Interest on the Class B-2 Notes and any Defaulted Interest on the Class B-2 Notes and then principal on the Class B-2 Notes until paid in full, (v) the Periodic Interest on the Class C-1 Notes and any Defaulted Interest on the Class C-1 Notes and then principal on the Class C-1 Notes (including Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full, (vi) the Periodic Interest on the Class C-2 Notes and any Defaulted Interest on the Class C-2 Notes and then principal on the Class C-2 Notes and Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full, (vii) the Periodic Interest on the Class D Notes and any Defaulted Interest on the Class D Notes and then principal on the Class D Notes (including Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full, (viii) amounts corresponding to the amounts set forth in clauses (xx) through (xxiv) of the Priority of Payments and (viii) any remaining amounts to the Holders of the Class E Subordinate Income Notes. Section 5.02.

Additional Provisions.

(a) (1) On the applicable Stated Maturity Date of the Notes, the Issuer (or the Collateral Advisor acting pursuant to the Collateral Advisory Agreement on behalf of the Issuer) shall direct the Trustee in writing to (and the Trustee shall, in the manner so directed by the Collateral Advisor on behalf of the Issuer) liquidate any remaining Collateral Debt Securities and any Hedge Agreements (for value on the applicable Stated Maturity Date of the Notes) and deposit the proceeds thereof, if any, in the Collection Account. On the applicable Stated Maturity Date of the Notes, all net proceeds from such 28

Processed and formatted by SEC Watch - Visit SECWatch.com

liquidation and all available Cash, after the payment of the amounts referred to in clauses (i) through (xxv) of the Priority of Payments in the order set forth therein, shall be distributed to the Holders of the Class E Subordinate Income Notes. (2) Upon any Redemption or Auction Call Redemption, the Issuer (or the Collateral Advisor acting pursuant to the Collateral Advisory Agreement on behalf of the Issuer) shall direct the Trustee in writing to (and the Trustee shall, in the manner so directed by the Collateral Advisor) liquidate any remaining Collateral Debt Securities and any Hedge Agreements (for value on the date of such Redemption or Auction Call Redemption, as the case may be) and deposit the proceeds thereof, if any, in the Collection Account. (b) If on any Payment Date the amount available in the Collection Account from amounts received in the related Due Period is insufficient to make the full amount of the disbursements required by the statements furnished by the Issuer pursuant to Section 4.07(a), the Trustee shall make the disbursements called for in the order and according to the Priority of Payments set forth under Section 5.01(a), subject to Section 7.01, to the extent funds are available therefor. (c) In the event that any Hedge Counterparty defaults in the payment of its obligations to the Issuer under the relevant Hedge Agreement on any date when such amount was due and payable, the Trustee shall make a demand on such Hedge Counterparty or any guarantor, if applicable, demanding payment by 12:30 p.m. on the Business Day following such date. The Trustee shall give notice to the Collateral Advisor, S&P and the Issuer and the Trustee shall deliver such notice to the Noteholders upon the continuing failure by such Hedge Counterparty to perform its obligations during the same Business Day following a demand made by the Trustee on such Hedge Counterparty, and shall take such action with respect to such continuing failure directed to be taken by the Collateral Advisor on behalf of the Issuer. (d) Notwithstanding any provision to the contrary contained herein, the provisions of Articles II and VII and the other provisions hereof are subject to the Priority of Payments specified in this Article V, and, in the event of any inconsistency between the provisions of Article II, Article VII or the other provisions hereof and the Priority of Payments, the Priority of Payments will control. (e) As a condition to the payment of principal and interest on any Note without U.S. federal back-up withholding, the Issuer shall require the delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor 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 Internal Revenue Service Form W-8BEN (or applicable successor 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) from each beneficial owner of the Notes. ARTICLE VI PURCHASE, SALE AND REINVESTMENT OF COLLATERAL DEBT SECURITIES Section 6.01.

Sale of Collateral Debt Securities.

(a) Subject to the satisfaction of the conditions specified in Section 4.08 as applicable, if the Collateral Advisor, on behalf of the Issuer, pursuant to this Section 6.01 and Section 6.02, shall direct the Trustee to sell any Temporary Ramp-Up Security, Defaulted Security, Equity Security, Credit Risk Security, Written Down Security or Withholding Tax Security, the Trustee 29

Processed and formatted by SEC Watch - Visit SECWatch.com

shall sell in the manner directed by the Collateral Advisor, any Temporary Ramp-Up Security, Defaulted Security, Equity Security, Credit Risk Security, Written Down Security or Withholding Tax Security. (b) During the Ramp-Up Period, and in any event, no later than the Effective Date, the Collateral Advisor shall direct the Issuer to sell or otherwise dispose of all Temporary Ramp-Up Securities. Sale Proceeds received with respect to Temporary Ramp-Up Securities shall be reinvested only in Ramp-Up Collateral Debt Securities that are Fixed Rate Collateral Debt Securities, provided that any Sale Proceeds received with respect to Temporary Ramp-Up Securities that are not reinvested in Fixed Rate Collateral Debt Securities, other than not more than U.S.$500,000 of such Sale Proceeds that may be reinvested in Substitute Collateral Debt Securities that are not Fixed Rate Collateral Debt Securities, shall be treated as Collateral Principal Collections and shall be applied by the Issuer to the making of payments on the Notes, subject to and in accordance with the Priority of Payments, on the Payment Date immediately following the Effective Date. (c) The Collateral Advisor shall direct the Issuer to sell or otherwise dispose of any Collateral Debt Security that is an Equity Security as soon as practicable after such Collateral Debt Security becomes an Equity Security. The Collateral Advisor may direct the Issuer to sell or otherwise dispose of all or a portion of any Collateral Debt Security that is a Defaulted Security, a Written Down Security or a Withholding Tax Security; provided that the Collateral Advisor shall have (i) certified that such Collateral Debt Security is a Defaulted Security, a Written Down Security or a Withholding Tax Security and (ii) declared within five (5) Business Days following such Collateral Debt Security becoming a Defaulted Security, a Written Down Security or a Withholding Tax Security whether it has elected to direct the Issuer to sell or otherwise dispose of all or a specified portion of such Collateral Debt Security. No such sale or other disposition is permitted for the primary purpose of recognizing gains or decreasing losses resulting from market value changes, or if the Issuer or the Collateral Advisor believes that any such sale or other disposition would not result in the reduction or withdrawal of the then-current rating on any Class of Rated Notes by any Rating Agency. If the Collateral Advisor elects to direct the Issuer to sell or otherwise dispose of any Defaulted Security, Written Down Security or Withholding Tax Security as described above, such Collateral Debt Security (or specified portion thereof) is required to be sold or otherwise disposed of within twelve (12) months following such election. If the Collateral Advisor does not elect within such five (5) Business Days to direct the Issuer to sell or otherwise dispose of any Defaulted Security, Written Down Security or Withholding Tax Security, such Collateral Debt Security shall not be sold or otherwise disposed of and shall remain part of the Collateral. Any decision by the Collateral Advisor to sell or not to sell any Collateral Debt Security within five (5) Business Days of such Collateral Debt Security first becoming either a Defaulted Security or a Written Down Security or a Withholding Tax Security shall not thereafter be changed by the Collateral Advisor or the Issuer for any reason. (d) The Collateral Advisor may direct the Issuer to sell or otherwise dispose of all or any portion of any Collateral Debt Security that is a Credit Risk Security; provided that the Collateral Advisor shall have (i) certified that a Credit Risk Event has occurred and (ii) declared within five (5) Business Days following the occurrence of any such Credit Risk Event that it has elected to direct the Issuer to sell or otherwise dispose of all or a portion of such Collateral Debt Security. No such sale or other disposition is permitted for the primary purpose of recognizing gains or decreasing losses resulting from market value changes, or if the Issuer or the Collateral Advisor believes that any such sale or other disposition would result in the reduction or withdrawal of the then-current rating on any Class of Rated Notes by any Rating Agency. If the Collateral Advisor elects to direct the Issuer to sell or otherwise dispose of any Credit Risk Security as described above, such Collateral Debt Security is required to be sold or otherwise disposed of as soon as reasonably practicable and in any event within 30 days following such election. If the Collateral Advisor does not elect within such five (5) Business Days following any Credit Risk Event to direct the Issuer to sell or otherwise dispose of any Collateral Debt Security, such 30

Processed and formatted by SEC Watch - Visit SECWatch.com

Credit Risk Security shall not be sold or otherwise disposed of and shall remain part of the Collateral, unless a subsequent Credit Risk Event occurs with respect to such Collateral Debt Security and the Collateral Advisor shall have made the certifications and declarations described above. (e) In the event of a Redemption or Auction Call Redemption, the Collateral Advisor shall direct the Trustee to sell Collateral Debt Securities without regard to the foregoing limitations; provided that the Sale Proceeds therefrom and other amounts available therefor will be at least sufficient to pay certain expenses, including all amounts due under any Hedge Agreements, and redeem, in whole but not in part, the Notes at the applicable Redemption Prices; and provided, further, that such Sale Proceeds are used to make such a Redemption or Auction Call Redemption. (f) The Collateral Advisor shall sell any Collateral Debt Security pursuant to this Section 6.01 only at a price that, in its judgment, is not substantially less than the market value of such Collateral Debt Security at the time of such sale. (g) Any Sale Proceeds not reinvested in accordance with Article VI shall be Collateral Principal Collections and shall be applied by the Issuer to the making of payments on the Notes, subject to and in accordance with the Priority of Payments. Section 6.02.

Eligibility Criteria, Ramp-Up Criteria and Replacement Criteria.

(a) Eligibility Criteria. Except as provided below, a Collateral Debt Security shall be eligible for purchase by the Issuer and pledged to the Trustee if it meets the following eligibility criteria (collectively, the “Eligibility Criteria”): (i) it is issued by an issuer incorporated or organized under the laws of the United States, the Bahamas, Bermuda, the Cayman Islands, the British Virgin Islands, the Netherlands Antilles, Jersey, Guernsey or Luxembourg or, it is issued by a Qualifying Foreign Obligor; (ii)

it is U.S. Dollar-denominated, and it is not convertible into, or payable in, any other currency;

(iii)

it is one of the Specified Types of Collateral Debt Securities;

(iv) subscript) and a Fitch Rating;

it has a Moody’s Rating, an S&P Rating (which rating does not include a “p”, “pi”, “q”, “t” or “r”

(v) the acquisition, ownership, enforcement and disposition of such security will not cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or otherwise to be subject to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation; (vi) the payments on such security are not subject to withholding tax unless the issuer thereof or the obligor thereon is required to make additional payments sufficient to cover any withholding tax imposed at any time on payments made to the Issuer with respect thereto; (vii) its acquisition would not cause the Issuer or the pool of Collateral to be required to register as an investment company under the Investment Company Act; (viii)

it is not a security that is ineligible under its Underlying Instruments to be purchased by the Issuer and

pledged to the Trustee; 31

Processed and formatted by SEC Watch - Visit SECWatch.com

(ix) it is not an insurance-linked debt instrument containing a provision pursuant to which the issuer’s obligation to pay interest or principal is deferred or forgiven in the event of loss due to certain natural catastrophes specified in the Underlying Instruments; (x)

it provides for the payment of principal at not less than par upon maturity;

(xi) its Underlying Instruments do not obligate the Issuer to make any future advances or any other payment except the purchase price thereof; (xii) it is not a security with respect to which, in the reasonable judgment of the Collateral Advisor, the timely repayment of principal and interest is subject to substantial non-credit related risks; (xiii)

it is not an Interest Only Security;

(xiv)

it is not a security issued by an Emerging Market Issuer;

(xv) it is not a security that has a Moody’s Rating lower than “B3”, an S&P Rating lower than “B-” or a Fitch Rating lower than “B-” at the time of purchase; (xvi)

it is not a security that has, at the time of purchase, any deferred or capitalized interest;

(xvii) it is not a security that, at the time it is purchased, is a Credit Risk Security, a Defaulted Security, a Written Down Security or a Deferred Interest PIK Bond; (xviii)

at the time the security is purchased by the Issuer:

(A) it is not a security issued by an issuer located in a country that imposes foreign exchange controls that effectively limit the availability or use of U.S. Dollars to make when due the scheduled payments of principal of and interest on such security; (B)

it is not, and does not provide for conversion or exchange into, Margin Stock at any time over its

life; (C) it is not an obligation which (1) was incurred in connection with a merger, acquisition, consolidation or sale of all or substantially all of the assets of a person or entity or similar transaction and (2) by its terms is required to be repaid within one year of the incurrence thereof with proceeds from additional borrowings or other refinancing; (D) it is not the subject of (1) any offer by the issuer of such security or by any other person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related underlying instruments) or to convert or exchange such security into or for cash, securities or any other type of consideration or (2) any solicitation by an issuer of such security or any other person to amend, modify or waive any provision of such security or any related underlying instrument, and has not been called for redemption; (E)

it is not an Equity Security; 32

Processed and formatted by SEC Watch - Visit SECWatch.com

(F) it is not a security that by the terms of its underlying instruments provides for conversion or exchange (whether mandatory or at the option of the issuer or the holder thereof) into equity capital at any time prior to its maturity; (G)

it is not a financing by a debtor-in-possession in any insolvency proceeding;

(H) it is not a first loss tranche of any securitization that does not have an S&P Rating or a Moody’s Rating (as defined in clause (i) of the defmition of S&P Rating and in clause (i) of the definition of Moody’s Rating) that addresses the obligation of the obligor (or guarantor, if applicable) to pay principal of and interest on the relevant Collateral Debt Security in full, which ratings are monitored on an ongoing basis by the relevant Rating Agency; and (I)

it is not a security that provides for the payment of interest less frequently than semi-annually;

provided that notwithstanding anything to the contrary herein, the Issuer shall not purchase, acquire or hold (whether as part of a “unit” with a Collateral Debt Security, in exchange for a Collateral Debt Security or otherwise) any asset the gain from the disposition of which will be subject to U.S. federal income or withholding tax under Section 897 or Section 1445 of the Code and the Treasury Regulations promulgated thereunder. (b) Ramp-Up Criteria. Each additional Collateral Debt Security selected by the Collateral Advisor for purchase by the Issuer and pledged to the Trustee during the Ramp-Up Period (a “Ramp-Up Collateral Debt Security”) will be eligible for purchase by the Issuer if it meets the following criteria (collectively, the “Ramp-Up Criteria”): (i)

such Ramp-Up Collateral Debt Security is not a Real Estate CDO Security;

(ii) no more than U.S.$21 million in aggregate Principal Balance of Ramp-Up Collateral Debt Securities is rated “Bal” or lower by Moody’s, “BB+” or lower by S&P or “BB+” or lower by Fitch; (iii) no more than U.S.$10 million in aggregate Principal Balance of Ramp-Up Collateral Debt Securities is rated “B1” or lower by Moody’s, “B+” or lower by S&P or “B+” or lower by Fitch; (iv)

such Ramp-Up Collateral Debt Security is not rated below “B3” by Moody’s, “B-” by S&P or “B-” by

(v)

no more than U.S.$10 million in aggregate Principal Balance of Ramp-Up Collateral Debt Securities is

Fitch;

issued by a single issuer; (vi) such Ramp-Up Collateral Debt Security is not on the “credit watch negative” watchlist of S&P or on the “under review for possible downgrade” watchlist of Moody’s; and (vii)

such Ramp-Up Collateral Debt Security is denominated in U.S. dollars and all cash flows are to be paid in

U.S. Dollars. 33

Processed and formatted by SEC Watch - Visit SECWatch.com

(c) Replacement Criteria. Following the receipt of (i) Collateral Principal Collections during the Ramp-Up Period (other than with respect to proceeds received from the disposition of any Temporary Ramp-Up Securities), (ii) Prepaid Collateral Principal Collections received prior to the third anniversary of the Effective Date or (iii) Sale Proceeds received after the Ramp-Up Period on Collateral Debt Securities that are Defaulted Securities, Equity Securities, Credit Risk Securities, Written Down Securities or Withholding Tax Securities, the Collateral Advisor may but will have no obligation to purchase, no later than sixty (60) calendar days after receipt of such proceeds, Substitute Collateral Debt Securities satisfying the Eligibility Criteria, and in the case of Collateral Principal Collections during the Ramp-Up Period (other than with respect to proceeds received from the disposition of any Temporary Ramp-Up Securities), the Ramp-Up Criteria, with an aggregate purchase price no less than such Collateral Principal Collections (including such Sale Proceeds) from such sale in compliance with the Replacement Criteria described below; provided that the cumulative amount reinvested in Substitute Collateral Debt Securities shall not exceed 10% of the CDS Principal Balance as of the Effective Date; provided further, that (i) any such acquisition is not for the primary purpose of recognizing gains or decreasing losses resulting from market value changes and (ii) neither the Issuer nor the Collateral Advisor believes that any such acquisition will result in a reduction or withdrawal of the then-current rating on any Class of Rated Notes by any Rating Agency; provided, further, that no Substitute Collateral Debt Securities may be acquired by or on behalf of the Issuer at any time during which the rating by any Rating Agency, with respect to (i) the Class A Notes is one or more notches below the rating assigned to the Class A Notes by such Rating Agency on the Closing Date or (ii) any other Class of Rated Notes, is two or more notches below the rating assigned to such Class of Notes by such Rating Agency on the Closing Date. Such Collateral Principal Collections shall be eligible to be reinvested in Substitute Collateral Debt Securities by the Issuer and pledged to the Trustee if such Substitute Collateral Debt Securities meet the following criteria (collectively, the “Replacement Criteria”): (i) If the Collateral Debt Security being replaced was a REIT Debt Security, then the Substitute Collateral Debt Security must be a REIT Debt Security; (ii) If the Collateral Debt Security being replaced was a CMBS Security, then the Substitute Collateral Debt Security must be a CMBS Security; (iii) If the Collateral Debt Security being replaced was a Real Estate CDO Security, then the Substitute Collateral Debt Security must be either a CMBS Security or a REIT Debt Security; (iv) The lowest explicit rating of the Substitute Collateral Debt Security must be as good or better than the lowest explicit rating at purchase by the Issuer of the Collateral Debt Security being replaced; (v) If the Collateral Debt Security being replaced was a Fixed Rate Collateral Debt Security, the Substitute Collateral Debt Security must be a Fixed Rate Collateral Debt Security; (vi) If the Collateral Debt Security being replaced was a Floating Rate Collateral Debt Security, the Substitute Collateral Debt Security must be a Floating Rate Collateral Debt Security; (vii) The price of the Substitute Collateral Debt Security must be between 90% and 110% of the original issue price of such Substitute Collateral Debt Security (as determined by the Collateral Advisor), as adjusted to reflect the accretion of any original issue discount or the amortization of any original issue premium calculated on a yield-to-maturity basis; 34

Processed and formatted by SEC Watch - Visit SECWatch.com

(viii) The legal final maturity date of the Substitute Collateral Debt Security must be earlier than that of the Collateral Debt Security being replaced; and (ix) The average life of the Substitute Collateral Debt Security must be the same or lower than that of the Collateral Debt Security being replaced. If all such Collateral Principal Collections (including Sale Proceeds related to the sale of any Defaulted Securities, Equity Securities, Credit Risk Securities, Written Down Securities or Withholding Tax Securities) are not reinvested in Substitute Collateral Debt Securities as described above for any reason within sixty (60) calendar days of receipt of such Collateral Principal Collections, such Collateral Principal Collections shall be reinvested in Eligible Investments until the next succeeding Payment Date when the Issuer shall distribute such Collections in accordance with the Priority of Payments. Section 6.03.

Conditions Applicable to all Transactions.

(a) Any transaction effected under this Article VI shall be conducted on an arm’s-length basis, and, if effected with a Person affiliated with the Collateral Advisor, the Issuer or the Trustee, shall be effected in a primary or secondary market transaction on terms as favorable to the Issuer as would be the case if such Person were not so affiliated; provided, however, that after the Closing Date, the Collateral Advisor and its Affiliates may, as principals or for their own accounts, enter into agreements to buy or sell Collateral Debt Securities or enter into any Hedge Agreements with the Issuer if and to the extent such transactions comply with the Investment Advisers Act; provided, further, that the Collateral Advisor may, on behalf of the Issuer, buy or sell Collateral Debt Securities or enter into Hedge Agreements with other entities for which it, or an Affiliate, acts as an investment advisor; provided, further, that, subject to the Eligibility Criteria and, during the Ramp-Up Period, the Ramp-Up Criteria, the Collateral Advisor will be permitted to acquire an obligation on behalf of the Issuer to be included in the Collateral from its Permitted Affiliates as principal or as agent or to sell an obligation to its Permitted Affiliates as principal or agent subject to the Investment Advisers Act; and provided, further, that, subject to the Eligibility Criteria and, during the RampUp Period, the Ramp-Up Criteria, the Collateral Advisor may acquire an obligation on behalf of the Issuer to be included in the Collateral from itself or from any of its Affiliates that are not Permitted Affiliates, or from funds or accounts for which the Collateral Advisor or any of its Affiliates acts as investment adviser or sell an obligation on behalf of the Issuer to itself, or to any of its Affiliates that are not Permitted Affiliates or to funds or accounts for which the Collateral Advisor or any of its Affiliates acts as an investment adviser. Notwithstanding the foregoing, prior to selling any Collateral Debt Securities to any Person affiliated with the Collateral Advisor (other than a Permitted Affiliate), the Collateral Advisor shall use its reasonable efforts to solicit bids from two non-affiliated Persons; provided that transactions with Permitted Affiliates shall be conducted as arm’s-length transactions; and provided, further, that in the event that the Collateral Advisor is unable, in its good faith determination, to obtain two bids from non-affiliated Persons, the Collateral Advisor shall use its reasonable efforts to solicit bids from a non-affiliated Person; and provided, further, that in the event that the Collateral Advisor in its good faith determination is unable to obtain a bid from a non-affiliated Person, it shall use its reasonable efforts to obtain an appraisal from a non-affiliated Person; and provided, further, that such Collateral Debt Securities shall be sold to such Person affiliated with the Collateral Advisor at the highest of the bids or the appraisal value so obtained. (b) Upon any substitution pursuant to this Article VI, all of the Issuer’s right, title and interest to the Collateral Debt Security or Collateral Debt Securities shall be Granted to the Trustee pursuant to this Agreement, such Collateral Debt Securities shall be Delivered to the Trustee as 35

Processed and formatted by SEC Watch - Visit SECWatch.com

Accountholder, and, if applicable, the Issuer shall receive the Collateral Debt Security or Collateral Debt Securities for which the Collateral Debt Security or Collateral Debt Securities were substituted. The Trustee shall also receive, not later than the Subsequent Delivery Date, an officer’s certificate of the Collateral Advisor demonstrating compliance with the provisions of this Article VI. Section 6.04. Collateral Quality Tests. The Collateral Quality Tests will be satisfied if, as of the Closing Date and the Effective Date, in the aggregate, the Collateral Debt Securities comply with all of the requirements set forth below (collectively, the “Collateral Quality Tests”): (i) the aggregate Principal Balance of all Collateral Debt Securities with a Moody’s Rating of below “Baa3” and above “B1” does not exceed 30% of the CDS Principal Balance; (ii) the aggregate Principal Balance of all Collateral Debt Securities with a Moody’s Rating of lower than “Ba3” does not exceed 15% of the CDS Principal Balance; (iii) the aggregate Principal Balance of all Collateral Debt Securities with a S&P Rating lower than “BBB-” and above “B+” does not exceed 30% of the CDS Principal Balance; (iv) the aggregate Principal Balance of all Collateral Debt Securities with an S&P Rating of lower than “BB-” does not exceed 15% of the CDS Principal Balance; (v) (v) the aggregate Principal Balance of all Collateral Debt Securities that are not publicly rated by Moody’s but derived in accordance with clauses (i) and (ii) of the definition of “Moody’s Rating” does not exceed 35% of the CDS Principal Balance; (vi) of the CDS Principal Balance;

the aggregate Principal Balance of all Collateral Debt Securities that are PIK Bonds does not exceed 5.5%

(vii) the aggregate Principal Balance of all Collateral Debt Securities that are CMBS Securities does not exceed 80% of the CDS Principal Balance; provided that no more than17.5% of the CDS Principal Balance shall consist of CMBS Large Loan Securities, no more than 5% of the CDS Principal Balance shall consist of CMBS Credit Tenant Lease Securities; (viii) the aggregate Principal Balance of all Collateral Debt Securities that are REIT Debt Securities does not exceed 26% of the CDS Principal Balance; (ix) the aggregate Principal Balance of all Collateral Debt Securities that are Real Estate CDO Securities does not exceed 5.5% of the CDS Principal Balance; (x) with respect to the particular issue of the Collateral Debt Security being acquired, (a) the aggregate Principal Balance of all Collateral Debt Securities that are part of the same issue does not exceed 3% of the CDS Principal Balance, (b) the aggregate Principal Balance of all Collateral Debt Securities that are REIT Debt Securities that are issued by the same obligor does not exceed 2.75% of the CDS Principal Balance and (c) the aggregate Principal Balance of all Collateral Debt Securities that are part of the same issue rated below “Baa3” by Moody’s at purchase does not exceed 2% of the CDS Principal Balance; (xi) with respect to the servicer of the security being acquired, (a) the aggregate Principal Balance of all Collateral Debt Securities serviced by such servicer does not exceed 20% of the CDS Principal Balance, except that the aggregate Principal Balance of all Collateral Debt Securities serviced by servicers rated “Below Average” by S&P, or if there is no servicer rating by S&P 36

Processed and formatted by SEC Watch - Visit SECWatch.com

or Fitch, having long-term unsecured debt securities rated “BB” or lower, shall not exceed 5% of the CDS Principal Balance; (xii) the aggregate Principal Balance of all Collateral Debt Securities that mature beyond the Stated Maturity Date does not exceed 20% of the CDS Principal Balance; (xiii)

the aggregate Principal Balance of all Fixed Rate Collateral Debt Securities does not exceed 95% of the

(xiv)

the Weighted Average Moody’s Rating Factor must not exceed 900;

(xv)

the Fitch Weighted Average Rating Factor must not exceed 7.75;

CDS Principal Balance;

(xvi) (i) the Weighted Average Fixed Rate Coupon as of such date equals or exceeds 6.15% and (ii) the Weighted Average Spread as of such date equals or exceeds 2.55%; (xvii)

the Moody’s Diversity Score must be greater than or equal to 8.5;

(xviii)

the Weighted Average Life must be less than or equal to 8.2;

(xix)

the Moody’s Recovery Rate must be greater than or equal to 25.5%;

(xx)

the S&P CDO Monitor Test must be satisfied;

(xxi)

the S&P Minimum Average Recovery Test must be satisfied; and

(xxii) the aggregate Principal Balance of all Collateral Debt Securities that provide for periodic payments of interest in Cash less frequently than monthly does not exceed 32% of the CDS Principal Balance; provided that Temporary Ramp-Up Securities will be excluded from the calculation of the Collateral Quality Tests. Section 6.05.

Coverage Tests.

(a) At any time during which any of the Notes are Outstanding, if any of the Coverage Tests described below are not satisfied as of the related Calculation Date, amounts that would otherwise be used (i) for payments of Excess Funds on the Class E Subordinate Income Notes, (ii) for the purchase of additional Collateral Debt Securities; (iii) for the payment of certain fees and expenses; (iii) in the case of a failure to satisfy either the Class A Interest Coverage Test or the Class A Principal Coverage Test, for interest payments on the Class B Notes, the Class C Notes and the Class D Notes; (iv) in the case of a failure to satisfy either the Class B Interest Coverage Test or the Class B Principal Coverage Test, for interest payments on the Class C Notes and the Class D Notes; (v) in the case of a failure to satisfy either the Class C Interest Coverage Test or Class C Principal Coverage Test, for interest payments on the Class D Notes; and (vi) in the case of a failure to satisfy either the Class D Interest Coverage Test or the Class D Principal Coverage Test, for payments of Excess Funds on the Class E Subordinate Income Notes shall instead be applied on the related Payment Date, to the extent necessary to satisfy such Coverage Test as of such Calculation Date, to Principal Prepayments until such Coverage Test is satisfied as of such Calculation Date or the Notes are paid in full. 37

(b) On the Effective Date, the portfolio of Collateral Debt Securities must meet each of the Coverage Tests. Furthermore, if any of the Coverage Tests set forth herein are not satisfied prior to or as a result of any proposed purchase of additional Collateral Debt Securities or Substitute Collateral Debt Securities after the Effective Date, the Issuer will not be permitted to make such purchase. (c) The Interest Coverage Test for each Class of Notes shall be satisfied as of any date of determination when the Interest Coverage Ratio for each such Class is equal to or exceeds the required level set forth below:

Processed and formatted by SEC Watch - Visit SECWatch.com Inte re st C ove rage Te st Re qu ire d In te re st C ove rage Ratio

Class A Interest Coverage Test

115%

Class B Interest Coverage Test

110%

Class C Interest Coverage Test

104%

Class D Interest Coverage Test

102%

The respective Interest Coverage Ratio is equal to the percentage based on the ratio of (x) to (y), where (x) is equal to the Interest Coverage Amount and where (y) is an amount equal to (i) in the case of the Class A Interest Coverage Ratio, the Periodic Interest for the Class A Notes for the Payment Date immediately following such date of determination; (ii) in the case of the Class B Interest Coverage Ratio, the sum of the Periodic Interest for the Class A Notes and the Class B Notes for such Payment Date; (iii) in the case of the Class C Interest Coverage Ratio, the sum of the Periodic Interest for the Class A Notes, the Class B Notes and the Class C Notes for such Payment Date; and (iv) in the case of Class D Interest Coverage Ratio, the sum of the Periodic Interest for the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes for such Payment Date. (d) The Principal Coverage Test for each Class of Notes shall be satisfied as of any date of determination when the Principal Coverage Ratio for each such Class is equal to or exceeds the required level set forth below: Prin cipal C ove rage Te st Re qu ire d Prin cipal C ove rage Ratio

Class A Principal Coverage Test

125%

Class B Principal Coverage Test

118%

Class C Principal Coverage Test

105.6%

Class D Principal Coverage Test

103%

The respective Principal Coverage Ratio is equal to the percentage based on the ratio of (x) to (y), where (x) is the Principal Coverage Amount as of such date and (y) is an amount equal to (i) in the case of the Class A Principal Coverage Ratio, the aggregate principal amount of the Class A Notes then Outstanding; (ii) in the case of the Class B Principal Coverage Ratio, the sum of the aggregate principal amount of the Class A Notes and the Class B Notes then Outstanding (including any Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount); (iii) in the case of the Class C Principal Coverage Ratio, the sum of the aggregate principal amount of the Class A Notes, the Class B Notes (including any Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) and the Class C Notes (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) then Outstanding; and (iv) in the case of the Class D Principal Coverage Ratio, the sum of the aggregate principal amount of the Class A Notes, the Class B Notes (including any Class B-2 Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount), the Class C 38

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) and the Class D Notes (including any Class D Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) then Outstanding. ARTICLE VII SUBORDINATION Section 7.01.

Subordination.

(a) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Class A-2 Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes and the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class A-1 Notes that the Class A-2 Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes, the Ordinary Shares and the Issuer’s rights in and to the Collateral (collectively, the “Class A-1 Subordinate Interests”) shall be subordinate and junior to the Class A-1 Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class A-1 Notes, to the extent set forth in Section 5.01(c), shall be paid in full in Cash or, to the extent that the Holders of 662/3% of the outstanding principal amount of the Class A-1 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Class A-1 Subordinate Interests. The Holders of the Class A-2 Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes and the Class E Subordinate Income Notes have agreed in the Trust Deed, and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class A-1 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Class A-2 Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes and the Ordinary Shares or hereunder until the payment in full of the Class A-1 Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands. (b) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes and the Class E Subordinate Income Notes and the holders of the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class A-2 Notes that the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes, the Ordinary Shares and the Issuer’s rights in and to the Collateral (collectively, the “Class A-2 Subordinate Interests”) shall be subordinate and junior to the Class A-2 Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class A-2 Notes shall be paid in full in Cash or, to the extent 662/3% of the outstanding principal amount of the Class A-2 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Class A-2 Subordinate Interests. The Holders of the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes and the Class E Subordinate Income Notes have agreed in the Trust Deed, and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class A-2 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them 39

Processed and formatted by SEC Watch - Visit SECWatch.com

amounts due under the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes and the Ordinary Shares or hereunder until the payment in full of the Class A-2 Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands. (c) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes and the holders of the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class B-1 Notes that the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes, the Ordinary Shares and the Issuer’s rights in and to the Collateral (collectively, the “Class B-1 Subordinate Interests”) shall be subordinate and junior to the Class B-1 Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class B-1 Notes shall be paid in full in Cash or, to the extent 662/3% of the outstanding principal amount of the Class B-1 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Class B-1 Subordinate Interests. The Holders of the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes and the Class E Subordinate Income Notes have agreed in the Trust Deed, and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class B-1 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes and the Ordinary Shares or hereunder until the payment in full of the Class B-1 Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands. (d) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes and the holders of the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class B2 Notes that the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes, the Ordinary Shares and the Issuer’s rights in and to the Collateral (collectively, the “Class B-2 Subordinate Interests”) shall be subordinate and junior to the Class B-2 Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class B-2 Notes shall be paid in full in Cash or, to the extent 662/3% of the outstanding principal amount of the Class B-2 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Class B-2 Subordinate Interests. The Holders of the Class C-1 Notes, the Class C-2 Notes, the Class D Notes and the Class E Subordinate Income Notes have agreed in the Trust Deed, and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class B-2 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes and the Ordinary Shares or hereunder until the payment in full of the Class B-2 Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands. 40

Processed and formatted by SEC Watch - Visit SECWatch.com

(e) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Class C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes and the holders of the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class C-1 Notes that the Class C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes, the Ordinary Shares and the Issuer’s rights in and to the Collateral (collectively, the “Class C-1 Subordinate Interests”) shall be subordinate and junior to the Class C-1 Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class C-1 Notes shall be paid in full in Cash or, to the extent 662/3% of the outstanding principal amount of the Class C-1 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Class C-1 Subordinate Interests. The Holders of the Class C-2 Notes, the Class D Notes and the Class E Subordinate Income Notes have agreed in the Trust Deed and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class C-1 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the CoIssuer for failure to pay to them amounts due under the Class C-2 Notes, the Class D Notes, the Class E Subordinate Income Notes and the Ordinary Shares or hereunder until the payment in full of the Class C-1 Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands. (f) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Class D Notes, the Class E Subordinate Income Notes and the holders of the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class C-2 Notes that the Class D Notes, the Class E Subordinate Income Notes, the Ordinary Shares and the Issuer’s rights in and to the Collateral (collectively, the “Class C-2 Subordinate Interests”) shall be subordinate and junior to the Class C-2 Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class C-2 Notes shall be paid in full in Cash or, to the extent 662/3% of the outstanding principal amount of the Class C-2 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Class C-2 Subordinate Interests. The Holders of the Class D Notes and the Class E Subordinate Income Notes have agreed in the Trust Deed and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class C-2 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Class D Notes and the Class E Subordinate Income Notes and the Ordinary Shares or hereunder until the payment in full of the Class C-2 Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands. (g) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer, the Holders of the Class E Subordinate Income and the holders of the Ordinary Shares, by virtue of the respective ownership of such securities, agree for the benefit of the Holders of the Class D Notes that the Class E Subordinate Income, the Ordinary Shares and the Issuer’s rights in and to the Collateral (collectively, the “Class D Subordinate Interests”) shall be subordinate and junior to the Class D Notes to the extent and in the manner set forth in this Agreement including as set forth in Section 5.01(a) and hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with the Conditions and the Trust Deed, the Class D Notes shall be paid in full in Cash or, to the extent 662/3% of the outstanding principal amount of the Class D Notes consent, other than in Cash, before any further payment or distribution is 41

Processed and formatted by SEC Watch - Visit SECWatch.com

made on account of the Class D Subordinate Interests. The Holders of the Class E Subordinate Income have agreed in the Trust Deed and the holders of the Ordinary Shares have agreed in the Declaration of Trust for the benefit of the Holders of the Class D Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Class E Subordinate Income and the Ordinary Shares or hereunder until the payment in full of the Class D Notes and not before one (1) year and one (1) day have elapsed since such payment or, if longer, the applicable preference period then in effect, including any preference period established pursuant to the laws of the Cayman Islands. (h) Notwithstanding anything in this Agreement, the Trust Deed, the Notes or any other Transaction Document to the contrary, the Issuer and the Holders of the Notes agree for the benefit of any Hedge Counterparty that the Notes and the Issuer’s rights in and to the Collateral (collectively, the “Hedge Counterparty Subordinate Interests”) shall be subordinate and junior to the rights of any Hedge Counterparty with respect to payments to be made to any Hedge Counterparty pursuant to a Hedge Agreement to the extent and in the manner set forth in Section 5.01(a) and as hereinafter provided. If any Event of Default has occurred and has not been cured or waived and acceleration occurs in accordance with Condition 13 (Events of Default), including as a result of an Event of Default specified in clause (g) or (h) of Condition 13 (Events of Default), all amounts payable to any Hedge Counterparty pursuant to Section 5.01(a)(iii) shall be paid in Cash or, to the extent any Hedge Counterparty consents, other than in Cash, before any further payment or distribution is made on account of the Hedge Counterparty Subordinate Interests. ARTICLE VIII HEDGE AGREEMENTS, INITIAL HEDGE AGREEMENT Section 8.01.

Hedge Agreement Provisions.

(a) The Issuer may from time to time enter into one or more Hedge Agreements (other than the Initial Hedge Agreement, but including Hedge Agreements offsetting other Hedge Agreements previously entered into), with respect to which Rating Agency Confirmation from each Rating Agency shall have been obtained. The Issuer (or the Collateral Advisor on behalf of the Issuer) may, from time to time, enter into, subject to the remainder of this Section 8.01, one or more replacement Hedge Agreements in the event that any Hedge Agreement is terminated prior to its scheduled expiration, and the Trustee may release funds in the Collection Account in accordance with the Priority of Payments for such purpose; provided, however, that such released funds shall not exceed the amount of any termination payment received in respect of a terminated Hedge Agreement; and provided, further, that Rating Agency Confirmation shall have been received. The notional amounts of the Hedge Agreements may be reduced from time to time by the Issuer; provided that Rating Agency Confirmation shall have been received. The Collateral Advisor shall not cause the occurrence of a Notional Balance Reduction (as defined in the Hedge Agreements) unless a Rating Agency Confirmation shall have been received. At least five (5) Business Days before the effective date of any amendment to a Hedge Agreement, the Issuer (or the Collateral Advisor on behalf of the Issuer) shall provide each Rating Agency with a copy of such amendment. The Issuer shall obtain Rating Agency Confirmation from Fitch, S&P and Moody’s prior to entering into any such amendment. (b) In the event of any early termination of a Hedge Agreement with respect to which the Hedge Counterparty is the sole Defaulting Party or Affected Party (as defined in the Hedge Agreements), (i) any termination payment paid by the Hedge Counterparty to the Issuer will be deposited in a single, segregated account held in the United States in the name of the Trustee (the “Hedge Termination Receipts Account”) for and on behalf of the Secured Parties (other than the Hedge 42

Processed and formatted by SEC Watch - Visit SECWatch.com

Counterparty) under this Agreement and (ii) any Hedge Replacement Proceeds received from a replacement counterparty will be deposited in a single, segregated account held in the United States in the name of the Trustee (the “Hedge Replacement Account”) for the benefit of the Hedge Counterparty under the terminated Hedge Agreement. (c) The Collateral Advisor will use its best efforts to cause the Issuer, promptly following the early termination of a Hedge Agreement (other than on a Redemption Date) and to the extent possible through application of funds available in the Hedge Termination Receipts Account and the Hedge Replacement Account, to enter into a replacement hedge agreement (a “Replacement Hedge”); provided that Rating Agency Confirmation has been received. (i) If (A) the funds available in the Hedge Termination Receipts Account exceed the costs of entering into a Replacement Hedge, (B) the Collateral Advisor determines not to replace the terminated Hedge Agreement and Rating Agency Confirmation is received or (C) the termination is occurring on a Redemption Date, then amounts in the Hedge Termination Receipts Account (after providing for the costs of entering into a Replacement Hedge, if any) shall become part of Collateral Principal Collections and be distributed in accordance with the Priority of Payments on the next following Payment Date (or on such Redemption Date, in the event that the Notes are optionally redeemed thereon). (ii) If the termination of the applicable Hedge Agreement occurred as a result of a credit rating failure described in Section 8.01(f) in respect of such Hedge Counterparty and a Hedge Shortfall Amount exists, the Trustee shall demand that the applicable Hedge Counterparty pay to the Issuer such Hedge Shortfall Amount, and upon receipt such payment shall become part of Collateral Principal Collections. If the termination of the applicable Hedge Agreement occurred for any other reason, the Hedge Shortfall Amount shall become part of the Hedge Payment Amount to be paid in accordance with the Priority of Payments on the next following Payment Date (or on such Redemption Date, in the event that the Notes are optionally redeemed thereon). (d) The amounts in the Hedge Replacement Account will be applied directly to the payment of Defaulted Hedge Termination Payments, if any, payable by the Issuer to the Hedge Counterparty. To the extent not fully paid from Hedge Replacement Proceeds, a Defaulted Hedge Termination Payment shall be payable to the Hedge Counterparty on the next Payment Date in accordance with the Priority of Payments. To the extent that the funds available in the Hedge Replacement Account exceed any such Defaulted Hedge Termination Payments (or if there are no Defaulted Hedge Termination Payments), the amounts in the Hedge Replacement Account shall become part of Collateral Principal Collections and shall be transferred to the Note Payment Account and distributed in accordance with the Priority of Payments on the following Payment Date. (e) The Trustee shall, upon receiving written notice from the Collateral Advisor of the exposure calculated under the Credit Support Annex (as defined below) to the Hedge Agreement, make a demand to the Hedge Counterparty and its credit support provider, if applicable, for securities having a value under such Credit Support Annex equal to the required credit support amount. If at any time (A) the short-term rating of the Hedge Counterparty from Moody’s is lower than “P-1” or is “P-1” and has been placed on and is remaining on credit watch with negative implications by Moody’s or the long-term rating of the Hedge Counterparty from Moody’s is lower than “A1” or is “Al” and has been placed on and is remaining on credit watch with negative implications by Moody’s or, if no short-term rating is available, the long-term rating of the Hedge Counterparty from Moody’s is withdrawn, suspended or downgraded below “Aa3” or is “Aa3” and has been placed on and is remaining on credit watch with negative implications by Moody’s, or the short-term rating of the Hedge 43

Processed and formatted by SEC Watch - Visit SECWatch.com

Counterparty from Fitch is lower than “F-1” or the long-term rating of the Hedge Counterparty or its guarantor from Fitch is lower than “A” or (B) the short-term rating of the Hedge Counterparty or its guarantor from S&P is lower than “A-1” or, if the Hedge Counterparty or its guarantor does not have a short-term rating from S&P, the long-term rating of such the Hedge Counterparty or its guarantor is lower than “A+” or is “A+” but has been placed on and is remaining on credit watch with negative implications by S&P (each, a “Collateralization Event”), the Issuer and the Hedge Counterparty shall amend the Hedge Agreement, solely at the expense of the Hedge Counterparty, by incorporating provisions in the form of the ISDA Credit Support Annex attached as an annex to the Hedge Agreement (the “Credit Support Annex”) which shall require that the Hedge Counterparty deliver collateral sufficient to maintain the then current rating of each Class of Notes provided that if the Hedge Counterparty has not within 30 days following a Collateralization Event incorporated the Credit Support Annex and provided sufficient collateral, a Substitution Event (as defined below) shall be deemed to have occurred and the Hedge Counterparty shall be required to take the remedial action specified thereunder. In the event that (i) so long as any Notes are Outstanding and rated by S&P, the long-term rating of the Hedge Counterparty from S&P is withdrawn, suspended or downgraded below “BBB-” or, if no long-term rating is available, the short-term rating of the Hedge Counterparty from S&P is withdrawn, suspended or downgraded below “A-3”, (ii) so long as any Notes are Outstanding and rated by Fitch, the short-term rating of the Hedge Counterparty from Fitch is withdrawn, suspended or downgraded below “F-2” or, if no short-term rating is available, the long-term rating of the Hedge Counterparty or its guarantor from Fitch is withdrawn, suspended or downgraded below “BBB+” or (iii) the short-term rating of the Hedge Counterparty from Moody’s is “P-2” or lower or the long-term rating of the Hedge Counterparty from Moody’s is “A3” or lower or, if no short-term rating is available, the long-term rating of the Hedge Counterparty from Moody’s is “A2” or lower (each, a “Substitution Event”), the Hedge Counterparty will be required, within thirty (30) days following such Substitution Event (in the case of a Substitution Event referred to in subparagraph (iii) of the definition thereof above) or within 7 days following such Substitution Event (in the case of a Substitution Event referred to in subparagraph (i) of the definition thereof above), to assign its rights and obligations under the Hedge Agreement at no cost to the Issuer to a party (the “Substitute Party”) selected by the Hedge Counterparty that satisfies the Hedge Counterparty Ratings Requirement and with respect to which each Rating Agency has confirmed in writing that its then-current ratings on any Class of Notes rated by such Rating Agency will not be adversely affected; provided that such right shall be subject to the assumption by the Substitute Party of all of the Hedge Counterparty’s obligations under the Hedge Agreement pursuant to an agreement satisfactory to the Issuer. If the Hedge Counterparty fails to assign its rights and obligations under the Hedge Agreement to a Substitute Party within thirty (30) days following such Substitution Event, (in the case of a Substitution Event referred to in subparagraph (iii) of the definition thereof above) or within 7 days following such Substitution Event (in the case of a Substitution Event referred to in subparagraph (i) of the definition thereof above); the Hedge Counterparty shall, while it continues in good faith to search for an eligible Substitute Party, post and maintain, or continue to maintain, as the case may be, Eligible Collateral in accordance with the Credit Support Annex and it shall become an Additional Termination Event pursuant to the Initial Hedge Agreement. Any costs attributable to pledging and assigning any collateral and finding a suitable Substitute Party shall be borne solely by the Hedge Counterparty and nothing in this paragraph shall relieve the Hedge Counterparty from its obligations to assign its rights and obligations under the Hedge Agreement to a Substitute Party in accordance herewith or the terms of the Hedge Agreement. (f) The Issuer (or the Collateral Advisor on behalf of the Issuer) shall enter into Hedge Agreements solely for the purpose of managing interest rate and other risks in connection with the Issuer’s issuance of, and payments on, the Notes and the Issuer’s ownership and disposition of the Collateral Debt Securities. 44

Processed and formatted by SEC Watch - Visit SECWatch.com

(g) The amounts payable to the Hedge Counterparties shall be limited to the amounts payable under the Priority of Payments and the claims of each Hedge Counterparty (if there is more than one) shall rank equally. (h) The Collateral Advisor and the Rating Agencies shall be notified by the Issuer of any amendments to and modifications of the Hedge Agreements. (i)

Each Hedge Agreement will provide with respect to the Issuer for provisions substantially similar to Sections 11.06

and 11.15. Section 8.02. Initial Hedge Agreement. On or prior to the Closing Date, the Issuer shall enter into an interest rate hedge agreement (the “Initial Hedge Agreement”), dated as of the Closing Date, with the Initial Hedge Counterparty. Under the Initial Hedge Agreement, on each Payment Date, the Issuer will pay an amount equal to the Issuer Initial Hedge Payment Amount and the Initial Hedge Counterparty will pay an amount equal to the Initial Hedge Counterparty Payment Amount. Upon receipt of each Initial Hedge Counterparty Payment Amount, such Initial Hedge Counterparty Payment Amount shall be deposited in the Collection Account. Section 8.03. Acknowledgement of Custodian. Subject to a mutual agreement with respect to a custodial arrangement, LaSalle Bank National Association will act as the custodian of the Issuer under the Initial Hedge Agreement and will comply with the Issuer’s instructions with respect to any collateral posted pursuant to such Initial Hedge Agreement. ARTICLE IX THE TRUSTEE AND ACCOUNTHOLDER Section 9.01. Appointment and Powers. Subject to the terms and conditions hereof, the Issuer hereby appoints LaSalle as the Accountholder and LaSalle hereby accepts such appointment and agrees to act as Accountholder for and on behalf of the Secured Parties to maintain custody and possession of the Collateral and to perform the other duties of the Accountholder in accordance with the provisions of this Agreement. The Trustee hereby authorizes (and the other Secured Parties shall be deemed to have authorized) the Accountholder to take such action on its behalf and to exercise such rights, remedies, powers and privileges hereunder as are specifically authorized to be exercised by the Accountholder by the terms hereof, together with such rights, remedies, powers and privileges as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained in this Agreement, if an Event of Default has occurred and is continuing, the Accountholder shall act upon and in compliance with written instructions of the Trustee delivered pursuant to and in accordance with this Agreement with respect to any and all matters upon which the Trustee is permitted to act pursuant to this Agreement or the Trust Deed and any such action taken by the Accountholder in compliance with any such instruction shall be binding upon all of the Secured Parties. Section 9.02.

Performance of Duties.

(a) The Trustee and the Accountholder, as applicable, may perform any of its duties hereunder directly or by or through agents or employees and shall be entitled to consult with counsel and to act in reliance upon the advice of such counsel concerning matters pertaining to the agencies created hereby and its duties hereunder, and shall not be liable for any action taken or omitted to be taken by it in good faith and in reasonable reliance upon and in accordance with the advice of counsel selected by it. The Trustee and the Accountholder, as applicable, each undertakes to perform only such duties as are expressly set forth herein, and no implied covenants or obligations shall be read into this Agreement 45

Processed and formatted by SEC Watch - Visit SECWatch.com

against the Trustee or the Accountholder. No provision hereof shall be construed to relieve the Accountholder from liability to the Trustee or the Issuer, or the Trustee from liability to the Accountholder or the Issuer, in each case, for its own gross negligence, bad faith or willful misconduct; provided that (i) the Trustee or the Accountholder shall not be liable with respect to any action taken, suffered or omitted by it in good faith (A) reasonably believed by it to be authorized or within the discretion or rights or powers conferred on it by this Agreement or (B) in accordance with any written direction or request of the Issuer or the Collateral Advisor (prior to the occurrence of an Event of Default) or the Trustee or Accountholder, as applicable, (other than those that require the consent of other parties and such consent has been withheld), unless in either case the Accountholder or the Trustee, as the case may be, was grossly negligent, acted in bad faith or committed willful misconduct in ascertaining the pertinent facts or was grossly negligent, acted in bad faith or committed willful misconduct in determining the requirements imposed by this Agreement or such written direction or request; and (ii) neither the Trustee nor the Accountholder shall be liable for any error of judgment made in good faith by any of its officers or employees, unless the Trustee or the Accountholder, as the case may be, was grossly negligent, acted in bad faith or committed willful misconduct in ascertaining the pertinent facts or in determining the requirements imposed by this Agreement. Whenever in this Agreement it is provided that the absence of the occurrence and continuation of an Event of Default is a condition precedent to the taking of any action by the Trustee or the Accountholder at the request of the Issuer, then notwithstanding that the satisfaction of such condition is a condition precedent to the Issuer’s right to make such request or direction, the Trustee or the Accountholder, as the case may be. shall not be liable for acting in accordance with such request or direction if it does not have knowledge of the occurrence and continuance of such Event of Default. (b) Anything in this Agreement to the contrary notwithstanding, in no event shall the Trustee or the Accountholder be liable under or in connection with this Agreement for indirect, special, incidental, punitive or consequential losses or damages of any kind whatsoever, including, but not limited to, lost profits, even if the Trustee or the Accountholder, as the case may be, has been advised of the possibility thereof and regardless of the form of action in which such damages are sought. (c) In respect of the Collateral credited to and deposited in an account with respect to which the Trustee acts as Accountholder, the Trustee shall act in accordance with the terms of this Agreement. (d) The Accountholder shall not be required to take notice or be deemed to have notice or knowledge of any Potential Event of Default or Event of Default under the Transaction Documents unless an Authorized Officer of the Accountholder shall have received written notice thereof. In the absence of receipt of such notice, the Accountholder may conclusively assume that there is no default or event of default under the Transaction Documents. Section 9.03.

Reliance Upon Documents.

(a) In the absence of bad faith on its part, the Trustee or the Accountholder, as applicable, (i) may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any note, notice, resolution, consent, certificate, affidavit, letter, telegram, teletype message, statement, order or other document or instrument reasonably believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, (ii) shall not be obligated to make any investigation into facts or matters stated in any such document or instrument and (iii) shall have no liability in acting, or in omitting to act, where such action or omission to act is in reliance upon any statement or opinion contained in any such document or instrument. Neither the Trustee nor the Accountholder assumes responsibility for the correctness of the recitals to this Agreement or for the validity, effectiveness, value, sufficiency or enforceability of this Agreement against the other 46

Processed and formatted by SEC Watch - Visit SECWatch.com

parties hereto, of the other Transaction Documents against the parties thereto or of the other Collateral (or any part thereof) against any parties thereto. Neither the Trustee nor the Accountholder shall have responsibility for maintaining the value of the Collateral or ensuring that any Collateral is properly delivered to it; provided that the Accountholder shall be responsible for holding the Collateral in accordance with the provisions hereof. The Issuer shall take or cause to be taken all action specified in Annex A hereto or recommended pursuant to any Opinion of Counsel received by the Issuer pursuant to Section 10.02 as may be necessary or appropriate to perfect and protect the security interests Granted hereby. In the event that any item of Collateral is not of the type specified in Annex A hereto, then the Issuer shall take such actions as are necessary to cause such item of Collateral to be subject to a valid perfected security interest in accordance with Section 2.01. (b) Notwithstanding any provision to the contrary contained in Article V, in performing its obligations to transfer amounts and make payments to any Person in accordance with Article V, the Accountholder and the Trustee is entitled to rely upon the information furnished to it by the Issuer (or the Collateral Advisor on behalf of the Issuer) pursuant to Article IV. If the Trustee or the Accountholder has been given notice that a transfer or payment by the Trustee or the Accountholder, as applicable, under Article V is required to be made on a specified date and on such specified date the Trustee or Accountholder, as the case may be, shall not have received all information necessary for the making of such transfer or payment, then the Trustee or the Accountholder, as the case may be, shall promptly give notice to the Issuer, the Collateral Advisor and the Administrator, specifying, to the extent reasonably within the knowledge of the Trustee or the Accountholder, such absence of information or any inability to confirm information necessary for the making of such transfer or payment. In the absence of information required to be furnished by the Issuer under Article IV, the Trustee or the Accountholder shall act in accordance with written instructions furnished to the Trustee or the Accountholder, as applicable, by the Issuer. If the Trustee or the Accountholder, as applicable, has been given notice that a transfer or payment by the Trustee or the Accountholder under Article V is required to be made on a specified date and on such specified date any information necessary for the making of such transfer or payment is not furnished by the Issuer and instructions necessary for the making of such transfer or payment are not received from the Issuer in sufficient time to effect such transfer or payment, then upon notice by the Trustee or the Accountholder to the Issuer, the Trustee’s or the Accountholder’s obligations with respect to such transfer or payment shall be suspended and the Trustee or the Accountholder, as applicable, shall not be liable for the failure to make such transfer or payment. Notwithstanding the foregoing, the Trustee or the Accountholder may carry out transfers and payments of amounts specified in Article V without specific instructions from the Collateral Advisor or the Issuer if the Trustee or the Accountholder has actual knowledge of the information required for the making of such transfer and payments. For the avoidance of doubt, the parties hereto confirm that the Trustee and the Accountholder shall be entitled to indemnification pursuant to Section 9.06 with respect to any actions taken by it pursuant to the preceding sentence. Section 9.04.

[Intentionally Omitted].

Section 9.05.

[Intentionally Omitted].

Section 9.06. Indemnification. The Issuer shall indemnify, defend and hold the Trustee and its directors, officers, employees and agents (collectively with the Trustee, the “Indemnitees”) harmless from and against every loss, liability or expense, including, without limitation, damages, fines, suits, actions, demands, penalties, costs, out-of-pocket or incidental expenses, legal fees and expenses, the allocated costs and expenses of in-house counsel and legal staff and the costs and expenses of defending or preparing to defend against any claim (collectively, “Losses”), that may be imposed on, incurred by, or asserted against, any Indemnitee for or in respect of the Trustee’s (a) execution and delivery of this Agreement, (b) compliance or attempted compliance with or reliance upon any instruction or other 47

direction upon which the Trustee is authorized to rely pursuant to the terms of this Agreement and (c) performance under this Agreement, except in the case of such performance only and with respect to any Indemnitee to the extent that the Loss resulted from such Indemnitee’s gross negligence, willful misconduct, bad faith or default. The obligation of the Issuer under this Section 9.06 shall be subject to the Priority of Payments and shall survive the termination of this Agreement and the resignation or removal of the Trustee and the Accountholder. The Issuer agrees that the Trustee or the Accountholder, as applicable, shall not be liable as a result of the Trustee’s or the Accountholder’s following, in good faith and in accordance with this Agreement, the written instructions given to it by the Issuer or the Collateral Advisor, as applicable. None of the Secured Parties shall have any liability under this Section 9.06. In the absence of a written request from the Issuer to return unclaimed funds to the Issuer, the Trustee shall from time to time deliver all unclaimed funds to or as directed by applicable escheat authorities, as determined by the Trustee, in its sole discretion, in accordance with the customary practices and procedures of the Trustee. Any unclaimed funds held by the Trustee pursuant to this Section 9.06 shall be held uninvested and without any liability for interest. Section 9.07. Compensation and Reimbursement. The Issuer agrees (a) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder and (b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of, or carrying out its duties and obligations under, this Agreement (including reasonable compensation and fees and the expenses and disbursements of its agents, any Independent certified public accountants and Independent counsel), except any expense, disbursement or advance as may be attributable to gross negligence, bad faith or willful misconduct on the part of the Trustee. The compensation and reimbursement to the Trustee under this Section 9.07 shall be an Administrative Expense and the obligation of each of the Co-Issuers under this Section 9.07 shall survive the termination of this Agreement and the resignation or removal of the Trustee pursuant to the Trust Deed. None of the Hedge Counterparties, the Principal Paying Agent, the other Paying Agents, the Trustee, the Initial Purchasers, the Placement Agent, the Collateral Advisor and the Noteholders shall have any liability under this Section 9.07.

Processed and formatted by SEC Watch - Visit SECWatch.com

Section 9.08.

[Intentionally Omitted].

Section 9.09. Accounts. Notwithstanding anything else contained herein, the Trustee agrees that with respect to each of the Accounts constituting: (a) a Securities Account, it will cause the Accountholder to enter into an agreement whereby the Accountholder agrees that it will (i) comply with Entitlement Orders (i.e., orders directing the transfer or redemption of any Financial Assets credited to such Accounts) relating to such Account issued by the Trustee without further consent by the Issuer; (ii) credit all Collateral to the applicable Account; (iii) treat each item of property credited to such Account as a Financial Asset; (iv) not enter into any agreement with any other Person relating to any Account pursuant to orders made by such Person; (v) not accept for credit to any Account any Collateral which is registered in the name of, or payable to, any Person other than the Accountholder unless it has been endorsed to it as Accountholder or is endorsed in blank and (vi) the Accountholder has agreed that it will waive any right of set-off unrelated to its fees for such account; and (b) a Deposit Account (if any), it will cause the Accountholder to enter into an agreement with the depository bank that will provide that (i) the Accountholder is the customer with respect to such Deposit Account; (ii) the Deposit Account is not in the name of any person other than the Accountholder and (iii) the Accountholder has not consented to the depository bank complying with instructions from any person other than the Accountholder. Section 9.10. Waiver of Setoffs. The Trustee hereby expressly waives any and all rights of setoff that the Trustee may otherwise at any time have under applicable law with respect to any Account and agrees that amounts in the Collateral Account, the Collection Account, the Hedge Termination 48

Processed and formatted by SEC Watch - Visit SECWatch.com

Receipt Account or the Hedge Replacement Account and the amounts withdrawn under the Initial Hedge Agreement shall at all times be held and applied in accordance with the provisions of Article V or otherwise as expressly contemplated by this Agreement and the Account Control Agreement. Section 9.11. Provision of Information. Upon written request by the Independent certified public accountants, the Trustee shall provide to such Independent certified public accountants such information contained in the Note Register as is requested by them. ARTICLE X COVENANTS OF THE ISSUER Section 10.01.

Preservation of Collateral.

(a) The Issuer or the Collateral Advisor, on behalf of the Issuer, shall, at its own expense, take, or cause to be taken, such action as is necessary and proper with respect to the Collateral in order to preserve, maintain and service such Collateral and to cause (subject to the rights of the Trustee) (i) the Accountholder to perform its obligations with respect to such Collateral as provided in the Account Control Agreement and (ii) the Trustee to perform its obligations herein. The Issuer will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered such instruments of transfer, or take such other steps or actions as may be necessary, to perfect the security interests Granted hereunder in the Collateral, to ensure that such security interests rank prior to all other Liens and to preserve the priority of such security interests and the validity and enforceability thereof. Upon any delivery or substitution of Collateral, the Issuer shall be obligated to create for the benefit of the Trustee a valid Lien on, and valid and perfected security interest in, the Collateral so delivered in favor of the Trustee and to deliver or transfer Control of such Collateral to the Trustee, free and clear of any other Lien, together with satisfactory assurances thereof, and to pay any reasonable costs incurred by the Trustee, the Accountholder, the Issuer (including its agents) or otherwise in connection with such delivery. (b) The Issuer shall defend the Collateral against all claims of any kind or nature of all Persons at any time claiming the same or any interest therein adverse to the interests of the Trustee, and the Issuer shall not cause, permit or suffer to exist any Lien upon the Collateral other than the Liens Granted hereby. (c) The Trustee shall have the right to enforce all rights of the Issuer under the Collateral Advisory Agreement, the Collateral Administration Agreement, the Initial Hedge Agreement and other Hedge Agreements (other than the Initial Hedge Agreement), if any. Section 10.02. Opinions as to Collateral. On each anniversary of the Closing Date, the Issuer shall furnish (at the expense of the Issuer) to the Trustee, each Rating Agency and the Collateral Advisor an Opinion of Counsel stating that either (a) in the opinion of such counsel, such actions have been taken as are necessary to perfect the Lien and security interest of the Trustee, for and on behalf of the Secured Parties, with respect to the Collateral including, without limitation, actions with respect to the recording, filing, rerecording and refiling of this Agreement, any supplements and any other requisite documents and with respect to the execution and filing of any financing statements and continuation statements and reciting the details of such action or (b) in the opinion of such counsel, no such action is necessary to maintain such perfected Lien and security interest. Any Opinion of Counsel shall describe each action that will, in the opinion of such counsel, be required to perfect the Lien and security interest of the Trustee, with respect to the Collateral, specified in such Opinion of Counsel. Such Opinion of Counsel shall state the procedures with respect to the delivery of Collateral which are sufficient for the creation 49

Processed and formatted by SEC Watch - Visit SECWatch.com

and maintenance of a perfected, first priority security interest therein in favor of the Trustee and specifying any additional procedures as shall, in the opinion of such counsel, be necessary or appropriate for such creation and maintenance. Section 10.03. Non-Interference; etc. The Issuer shall not (a) waive, amend, modify or alter any of its rights or obligations under the Collateral Advisory Agreement or any Hedge Agreement without the prior written consent of the Trustee, acting at the direction of a majority of the Holders of the Notes, and unless Rating Agency Confirmation from S&P has been received; (b) fail to pay any tax, assessment, charge or fee levied or assessed against the Collateral, or to defend any action, if such failure to pay or defend may adversely affect the priority or enforceability of the Issuer’s right, title or interest in and to the Collateral or the Trustee’s Lien on, and security interest in, the Collateral; (c) except as provided in clause (d) below, directly or indirectly avail itself of any right, benefit, power, authority or remedy conferred on it pursuant to the provisions of any Transaction Document, whether through action or inaction, except as may be expressly directed from time to time by the Trustee or (d) take any action, or fail to take any action, if such action or failure to take action will interfere with the enforcement of any rights under the Collateral Advisory Agreement and each Hedge Agreement. ARTICLE XI MISCELLANEOUS Section 11.01.

Amendments.

(a) Subject to Section 4.12 and Clause 7.3 of the Trust Deed, this Agreement may be amended, changed, modified or altered only by written instrument or written instruments signed by the Trustee, the Accountholder and the Issuer and upon receipt of Rating Agency Confirmation; provided that to the extent that such amendment, change, modification or alteration of this Agreement would have a material adverse effect (as evidenced by an Opinion of Counsel) on the obligations of the Collateral Advisor, the Issuer shall not consent to any such amendment, change, modification or alteration of this Agreement without the approval of the Collateral Advisor; provided, further, that subject to the terms hereof, the consent of the Trustee and the Accountholder shall not be unreasonably withheld or delayed by any such Person with respect to any amendment which does not adversely affect such Person (or, in the case of the Trustee, the Noteholders); provided, further, that to the extent that such amendment, change, modification or alteration of this Agreement would have a material adverse effect on the rights of any Hedge Counterparty to payments under the Priority of Payments, no such amendment, change, modification or alteration to this Agreement shall become effective without the prior written consent of such Hedge Counterparty. In executing or accepting any amendment, change, modification or alteration of this Agreement as permitted by this Article XI, the Trustee shall be entitled to receive, and (subject to Clause 11.4 of the Trust Deed) shall be fully protected in relying in good faith upon, an Opinion of Counsel stating that the execution or acceptance of such amendment, change, modification or alteration is authorized or permitted by this Agreement and that all conditions precedent thereto have been complied with. The Trustee may, but shall not be obligated to, enter into or accept any such amendment, change, modification or alteration which affects the Trustee’s own rights, duties or indemnities under this Agreement or otherwise. (b) This Agreement (including, without limitation, Annex A hereto) may otherwise be amended by the Issuer, with notice to the Rating Agencies and upon receipt of Rating Agency Confirmation from S&P, any other party hereto and each Hedge Counterparty (except as may be specifically provided herein) (i) in order to further effectuate the Grant of or further perfect any Lien or 50

Processed and formatted by SEC Watch - Visit SECWatch.com

security interest of the Trustee in any item of Collateral, any such amendment that becomes effective as of a specified date after the Closing Date to be accompanied by an Opinion of Counsel to the Issuer and a copy of such amendment and the related Opinion of Counsel shall be provided to the Trustee, (ii) to amend the terms herein for the purpose of facilitating compliance by the Issuer with any more favorable exemption from registration under the Securities Act or the Investment Company Act, or to ensure the Issuer’s exemption thereunder, (iii) upon receipt of Rating Agency Confirmation from Moody’s and S&P, to effect the appointment of a successor Trustee, (iv) upon receipt of Rating Agency Confirmation from Moody’s and S&P, to take any action necessary or advisable to prevent the Issuer, the Accountholder, any Paying Agent or the Trustee from being subject to withholding or other taxes, fees or assessments or to prevent the Issuer from being treated as engaged in a United States trade or business or otherwise being subjected to United States federal, state or local income tax on a net income tax basis, (v) to correct or amplify the description of any property at any time subject to the Grant and Lien of this Agreement, or to better assure, convey and confirm unto the Trustee any property subject to the Grant and Lien of this Agreement, (vi) upon receipt of Rating Agency Confirmation from Moody’s and S&P, to cure ambiguity or correct or supplement any provision contained in this Agreement which may be defective or inconsistent with any other provision contained in this Agreement or make any modification that is of a formal, minor or technical nature or which is made to correct a manifest error, (vii) upon receipt of Rating Agency Confirmation from Moody’s and S&P, to correct, modify or supplement any provision which is inconsistent with the Final Offering Circular; provided that any such correction, modification or supplement made pursuant to this clause (vii) shall be consistent with the Final Offering Circular and (viii) to make any change required by the Irish Stock Exchange (so long as any of the Notes are listed thereon) in order to permit or maintain the listing of the Notes thereon. (c) The Issuer shall cause the Administrator to give prior notice to each Hedge Counterparty, the Collateral Advisor, the Principal Paying Agent, the Trustee, the Accountholder and each Rating Agency of any amendment, change, modification or alteration of this Agreement and provide copies of such amendment, change, modification or alteration to the Trustee and each Rating Agency. Section 11.02.

Notices.

(a) All notices, certificates, directions, reports or other communications hereunder shall be sufficiently given and shall be deemed given when delivered in writing, either via facsimile or first class mail postage prepaid addressed to the appropriate Notice Address. Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices, certificates, directions, reports or other communications shall be sent. (b) For so long as any of the Securities are listed on the Irish Stock Exchange and the rules of the Irish Stock Exchange so require, notices to the Holders of such Securities (excluding the Note Reports) shall also be published in the Irish Stock Exchange’s Daily Official List at the expense of the Issuer. (c) Upon receipt of notice of an Event of Default and acceleration of indebtedness from the Trustee, the Accountholder shall have the right, at the direction of the Trustee, to exercise any and all rights and remedies (i) granted to a secured party by the NY UCC or otherwise allowed by applicable law and (ii) otherwise provided by this Agreement. Upon receipt of notice of an Event of Default from the Trustee, the Accountholder shall give prompt notice thereof to the Issuer and the Collateral Advisor. Section 11.03. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render 51

Processed and formatted by SEC Watch - Visit SECWatch.com

unenforceable any other provision hereof. The parties hereto further agree that the holding by any court of competent jurisdiction that any right, power, privilege or remedy pursued by the Trustee hereunder is unavailable or unenforceable shall not affect in any way the ability of the Trustee to pursue any other right, power, privilege or remedy available to it. Section 11.04. Term of This Agreement. This Agreement shall take effect on the Closing Date and shall continue in effect until the Final Termination Date. On the Final Termination Date, this Agreement shall terminate, all obligations of the parties hereunder shall cease and terminate and the Collateral, if any, held hereunder and not to be used or applied in discharge of any obligations of the Issuer in respect of the obligations of the Issuer in respect of the Notes or otherwise under this Agreement shall be released to and in favor of the Issuer; provided that the provisions of Sections 9.06, 9.07, 11.06, 11.07, 11.09 and 11.15 shall survive any termination of this Agreement and the release of the Collateral upon such termination. Notwithstanding the foregoing, if (a) after the termination of this Agreement or (b) at any time or times subsequent to the payment of all or any part of the obligations of the Issuer in respect of the Notes, the Trustee shall be required to repay any amounts previously paid by or on behalf of the Issuer in reduction thereof by virtue of an order of any court having jurisdiction in the premises, including, without limitation, as a result of an adjudication that such amounts constituted preferential payments or fraudulent conveyances, then this Agreement and the obligations of the Issuer hereunder shall be reinstated and the Issuer unconditionally agrees to pay to the Accountholder upon demand by the Trustee or the Accountholder a sum in cash equal to the amount of any such repayment, together with interest on such amount from the date of such repayment by the Trustee to the date of payment to the Trustee. In all instances, the Accountholder shall pay any amount received by it as aforesaid to the Trustee, subject to the Priority of Payments. Section 11.05. Assignments. This Agreement shall be a continuing obligation of the Issuer and shall (a) be binding upon the Issuer and its successors, transferees and assigns and (b) inure to the benefit of and be enforceable by the Trustee, the Collateral Advisor, and the Accountholder, and by their respective successors, transferees and assigns. Except as contemplated or provided herein, the Issuer may not assign this Agreement, or delegate any of its duties hereunder, without the prior written consent of the Trustee, and Rating Agency Confirmation from S&P, and any such attempted assignment shall be null and void. Subject to any restrictions on transfer or assignment in any Transaction Document, nothing contained herein shall restrict the Trustee from assigning to any Person any or all of its rights under this Agreement or with respect to any real or personal property or other interests pledged to the Trustee, or in which the Trustee has a Lien or security interest, in connection with the transactions contemplated hereby. Section 11.06. Non-Petition Agreement. Each of the parties hereto covenants and agrees that, so long as any Note is outstanding and for a period of one (1) year plus one (1) day (or, if longer, the applicable preference period then in effect) after payment in full of all amounts payable under or in respect of the Transaction Documents, it will not institute against, or join any other Person in instituting against, the Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation Proceedings, or other Proceedings under any federal or state bankruptcy, insolvency or similar law. Nothing in this Section 11.06 shall preclude, or be deemed to estop, any of the parties hereto (a) from taking any action prior to the expiration of the aforementioned one (1) year plus one (1) day period (or, if longer, the applicable preference period then in effect) in (i) any case or proceeding voluntarily filed or commenced by the Issuer or the Co-Issuer or (ii) any involuntary insolvency proceeding filed or commenced by a Person other than any of the parties hereto, or (b) from commencing against the Issuer or the Co-Issuer or any of its properties any legal action which is not a bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceeding Section 11.07. Trial by Jury Waived. EACH OF THE PARTIES HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY 52

Processed and formatted by SEC Watch - Visit SECWatch.com

IN RESPECT OF ANY PROCEEDING ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER OR THEREUNDER. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER. Section 11.08. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. Section 11.09. Consents to Jurisdiction. Each of the parties hereto irrevocably submits to the jurisdiction of the United States District Court for the Southern District of New York, any court in the State of New York located in the borough of Manhattan in the city and county of New York, and any appellate court from any thereof, in any Proceeding brought against it and related to or in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereunder or thereunder or for recognition or enforcement of any judgment and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such Proceeding may be heard or determined in such New York State court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such Proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. To the extent permitted by applicable law, each of the parties hereto hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such Proceeding, any claim that it is not personally subject to the jurisdiction of such courts, that the Proceeding is brought in an inconvenient forum, that the venue of the Proceeding is improper or that this Agreement or any of the other Transaction Documents or the subject matter hereof may not be litigated in or by such courts. Section 11.10. Service of Process. The Issuer hereby agrees that service of process on the Issuer in any such Proceeding brought in the State of New York may be made upon CT Corporation System (the “Process Agent”) at its offices at 111 Eighth Avenue, 13th Floor, New York, New York 10011 (or such other address as may be specified by the Process Agent from time to time) and the Issuer hereby irrevocably appoints the Process Agent as its authorized agent to accept such service of process and agrees that the failure of the Process Agent to give any notice of any such service shall not impair or affect the validity of such service or any judgment rendered in any Proceeding based thereon. The Issuer hereby agrees that any such service (a) shall be deemed in every respect effective service of process upon it in any such Proceeding and (b) shall, to the fullest extent enforceable by applicable law, be taken and held to be valid personal service upon and personal delivery to it. Section 11.11. Time of Essence. All parties hereto agree that time shall be of the essence in respect of the performance by the Issuer and the Trustee of their respective obligations hereunder. Section 11.12. Counterparts. This Agreement may be executed in any number of counterparts by the parties hereto, each of which shall be an original, and all such counterparts shall constitute one and the same instrument. 53

Processed and formatted by SEC Watch - Visit SECWatch.com

Section 11.13. Integration. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. Section 11.14. Headings. The headings of Articles, Sections and subsections herein are for convenience of reference only and shall not affect the interpretation hereof. Section 11.15. Limited Recourse. Notwithstanding any provisions of this Agreement to the contrary, the payment obligations of the Issuer set forth under this Agreement shall be non-recourse obligations of the Issuer and shall be payable only from the Collateral or the proceeds thereof, whether held by the Trustee or any other Person on behalf of the Issuer. No recourse shall be had for the payment of any amount owing in respect of the Notes appertaining thereto against any officer, director, employee, stockholder, director or incorporator of the Co-Issuers, or of any Affiliate of the Co-Issuers, the Trustee, the Collateral Agent, the Accountholder or any Affiliate of any of the foregoing, in their respective capacities as such, or successors or assigns of any of them for any amounts payable under the Notes or this Agreement. Upon the exhaustion of the Collateral, all further liability of the Co-Issuers shall be extinguished and no further claims shall be made against the Co-Issuers in respect thereof. Section 11.16. Payments in Accordance with the Priority of Payments. Notwithstanding any provision herein to the contrary, the payment of all principal, interest, fees, expenses, indemnities or other amounts payable by or on behalf of the Issuer under this Agreement shall be made in accordance with the Priority of Payments, Section 11.15 and the subordination provisions set forth in this Agreement. In the event that the Issuer fails to pay any amount on the date when due under this Agreement solely by reason of the limitation on the payment of certain expenses set forth under the Priority of Payments under Section 5.01, the Issuer shall not be deemed to have failed to pay such amount (and a default shall not have occurred as the result thereof) for purposes of this Agreement unless it fails to pay such amount on the date (inclusive of any grace periods) on which it is permitted to be paid under the Priority of Payments. Section 11.17. Trustee and Its Affiliates. LaSalle Bank National Association and any of its Affiliates providing services in connection with the transactions contemplated in the Transaction Documents shall have only the duties and responsibilities expressly provided in each capacity and shall not, by virtue of its or any of its Affiliates acting in any other capacity, be deemed to have duties or responsibilities or be deemed to be held to a standard of care other than as expressly provided with respect to each such capacity. LaSalle Bank National Association (or its Affiliates) in its and their various capacities in connection with the transactions contemplated in the Transaction Documents, including as Trustee, may enter into business transactions, including the acquisition of investment securities as contemplated by the Transaction Documents, from which it and/or such Affiliates may derive revenues and profits in addition to the fees stated in the various Transaction Documents, without any duty to account therefor. Section 11.18. Judgment Currency. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due under this Agreement in any currency (the “Original Currency”) into another currency (the “Other Currency”), the parties hereto agree, to the fullest extent permitted by law, that the rate of exchange to be used in effecting such conversion shall be that at which, in accordance with normal banking procedures, the party seeking such judgment could purchase the Original Currency with the Other Currency on the Business Day preceding that on which final judgment is given. To the fullest extent permitted by applicable law, the obligations of a party in respect of any such amount due in the Original Currency under this Agreement to another party (the “Recipient”) shall, notwithstanding any judgment in Other Currency, be discharged only to the extent that on the Business Day following receipt by the Recipient of any sum adjudged to be so due in the Other Currency the Recipient may in accordance 54

Processed and formatted by SEC Watch - Visit SECWatch.com

with normal banking procedures purchase the Original Currency with the Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due to the Recipient in the Original Currency, the party obligated to make such payment agrees, as a separate obligation and notwithstanding any such judgment, to pay to the Recipient the amount of such loss. [SIGNATURES COMMENCE ON NEXT PAGE] 55

Processed and formatted by SEC Watch - Visit SECWatch.com

IN WITNESS WHEREOF, the Issuer and the Trustee have duly executed this Agreement as of the date first set forth above. ISSUER:

N-STAR REAL ESTATE CDO II LTD. Executed as a Deed By: /s/ Derrie Boggess Name: Derrie Boggess Title: Director

TRUSTEE:

LASALLE BANK NATIONAL ASSOCIATION By: /s/ Koren Sumser Name: Koren Sumser Title: First Vice President

ACCOUNTHOLDER:

LASALLE BANK NATIONAL ASSOCIATION By: /s/ Koren Sumser Name: Koren Sumser Title: First Vice President

Exhibit 10.10 Dated as of March 10, 2005

N-STAR REAL ESTATE CDO III LTD., as Issuer

N-STAR REAL ESTATE CDO III CORP., as Co-Issuer

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee

INDENTURE

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS S e ction

Page

PRELIMINARY STATEMENT

1

GRANTING CLAUSES

1

ARTICLE I Definitions and Interpretation 1.1. Definitions 1.2. Assumptions as to Collateral Debt Securities, Fees, Etc. 1.3. Rules of Construction

2 2 52 54

ARTICLE II The Rated Notes 2.1. Forms Generally 2.2. Authorized Amount; Applicable Periodic Interest Rate; Stated Maturity Date; Denominations 2.3. Execution, Authentication, Delivery and Dating 2.4. Registration, Transfer and Exchange of Rated Notes 2.5. Mutilated, Defaced, Destroyed, Lost or Stolen Rated Notes 2.6. Payment of Principal and Interest; Rights Preserved

55 55 56 57 58 66 67

ARTICLE III Conditions Precedent 3.1. General Provisions 3.2. Security for the Rated Notes 3.3. Custodianship; Transfer of Collateral Debt Securities and Eligible Investments

70 70 73 74

ARTICLE IV Satisfaction and Discharge 4.1. Satisfaction and Discharge of Indenture 4.2. Application of Trust Money 4.3. Repayment of Funds Held by Note Paying Agent

77 77 79 79

ARTICLE V Events of Default; Remedies 5.1. Events of Default 5.2. Acceleration of Maturity; Rescission and Annulment 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee 5.4. Remedies 5.5. Preservation of Collateral 5.6. Trustee May Enforce Claims Without Possession 5.7. Application of Funds Collected 5.8. Limitation on Suits 5.9. Unconditional Rights of Rated Noteholders to Receive Principal and Interest 5.10. Restoration of Rights and Remedies 5.11. Rights and Remedies Cumulative 5.12. Delay or Omission Not Waiver 5.13. Control by Controlling Class 5.14. Waiver of Past Defaults 5.15. Undertaking for Costs 5.16. Waiver of Stay or Extension Laws 5.17. Sale of Collateral 5.18. Action on the Rated Notes

79 79 80 82 84 85 87 87 87 88 88 88 89 89 89 90 90 90 91

i

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

ARTICLE VI The Trustee 6.1. Certain Duties and Responsibilities 6.2. Notice of Default 6.3. Certain Rights of Trustee 6.4. Authenticating Agents 6.5. Not Responsible for Recitals or Issuance of Rated Notes 6.6. May Hold Rated Notes 6.7. Funds Held in Trust 6.8. Compensation and Reimbursement 6.9. Corporate Trustee Required; Eligibility 6.10. Resignation and Removal; Appointment of Successor 6.11. Acceptance of Appointment by Successor 6.12. Merger, Conversion, Consolidation or Succession to Business of Trustee 6.13. Co-Trustees 6.14. Certain Duties Related to Delayed Payment of Proceeds; Other Notices 6.15. Representations and Warranties of the Bank 6.16. Exchange Offers, Proposed Amendments etc. 6.17. Fiduciary for Rated Noteholders Only; Agent For Other Secured Parties 6.18. Withholding

91 91 93 93 95 96 96 96 96 98 98 99 100 100 101 101 102 102 102

ARTICLE VII Covenants 7.1. Payment of Principal and Interest 7.2. Maintenance of Office or Agency 7.3. Funds for Rated Note Payments to be Held in Trust 7.4. Existence of Co-Issuers 7.5. Protection of Collateral 7.6. Opinions as to Collateral 7.7. Performance of Obligations 7.8. Negative Covenants 7.9. Statement as to Compliance 7.10. Co-Issuers May Consolidate, Etc., Only on Certain Terms 7.11. Successor Substituted 7.12. No Other Business 7.13. Change or Withdrawal of Rating 7.14. Reporting 7.15. Rated Note Calculation Agent 7.16. Listing 7.17. Amendment of Certain Documents 7.18. Purchase of Collateral; Information Regarding Collateral; Rating Confirmation

103 103 103 104 106 106 108 108 109 110 111 113 114 114 114 114 115 115 116

ARTICLE VIII Supplemental Indentures 8.1. Supplemental Indentures Without Consent of Rated Noteholders 8.2. Supplemental Indentures with Consent of Rated Noteholders 8.3. Execution of Supplemental Indentures 8.4. Effect of Supplemental Indentures 8.5. Reference in Rated Notes to Supplemental Indentures

117 117 119 122 122 122

ii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

ARTICLE IX Redemption of Rated Notes 9.1. Redemption of Rated Notes 9.2. Redemption Procedures; Auction 9.3. Record Date; Notice to Trustee of Redemption 9.4. Notice of Redemption 9.5. Notice of Withdrawal 9.6. Rated Notes Payable on Redemption Date 9.7. Special Amortization

122 122 123 124 125 125 126 126

ARTICLE X Accounts, Accountings and Releases 10.1. Collection of Funds 10.2. General Provisions Applicable to Accounts 10.3. Collateral Account 10.4. Uninvested Proceeds Account 10.5. Collection Account and CPP Sub-Accounts 10.6. Expense Reserve Account 10.7. Interest Reserve Account 10.8. Payment Account 10.9. Reports by Trustee 10.10. Accountings 10.11. Release of Securities 10.12. Reports by Independent Accountants 10.13. Reports to Rating Agencies 10.14. Tax Matters 10.15. Tax Information

127 127 127 128 129 128 130 130 131 131 132 137 137 138 138 138

ARTICLE XI Application of Monies 11.1. Disbursements of Funds from Payment Account; Priority of Payments

139 139

ARTICLE XII Purchase and Sale of Collateral Debt Securities 12.1. Sale of Collateral Debt Securities 12.2. Portfolio Characteristics 12.3. Conditions Applicable to all Transactions Involving Sale or Grant

151 151 155 158

ARTICLE XIII Secured Parties’ Relations 13.1. Subordination 13.2. Standard of Conduct

159 159 162

ARTICLE XIV Miscellaneous 14.1. Form of Documents Delivered to Trustee 14.2. Acts of Rated Noteholders 14.3. Notices, Etc., to Trustee, the Co-Issuers and the Rating Agencies 14.4. Notices and Reports to Rated Noteholders; Waiver 14.5. Effect of Headings and Table of Contents 14.6. Successors and Assigns 14.7. Severability 14.8. Benefits of Indenture 14.9. Governing Law 14.10. Submission to Jurisdiction

162 162 163 164 165 166 166 166 166 166 166

iii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

14.11. 14.12. 14.13. 14.14.

167 167 167 168

Counterparts Waiver of Jury Trial Judgment Currency Confidential Treatment of Documents

ARTICLE XV Assignment of Agreements, Etc. 15.1. Assignment 15.2. No Impairment 15.3. Termination, Etc. 15.4. Issuer Agreements, Etc.

168 168 168 168 168

ARTICLE XVI Hedge Agreement 16.1. Hedge Agreement

169 169

Schedules Schedule A Schedule B Schedule C Schedule D Schedule E Schedule F Schedule G Schedule H Schedule I

Schedule of Collateral Debt Securities as of the Closing Date LIBOR Formula Schedule of Temporary Ramp-Up Securities S&P’s Recovery Rate Matrix Auction Procedures S&P’s Notching Criteria S&P’s Types of Asset-Backed Securities ineligible for Notching S&P’s Industry Classification Groups Fitch Industry Classification Groups

Exhibits Exhibit A-1 Exhibit A-2 Exhibit B Exhibit C-1 Exhibit C-2 Exhibit C-3 Exhibit D Exhibit E-1 Exhibit E-2 Exhibit F Exhibit G Exhibit H Exhibit I

Form of Regulation S Global Note Form of Rule 144A Global Note Form of Definitive Class D Note Form of Rule 144A Transfer Certificate Form of Regulation S Transfer Ccrtificate Form of Definitive Class D Note Transfer Certificate Form of Funding Certificate Form of Opinion of Clifford Chance US LLP Form of Opinion of Walkers Form of Opinion of Kennedy Covington Lobdell & Hickman, L.L.P. Form of Opinion of Thacher Profitt & Wood LLP Form of Opinion of In-House Counsel to Initial Hedge Counterpart Rated Noteholder’s Certificate iv

THIS INDENTURE dated as of March 10, 2005 among: N-STAR REAL ESTATE CDO III LTD., an exempted company incorporated and existing under the law of the Cayman Islands; N-STAR REAL ESTATE CDO III CORP., a corporation organized and existing under the law of the State of Delaware; and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, organized under the law of the United States, as trustee. PRELIMINARY STATEMENT The Co-Issuers are duly authorized to execute and deliver this Indenture to provide for the issuance of the Rated Notes as provided in this Indenture. All covenants and agreements made by the Co-Issuers herein are for the benefit and security of the Secured Parties. The Co-Issuers are entering into this Indenture, and the Trustee is accepting the trusts created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. All things necessary to make this Indenture a valid agreement of the Co-Issuers in accordance with its terms have been done. GRANTING CLAUSES The Issuer hereby Grants to the Trustee, for the benefit and security of the Secured Parties, all of its right, title and interest in, to and under, in

Processed and formatted by SEC Watch - Visit SECWatch.com

each case, whether now owned or existing, or hereafter acquired or arising, the following property (other than the Excepted Property) (a) the Collateral Debt Securities listed on Schedule A, the Temporary Ramp-Up Securities listed on Schedule C, the Collateral Debt Securities acquired after the Closing Date and any Equity Securities which, in each case, are delivered to the Trustee (directly or through a Securities Intermediary) after the Closing Date pursuant to the terms hereof and all payments thereon or with respect thereto, (b) the Collection Account (including each Sub-Account established therein), the Interest Reserve Account, the Payment Account, the Expense Reserve Account, the Collateral Account, the Uninvested Proceeds Account, all amounts credited to such accounts, and Eligible Investments purchased with funds credited to such accounts and all income from the investment of funds therein, (c) the rights of the Issuer under each of the Transaction Documents to which the Issuer is a party and all payments to the Issuer thereunder or with respect thereto, (d) all Cash or other property delivered to the Trustee (directly or through a Securities Intermediary) and (e) all proceeds, whether voluntary or involuntary, of and to any of the property of the Issuer described in the preceding clauses (collectively, the Collateral). Such Grants are made to the Trustee to hold in trust, to secure the Rated Notes equally and ratably without prejudice, priority or distinction between any Rated Note and any other Rated Note by reason of difference in time of issuance or otherwise, except as expressly provided in this Indenture, and to secure (i) the payment of all amounts due on the Rated Notes and under the Hedge Agreement and the Collateral Advisory Agreement in accordance with their respective terms, (ii) the payment of all other sums payable under this Indenture and (iii) compliance with the provisions of this Indenture, the Hedge Agreement and the Collateral Advisory Agreement, all as provided in this Indenture (collectively, the Secured Obligations). Except to the extent otherwise provided in this Indenture, the Issuer does hereby constitute and irrevocably appoint the Trustee the true and lawful attorney of the Issuer, with full power (in the name of the Issuer or otherwise), to exercise all rights of the Issuer with respect to the Collateral held for the benefit and security of the Secured Parties and to ask, require, demand, receive, settle, compromise,

Processed and formatted by SEC Watch - Visit SECWatch.com

compound and give acquittance for any and all moneys and claims for moneys due and to become due under or arising out of any of the Collateral held for the benefit and security of the Secured Parties, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Trustee may deem to be necessary or advisable in the premises. The power of attorney granted pursuant to this Indenture and all authority hereby conferred are granted and conferred solely to protect the Trustee’s interest in the Collateral held for the benefit and security of the Secured Parties and shall not impose any duty upon the Trustee to exercise any power. This power of attorney shall be irrevocable as one coupled with an interest prior to the payment in full of all the obligations secured hereby. Except to the extent otherwise provided in this Indenture, this Indenture shall constitute a security agreement under the law of the State of New York. Upon the occurrence of any Event of Default and in addition to any other rights available under this Indenture or any other instruments included in the Collateral held for the benefit and security of the Secured Parties or otherwise available at law or in equity, the Trustee shall have all rights and remedies of a secured party on default under the law of the State of New York and other applicable law to enforce the assignments and security interests contained herein and, in addition, shall have the right, subject to compliance with any mandatory requirements of applicable law, to sell or apply any rights and other interests assigned or pledged hereby in accordance with the terms hereof at public or private sale. It is expressly agreed that anything therein contained to the contrary notwithstanding, the Issuer shall remain liable under any instruments included in the Collateral to perform all the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and except as otherwise expressly provided herein, the Trustee shall not have any obligations or liabilities under such instruments by reason of or arising out of this Indenture, nor shall the Trustee be required or obligated in any manner to perform or fulfill any obligations of the Issuer under or pursuant to such instruments or to make any payment, to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim, or to take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. The designation of the Trustee in any transfer document or record is intended and shall be deemed, first, to refer to the Trustee as custodian on behalf of the Issuer and second, to refer to the Trustee as secured party on behalf of the Secured Parties, provided that the Grant made by the Issuer to the Trustee pursuant to the granting clauses hereof shall apply to any Collateral bearing such designation. The Trustee acknowledges such Grants, accepts the trust hereunder in accordance with the provisions hereof, and agrees to perform the duties herein in accordance with the required standard of care set forth herein such that the interests of the Secured Parties may be protected. Each of the Secured Parties hereby agrees and acknowledges that it shall not have any claim on the funds and property from time to time deposited in or credited to the Income Note Distribution Account and the proceeds thereof. ARTICLE I DEFINITIONS AND INTERPRETATION 1.1.

DEFINITIONS

Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Indenture. Whenever any reference 2

Processed and formatted by SEC Watch - Visit SECWatch.com

is made to an amount the determination of which is governed by Section 1.2, the provisions of Section 1.2 shall be applicable to such determination or calculation, whether or not reference is specifically made to Section 1.2, unless some other method of calculation or determination is expressly specified in the particular provision. In addition, terms defined in Article 9 of the UCC and used but not capitalized herein have the meanings assigned thereto in Article 9 of the UCC. Account means any of the Collection Account (including each Collateral Sub-Account established therein), the Collateral Account, the Uninvested Proceeds Account, the Payment Account, the Interest Reserve Account and the Expense Reserve Account (including each Collateral Sub-Account established therein). Account Control Agreement means that certain Account Control Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, among the Issuer, the Trustee and the Custodian. Accountants’ Report means a report of a firm of Independent certified public accountants of recognized national reputation appointed by the Issuer (or the Collateral Advisor on its behalf) on the Closing Date pursuant to Section 10.12(a), which may be the firm of Independent accountants that reviews or performs procedures with respect to the financial reports prepared by the Issuer. Act has the meanings specified in Section 14.2. Administrative Expenses means amounts (including any applicable indemnities) due from, or accrued for, the account of the Co-Issuers with respect to any Payment Date to (i) the Trustee for Trustee Expenses; (ii) the Income Note Paying Agent pursuant to the Income Note Paying Agency Agreement; (iii) the Collateral Administrator pursuant to the Collateral Administration Agreement; (iv) the independent accountants, agents and counsel of the Co-Issuers for fees and expenses (including, without limitation, tax reports); (v) the Rating Agencies for fees and expenses in connection with any Class of Notes rated by each such Rating Agency (including, without limitation, expenses for credit estimates and ongoing surveillance of the ratings of the Notes); (vi) the Administrator pursuant to the Corporate Services Agreement; (vii) the Collateral Advisor and its counsel for fees, expenses and indemnities under the Transaction Documents to the extent set forth therein (including, without limitation, amounts payable under the Collateral Advisory Agreement but excluding the Collateral Advisory Fee); (viii) any other Person in respect of any governmental fee, charge or tax (including all filing, registration and annual return fees payable to the Cayman Islands’ government and registered office fees); and (ix) any other Person in respect of any other fees or expenses permitted under the Indenture and the documents delivered pursuant to or in connection with this Indenture, the Income Note Paying Agency Agreement, the Collateral Advisory Agreement and the Notes; provided that Administrative Expenses may not include any amounts due or accrued with respect to the actions taken on, or prior to, the Closing Date. Administrator means Walkers SPV Limited and any successor thereto appointed under the Corporate Services Agreement. Affected Party has the meaning given to such term in the standard form 1992 ISDA Master Agreement (Multicurrency-Cross Border). Affiliate means any person, directly or indirectly through one or more intermediaries, controlling, controlled by or under common control with the person; provided that (i) with respect to the Issuer, “Affiliate” shall be deemed not to include Walkers SPV Limited or any entity which Walkers SPV Limited controls and (ii) control of a person shall mean the power, direct or indirect, (a) to vote more than 50% of the securities having ordinary voting power for the election of directors of such person or (b) to 3

Processed and formatted by SEC Watch - Visit SECWatch.com

direct or cause the direction of the management and policies of such person whether by contract or otherwise. Agent Members means members of, or participants in, the Clearing Agencies. Aggregate Fees and Expenses means, on any Payment Date, the sum of (i) the Trustee Fee with respect to such Payment Date and any unpaid Trustee Fee accrued with respect to a previous Payment Date, (ii) the Income Note Paying Agent Fee with respect to such Payment Date and any unpaid Income Note Paying Agent Fee accrued with respect to a previous Payment Date (iii) the Senior Collateral Advisory Fee and all expenses of the Collateral Advisor payable by the Issuer pursuant to the Collateral Advisory Agreement with respect to such Payment Date and any unpaid Senior Collateral Advisory Fee and unpaid expenses of the Collateral Advisor accrued with respect to a previous Payment Date, (iv) the Trustee Expenses and other expenses (including other Administrative Expenses) of the Co-Issuer (including the fees to be paid to the Irish Stock Exchange), (v) taxes payable by the Co-Issuers, if any, and (vi) all other expenses of the Co-Issuers (including, without limitation, Administrative Expenses) payable on such Payment Date pursuant to Sections 11.1(a)(1) and 11.1(b)(1) (in each case to the extent not included in clauses (i) through (vi) above). Aggregate Outstanding Amount means, when used with respect to any of the Rated Notes at any time, the aggregate principal amount of such Rated Notes Outstanding at such time. Except as otherwise provided herein, (i) the Aggregate Outstanding Amount of any Class B Notes at any time shall include the Class B Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class B Notes at such time, (ii) the Aggregate Outstanding Amount of any Class C-lA Notes at any time shall include the Class C-lA Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class C-lA Notes at such time, (iii) the Aggregate Outstanding Amount of any Class C-1B Notes at any time shall include the C-1B Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class C-1B Notes at such time, (iv) the Aggregate Outstanding Amount of any Class C-2A Notes at any time shall include the C-2A Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class C-2A Notes at such time, (v) the Aggregate Outstanding Amount of any Class C-2B Notes at any time shall include the C-2B Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class C-2B Notes at such time and (vi) the Aggregate Outstanding Amount of any Class D Notes at any time shall include the Class D Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class D Notes at such time. Applicable Periodic Interest Rate means, for any Interest Period, (i) with respect to the Class A-1 Notes, the applicable Class A-1 Note Interest Rate, (ii) with respect to the Class A-2A Notes, the applicable Class A-2A Note Interest Rate, (iii) with respect to the Class A-2B Notes, the applicable Class A-2B Note Interest Rate (iv) with respect to the Class B Notes, the applicable Class B Note Interest Rate, (v) with respect to the Class C-lA Notes, the applicable Class C-lA Note Interest Rate, (vi) with respect to the Class C-1B Notes, the applicable Class C1B Note Interest Rate, (vii) with respect to the Class C-2A Notes, the applicable Class C-2A Note Interest Rate, (viii) with respect to the Class C-2B Notes, the applicable Class C-2B Note Interest Rate and (ix) with respect to the Class D Notes, the applicable Class D Note Interest Rate. Applicable Recovery Rate means, with respect to any Collateral Debt Security on any Measurement Date, the applicable S&P Recovery Rate for such Collateral Debt Security on such date. Articles means the Amended and Restated Memorandum and Articles of Association of the Issuer, filed under the Companies Law (2004 Revision) of the Cayman Islands, as modified and supplemented and in effect from time to time. 4

Processed and formatted by SEC Watch - Visit SECWatch.com

Asset-Backed Securities are debt securities that entitle the holders thereof to receive payments that depend primarily on the cash flow from (i) a specified pool of financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities (including, for the avoidance of doubt, leases) or (ii) real estate mortgages, either fixed or revolving, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to the holders of such securities. Assumed Reinvestment Rate means, with respect to any Account or fund securing the Rated Notes, the greater of (i) LIBOR minus 0.5% and (ii) zero. Auction has the meaning specified in Section 9.2. Auction Call Redemption has the meaning specified in Section 9.1(c). Auction Date has the meaning specified in Section 9.2; provided that, for the purposes of Section 5.5, “Auction Date” means the date upon which an Auction of the Collateral Debt Securities is conducted in connection with an Event of Default. Auction Procedures has the meaning specified in Section 9.2. Auction Purchase Agreement has the meaning specified in Schedule E. Authenticating Agent means, with respect to the Rated Notes or any Class of the Rated Notes, the Person designated by the Trustee, if any, to authenticate such Rated Notes on behalf of the Trustee pursuant to Section 6.4. Authorized Officer means (i) with respect to the Issuer, any Officer of the Issuer who is authorized to act for the Issuer in matters relating to, and binding upon, the Issuer, (ii) with respect to the Co-Issuer, any Officer who is authorized to act for the Co-Issuer in matters relating to, and binding upon, the Co-Issuer, (iii) with respect to the Collateral Advisor, any officer of the Collateral Advisor who is authorized to act for the Collateral Advisor in matters relating to, and binding upon, the Collateral Advisor, (iv) with respect to the Trustee or any other bank or trust company acting as trustee of an express trust or as custodian, a Trust Officer and (v) with respect to the Income Note Paying Agent, any officer who is authorized to act for the Income Note Paying Agent in matters relating to, and binding upon, the Income Note Paying Agent. 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. Available Funds means, with respect to any Payment Date, the amount of any positive balance of Cash or Eligible Investments in the Collection Account as of the Calculation Date relating to such Payment Date and, with respect to any other date, such amount as of that date. Average Life means, on any Calculation Date with respect to any Collateral Debt Security, the quotient obtained by the Collateral Advisor by dividing (i) the sum of the products of (a) the number of years (rounded to the nearest one tenth thereof) from such Calculation Date to the respective dates of each successive distribution of principal of such Collateral Debt Security (assuming that (1) no Collateral Debt Securities default or are sold and (2) any optional redemption of the Collateral Debt Securities occurs in accordance with their respective terms) and (b) the respective amounts of principal of such scheduled distributions by (ii) the sum of all successive scheduled distributions of principal on such Collateral Debt Security. 5

Processed and formatted by SEC Watch - Visit SECWatch.com

Balance means at any time, with respect to Cash or Eligible Investments in any Account at such time, the aggregate of the (i) current balance of Cash, demand deposits, time deposits, certificates of deposit and federal funds; (ii) principal amount of interest-bearing corporate and government securities, money market accounts and repurchase obligations; and (iii) purchase price (but not greater than the face amount) of non-interest-bearing government and corporate securities and commercial paper. Bank means Wells Fargo Bank, National Association, a national banking association organized under the laws of the United States, in its individual capacity and not as Trustee. Bankruptcy Code means the U.S. Bankruptcy Code, Title 11 of the United States Code, as amended or where the context requires, the applicable insolvency provisions of the laws of the Cayman Islands. Beneficial Owner means, with respect to any Global Note, each Person that appears on the records of a Clearing Agency (other than each such Clearing Agency to the extent that it is an accountholder with the other Clearing Agency for the purpose of operating the “bridge” between them) as entitled to a particular amount of Rated Notes by reason of an interest in a Global Note (for all purposes other than with respect to the payment of principal of and interest on the Rated Notes, the right to which will be vested, as against the Issuer and the Trustee, solely in the Person in whose name the Global Note is registered in the Note Register (in the case of the Rated Notes) or the Income Note Register (in the case of the Income Notes)); provided that the Trustee and the Income Note Paying Agent may conclusively rely upon the certificate of a Clearing Agency as to the identity of such Persons holding an interest in a Global Note. Benefit Plan Investor means (i) an “employee benefit plan” (as defined in Section 3(3) of ERISA), whether or not subject to Title I of ERISA, including without limitation governmental plans, foreign plans and church plans, (ii) a “plan” (as defined in Section 4975(e)(1) of the Code), whether or not subject to Section 4975 of the Code, including, without limitation, individual retirement accounts and Keogh plans or (iii) an entity whose underlying assets include plan assets by reason of such an employee benefit plan’s or plan’s investment in such entity, including, without limitation, as applicable, an insurance company general account. Board of Directors means, with respect to the Issuer, the directors of the Issuer duly appointed in accordance with the Articles, and, with respect to the Co-Issuer, the directors of the Co-Issuer duly appointed by the shareholders of the Co-Issuer. Board Resolution means, with respect to the Issuer or the Co-Issuer, a resolution of the Board of Directors of the Issuer or the Co-Issuer, as the case may be. Business Day means any day that is not a Saturday, Sunday or other day on which commercial banking institutions in New York, New York, Minneapolis, Minnesota, Columbia, Maryland or any other cities in which the Corporate Trust Office of the Trustee is located are authorized or obligated by law or executive order to be closed; provided that, if any action is required of the Irish Paying Agent, solely for purposes of determining when such action of the Irish Paying Agent is required, days on which commercial banking institutions in Dublin, Ireland are authorized or obligated by law or executive order to be closed will also be considered in determining whether such day is a “Business Day”. Calculation Date means, with respect to any Payment Date, the last day of the related Due Period. Call Period has the meaning specified in Section 9.1(a) hereof. 6

Processed and formatted by SEC Watch - Visit SECWatch.com

Cash means such funds denominated with currency of the United States as at the time shall be legal tender for payment of all public and private debts, including funds credited to a deposit account or a Securities Account. Cash Release Conditions has the meaning specified in Section 12.1(c). CDS Principal Balance means, prior to the Effective Date, U.S.$400,000,000, and thereafter, the aggregate Principal Balance of (i) Collateral Debt Securities included in the Collateral (including any Collateral Debt Securities that have become Defaulted Securities or Written Down Securities) and (ii) Eligible Investments, in each case, purchased with the proceeds of the issuance of the Notes or thereafter with Collateral Principal Collections. Certificated Security has the meaning specified in Section 8-102(a)(4) of the UCC. Certificate of Authentication has the meaning specified in Section 2.3(f). Citigroup means Citigroup Global Markets Inc. Class means any class of the Notes, consisting of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Income Notes. Class A Coverage Tests means the Class A Interest Coverage Test and the Class A Principal Coverage Test. Class A Interest Coverage Ratio means on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes for the Payment Date immediately following such Measurement Date. Class A Interest Coverage Test means, for so long as any Class A Notes remain Outstanding, a test satisfied on any date of determination if the Class A Interest Coverage Ratio as of such date of determination is equal to or greater than 115%. Class A Notes means, collectively, the Class A-1 Notes and the Class A-2 Notes. Class A Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such date and (ii) is an amount equal to the Aggregate Outstanding Amount of the Class A Notes on such Measurement Date. Class A Principal Coverage Test means, for so long as any Class A Notes remain Outstanding, a test satisfied on any Measurement Date, if the Class A Principal Coverage Ratio as of such Measurement Date is equal to or greater than 117%. Class A-1 Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class A-1 Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class A-1 Notes. Class A-1 Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class A-1 Note Scenario Default Rate from the Class A-1 Note Break-Even Default Rate. 7

Processed and formatted by SEC Watch - Visit SECWatch.com

Class A-1 Note Interest Rate means LIBOR plus 0.28%. Class A-1 Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class A-1 Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class A-1 Notes means the U.S.$294,000,000 aggregate principal amount of Class A-1 Floating Rate Senior Notes Due 2040. Class A-2 Notes means, collectively, the Class A-2A Notes and the Class A-2B Notes. Class A-2A Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class A-2A Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class A-2A Notes. Class A-2A Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class A-2A Note Scenario Default Rate from the Class A-2A Note Break-Even Default Rate. Class A-2A Note Interest Rate means LIBOR plus 0.50%. Class A-2A Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class A-2A Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class A-2A Notes means the U.S.$15,000,000 aggregate principal amount of Class A-2A Floating Rate Senior Notes Due 2040. Class A-2B Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class A-2B Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class A-2B Notes. Class A-2B Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class A-2B Note Scenario Default Rate from the Class A-2B Note Break-Even Default Rate. Class A-2B Note Interest Rate means 5.042%. Class A-2B Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class A-2B Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class A-2B Notes means the U.S.$5,000,000 aggregate principal amount of Class A-2B Fixed Rate Senior Notes Due 2040. Class B Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the 8

Processed and formatted by SEC Watch - Visit SECWatch.com

Class B Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class B Notes. Class B Coverage Tests means the Class B Interest Coverage Test and the Class B Principal Coverage Test. Class B Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class B Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments, to reduce such sum. Class B Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes and the Class B Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Interest Reserve Account for the Payment Date immediately following such Measurement Date. Class B Interest Coverage Test means, for so long as any Class A Notes or Class B Notes remain Outstanding, a test that is satisfied on any date of determination if the Class B Interest Coverage Ratio as of such date of determination is equal to or greater than 110%. Class B Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class B Notes in full by their Stated Maturity Date and the timely payment of interest on such Class B Notes. Class B Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class B Note Scenario Default Rate from the Class B Note Break-Even Default Rate. Class B Note Interest Rate means LIBOR plus 0.85%. Class B Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class B Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class B Notes means the U.S.$17,000,000 aggregate principal amount of Class B Floating Rate Senior Subordinate Notes Due 2040. Class B Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes and the Class B Notes as of such Measurement Date. Class B Principal Coverage Test means, for so long as any Class A Notes or Class B Notes remain Outstanding, a test satisfied on any date of determination if the Class B Principal Coverage Ratio as of such date of determination is equal to or greater than 114%. 9

Class C Applicable Periodic Interest Shortfall Amount means, collectively, the Class C-1 Applicable Periodic Interest Shortfall Amount and the Class C-2 Applicable Periodic Interest Shortfall Amount. Class C Coverage Tests means the Class C Interest Coverage Test and the Class C Principal Coverage Test. Class C Cumulative Applicable Periodic Interest Shortfall Amount means, collectively, the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount and the Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount. Class C Interest Coverage Ratio means on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes, the Class B Notes and the Class C Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Interest Reserve Account for such Payment Date. Class C Interest Coverage Test means, for so long as any Class A Notes, Class B Notes or Class C Notes remain Outstanding, a test that is satisfied as of any date of determination when the Class C Interest Coverage Ratio as of such date of determination is equal to or exceeds 104%. Class C Notes means collectively the Class C-1 Notes and the Class C-2 Notes. Class C Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes, the

Processed and formatted by SEC Watch - Visit SECWatch.com

Class B Notes and the Class C Notes as of such Measurement Date. Class C Principal Coverage Test means, for so long as any Class A Notes, Class B Notes or Class C Notes remain Outstanding, a test satisfied on any date of determination if the Class C Principal Coverage Ratio as of such Date of determination is equal to or greater than 106%. Class C-1 Applicable Periodic Interest Shortfall Amount means, collectively, the Class C-1A Applicable Periodic Interest Shortfall Amount and the Class C-1B Applicable Periodic Interest Shortfall Amount. Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount means, collectively, the Class C-1A Cumulative Applicable Periodic Interest Shortfall Amount and the Class C-1B Cumulative Applicable Periodic Interest Shortfall Amount. Class C-1 Notes means, collectively, the Class C-1A Notes and the C-1B Notes. Class C-1A Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class C-1A Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes or Class B Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class C-1A Notes. Class C-1A Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class C-1A Applicable Periodic Interest Shortfall Amounts with respect 10

Processed and formatted by SEC Watch - Visit SECWatch.com

to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class C-1A Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class C-lA Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class C-lA Notes. Class C-1A Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class C-1 Note Scenario Default Rate from the Class C-1 Note Break-Even Default Rate. Class C-1A Note Interest Rate means LIBOR plus 1.25%. Class C-1A Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class C-lA Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class C-IA Notes means the U.S.$10,000,000 aggregate principal amount of Class C-lA Floating Rate Junior Subordinate Notes Due 2040. Class C-1B Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class C-1B Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes or Class B Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class C-1B Notes. Class C-1B Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class C-1B Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class C-1B Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class C-1B Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class C-1B Notes. Class C-1B Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class C-1B Note Scenario Default Rate from the Class C-1B Note Break-Even Default Rate. Class C-1B Note Interest Rate means 5.804%. Class C-1B Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class C-1B Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class C-1B Notes means the U.S.$6,000,000 aggregate principal amount of Class C-1B Fixed Rate Junior Subordinate Notes Due 2040. 11

Processed and formatted by SEC Watch - Visit SECWatch.com

Class C-2 Applicable Periodic Interest Shortfall Amount means, collectively, the Class C-2A Applicable Periodic Interest Shortfall Amount and the Class C-2B Applicable Periodic Interest Shortfall Amount. Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount means, collectively, the Class C-2A Cumulative Applicable Periodic Interest Shortfall Amount and the Class C-2B Cumulative Applicable Periodic Interest Shortfall Amount. Class C-2 Notes means, collectively, the Class C-2A Notes and the Class C-2B Notes. Class C-2A Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class C-2A Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes or Class C-1 Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class C-2A Notes. Class C-2A Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class C-2A Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class C-2A Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class C-2A Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class C-2A Notes. Class C-2A Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class C-2A Note Scenario Default Rate from the Class C-2B Note Break-Even Default Rate. Class C-2A Note Interest Rate means LIBOR plus 1.55%. Class C-2A Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class C-2A Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class C-2A Notes means the U.S.$12,000,000 aggregate principal amount of Class C-2A Floating Rate Junior Subordinate Notes Due 2040. Class C-2B Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class C-2B Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes or Class C-1 Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class C-2B Notes. Class C-2B Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class C-2B Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. 12

Processed and formatted by SEC Watch - Visit SECWatch.com

Class C-2B Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class C-2B Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class C-2B Notes. Class C-2B Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class C-2B Note Scenario Default Rate from the Class C-2B Note Break-Even Default Rate. Class C-2B Note Interest Rate means 6.135%. Class C-2B Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class C-2B Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class C-2B Notes means the U.S.$2,000,000 aggregate principal amount of Class C-2B Fixed Rate Senior Subordinate Notes Due 2040. Class D Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class D Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes or Class C Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class D Notes. Class D Coverage Tests means the Class D Interest Coverage Test and the Class D Principal Coverage Test. Class D Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class D Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class D Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Interest Reserve Account for such Payment Date. Class D Interest Coverage Test means, for so long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes remain Outstanding, a test that is satisfied as of any date of determination when the Class D Interest Coverage Ratio as of such date of determination is equal to or exceeds 101%. Class D Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class D Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class D Notes. 13

Processed and formatted by SEC Watch - Visit SECWatch.com

Class D Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class D Note Scenario Default Rate from the Class D Note Break-Even Default Rate. Class D Note Interest Rate means 6.458%. Class D Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class D Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class D Notes means the U.S.$16,000,000 aggregate principal amount of Class D Fixed Rate Junior Subordinate Notes due 2040. Class D Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes, the Class B Notes , the Class C Notes , and the Class D Notes as of such Measurement Date. Class D Principal Coverage Test means a test that is satisfied as of any date of determination when the Class D Principal Coverage Ratio is equal to or exceeds 103%. Clearing Agency means DTC, Euroclear or Clearstream. Clearing Corporation has the meaning specified in Section 8-102(a)(5) of the UCC. Clearstream means Clearstream Banking, société anonyme. Closing Date means March 10, 2005. CMBS Conduit Securities means Commercial Mortgage Backed Securities (a) issued by a single-seller or multi-seller conduit under which the holders of such Commercial Mortgage Backed Securities have recourse to a specified pool of assets (but not other assets originated by the conduit that support payments on other series of securities) and (b) that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Commercial Mortgage Backed Securities) on the cash flow from a pool of commercial mortgage loans. CMBS Credit Tenant Lease Securities means CMBS Securities (other than CMBS Large Loan Securities and CMBS Conduit Securities) that entitle the holders thereof to receive payments that depend on the cash flow from a pool of commercial mortgage loans made to finance the acquisition, construction and improvement of properties leased to corporate tenants (or on the cash flow from such leases); provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the CMBS Securities such as a financial guaranty insurance policy. CMBS Large Loan Securities means Commercial Mortgage Backed Securities (other than CMBS Conduit Securities) that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Commercial Mortgage Backed Securities) on the cash flow from a commercial mortgage loan or a small pool of commercial mortgage loans made to finance the acquisition or improvement of real properties. 14

Processed and formatted by SEC Watch - Visit SECWatch.com

CMBS Securities means CMBS Conduit Securities, CMBS Large Loan Securities, CMBS Single Borrower Securities or CMBS Credit Tenant Lease Securities, as the case may be. CMBS Single Borrower Securities means CMBS Securities (other than CMBS Large Loan Securities and CMBS Credit Tenant Lease Securities) that entitle the holders thereof to receive payments that depend on the cash flow from one or more loans with a single borrower or group of affiliated borrowers secured by one or more properties; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the CMBS Securities such as a financial guaranty insurance policy. Code means the Internal Revenue Code of 1986, as amended. Co-Issuer means N-Star Real Estate CDO III Corp., a corporation organized under the law of the State of Delaware, unless a successor Person shall have become the Co-Issuer pursuant to the applicable provisions of this Indenture, and thereafter Co-Issuer shall mean such successor Person. Co-Issuers means the Issuer and Co-Issuer. Collateral has the meaning specified in the Granting Clauses. Collateral Administration Agreement means the Collateral Administration Agreement, dated March 10, 2005, by and among the Issuer, the Collateral Advisor and the Collateral Administrator, as the same may be amended and modified from time to time in accordance with its terms. Collateral Administrator means Wells Fargo Bank, National Association, solely in its capacity as Collateral Administrator under the Collateral Administration Agreement, unless a successor Person shall have become the Collateral Administrator pursuant to the applicable provisions of Collateral Administration Agreement, in which case Collateral Administrator shall mean such successor Person. Collateral Advisor means NS Advisors, LLC, a Delaware limited liability company, unless a successor Person shall have become Collateral Advisor pursuant to the applicable provisions of the Collateral Advisory Agreement, in which case Collateral Advisor shall mean such successor Person. Collateral Advisory Agreement means the Collateral Advisory Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, between the Issuer and the Collateral Advisor. Collateral Advisory Fee means the Senior Collateral Advisory Fee and the Subordinate Collateral Advisory Fee. Collateral Assignment of Hedge Agreement means the collateral assignment of Hedge Agreement, dated the date that the Issuer enters into the Hedge Agreement, among the Issuer, the Trustee and the Initial Hedge Counterparty, and any other Collateral Assignment of the Hedge Agreement in respect of any Hedge Agreement entered into between the Issuer, the Trustee and a Hedge Counterparty after the Closing Date. Collateral Debt Security means an item of Collateral which satisfies the Eligibility Criteria specified in Section 12.2. Collateral Interest Collections means, with respect to any Due Period and the related Payment Date, without duplication, the sum of (i) all cash payments of interest with respect to any Collateral Debt 15

Processed and formatted by SEC Watch - Visit SECWatch.com

Securities and Eligible Investments included in the Collateral (including any Sale Proceeds representing unpaid interest accrued thereon to the date of the sale thereof to the extent not treated as Collateral Principal Collections at the option of the Collateral Advisor, but excluding all funds received on a Defaulted Security (including any unpaid interest) and any unpaid interest accrued on a Deferred Interest PIK Bond or a Written Down Security to the date of sale) which are received during the related Due Period (excluding any Purchased Accrued Interest), (ii) all payments on Eligible Investments purchased with Collateral Interest Collections, (iii) payments received or scheduled to be received from a Hedge Counterparty under any Hedge Agreement (including the initial Hedge Agreement) on the related Payment Date, excluding any payments received from a Hedge Counterparty upon reduction of the notional amount and any termination payments (provided that so long as the Notes are Outstanding, any termination payments received from a Hedge Counterparty will be used to enter into a substitute Hedge Agreement to the extent required to maintain the then-current rating of the Notes by each Rating Agency), (iv) all amendment and waiver fees, all late payment fees and all other fees and commissions received during the related Due Period (other than fees and commissions received in connection with the sale, restructuring, workout or default of Collateral Debt Securities or in connection with Defaulted Securities or Written Down Securities), (v) the Principal Balance of any Eligible Investments purchased with Collateral Interest Collections, (vi) all interest accrued on the Closing Date on Collateral Debt Securities included in the Collateral, (vii) any amounts on deposit in the Interest Reserve Account, (viii) at the option of the Collateral Advisor, any amount on deposit in the Expense Reserve Account in excess of U.S.$25,000 and (ix) all proceeds from the foregoing; provided, however, that Collateral Interest Collections shall not include the funds and other property (including, without limitation, the paid-up share capital of the Issuer) with respect to the Income Notes and the bank account in which such funds and the proceeds thereof are held); provided, further, that Collateral Interest Collections shall not include principal of any Collateral Debt Security representing capitalized interest after the date of purchase thereof by the Issuer but shall include the funds and other property (including, without limitation, the paid-up share capital of the Issuer) with respect to the Income Notes and the bank account in which such funds and the proceeds thereof are held).. Collateral Principal Collections means, with respect to any Due Period and the related Payment Date, all amounts received by the Issuer during such Due Period that do not constitute Collateral Interest Collections; provided, however, that Collateral Principal Collections shall include (A) principal of any Collateral Debt Security representing capitalized interest after the date of purchase thereof by the Issuer and (B) any Uninvested Proceeds which have not been invested on or prior to the Effective Date. Collateral Principal Collections Sub-Account has the meaning specified in Section 10.5(a)(1) hereof. Collateral Principal Payments means, with respect to any Due Period and the related Payment Date, Collateral Principal Collections other than Sale Proceeds and any amounts received in respect of Temporary Ramp-Up Securities and Eligible Investments. Collateral Quality Tests will be satisfied if, as of any Measurement Date, the Collateral Debt Securities comply, in the aggregate, with all of the requirements set forth below (collectively, the “Collateral Quality Tests”): (1)

the aggregate Principal Balance of all Collateral Debt Securities with an S&P Rating of below “BBB-” does not exceed the greater of (a) 30% of the CDS Principal Balance and (b) U.S.$120,000,000;

(2)

the aggregate Principal Balance of all Collateral Debt Securities with an S&P Rating of below “BB-” does not exceed the greater of (a) 14% of the CDS Principal Balance and (b) U.S.$56,000,000; 16

Processed and formatted by SEC Watch - Visit SECWatch.com

(3)

the aggregate Principal Balance of all Collateral Debt Securities that are PIK Bonds does not exceed 6.5% of the CDS Principal Balance;

(4)

the aggregate Principal Balance of all Collateral Debt Securities that are CMBS Securities does not exceed the greater of (a) 80% of the CDS Principal Balance and (b) U.S.$320,000,000; provided that (x) the aggregate Principal Balance of all Collateral Debt Securities that are CMBS Large Loan Securities does not exceed the greater of (a) 25% of the CDS Principal Balance and (b) U.S.$100,000,000, (y) the aggregate Principal Balance of all Collateral Debt Securities that are CMBS Credit Tenant Lease Securities does not exceed the greater of (a) 5% of the CDS Principal Balance and (b) U.S.$20,000,000, and (z) the aggregate Principal Balance of all Collateral Debt Securities that are CMBS Single Borrower Securities does not exceed the greater of (a) 14% of the CDS Principal Balance and (b) U.S.$56,000,000;

(5)

the aggregate Principal Balance of all Collateral Debt Securities that are REIT Debt Securities does not exceed the greater of (a) 25% of the CDS Principal Balance and (b) U.S.$100,000,000;

(6)

the aggregate Principal Balance of all Collateral Debt Securities that are Real Estate CDO Securities does not exceed the greater of (a) 6.5% of the CDS Principal Balance and (b) U.S.$26,000,000;

(7)

the aggregate Principal Balance of all Collateral Debt Securities that are Real Estate Interests does not exceed the greater of (a) 9% of the CDS Principal Balance and (b) U.S.$36,000,000;

(8)

with respect to the particular Issue of the Collateral Debt Security being acquired,

(9)

(i)

the aggregate Principal Balance of all Collateral Debt Securities that are part of the same Issue does not exceed the greater of (a) 4% of the CDS Principal Balance and (b) U.S.$16,000,000,

(ii)

the aggregate Principal Balance of all Collateral Debt Securities that are CMBS Securities Rated below BBB- by S&P and are part of the same Issue does not exceed the greater of (a) 3% CDS Principal Balance and (b) U.S.$12,000,000,

(iii)

the aggregate Principal Balance of all Collateral Debt Securities that are REIT Debt Securities issued by the same obligor does not exceed the greater of (a) 4% of the CDS Principal Balance and (b) U.S.$16,000,000,

(iv)

the aggregate Principal Balance of all Collateral Debt Securities that are Real Estate CDO Securities that are part of the same Issue does not exceed the greater of (a) 2.5% of the CDS Principal Balance and (b) U.S.$10,000,000 and

(v)

the aggregate Principal Balance of all Collateral Debt Securities that are Real Estate Interests that are part of the same Issue does not exceed the greater of (a) 4% of the CDS Principal Balance and (b) U.S.$16,000,000;

with respect to the servicer of the security being acquired, (a) the aggregate Principal Balance of all Collateral Debt Securities serviced by such servicer does not exceed the greater of (a) 20% of the CDS Principal Balance and (b) U.S.$80,000,000, except that the aggregate Principal Balance of all Collateral Debt Securities serviced by servicers rated “Below Average” by S&P, or if there is no servicer rating by S&P or Fitch, having long-term unsecured debt securities rated “BB” or 17

Processed and formatted by SEC Watch - Visit SECWatch.com

lower, shall not exceed the greater of (a) 5% of the CDS Principal Balance and (b) U.S.$20,000,000; (10)

the aggregate Principal Balance of all Collateral Debt Securities that mature beyond the Stated Maturity Date does not exceed 25% of the CDS Principal Balance;

(11)

the aggregate Principal Balance of all Fixed Rate Collateral Debt Securities does not exceed the greater of (a) 90% of the CDS Principal Balance and (b) U.S.$360,000,000;

(12)

the Fitch Weighted Average Rating Factor does not exceed 9.5;

(13)

(i) the Weighted Average Fixed Rate Coupon as of such date equals or exceeds 6.15% and (ii) the Weighted Average Spread as of such date equals or exceeds 1.87%;

(14)

the Weighted Average Life Test is satisfied;

(15)

the S&P CDO Monitor Test is satisfied;

(16)

the S&P Minimum Average Recovery Rate Test is satisfied;

(17)

the aggregate Principal Balance of all Collateral Debt Securities that provide for periodic payments of interest in Cash less frequently than monthly does not exceed the greater of (a) 32% of the CDS Principal Balance and (b) U.S.$128,000,000; and

(18)

the aggregate Principal Balance of all Collateral Debt Securities that are Deemed Floating Rate Collateral Debt Securities does not exceed 17.5% of the CDS Principal Balance;

provided that Temporary Ramp-Up Securities will be excluded from the calculation of the Collateral Quality Tests. Collateral Sub-Account means any sub-account established within an Account. Collateralization Event means, provided that no Substitution Event has occurred, any of the following events: (a) if the Hedge Ratings Determining Party’s short-term rating from Fitch is lower than “F1” or the long-term rating of the Hedge Ratings Determining Party from Fitch is withdrawn, suspended or downgraded below “A”, (b) if no short-term rating is available from Fitch, the long-term rating of the Hedge Ratings Determining Party from Fitch is withdrawn, suspended or downgraded below “A”, or (c) the short term rating of the Hedge Ratings Determining Party from S&P is lower than “A-1” or, if the Hedge Ratings Determining Party does not have a short term rating from S&P, the long term rating of such Hedge Ratings Determining Party is lower than “A+”. Collection Account means the Securities Account designated the “Collection Account” and established in the name of the Trustee pursuant to Section 10.5, including the Collateral Principal Collections Sub-Account and each CPP Sub-Account established therein. Collections means, with respect to any Payment Date, the sum of (i) the Collateral Interest Collections collected during the applicable Due Period and (ii) the Collateral Principal Collections collected during the applicable Due Period. Commercial Mortgage Backed Security means securities backed by obligations (including certificates of participations in obligations) that are principally secured by mortgages on real property or interests 18

Processed and formatted by SEC Watch - Visit SECWatch.com

therein having a multifamily or commercial use, such as regional malls, retail space, office buildings, warehouse or industrial properties, hotels, nursing homes and senior living centers. Commission means the United States Securities and Exchange Commission. Controlling Class means the Class A Notes voting as a single Class, so long as any Class A Notes are Outstanding, then the Class B Notes, so long as any Class B Notes are Outstanding, then the Class C Notes voting as a single Class, so long as any Class C Notes are Outstanding and then the Class D Notes, so long as any Class D Notes are Outstanding in each case, based on the then Aggregate Outstanding Amount thereof; provided that if any Coverage Test is not satisfied on a Calculation Date (i) the “Controlling Class” shall mean the Class A-1 Notes, so long as any Class A-1 Notes are Outstanding, then, the Class A-2 Notes, so long as any Class A-2 Notes are Outstanding, then, the Class B Notes, so long as any Class B Notes are Outstanding, then the Class C-1 Notes, so long as any Class C-1 Notes are Outstanding, and then the Class C-2 Notes, as long as any Class C-2 Notes are Outstanding, in each case, based on the aggregate principal amount thereof and (ii) on any Calculation Date thereafter, the “Controlling Class” shall remain as specified in (i) above notwithstanding any subsequent satisfaction of the failed Coverage Test. Controlling Person any other person (other than a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of the Issuer, a person who provides investment advice for a fee (direct or indirect) with respect to the assets of the Issuer, or any “affiliate” (within the meaning of 29 C.F.R. Section 2510.3-101(f)(3)) of any such person. Corporate Services Agreement means that certain Corporate Services Agreement, dated as of March 10, 2005, as the same may be amended or supplemented from time to time, between the Issuer and the Administrator. Corporate Trust Office means the designated corporate trust office of the Trustee, currently located at: (i) for note transfer purposes, Wells Fargo Center, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 66749, Attention: CDO Trust Services — N-Star Real Estate CDO III and (ii) for all other purposes, 9062 Old Annapolis Road, Columbia, Maryland 21045. Attention: CDO Trust Services — N-Star Real Estate CDO III, telephone number 410-884-2000, fax number 410-715-3748, or such other address as the Trustee may designate from time to time by notice to the Rated Noteholders, the Income Noteholders, the Collateral Advisor and the Co-Issuers or the principal corporate trust office of any successor Trustee. Coverage Tests means the Class A Coverage Tests, the Class B Coverage Tests, the Class C Coverage Tests and the Class D Coverage Tests. CPP Asset Type means REIT Debt Securities that are Fixed Rate Securities, REIT Debt Securities that are Floating Rate Securities, CMBS Securities that are Fixed Rate Securities, CMBS Securities that are Floating Rate Securities, Real Estate CDO Securities that are Fixed Rate Securities and Real Estate CDO Securities that are Floating Rate Securities. CPP Sub-Account has the meaning specified in Section 10.5(b). Credit Risk Event means, with respect to any Collateral Debt Security, (i) if a Note Downgrade Event shall have occurred and be continuing, (a) such Collateral Debt Security has been put on watch for possible downgrade, or has been downgraded, by any Rating Agency or (b) such Collateral Debt Security has experienced an increase in credit spread of 10% or more (due to credit related reasons as determined by the Collateral Advisor in its reasonable business judgment) compared to the credit spread at which 19

Processed and formatted by SEC Watch - Visit SECWatch.com

such Collateral Debt Security was purchased by the Issuer, determined by reference to an applicable index selected by the Collateral Advisor or (ii) if no Note Downgrade Event shall have occurred and be continuing, there has been an event or circumstance that constitutes a change in the condition of the issuer of such Collateral Debt Security (or of available information with respect to such issuer) that evidences, in the good faith judgment of the Collateral Advisor, (a) a significant risk of such Collateral Debt Security materially declining in credit quality, or (b) a significant risk, with a lapse of time, of such Collateral Debt Security becoming a Defaulted Security or a Written Down Security. Credit Risk Security means any Collateral Debt Security with respect to which there shall have occurred a Credit Risk Event. Credit Support Annex means an ISDA Credit Support Annex to a Hedge Agreement, if any. Current Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Debt Securities and the proceeds of the disposition thereof held as Cash and (b) Eligible Investments purchased with proceeds of the disposition of Pledged Collateral Debt Securities, existing immediately prior to the sale, maturity or other disposition of a Pledged Collateral Debt Security or immediately prior to the acquisition of a Pledged Collateral Debt Security, as the case may be. Custodian has the meaning specified in Section 3.3(a). Daily Official List means the Daily Official List of the Irish Stock Exchange. Deemed Floating Asset Hedge means, with respect to a Fixed Rate Collateral Debt Security, an interest rate swap having (i) a notional schedule equal to the Principal Balance as it is reduced by expected amortization of such Fixed Rate Collateral Debt Security over time and (ii) payment dates identical to the Payment Dates of the Issuer under the Indenture; provided that, (w) at the time of entry into the Deemed Floating Asset Hedge, (i) the expected principal payments on the Fixed Rate Collateral Debt Security comprising a Deemed Floating Rate Collateral Debt Security will not extend beyond 10 years after the effective date thereof and (ii) the scheduled notional amount of such Deemed Floating Asset Hedge at any time is equal to the expected principal amount of the related Fixed Rate Collateral Debt Security (as calculated at such time), (x) the Rating Agencies and the Trustee are notified prior to the Issuer’s entry into a Deemed Floating Asset Hedge, and each will be provided with the identity of the proposed hedge counterparty and copies of the hedge documentation and notional schedule, (y) such Deemed Floating Asset Hedge will require Rating Agency Confirmation from S&P to the extent the applicable master agreement or schedule attached thereto is not a hedge agreement with respect to which the documentation thereof conforms in all material respects to a form in respect of which Rating Agency Confirmation was previously obtained by the Issuer and (z) such Deemed Floating Asset Hedge is priced at then-current market rates. Deemed Floating Rate Collateral Debt Security means a Fixed Rate Collateral Debt Security the interest rate of which is hedged into a Floating Rate Collateral Debt Security using a Deemed Floating Asset Hedge; provided that at the time of entry into the Deemed Floating Asset Hedge the Average Life of such Deemed Floating Rate Collateral Debt Security would not increase or decrease by more than one year from its expected average life if it were to prepay at either 50% or 150% of its pricing speed. Deemed Floating Spread means the difference between the stated rate at which interest accrues on each Fixed Rate Collateral Debt Security that comprises a Deemed Floating Rate Collateral Debt Security (excluding all Defaulted Securities and Deferred Interest PIK Bonds) and the fixed rate that the Issuer agrees to pay on the Deemed Floating Asset Hedge at the time such swap is executed. 20

Default means any Event of Default or any occurrence that, with notice or the lapse of time or both, would become an Event of Default. Defaulted Interest means any interest due and payable in respect of any Class A Note or, if no Class A Notes are Outstanding, in respect of any Class B Note or, if no Class B Notes are Outstanding, in respect of any Class C-1 Note or, if no Class C-1 Notes are Outstanding, in respect of any Class C-2 Note, or if no Class C-2 Notes are Outstanding, in respect of any Class D Note and any interest on such Defaulted Interest that (in each case) is not punctually paid or duly provided for on the applicable Payment Date (including the applicable Stated Maturity Date) of the applicable Rated Note. Defaulted Securities Amount means the sum, with respect to each Defaulted Security in the Collateral, of the lesser of (i) the product of the Principal Balance of such Defaulted Security and the Applicable Recovery Rate of such Defaulted Security and (ii) the product of the Principal Balance of such Defaulted Security and the Market Value of such Defaulted Security. Defaulted Security means any Collateral Debt Security or any other security included in the Collateral: (i)

as to which (a) the issuer thereof has defaulted in the payment of principal or interest (without giving effect to any applicable notice or grace period or waiver, unless the Collateral Advisor certifies to the Trustee that in the Collateral Advisor’s judgment such default of up to the lesser of (1) three (3) Business Days and (2) the grace period provided for in the Underlying Instruments is due to noncredit and non-fraud related reasons and the Collateral Advisor has so certified in writing to the Trustee or (b) pursuant to its Underlying Instruments, there has occurred any default or event of default which entitles the holders thereof, with notice or passage of time or both, to accelerate the maturity (whether by mandatory prepayments, mandatory redemption or otherwise) of all or a portion of the outstanding principal amount of such security, unless (1) in the case of a default or event of default consisting of a failure of

Processed and formatted by SEC Watch - Visit SECWatch.com

the obligor on such security to make required interest payments and/or scheduled principal payments, such security has resumed current payments of interest and scheduled principal in cash (including all past due interest and scheduled principal) and, in the Collateral Advisor’s judgment, will continue to make such current payments of interest in cash (provided that no restructuring has been effected) or (2) in the case of any other default or event of default, such default or event of default is no longer continuing (provided that no event of default has been waived with respect to (A) a default in the payment of principal or interest or (B) insolvency in the event that all outstanding amounts have not been paid) and such security satisfies the criteria for inclusion of securities in the definition of “Collateral Debt Security”; (ii)

that ranks pari passu with or subordinate to any other indebtedness for borrowed money owing by the issuer of such security, if any (for purposes hereof, “Other Indebtedness”; provided, however, that such Other Indebtedness of such issuer will not include series of such Other Indebtedness that may be issued or owing by a separate special purpose entity and is not guaranteed by the issuer) if such issuer had defaulted in the payment of principal or interest in respect of such Other Indebtedness (without giving effect to any applicable notice or grace period or waiver, unless the Collateral Advisor certifies to the Trustee that in the Collateral Advisor’s judgment such default of up to the lesser of (a) three (3) Business Days and (b) the grace period provided for in the Underlying Instruments is due to non-credit and non-fraud related reasons and the Collateral Advisor has so certified in writing to the Trustee), unless, in the case of a default or event of default consisting of a failure of the obligor on such security to make required interest payments and/or scheduled principal payments, such Other Indebtedness has resumed current payments of interest and scheduled principal (including all due interest and scheduled principal) in cash (whether or not any waiver or restructuring has been effected) and, in the Collateral 21

Processed and formatted by SEC Watch - Visit SECWatch.com

Advisor’s judgment, will continue to make such current payments of interest and scheduled principal in cash; provided that a security shall be considered a Defaulted Security pursuant to this clause (ii) only if the Collateral Advisor knows, after due inquiry as required pursuant to the Collateral Advisory Agreement, that the issuer thereof is (or is reasonably expected by the Collateral Advisor to be, as of the next scheduled payment distribution date) in default (without giving effect to any applicable grace period or waiver) as to payment of principal and/or interest on another obligation (and such default has not been cured or waived) which is senior or pari passu in right of payment to such Collateral Debt Security; (iii)

with respect to which any bankruptcy, insolvency or receivership proceeding has been initiated in respect of the issuer of such Collateral Debt Security, or there has been proposed or effected any distressed exchange or other debt restructuring where the issuer of such Collateral Debt Security has offered the debt holders a new security or package of securities that, in the judgment of the Collateral Advisor either (a) amounts to a diminished financial obligation or (b) has the purpose of helping the issuer to avoid default. For the avoidance of doubt in applying and interpreting this definition of Defaulted Security, the Collateral Advisor shall be deemed to have knowledge of all information that Authorized Officers of the Collateral Advisor have actually received, and shall be responsible under the Collateral Advisory Agreement for obtaining and reviewing information available to it either in its capacity as an investment manager of national standing or as holder of such Collateral Debt Security;

(iv)

if such Collateral Debt Security has been rated “CC” or lower by S&P or Fitch or if S&P has withdrawn its rating and has not provided the Issuer with a shadow rating;

(v)

which is a Written Down Security unless S&P has affirmed its rating of such Written Down Security.

Defaulting Party has the meaning given to such term in the standard form 1992 ISDA Master Agreement (Multicurrency-Cross Border). Deferred Interest PIK Bond means a PIK Bond with respect to which interest has been deferred or capitalized or does not pay interest when scheduled (other than a Defaulted Security) for each consecutive payment date occurring over a period of the lesser of (i) six months or (ii) two consecutive payment dates, but only until such time as payment of interest on such PIK Bond has resumed and all capitalized and deferred interest and any interest thereon has been paid in cash in accordance with the terms of the Underlying Instruments. Deferred Interest PIK Bond Amount means, with respect to each Deferred Interest PIK Bond in the Collateral, the lesser of (i) the product of the Principal Balance of such Deferred Interest PIK Bond and the Applicable Recovery Rate of such Deferred Interest PIK Bond and (ii) the product of the Principal Balance of such Deferred Interest PIK Bond and the Market Value of such Deferred Interest PIK Bond. Definitive Class A-C Note has the meaning specified in Section 2.1(c). Definitive Class D Note has the meaning specified in Section 2.1(d). Definitive Class D Note Transfer Certificate has the meaning specified in Section 2.4(c)(1) Definitive Income Notes means Income Notes issued in the form of physical certificates in definitive, fully registered form. 22

Processed and formatted by SEC Watch - Visit SECWatch.com

Depositary means, with respect to the Rated Notes issued in the form of one or more Global Notes, the Person designated as Depositary pursuant to Section 2.2(e), or any successor thereto, appointed pursuant to the applicable provisions of this Indenture. Depositary Participant means a broker, dealer, bank or other financial institution or other Person for whom from time to time the Depositary effects book-entry transfers and pledges of notes deposited with the Depositary. Distribution means any payment of principal, interest or fee or any dividend or premium payment made on, or any other distribution in respect of, an obligation or security. Dollar or U.S.$ means currency of the United States as at the time shall be legal tender for all debts, public and private. Double B Excess Percentage means, on any Measurement Date, the greater of (a) zero; and (b) (i) the aggregate Principal Balance of all Collateral Debt Securities with an S&P Rating lower than BBB- and higher than B+ (expressed as a percentage of the CDS Principal Balance) minus (ii) 18%; Double B Principal Coverage Adjustment Percentage means, on any Measurement Date, the greater of (a) zero; and (b) (i) the Double B Excess Percentage minus (ii) 5%; DTC means The Depository Trust Company, a New York corporation, and its nominees and their respective successors. Due Date means each date on which a Distribution is due on a Pledged Security. Due Period means, with respect to each Payment Date, the period beginning on the day following the last day of the preceding Due Period relating to the preceding Payment Date (or, in the case of the Due Period that is applicable to the first Payment Date, beginning on the Closing Date) and ending at the close of business on the fourth (4th) Business Day preceding such Payment Date. Effective Date means the date that is the earliest of (i) the 90th day following the Closing Date, (ii) the date on which the Issuer has purchased Collateral Debt Securities, excluding Temporary Ramp-Up Securities, having an aggregate par amount of U.S.$400,000,000 or (iii) such earlier date (if any) that is designated by the Collateral Advisor by notice to the Trustee under the Indenture; provided that the Collateral Advisor has received Rating Agency Confirmation on such date; provided, further, that in the event that such day does not fall on a Business Day, the Effective Date shall be the next succeeding Business Day. Eligibility Criteria has the meaning specified in Section 12.2. Eligible Investments means any U.S. dollar denominated investment that, at the time it is delivered to the Trustee, is one or more of the following obligations or securities, including, without limitation, those investments for which the Trustee or an Affiliate of the Trustee provides services: (i)

cash;

(ii)

direct Registered obligations of, and Registered obligations the timely payment of principal of and interest on which is fully and expressly guaranteed by, the United States of America, or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America; 23

Processed and formatted by SEC Watch - Visit SECWatch.com

(iii)

demand and time deposits in, interest bearing trust accounts and certificates of deposit of, bankers’ acceptances issued by, or federal funds sold by any depository institution or trust company (including the Trustee) incorporated under the laws of the United States of America or any state thereof and subject to the supervision and examination by federal and/or state banking authorities so long as the commercial paper and/or debt obligations of such depository institution or trust company (or, in the case of the principal depository institution in a holding company system, the commercial paper or debt obligations of such holding company) at the time of such investment or contractual commitment providing for such investment have a credit rating of: (a)

in the case of long-term debt obligations, not less than “AA+” by S&P; or

(b)

in the case of commercial paper and short-term debt obligations including time deposits, “A-1” by S&P (provided that, in the case of commercial paper and short-term debt obligations with a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment a long-term credit rating of not less than “AA+” by S&P);

(iv)

Registered securities other than mortgage-backed securities bearing interest or sold at a discount issued by any corporation under the laws of the United States of America or any state thereof that have a credit rating of “AA+” by S&P at the time of such investment or contractual commitment providing for such investment;

(v)

unleveraged repurchase obligations (if treated as debt for tax purposes by the issuer) with respect to any security described in clause (ii) above, entered into with a depository institution or trust company (acting as principal) described in clause (iii) or entered into with broker-dealers registered with the Commission (acting as principal) whose short-term debt has a credit rating of “A-1+” by S&P at the time of such investment in the case of any repurchase obligation for a security having a maturity not more than 183 days from the date of its issuance or whose long-term debt has a credit rating of at least “AA+” by S&P at the time of such investment in the case of any repurchase obligation for a security having a maturity more than 183 days from the date of its issuance;

(vi)

commercial paper or other short-term obligations having at the time of such investment a credit rating of “A-1+” by S&P that are registered and are either bearing interest or are sold at a discount from the face amount thereof and that have a maturity of not more than 183 days from its date of issuance; provided that in the case of commercial paper with a maturity of longer than 91 days, the issuer of such commercial paper (or, in the case of a principal depository institution in a holding company system, the holding company of such system), if rated by the Rating Agencies, must have at the time of such investment a long-term credit rating of at least “AA+” by S&P;

(vii)

money market funds with respect to any investments described in clauses (ii) through (vi) above having, at the time of such investment, a credit rating of not less than “AAA/AAAm/AAAm-G” by S&P (if such funds are rated by S&P), respectively (including those for which the Trustee is investment manager or advisor), provided that such fund or vehicle is formed and has its principal office outside the United States; and

(viii)

any other investments approved in writing by the Rating Agencies;

provided that (a) Eligible Investments purchased with funds in the Collection Account will be held until maturity except as otherwise specifically provided herein and will include only such obligations or securities as mature no later than the Business Day prior to the Payment Date next succeeding the date of 24

Processed and formatted by SEC Watch - Visit SECWatch.com

investment in such obligations or securities, unless such Eligible Investments are investments of the type described in clause (i) or (iii) above, in which event such Eligible Investments may mature on such Payment Date and (b) none of the foregoing obligations or securities will constitute Eligible Investments if all, or substantially all, of the remaining amounts payable thereunder will consist of interest and not principal payments, if such security is purchased at a price in excess of 100% of par, if such security is subject to substantial non-credit related risk, as determined by the Collateral Advisor in its judgment, if any income from or proceeds of disposition of the obligation or security is or will be subject to deduction or withholding for or on account of any withholding or similar tax or the acquisition (including the manner of acquisition), ownership, enforcement or disposition of the obligation or security will subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation, if such security has an assigned rating with an “r” or “t” subscript, if such security is a mortgage-backed security or if such security is subject to an Offer. Eligible SPV Jurisdiction means Bahamas, Bermuda, the Cayman Islands, the Channel Islands, the Netherlands Antilles, Luxembourg or any other similar jurisdiction (so long as Rating Agency Confirmation is obtained in connection with the inclusion of such other jurisdiction) generally imposing either no or nominal taxes on the income of companies organized under the laws of such jurisdiction. Emerging Market Issuer means a sovereign or non-sovereign issuer located in a country that is in Latin America, Asia, Africa, Eastern Europe or the Caribbean or in a country the dollar-denominated sovereign debt obligations of which are rated lower than “AA” by S&P and lower than “AA” by Fitch; provided that an issuer of Asset-Backed Securities located in any Eligible SPV Jurisdiction shall not be an Emerging Market Issuer for purposes hereof if the underlying collateral of such Asset-Backed Securities consists solely of obligations of obligors located in the United States and Qualifying Foreign Obligors. Entitlement Holder has the meaning specified in Section 8-102(a)(7) of the UCC. Entitlement Order has the meaning specified in Section 8-102(a)(8) of the UCC. Equity Security means any security that does not entitle the holder thereof to receive periodic payments of interest and one or more installments of principal acquired by the Issuer as a result of the exercise or conversion of Collateral Debt Securities, in conjunction with the purchase of Collateral Debt Securities or in exchange for a Collateral Debt Security. ERISA means the U.S. Employee Retirement Income Security Act of 1974, as amended. Euroclear means Euroclear Bank S.A/N.V., as operator of the Euroclear system. Event of Default has the meaning specified in Section 5.1. Excepted Property means the U.S.$1,000 of capital contributed to the Issuer in respect of the Issuer’s Ordinary Shares in accordance with the Articles and U.S.$1,000 representing a profit fee to the Issuer. Exchange Act means the United States Securities Exchange Act of 1934, as amended. Expense Reserve Account means the Securities Account designated the “Expense Reserve Account” and established in the name of the Trustee pursuant to Section 10.6. Fee Basis Amount means an amount equal, for any Payment Date, to the average of the aggregate CDS Principal Balance (excluding the aggregate Principal Balance of Defaulted Securities) on the first day of 25

Processed and formatted by SEC Watch - Visit SECWatch.com

the related Due Period and the aggregate CDS Principal Balance (excluding the aggregate Principal Balance of Defaulted Securities) on the last day of such Due Period. Financial Asset has the meaning specified in Section 8-102(a)(9) of the UCC. Financing Statement means a financing statement relating to the Collateral naming the Issuer as debtor and the Trustee on behalf of the Secured Parties as secured party. Fitch means Fitch, Inc. and any successor or successors thereto. Fitch Industry Classification Group means any of the Fitch industrial classification groups as set forth on Schedule I and any additional classification groups established by Fitch with respect to the Collateral Debt Securities and provided, in each case, by the Collateral Advisor or Fitch to the Trustee. Fitch Rating with respect to any Collateral Debt Security, for determining the Fitch Rating as of any date of determination: (i)

if such Collateral Debt Security is rated by Fitch, the Fitch Rating shall be such rating as published in any publicly available source;

(ii)

if such Collateral Debt Security is not rated by Fitch, or the Fitch Rating cannot be determined by the method in clause (i) above, and a rating is publicly available from both S&P and Moody’s, the Fitch Rating shall be the lower of such ratings; and if a rating is publicly available from only one of S&P and Moody’s, the Fitch Rating shall be the equivalent of such rating by S&P or Moody’s, as the case may be; and

(iii)

in all other circumstances, the Fitch Rating shall be the private rating assigned by Fitch upon request of the Collateral Advisor;

provided that (a) if such Collateral Debt Security has been put on rating watch negative for possible downgrade by any Rating Agency, then the rating used to determine the Fitch Rating under either of clauses (i) or (ii) above shall be one (1) rating subcategory below such rating by that Rating Agency, (b) if such Collateral Debt Security has been put on rating watch positive for possible upgrade by any Rating Agency, then the rating used to determine the Fitch Rating under either of clauses (i) or (ii) above shall be one rating subcategory above such rating by that Rating Agency and (c) notwithstanding the rating definition described above, Fitch reserves the right to issue a rating estimate for any Collateral Debt Security at any time. Fitch Rating Factor means, for the purpose of computing the Fitch Weighted Average Rating Factor, with respect to any Collateral Debt Security or Eligible Investment on any relevant date, the number set forth in the table below opposite the Fitch Rating of such Collateral Debt Security or Eligible Investment: 26

Processed and formatted by SEC Watch - Visit SECWatch.com Fitch Ratin g

Fitch Ratin g Factor

Fitch Ratin g

Fitch Ratin g Factor

AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+

.019 .057 .089 1.15 1.65 1.85 2.44 3.13 3.74 7.26 10.18

BB BBB+ B BCCC+ CCC CC C DDD-D

13.53 18.46 22.84 27.67 34.98 43.36 48.52 77.00 95.00 100.00

Fitch Weighted Average Rating Factor means the number determined on any Calculation Date by dividing (i) the summation of the series of products obtained (a) for any Collateral Debt Security that is not a Defaulted Security or Deferred Interest PIK Bond, by multiplying (1) the Principal Balance on such Calculation Date of each such Collateral Debt Security by (2) its respective Fitch Rating Factor on such Calculation Date and (b) for any Defaulted Security or Deferred Interest PIK Bond, by multiplying (1) the Applicable Recovery Rate for such Defaulted Security or Deferred Interest PIK Bond by (2) the Principal Balance on such Calculation Date of each such Defaulted Security or Deferred Interest PIK Bond by (3) its respective Fitch Rating Factor on such Calculation Date by (ii) the sum of (a) the aggregate Principal Balance on such Calculation Date of all Collateral Debt Securities and Eligible Investments that are not Defaulted Securities or Deferred Interest PIK Bonds, plus (b) the summation of the series of products obtained by multiplying (1) the Applicable Recovery Rate for each Defaulted Security or Deferred Interest PIK Bond by (2) the Principal Balance on such Calculation Date of such Defaulted Security or Deferred Interest PIK Bond, and rounding the result up to the nearest whole number. Five Percent Limit means the maximum cumulative amount that is allowed to be reinvested in Substitute Collateral Debt Securities with Sale Proceeds received in the manner specified in Section 12.1(b) and which amount cannot exceed 5% of the CDS Principal Balance as of the Effective Date Fixed Rate Collateral Debt Security means any Collateral Debt Security which bears a fixed rate of interest. Fixed Rate 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 zero and the excess, if any, of the Weighted Average Fixed Rate Coupon for such Measurement Date over 6.15%, and (b) the aggregate Principal Balance of all Collateral Debt Securities that are Fixed Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities, Deferred Interest PIK Bonds and Deemed Floating Rate Collateral Debt Securities) and the denominator of which is the aggregate Principal Balance of all Collateral Debt Securities that are Floating Rate Collateral Debt Securities or Deemed Floating Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities and Deferred Interest PIK Bonds). Fixed Rate Notes means, collectively, the Class A-2B Fixed Rate Senior Notes, the Class C-1B Fixed Rate Junior Subordinate Notes, the Class C-2B Fixed Rate Junior Subordinate Notes and the Class D Notes. 27

Processed and formatted by SEC Watch - Visit SECWatch.com

Floating Rate Collateral Debt Security means any Collateral Debt Security that bears interest based upon a floating rate index. Floating Rate Notes means, collectively, the Class A-1 Notes, the Class A-2A Notes, the Class B Notes, the Class C-lA Notes, and the Class C-2A Notes. Form-Approved Hedge Agreement means a Hedge Agreement relating to a specific Hedge Counterparty with respect to which (a) the related Collateral Debt Security could be purchased by the Issuer without any required action by the Rating Agencies and (b) the documentation of which conforms in all material respects to a form for such Hedge Counterparty which does not require Rating Agency Confirmation (as certified to the Trustee by the Collateral Advisor, following receipt of confirmation by the Collateral Advisor from the Hedge Counterparty and the Rating Agencies); provided that (i) such Form-Approved Hedge Agreement shall not provide for any upfront payments to be made to any Hedge Counterparty (other than the Initial Hedge Counterparty), (ii) any revised Form-Approved Hedge Agreement with respect to a particular Hedge Counterparty shall be approved by each of the Rating Agencies at least 10 days prior to the initial use thereof, (iii) any Rating Agency may withdraw its consent to the use of a particular Form-Approved Hedge Agreement by written notice to the Trustee, the Collateral Advisor and the relevant Hedge Counterparty (provided that such withdrawal of consent shall not affect any existing Hedge Agreement entered into with such Hedge Counterparty) and (iv) the Issuer (or the Collateral Advisor on its behalf) shall deliver to the Trustee and each Rating Agency a copy of each Form-Approved Hedge Agreement specifying the Hedge Counterparty to which it relates upon receipt of Rating Agency Confirmation with respect thereto, and the Trustee’s records (when taken together with any correspondence received from the Rating Agencies pursuant to clause (ii)) shall be conclusive evidence of such form. GAAP has the meaning specified in Section 6.3(k). Global Notes means the Rule 144A Global Notes and the Regulation S Global Notes. Grant means to grant, bargain, sell, warrant, alienate, remise, demise, release, convey, assign, transfer, mortgage, pledge, create and grant a security interest in and right of set-off against, deposit, set over and confirm. A Grant of the Pledged Securities, or of any other instrument, shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate continuing right to claim for, collect, receive and receipt for principal, interest and fee payments in respect of the Pledged Securities or such other instruments, and all other amounts payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto. Hedge Agreement means the interest rate protection agreement, as amended from time to time, together with any replacement hedge agreement on substantially identical terms (or that otherwise satisfies the conditions of Section 16.1(d)), entered into pursuant to Section 16.1 or a Deemed Floating Asset Hedge. The Hedge Agreement shall provide that any amount payable to the Hedge Counterparty thereunder shall be subject to the Priority of Payments and that any amount payable upon the early termination or liquidation thereof shall be payable only on a Payment Date in accordance with the Priority of Payments. Hedge Counterparty means (a) with respect to the initial Hedge Agreement entered into on the Closing Date, the Initial Hedge Counterparty, (b) any hedge counterparty (or any permitted assignee or successor) under a Hedge Agreement that satisfies the Hedge Counterparty Ratings Requirement and (c) any substitute or additional parties therefore appointed in accordance with Section 16.1(d) or Section 16.1(e). 28

Processed and formatted by SEC Watch - Visit SECWatch.com

Hedge Counterparty Collateral Account means each Securities Account designated the “Hedge Counterparty Collateral Account” and established in the name of the Trustee pursuant to Section 16.1(f). Hedge Counterparty Ratings Requirement means, with respect to any Hedge Ratings Determining Party: (a) either (i) both (x) the short-term rating of such Hedge Ratings Determining Party by Fitch is not lower than “Fl” and (y) the long-term rating of such Hedge Ratings Determining Party by Fitch is not withdrawn, suspended or downgraded below “A” or is “A” and has been placed and is not remaining on credit watch with negative implications or (ii) if such Hedge Ratings Determining Party has no short-term rating from Fitch, the long-term rating by Fitch of such Hedge Ratings Determining Party is at least “A” and (b) either (i) the short-term rating of such Hedge Ratings Determining Party is not lower than “A-1” by S&P or (ii) if such Hedge Ratings Determining Party does not have a short-term rating from S&P, the longterm rating of such Hedge Ratings Determining Party by S&P is not lower than “A+”. Hedge Payment Amount means, with respect to the Hedge Agreement and any Payment Date, the amount, if any, then payable by the Issuer to the Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement. Hedge Ratings Determining Party means (a) unless clause (b) applies with respect to the Hedge Agreement, the Hedge Counterparty or any transferee thereof or (b) any Affiliate of the Hedge Counterparty or any transferee thereof that unconditionally and absolutely guarantees (with the form of such guarantee meeting S&P’s then-current published criteria with respect to guarantees) the obligations of the Hedge Counterparty or such transferee, as the case may be, under the Hedge Agreement. For the purpose of this definition, no direct or indirect recourse against one or more shareholders of the Hedge Counterparty or any such transferee (or against any Person in control of, or controlled by, or under common control with, any such shareholder) shall be deemed to constitute a guarantee, security or support of the obligations of the Hedge Counterparty or any such transferee. Hedge Receipt Amount means, with respect to the Hedge Agreement and any Payment Date, the amount, if any, then payable to the Issuer by the Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement. Highest Auction Price means, in connection with a Redemption, the bid or bids for the Collateral Debt Securities resulting in the highest auction price of one or more Subpools of Collateral Debt Securities. Holder means (i) with respect to any Rated Note, any Rated Noteholder and (ii) with respect to any Income Note, any Income Noteholder, as the context may require. Income Note Distribution Account means the account designated the “Income Note Distribution Account” and established by the Income Note Paying Agent in the name of the Income Note Paying Agent for the benefit of the Issuer pursuant to the Income Note Paying Agency Agreement. Income Note Excess Funds means all remaining Collateral Interest Collections and Collateral Principal Collections as set forth in Section 11.1(a)(24) and 11.1(b)(18). Income Note Paying Agency Agreement means that certain Income Note Paying Agency Agreement, dated as of March 10, 2005, as the same may be amended or supplemented from time to time, among the Issuer, the Income Note Paying Agent and the Income Note Registrar. Income Note Paying Agent means Wells Fargo Bank, National Association, and any successors or assigns in its capacity as Income Note Paying Agent under the Income Note Paying Agency Agreement. 29

Processed and formatted by SEC Watch - Visit SECWatch.com

Income Note Paying Agent Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by, or otherwise owing to, the Income Note Paying Agent during the preceding Due Period in accordance with the Income Note Paying Agency Agreement. Income Note Paying Agent Fee means, with respect to any Payment Date, the fee payable to the Income Note Paying Agent in an aggregate amount equal to U.S.$10,000 per annum. Income Note Redemption Approval Condition means, in connection with a Tax Redemption at the direction of the Controlling Class and an Auction Call Redemption, the requirement that, unless and to the extent the Holders of 662/3% of the aggregate principal amount of the Outstanding Income Notes have waived payment in full of the aggregate principal amount of the Income Notes, the Income Noteholders receive in connection with such Tax Redemption or Auction Call Redemption an amount equal to (x) the Income Notes Stated Amount minus (y) the aggregate amount of all cash distributions on the Income Notes (whether in respect of distributions or redemption payments made to the Income Note Paying Agent for distribution to the Income Noteholders) on or prior to the relevant Auction Date. Income Note Register means, with respect to the Income Notes, the Income Note Register maintained by the Income Note Registrar. Income Note Registrar means Wells Fargo Bank, National Association, and any successors or assigns in its capacity as Income Note Registrar under the Income Note Paying Agency Agreement. Income Noteholder means, with respect to any Income Note, the Person in whose name such Income Note is registered in the Income Note Register. Income Notes means the U.S.$23,000,000 Income Notes Due 2040. Income Notes Stated Amount means U.S.$23,000,000. Indenture means this instrument and, if from time to time supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, as so supplemented or amended. Independent means, as to any Person, any other Person (including, in the case of an accountant, or lawyer, a firm of accountants or lawyers and any member thereof) who (i) does not have and is not committed to acquire any material direct or any material indirect financial interest in such Person or in any Affiliate of such Person, (ii) is not connected with such Person as an Officer, employee, promoter, underwriter, voting trustee, partner, director or Person performing similar functions and (iii) if required to deliver an opinion or certificate to the Trustee pursuant to this Indenture, states in such opinion or certificate that the signer has read this definition and that the signer is Independent within the meaning hereof. “Independent” when used with respect to any accountant may include an accountant who audits the books of such Person if in addition to satisfying the criteria set forth above the accountant is independent with respect to such Person within the meaning of Rule 101 of the Code of Ethics of the American Institute of Certified Public Accountants. Initial Hedge Counterparty means Bank of America, N.A. under the initial Hedge Agreement and any of its successors, assigns or replacements under the initial Hedge Agreement appointed in accordance with the terms of this Indenture and the initial Hedge Agreement. Initial Payment Date means the Payment Date occurring in July, 2005. 30

Initial Purchasers means Citibank Global Markets Inc. and Banc of America Securities LLC, each as an initial purchaser of the Rated Notes. Instrument has the meaning specified in Section 9-102(a)(47) of the UCC. Interest Coverage Amount means, as of any Measurement Date, an amount equal to (i) the amount received or scheduled to be received as Collateral Interest Collections during the related Due Period, less (ii) the amounts scheduled to be paid on the related Payment Date pursuant to Section 11.1(a)(1) through (3) and (to the extent not covered by Section 11.1(a)(1) through (3)) Section 11.1(b)(1) and, for purposes of calculating the Class B Interest Coverage Ratio, the Class C Interest Coverage Ratio and Class D Interest Coverage Ratio only, any amounts scheduled to be paid to the Interest Reserve Account on the related Payment Date pursuant to Section 11.1(a)(7); provided that (a) following the date on which a Collateral Debt Security becomes a Defaulted Security, scheduled Collateral Interest Collections shall not include any amount scheduled to be received on Defaulted Securities or any amount scheduled to be received on securities that are currently deferring interest until (1) such amounts are actually received in Cash or (2) the cumulative aggregate amounts actually received on a Defaulted Security exceed the Principal Balance of such Defaulted Security, (b) the expected interest income on Floating Rate Collateral Debt Securities and Eligible Investments shall be calculated using the then-current interest rate applicable thereto and (c) with respect to any Written Down Security, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount. Interest Coverage Tests means the Class A Interest Coverage Test, the Class B Interest Coverage Test, the Class C Interest Coverage Test and the Class D Interest Coverage Test.

Processed and formatted by SEC Watch - Visit SECWatch.com

Interest Only Security means any security that by its terms provides for periodic payments of interest and does not provide for the repayment of a stated principal amount. Interest Period means (i) with respect to the Initial Payment Date, the period from and including the Closing Date to but excluding the Initial Payment Date and (ii) thereafter with respect to each Payment Date, the period beginning on the first day following the end of the preceding Interest Period and ending on (and including) the day before the next Payment Date. Interest Reserve Account means the account established by the Trustee, held in the name of the Trustee for the benefit and on behalf of the Secured Parties and into which the Trustee will deposit, on each Payment Date, the Interest Reserve Amount, if any, in accordance with the Priority of Payments. Interest Reserve Amount means, as of any Calculation Date, the sum of (i) the aggregate Quarterly Pay Security Interest Reserve Amounts and (ii) the aggregate amount of Semi-Annual Pay Security Interest Reserve Amounts. Investment Advisers Act means the United States Investment Advisers Act of 1940, as amended. Investment Company Act means the U.S. Investment Company Act of 1940, as amended, and the rules thereunder. Irish Listing Agent means NCB Stockbrokers Limited. Irish Paying Agent means NCB Stockbrokers Limited. Issue means Collateral Debt Securities issued by the same issuer secured by the same collateral pool. 31

Processed and formatted by SEC Watch - Visit SECWatch.com

Issuer means N-Star Real Estate CDO III Ltd., an exempted company incorporated and existing under the law of the Cayman Islands, unless a successor Person shall have become the Issuer pursuant to the applicable provisions of this Indenture, and thereafter “Issuer” shall mean such successor Person. Issuer Order and Issuer Request mean, respectively, a written order or a written request, which may be in the form of a standing order or request in each case dated and signed in the name of the Issuer (or, as expressly provided herein, the Collateral Advisor on its behalf) by an Authorized Officer of the Issuer (or, as expressly provided herein, the Collateral Advisor) and (if appropriate) the Co-Issuer, as the context may require or permit. LIBOR means, with respect to each Interest Period (other than the first Interest Period), a floating rate equal to the London interbank offered rate for one-month U.S. Dollar deposits determined in the manner described in Schedule B. LIBOR for the first Interest Period is 3.02645%. LIBOR Calculation Date has the meaning specified in Schedule B. Listed Bidders has the meaning specified in Schedule E. London Banking Day has the meaning specified in Schedule B. Majority means (a) with respect to any Class or Classes of Rated Notes, the Holders of more than 50% of the Aggregate Outstanding Amount of the Rated Notes of such Class or Classes of Rated Notes, as the case may be and (b) with respect to Income Notes, the Holders of more than 50% Income Notes Stated Amount. Margin Stock means “margin stock” as defined under Regulation U issued by the Board of Governors of the Federal Reserve System. Market Value means, on any date of determination, the average of three or more bid-side prices expressed as a percentage of the par amount, obtained from independent, nationally recognized financial institutions in the relevant market for one or more Collateral Debt Securities, each unaffiliated with each other and the Collateral Advisor, as certified by the Collateral Advisor (to the extent that such bid-side prices may be obtained by the Collateral Advisor using its commercially reasonable efforts and commercially reasonable business judgment). If three or more bid-side prices cannot be so obtained, then the Market Value on such date of determination will be the lower of two bid-side prices, if two bidside prices are obtained in the manner described above, and the sole bid-side price if only one bid-side price is obtained in the manner described above. If no bids can be obtained in the manner described above, the Market Value will be (1) in respect of an amount equal to not greater than 7.5% of the Principal Balance of the Proposed Portfolio, the price, expressed as a percentage of the par amount, determined by the Collateral Advisor in its commercially reasonable judgment or (2) the S&P Recovery Rate with respect to such Collateral Debt Security, to the extent not calculated pursuant to clause (1) above. Measurement Date means any of the following: (a) the Effective Date; (b) any date after the Effective Date upon which the Issuer disposes or acquires (which date of acquisition shall be deemed to be the date on which the Issuer enters into commitments to acquire such Collateral Debt Security) any Collateral Debt Security; (c) each Calculation Date; (d) the last Business Day of each calendar month (other than the calendar month preceding the month in which a Calculation Date occurs and any calendar month prior to and including the month in which the Effective Date occurs); and (e) with reasonable notice to the Issuer, the Collateral Advisor and the Trustee, any other Business Day that any Rating Agency or Holders of more than 50% of the then Aggregate Outstanding Amount of any Class of Rated Notes requests to be a 32

Processed and formatted by SEC Watch - Visit SECWatch.com

“Measurement Date”; 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 day that is a Business Day. Moneyline Telerate Page 3750 means the display page so designated on Moneyline Telerate Service (or such other page as may replace that page on that service, or such other service as may be nominated as the information vendor, for the purposes of displaying rates comparable to LIBOR). Monitoring Fee means, with respect to each Payment Date, an amount equal to 0.10% per annum of the Fee Basis Amount payable to the Collateral Advisor pursuant to the Collateral Advisory Agreement. Moody’s means Moody’s Investors Service, Inc. and any successor or successors thereto. Note Downgrade Event means any (i) reduction of the Fitch Rating of the Class A Notes to one or more categories below the Fitch Rating assigned to such Notes on the Closing Date or (ii) reduction of the Fitch Rating of the Class B Notes, the Class C Notes or the Class D Notes to two or more categories below the Fitch Rating assigned to such Class of Notes on the Closing Date. Note Paying Agent means any Person authorized by the Issuer to pay the principal of or interest on any Rated Notes on behalf of the Issuer as specified in Section 7.2. Note Register and Note Registrar have the respective meanings specified in Section 2.4(a). Note Transfer Agent has the meaning specified in Section 2.4(a). Note Valuation Report has the meaning specified in Section 10.10(a). Notes means the Rated Notes and the Income Notes. Offer means, with respect to any security, (a) any offer by the issuer of such security or by any other Person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related Underlying Instruments) or to convert or exchange such security into or for Cash, securities or any other type of consideration or (b) any solicitation by the issuer of such security or any other Person to amend, modify or waive any provision of such security or any related Underlying Instrument. Offering means the offering of the Rated Notes and the Income Notes under the Offering Circular. Offering Circular means the Offering Circular, prepared and delivered on or prior to the Closing Date in connection with the offer and sale of the Rated Notes and the Income Notes, as amended or supplemented from time to time. Officer means, (a) with respect to the Issuer, the Co-Issuer and any corporation, the Chairman of the Board of Directors (or, with respect to the Issuer, any director), the President, any Vice President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of such entity; and (b) with respect to any bank or trust company acting as trustee of an express trust or as custodian, any Trust Officer. Opinion of Counsel means a written opinion addressed to the Trustee and each Rating Agency (each, a Recipient), in form and substance reasonably satisfactory to each Recipient, of an attorney at law admitted to practice before the highest court of any state of the United States or the District of Columbia (or the Cayman Islands, in the case of an opinion relating to the laws of the Cayman Islands), which 33

Processed and formatted by SEC Watch - Visit SECWatch.com

attorney may, except as otherwise expressly provided in this Indenture, be inside or outside counsel for the Issuer or the Co-Issuer, as the case may be, and which attorney shall be reasonably satisfactory to the Trustee. Whenever an Opinion of Counsel is required hereunder, such Opinion of Counsel may rely on opinions of other counsel who are so admitted and so satisfactory which opinions of other counsel shall accompany such Opinion of Counsel and shall either be addressed to each Recipient or shall state that each Recipient shall be entitled to rely thereon. Optional Redemption has the meaning specified in Section 9.1(a). Ordinary Shares means the 1,000 ordinary shares, par value U.S.$1.00 per share issued by the Issuer. Outstanding means with respect to the Notes as of any Measurement Date, any and all Notes theretofore authenticated and delivered under the Indenture and the Income Note Paying Agency other than Notes cancelled, redeemed, exchanged or replaced in accordance with the terms of the Indenture or the Income Note Paying Agency Agreement, as applicable; provided that in determining whether the Holders of the requisite percentage of Notes have given any direction, notice, consent, approval or objection, any Notes held or beneficially owned by the Collateral Advisor or any of its Affiliates or by an account or fund for which the Collateral Advisor or any of its Affiliates acts as the investment advisor with discretionary authority will be disregarded with respect to any vote or consent relating to the removal, termination, substitution or replacement of the Collateral Advisor or the assignment by the Collateral Advisor of its rights and obligations under the Collateral Advisory Agreement, except for any assignments or transfers by the Collateral Advisor of its rights and obligations to Affiliates of the Collateral Advisor, subject to any applicable requirements under the Investment Advisers Act. Paying Agents means, collectively, the Note Paying Agent and the Income Note Paying Agent. Payment Account means the Securities Account designated the “Payment Account” and established in the name of the Trustee pursuant to Section 10.8. Payment Date means the 5th day of each calendar month, or if such day is not a Business Day, the next succeeding Business Day, commencing in July, 2005 and ending in April, 2040 or such earlier date upon which all of the Notes are redeemed as provided herein. Periodic Interest means the amount of interest payable (i) in respect of each Class of Floating Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of business on the day immediately preceding the relevant Payment Date, multiplying the resulting figure by the actual number of days in such Interest Period, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards), and (ii) in respect of each Class of Fixed Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of the Business Day immediately preceding the relevant Payment Date, multiplying the resulting figure by (a) for the first Interest Period, 115 days, and (b) for every other Interest Period, 30 days, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards). Permitted NS Purchaser means (i) NS CDO Holdings III, LLC or (ii) NS Advisors, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act. Person means any individual, corporation, partnership, limited liability partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), 34

Processed and formatted by SEC Watch - Visit SECWatch.com

unincorporated organization or government or any agency or political subdivision thereof or any similar entity. PIK Bond means any security that, pursuant to the terms of the related Underlying Instruments, permits the payment of interest thereon to be deferred or capitalized as additional principal thereof or not pay interest when scheduled (but without being a Defaulted Security) or that issues identical securities in lieu of payments of interest in Cash. Placement Agent means Citibank Global Markets Inc., as placement agent of the Income Notes. Pledged Collateral Debt Security means as of any date of determination, any Collateral Debt Security that has been Granted to the Trustee and has not been released from the lien of this Indenture pursuant to Section 10.11. Pledged Securities means on any date of determination, (a) the Collateral Debt Securities, Temporary Ramp-Up Securities, Equity Securities and the Eligible Investments that have been Granted to the Trustee and (b) all non-Cash proceeds thereof, in each case, to the extent not released from the lien of this Indenture pursuant hereto. Principal Balance means, with respect to any Collateral Debt Security or Eligible Investment, as of any date of determination, the outstanding principal amount of such Collateral Debt Security or Eligible Investment; provided that the Principal Balance of (i) any Collateral Debt Security which permits the deferral or capitalization of interest will not include any outstanding balance of the deferred and/or capitalized interest, (ii) any Equity Security will be zero, (iii) any putable Collateral Debt Security which matures after the Stated Maturity Date will be the lower of the put price and the outstanding principal amount and (iv) any Collateral Debt Security or Eligible Investment in which the Trustee does not have a first priority perfected security interest shall be deemed to be zero. Principal Coverage Amount means, on any Measurement Date, an amount equal to (i) the aggregate Principal Balance of all Collateral Debt Securities (other than Defaulted Securities, Written Down Securities and Deferred Interest PIK Bonds) included in the Collateral on such date, plus (ii) the aggregate Principal Balance of the Eligible Investments in the Collateral Account on such date that represent Collateral Principal Collections, plus (iii) the Defaulted Securities Amount, plus (iv) with respect to Written Down Securities, the Reduced Principal Balance, plus (v) the Deferred Interest PIK Bond Amount, minus, if the aggregate Principal Balance of all Collateral Debt Securities with an S&P Rating lower than “BBB-” and higher than “CCC+” (expressed as a percentage of the CDS Principal Balance) exceeds 33%, (vi) the product of (a) the aggregate Principal Balance of all Collateral Debt Securities, (b) the Double B Principal Coverage Adjustment Percentage and (c) 10%, minus, if the aggregate Principal Balance of all Collateral Debt Securities with an S&P Rating lower than “BBB-” and higher than “CCC+” (expressed as a percentage of the CDS Principal Balance) exceeds 33%, (vii) the product of (a) the aggregate Principal Balance of all Collateral Debt Securities, (b) the Single B Principal Coverage Adjustment Percentage and (c) 20%; provided that any Collateral Debt Security and Written Down Security carried at its Reduced Principal Balance (other than any Defaulted Security or any Deferred Interest PIK Bond) that has a Rating of “CCC+” or lower shall be included at 70% of its Principal Balance. Principal Coverage Ratios means the Class A Principal Coverage Ratio, the Class B Principal Coverage Ratio, the Class C Principal Coverage Ratio and the Class D Principal Coverage Ratio. Principal Coverage Tests means the Class A Principal Coverage Test, the Class B Principal Coverage Test, the Class C Principal Coverage Test and the Class D Principal Coverage Test. 35

Processed and formatted by SEC Watch - Visit SECWatch.com

Principal Prepayments means, following any failure of any Coverage Test as of any Calculation Date, amounts that would otherwise be used (i) for payments of Income Note Excess Funds, (ii) for the purchase of additional Collateral Debt Securities, (iii) for the payment of certain fees and expenses, (iv) in the case of a failure to satisfy either the Class A Interest Coverage Test or the Class A Principal Coverage Test, for interest payments on the Class B Notes, the Class C Notes and the Class D Notes, (v) in the case of a failure to satisfy either the Class B Interest Coverage Test or the Class B Principal Coverage Test, for interest payments on the Class C Notes and the Class D Notes, (vi) in the case of a failure to satisfy either the Class C Interest Coverage Test or the Class C Principal Coverage Test, for interest payments on the Class D Notes and (vii) in the case of a failure to satisfy either the Class D Interest Coverage Test or the Class D Principal Coverage Test, for payments of Income Note Excess Funds, that are instead applied on the related Payment Date, in each case to the extent necessary to satisfy such Coverage Test as of the related Calculation Date, to principal payments on each Class of Notes, starting with the most senior Class of Notes then Outstanding, until such Coverage Test is satisfied as of the related Calculation Date or the Notes are paid in full. Priority of Payments means, collectively, the priority of payments specified in Section 11.1(a), (b) and (c) or upon an Event of Default, the priority of payments in connection therewith. Proceeding means any suit in equity, action at law or other judicial or administrative proceeding. Proposed Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Debt Securities and the proceeds of disposition thereof held as Cash, (b) Uninvested Proceeds held as Cash and (c) Eligible Investments purchased with Uninvested Proceeds or the proceeds of disposition of Pledged Collateral Debt Securities resulting from the sale, maturity or other disposition of a Pledged Collateral Debt Security or a proposed purchase of a Collateral Debt Security, as the case may be. Pro Rata Principal Amortization means, with respect to any Payment Date, any payment by the Issuer in respect of the principal of the Notes that is made pursuant to Clause (13)(iii) of Section 11.1(b) on such Payment Date upon compliance with the Pro Rata Principal Amortization Condition, to the extent that the amount applied to such payment of principal constitutes (i) Sale Proceeds applied in accordance with the Substitution Criteria or (ii) Collateral Principal Payments applied in accordance with the Replacement Criteria. Purchased Accrued Interest means all payments of interest received, or amounts collected that are attributable to interest received on Collateral Debt Securities and Eligible Investments, to the extent such payments or amounts constitute accrued interest purchased with Collateral Principal Collections except for interest accrued on Collateral Debt Securities prior to the Closing Date. Qualified Bidder List means a list of not less than three Persons that are Independent from one another and the Issuer prepared by the Collateral Advisor and delivered to the Trustee prior to an Auction, as may be amended and supplemented by the Collateral Advisor from time to time upon written notice to the Trustee; provided that (i) the Qualified Bidder List may include the Collateral Advisor as a Qualified Bidder if it is Independent from the other Persons on such list and (ii) any such notice referred to above shall only be effective on any Auction Date if it was received by the Trustee at least two Business Days prior to such Auction Date. Qualified Bidders means the Persons whose names appear from time to time on the Qualified Bidder List. Qualified Institutional Buyer has the meaning given in Rule 144A under the Securities Act. 36

Processed and formatted by SEC Watch - Visit SECWatch.com

Qualified Purchaser means (i) a “qualified purchaser” as defined in Section 2(a)(51) of the Investment Company Act and the rules thereunder, (ii) a “knowledgeable employee” with respect to the Issuer as defined in rule 3c-5 under the Investment Company Act or (iii) a company beneficially owned exclusively by one or more “qualified purchasers” and/or “knowledgeable employees” with respect to the Issuer. Qualifying Foreign Obligor means a corporation, partnership or other entity organized or incorporated under the law of any of Australia, Canada, France, Germany, Ireland, Italy, New Zealand, Sweden, Switzerland or the United Kingdom, so long as the unguaranteed, unsecured and otherwise unsupported long-term Dollar sovereign debt obligations of such country are rated “AA” or better by S&P. Quarterly Pay Security means a security that provides for periodic payments of interest in cash quarterly. Quarterly Pay Security Interest Reserve Amount means, with respect to each Collateral Debt Security that is a Quarterly Pay Security, as of any Calculation Date, the amount equal to (i) the amount of interest received by the Issuer on the most recent payment date with respect to such Quarterly Pay Security multiplied by (ii) (A) three minus the number of months since the most recent payment date with respect to such Quarterly Pay Security (rounded up to the nearest whole number) divided by (B) three; provided that for any Quarterly Pay Security with respect to which no scheduled interest payments remain, the Quarterly Pay Security Interest Reserve Amount shall be zero. Ramp-Up Collateral Debt Security means each additional Collateral Debt Security selected by the Collateral Advisor for purchase by the Issuer and pledged to the Trustee during the Ramp-Up Period. Ramp-Up Criteria means the following criteria which must be met by each Ramp-Up Collateral Debt Security: (i)

such Ramp-Up Collateral Debt Security is not a Real Estate CDO Security;

(ii)

no more than U.S.$21,000,000 million in aggregate Principal Balance of Ramp-Up Collateral Debt Securities is rated “BB+” or lower by S&P or “BB+” or lower by Fitch;

(iii)

none of the Ramp-Up Collateral Debt Securities is rated “B+” or lower by S&P or “B+” or lower by Fitch;

(iv)

no more than U.S.$16,000,000 million in aggregate Principal Balance of Ramp-Up Collateral Debt Securities is issued by a single issuer;

(v)

such Ramp-Up Collateral Debt Security is not on the “credit watch negative” watchlist of S&P; and

(vi)

such Ramp-Up Collateral Debt Security is denominated in U.S. Dollars and all cash flows are to be paid in U.S. Dollars.

Ramp-Up Period means the period commencing on the Closing Date and ending on the Effective Date. Rated Note Calculation Agent has the meaning specified in Section 7.15. Rated Notes means, collectively, the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes. 37

Processed and formatted by SEC Watch - Visit SECWatch.com

Rated Noteholder means, with respect to any Rated Note, the Person in whose name such Note is registered; provided that Beneficial Owners or Agent Members will have no rights under the Indenture with respect to Global Notes, and the Rated Noteholder may be treated by the Issuer and the Trustee (and any agent of any of the foregoing) as the owner of such Global Notes for all purposes whatsoever. Rating means, as the context requires, a Fitch Rating or an S&P Rating. Rating Agency means each of (i) Fitch, for so long as any of the Outstanding Rated Notes are rated by Fitch (including any private or confidential rating) and (ii) S&P, for so long as any of the Outstanding Rated Notes are rated by S&P (including any private or confidential rating) or, with respect to Pledged Securities generally, if at any time Fitch or S&P ceases to provide rating services, any other nationally recognized investment rating agency selected by the Issuer (upon consultation with the Collateral Advisor) and reasonably satisfactory to a Majority of each Class of Rated Notes. In the event that at any time Fitch ceases to be a Rating Agency, references to rating categories of Fitch in this Indenture shall be deemed instead to be references to the equivalent categories of such other rating agency as of the most recent date on which such other rating agency and Fitch ’s published ratings for the type of security in respect of which such alternative rating agency is used. In the event that at any time S&P ceases to be a Rating Agency, references to rating categories of S&P in this Indenture shall be deemed instead to be references to the equivalent categories of such other rating agency as of the most recent date on which such other rating agency and S&P’s published ratings for the type of security in respect of which such alternative rating agency is used. Rating Agency Confirmation means, with respect to any specified action or determination, for so long as any of the Rated Notes are Outstanding and rated by S&P or Fitch, the receipt of written confirmation by each Rating Agency rating any Rated Notes, that such specified action or determination will not result in the reduction or withdrawal or other adverse action with respect to their then-current ratings on the Rated Notes (including any private or confidential rating) unless Rating Agency Confirmation is specified herein to be required by only S&P or Fitch, in which case such Rating Agency Confirmation will be sufficient. Rating Confirmation has the meaning specified in Section 7.18(e). Rating Confirmation Failure has the meaning specified in Section 7.18(e). Real Estate CDO Securities means securities that entitle the holders thereof to receive payments that depend on the cash flow from or the credit exposure to a portfolio consisting primarily of (i) REIT Debt Securities, (ii) CMBS Securities or (iii) a combination of the foregoing; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the Real Estate CDO Securities such as a financial guaranty insurance policy. Real Estate Interests means interests (other than REIT Debt Securities and Real Estate CDO Securities but including Tenant Lease Loan Interests) that entitle the holders thereof to receive payments that depend primarily on the cash flow from or sale proceeds of commercial mortgage loans, including subordinate commercial mortgage loans, participation interests in commercial mortgage loans, (including subordinate interests), mezzanine loans secured by ownership interests in entities owning commercial properties, mortgage loans secured by mortgages on commercial real estate properties that are subject to a lease to a single tenant or trust certificates representing beneficial ownership interests in the foregoing. Record Date means the date on which the Holders of Rated Notes entitled to (i) vote with respect to any matters under the Indenture are determined, such date being the 15th day (whether or not a Business Day) 38

Processed and formatted by SEC Watch - Visit SECWatch.com

prior to the date the Trustee delivers notice with respect to such vote and (ii) receive a payment in respect of principal or interest on the succeeding Payment Date or Redemption Date are determined, such date as to any Payment Date or Redemption Date being the 15th day (whether or not a Business Day) prior to such Payment Date or Redemption Date. Redemption means an Optional Redemption, an Auction Call Redemption or a Tax Redemption. Redemption Date means the Payment Date upon which the Rated Notes are redeemed pursuant to an Optional Redemption, an Auction Call Redemption or a Tax Redemption. Redemption Date Statement has the meaning specified in Section 10.10(b). Redemption Premium The premium payable to Holders of each Class of Fixed Rate Notes in connection with an Optional Redemption of such Class of Fixed Rate Notes in an amount equal to the excess, if any, of (i) the present value (discounted to the applicable Redemption Date using the Reinvestment Yield on a monthly basis using a 360-day year of twelve 30-day months as the discount rate) of the remaining payments of interest and principal due on such Class of Fixed Rate Notes, assuming that the entire outstanding principal amount of such Class of Fixed Rate Notes will be paid on the Payment Date occurring in April, 2017 and that each intervening payment of interest on such Class of Fixed Rate Notes will be made on the related Payment Date in its entirety (and therefore there is no Defaulted Interest on such Class of Fixed Rate Notes) over (ii) the outstanding principal amount of such Class of Fixed Rate Notes on the applicable Redemption Date. Redemption Price means, (i) with respect to each Class of Rated Notes, (a) their then Aggregate Outstanding Amount plus (b) accrued interest thereon to the date of redemption to the extent not already paid (including, without limitation, any Class B Cumulative Applicable Periodic Interest Shortfall Amount, Class C Cumulative Applicable Periodic Interest Shortfall Amount and Class D Cumulative Applicable Periodic Interest Shortfall Amount) plus (c) in the case of an Optional Redemption only and with respect to any Fixed Rate Notes, the applicable Redemption Premium and (ii) if the Income Notes are redeemed, the “Redemption Price” for the Income Notes, except to the extent the Income Note Redemption Approval Condition applies, means an amount equal to the aggregate of any residual amounts distributable on the Income Notes in respect of such redemption pursuant to Section 11.1(a) and (b) and in any instance where the Income Note Redemption Approval Condition applies, an amount equal to the amounts necessary to satisfy the Income Note Redemption Approval Condition. Redemption Spread means, with respect to the Class A-2B Notes, 0.75%, with respect to the Class C-1B Notes, 1.50%, with respect to the Class C-2B Notes 1.80%, and with respect to the Class D Notes, 3.75%. Reduced Principal Balance means, with respect to each Written Down Security, the original Principal Balance of such Written Down Security minus the Written Down Amount as notified by or on behalf of the related issuer or trustee to the holders of such Written Down Security (including appraisal reductions on CMBS Securities). Reference Banks has the meaning specified in Schedule B. Registered means in registered form for U.S. federal income tax purposes and issued after July 18, 1984; provided that a certificate of interest in a trust that is treated as a grantor trust for U.S. federal income tax purposes will not be treated as Registered unless each of the obligations or securities held by the trust was issued after that date. Registered Form has the meaning specified in Section 8-102(a)(13) of the UCC. 39

Regulation S means Regulation S under the Securities Act. Regulation S Definitive Note has the meaning specified in Section 2.4(b)(1)(vi). Regulation S Global Note has the meaning specified in Section 2.1(a). Regulation S Note has the meaning specified in Section 2.1(a). Regulation S Transfer Certificate has the meaning specified in Section 2.4(b)(1)(iii). 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 Criteria means, with respect to any reinvestment of Collateral Principal Payments, the following criteria: (i)

Each Collateral Principal Payment must be reinvested in one or more Substitute Collateral Debt Securities of the same CPP Asset Type as the Collateral Debt Security on which such Collateral Principal Payment occurred;

(ii)

The spread from a comparable index or security (Spread) of the Substitute Collateral Debt Security may not exceed the Spread of the original Collateral Debt Security on which the applicable Collateral Principal Payment was received as set forth in a schedule provided

Processed and formatted by SEC Watch - Visit SECWatch.com

to the Trustee; provided that in the event Collateral Principal Payments for any CPP Asset Type are comprised of proceeds from multiple Collateral Debt Securities, the Spread of each Substitute Collateral Debt Security may not exceed the Spread of a single Collateral Debt Security on which the Collateral Principal Payments being reinvested were received; and (iii)

The lowest explicit rating by either Rating Agency of the Substitute Collateral Debt Security must be equal to or higher than the lowest explicit rating by either Rating Agency at purchase by the Issuer of the Collateral Debt Security on which the applicable Collateral Principal Payment was received; provided that in the event that Collateral Principal Payments for any CPP Asset Type are comprised of proceeds from multiple Collateral Debt Securities, the lowest explicit rating by either Rating Agency of each Substitute Collateral Debt Security must be no lower than the lowest explicit rating as of the Effective Date of a single original Collateral Debt Security on which the applicable Collateral Principal Payment was received (or such earlier date, if any, of purchase by the Issuer);

provided, however, that in determining whether the Reinvestment Criteria are satisfied, Collateral Principal Payments on Real Estate Interests bearing interest at a fixed rate shall be treated as though such amounts were Collateral Principal Payments on CMBS Securities that are Fixed Rate Securities and Collateral Principal Payments on Real Estate Interests bearing interest at a floating rate shall be treated as though such amounts were Collateral Principal Payments on CMBS Securities that are Floating Rate Securities. Reinvestment Period means the period beginning on the Closing Date and ending and including the Payment Date in April, 2010. Reinvestment Threshold Amount means an amount that equal or exceeds U.S.$5,000,000; provided that for purposes of determining whether the Reinvestment Threshold Amount has been met, Collateral Principal Payments on Real Estate Interests bearing interest at a fixed rate shall be treated as though such 40

Processed and formatted by SEC Watch - Visit SECWatch.com

amounts were Collateral Principal Payments on CMBS Securities that are Fixed Rate Securities and Collateral Principal Payments on Real Estate Interests bearing interest at a floating rate shall be treated as though such amounts were Collateral Principal Payments on CMBS Securities that are Floating Rate Securities. Reinvestment Trigger Date means any Business Day, prior to the end of the Reinvestment Period, on which the Collateral Advisor directs the Issuer to reinvest Collateral Principal Payments in Substitute Collateral Debt Securities in accordance with the Reinvestment Criteria. Reinvestment Yield means with respect to either class of the Fixed Rate Notes, the rate equal to the sum of the Redemption Spread with respect to such Fixed Rate Note and the applicable yield to maturity implied by (i) the yields reported as of 10:00 a.m. (New York City time) on the tenth Business Day preceding the related Optional Redemption Date on the display page designated as “Page 678” on the Telerate Service (or such other display as may replace Page 678 on the Telerate Service) for actively traded U.S. Treasury securities having a maturity as nearly as practicable equal to the Payment Date occurring in April, 2017 or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the tenth Business Day preceding the Optional Redemption Date, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity as nearly as practicable equal to the Payment Date occurring in April, 2017. REIT Debt Securities means, collectively, REIT Debt Securities—Diversified, REIT Debt Securities— Health Care, REIT Debt Securities—Hotel, REIT Debt Securities—Industrial, REIT Debt Securities— Mortgage, REIT Debt Securities—Multi-Family, REIT Debt Securities—Office, REIT Debt Securities— Residential, REIT Debt Securities—Retail and REIT Debt Securities—Storage. REIT Debt Securities—Diversified means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of diverse real property interests; provided that any Collateral Debt Security falling within any other REIT Debt Security description set forth herein will be excluded from this definition. REIT Debt Securities—Health Care means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including hospitals, clinics, sport clubs, spas and other health care facilities and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Hotel means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including hotels, motels, youth hostels, bed and breakfasts and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Industrial means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including warehouse, industrial and distribution 41

Processed and formatted by SEC Watch - Visit SECWatch.com

facilities, factories, refinery plants, breweries and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Mortgage means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of mortgages, commercial mortgage-backed securities, collateralized mortgage obligations and other similar mortgage-related securities (including Collateral Debt Securities issued by a hybrid form of such trust that invests in both commercial real estate and commercial mortgages). REIT Debt Securities—Multi-Family means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including multi-family dwellings such as apartment blocks, condominiums and co-operative owned buildings. REIT Debt Securities—Office means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including office buildings, conference facilities and other similar real property interests used in the commercial real estate business. REIT Debt Securities—Residential means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of residential mortgages (other than multi-family dwellings) and other similar real property interests. REIT Debt Securities—Retail means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of regional malls, neighborhood shopping centers, big box centers, retail stores, restaurants, bookstores, clothing stores and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Storage means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) a portfolio of properties including storage facilities and other similar real property interests used in one or more similar businesses. Relevant Jurisdiction means, as to any obligor on any Collateral Debt Security, any jurisdiction (a) in which the obligor is incorporated, organized, managed and controlled or considered to have its seat, (b) where an office through which the obligor is acting for purposes of the relevant Collateral Debt Security is located, (c) in which the obligor executes Underlying Instruments or (d) in relation to any payment, from or through which such payment is made. Replacement Criteria means, with respect to any reinvestment of Sales Proceeds in accordance with Section 12.1(b) hereof, the following criteria: 42

Processed and formatted by SEC Watch - Visit SECWatch.com

(i)

If the Collateral Debt Security being replaced was a REIT Debt Security, then the Substitute Collateral Debt Security must be a REIT Debt Security;

(ii)

If the Collateral Debt Security being replaced was a CMBS Security or a Real Estate Interest, then the Substitute Collateral Debt Security must be a CMBS Security;

(iii)

If the Collateral Debt Security being replaced was a Real Estate CDO Security, then the Substitute Collateral Debt Security must be either a CMBS Security or a REIT Debt Security;

(iv)

The lowest explicit rating of the Substitute Collateral Debt Security must be as good or better than the lowest explicit rating at purchase by the Issuer of the Collateral Debt Security being replaced;

(v)

If the Collateral Debt Security being replaced was a Fixed Rate Collateral Debt Security, the Substitute Collateral Debt Security must be a Fixed Rate Collateral Debt Security;

(vi)

If the Collateral Debt Security being replaced was a Floating Rate Collateral Debt Security, the Substitute Collateral Debt Security must be a Floating Rate Collateral Debt Security;

(vii)

The price of the Substitute Collateral Debt Security must be between 90% and 110% of the original issue price of such Substitute Collateral Debt Security (as determined by the Collateral Advisor), as adjusted to reflect the accretion of any original issue discount or the amortization of any original issue premium calculated on a yield-to-maturity basis;

(viii)

The legal final maturity date of the Substitute Collateral Debt Security must be earlier than that of the Collateral Debt Security being replaced; and

(ix)

The Average Life of the Substitute Collateral Debt Security must be the same or lower than that of the Collateral Debt Security being replaced as of the date of the Issuer’s sale thereof.

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 and maintained by the Bond Market Association. Requisite Noteholders means the Holders of 662/3% or more of the then Aggregate Outstanding Amount of (i) the Class A-1 Notes, so long as any Class A-1 Notes remain Outstanding, (ii) thereafter the Class A-2 Notes so long as any Class A-2 Notes remain Outstanding, (iii) thereafter the Class B Notes so long as any Class B Notes remain Outstanding, (iv) thereafter the Class C-1 Notes so long as any Class C-1 Notes remain Outstanding, (v) thereafter the Class C-2 Notes so long as any Class C-2 Notes remain Outstanding and (vi) thereafter the Class D Notes so long as any Class D Notes remain Outstanding. Reserved Matters has the meaning specified in Section 8.2(j). Rule 144A means Rule 144A under the Securities Act. Rule 144A Definitive Note has the meaning specified in Section 2.4(b)(1)(vi). Rule 144A Global Note has the meaning specified in Section 2.1(b). 43

Processed and formatted by SEC Watch - Visit SECWatch.com

Rule 144A Information means such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto). Rule 144A Note has the meaning specified in Section 2.1(b). Rule 144A Transfer Certificate has the meaning specified in Section 2.4(b)(1)(ii). S&P means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor or successors thereto. S&P CDO Monitor means the dynamic, analytical computer model provided by S&P to the Collateral Advisor and the Trustee (together with such instructions and assumptions as are necessary to run such model) on or prior to the Effective Date used to determine the credit risk of a portfolio of Collateral Debt Securities, as may be modified by S&P from time to time. S&P CDO Monitor Test means the test which is satisfied, as of any Calculation Date, if each of the Class A-1 Note Default Differential, the Class A-2A Note Default Differential, the Class A-2B Note Default Differential, the Class B Note Default Differential, the Class C-1A Note Default Differential, the Class C-1B Note Default Differential, the Class C-2A Note Default Differential, the Class C-2B Note Default Differential and the Class D Note Default Differential of the Current Portfolio or the Proposed Portfolio, as applicable, is positive. The S&P CDO Monitor Test will be considered to be improved if the Class A-1 Note Default Differential of the Proposed Portfolio is greater than the Class A-1 Note Default Differential of the Current Portfolio, the Class A-2A Note Default Differential of the Proposed Portfolio is greater than the Class A-2A Note Default Differential of the Current Portfolio, the Class A-2B Note Default Differential of the Proposed Portfolio is greater than the Class A-2B Note Default Differential of the Current Portfolio, the Class B Note Default Differential of the Proposed Portfolio is greater than the Class B Note Default Differential of the Current Portfolio, the Class C-1A Note Default Differential of the Proposed Portfolio is greater than the Class C-1A Note Default Differential of the Current Portfolio, the Class C-1B Note Default Differential of the Proposed Portfolio is greater than the Class C-1B Note Default Differential of the Current Portfolio, the Class C-2A Note Default Differential of the Proposed Portfolio is greater than the Class C-2A Note Default Differential of the Current Portfolio, the Class C-2B Note Default Differential of the Proposed Portfolio is greater than the Class C-2B Note Default Differential of the Current Portfolio, and the Class D Note Default Differential of the Proposed Portfolio is greater than the Class D Note Default Differential of the Current Portfolio. S&P Industry Classification Group means any of the S&P industrial classification groups as set forth on Schedule H and any additional classification groups established by S&P with respect to the Collateral Debt Securities and provided, in each case, by the Collateral Advisor or S&P to the Trustee. S&P Minimum Average Recovery Rate Test means a test that will be satisfied as of any Measurement Date if the S&P Weighted Average Recovery Rate is greater than or equal to (i) 24.6% with respect to the Class A-1 Notes, (ii) 26.2% with respect to the Class A-2 Notes, (iii) 30.1% with respect to the Class B Notes, (iv) 36.3% with respect to the Class C Notes and (v) 41.7% with respect to the Class D Notes. S&P’s Preferred Format means an electronic spreadsheet file to be provided to S&P, which file shall include the following information, if available (to the extent such information is not confidential) with respect to each Collateral Debt Security: (a) the name and country of domicile of the issuer thereof and the particular issue held by the Issuer, (b) the CUSIP or other applicable identification number associated with such Collateral Debt Security, (c) the par value of such Collateral Debt Security, (d) the type of issue (including, by way of example, whether such Collateral Debt Security is a bond, loan or asset-backed security), using such abbreviations as may be selected by the Trustee, (e) a description of the index or 44

Processed and formatted by SEC Watch - Visit SECWatch.com

other applicable benchmark upon which the interest payable on such Collateral Debt Security is based (including, by way of example, fixed rate, step-up rate, zero coupon and LIBOR), (f) the coupon (in the case of a Collateral Debt Security which bears interest at a fixed rate) or the spread over the applicable index (in the case of a Collateral Debt Security which bears interest at a floating rate), (g) the S&P Industry Classification Group for such Collateral Debt Security, (h) the Stated Maturity Date of such Collateral Debt Security, (i) the S&P Rating of such Collateral Debt Security or the issuer thereof, as applicable, (j) the priority category assigned by S&P to such Collateral Debt Security, if available, and (k) such other information as the Trustee may determine to include in such file. S&P Rating means the rating by S&P of any Collateral Debt Security determined as follows: (a)

if S&P has assigned a rating to such Collateral Debt Security either publicly or privately (in the case of a private rating, with the written consent of the issuer of such Collateral Debt Security for use of such private rating and provided a copy of such consent has been delivered to S&P), the S&P’s Rating shall be the rating assigned thereto by S&P; provided that, solely for purposes of determining compliance with the S&P CDO Monitor Test, if such Collateral Debt Security is placed on a watch list for possible upgrade or downgrade by S&P, the S&P Rating applicable to such Collateral Debt Security shall be one rating subcategory above or below, respectively, the S&P Rating applicable to such Collateral Debt Security immediately prior to such Collateral Debt Security being placed on such watch list;

(b)

if such Collateral Debt Security is not rated by S&P but the Issuer or the Collateral Advisor on behalf of the Issuer has requested that S&P assign a rating to such Collateral Debt Security, the S&P Rating shall be the rating so assigned by S&P; provided that pending receipt from S&P of such rating, if such Collateral Debt Security is not eligible for notching in accordance with Schedule G, such Collateral Debt Security shall have a Rating of “CCC-”, otherwise such S&P Rating shall be the rating assigned according to Schedule F until such time as S&P shall have assigned a rating thereto; or

(c)

if any Collateral Debt Security is a Collateral Debt Security that has not been assigned a rating by S&P and is not a Collateral Debt Security listed in Schedule G, as identified by the Collateral Advisor, the S&P Rating of such Collateral Debt Security shall be the rating determined by reference to Schedule F; provided that (i) if any Collateral Debt Security shall, at the time of its purchase by the Issuer, be listed for a possible upgrade or downgrade on either Fitch or Fitch then current credit rating watch list, then the S&P Rating of such Collateral Debt Security shall be one subcategory above or below, respectively, the rating then assigned to such item as set forth in Schedule A, (ii) for purposes of determining compliance with S&P CDO Monitor Test, if the rating assigned to such Collateral Debt Security pursuant to this subparagraph (c) is placed on a watch list for possible upgrade or downgrade by any Rating Agency, the S&P Rating applicable to such Collateral Debt Security shall be one rating subcategory above or below, respectively, the S&P Rating applicable to such Collateral Debt Security immediately prior to such Collateral Debt Security being placed on such watch list and (iii) the aggregate Principal Balance that may be given a rating based on this subparagraph (c) may not exceed 20% of the aggregate Principal Balance of all Collateral Debt Securities; provided that if any Collateral Debt Security has not been assigned a rating by S&P and is a type of Collateral Debt Security not listed on Schedule G, subsequent to the Closing Date, the acquisition of any such Collateral Debt Security will require an estimate or shadow rating from S&P, the assignment of an S&P Recovery Rate to such Collateral Debt Security and receipt of Rating Agency Confirmation from S&P prior to the acquisition by the Issuer of such Collateral Debt Security. 45

Processed and formatted by SEC Watch - Visit SECWatch.com

Notwithstanding the foregoing, if any Collateral Debt Security shall, at the time of its purchase by the Issuer, be listed for a possible upgrade or downgrade by S&P’s then current credit rating watch list, then the S&P Rating of such Collateral Debt Security shall be one subcategory above or below, respectively, the rating then assigned to such item by S&P, as applicable; provided that if such Collateral Debt Security is removed from such list at any time, it shall be deemed to have its then-current actual rating by S&P. S&P Recovery Rate means, with respect to a Collateral Debt Security on any Calculation Date, an amount equal to the percentage for such Collateral Debt Security set forth in the S&P Recovery Rate Matrix attached as Schedule D (determined in accordance with procedures prescribed by S&P for such Collateral Debt Security on such Calculation Date or, in the case of Defaulted Securities, the S&P Rating immediately prior to default). S&P Weighted Average Recovery Rate means, as of any Calculation Date, a rate expressed as a percentage equal to the number obtained by (i) summing the products obtained by multiplying the Principal Balance of each Collateral Debt Security by its S&P Recovery Rate and (ii) dividing such sum by the aggregate Principal Balance of the Collateral Debt Securities and (iii) rounding up to the first decimal place. For this purpose, the Principal Balance of a Defaulted Security or Deferred Interest PIK Bond will be deemed to be equal to its outstanding principal amount (excluding any capitalized interest thereon). Sale has the meaning specified in Section 5.17(a). Sale Proceeds means all proceeds (including accrued interest) received with respect to Collateral Debt Securities and Equity Securities as a result of sales of such Collateral Debt Securities and Equity Securities pursuant to the Indenture, net of any reasonable amounts expended by the Collateral Advisor or the Trustee in their good faith determination in connection with such sale or disposition. Schedule of Collateral Debt Securities means the list of Collateral Debt Securities securing the Rated Notes that is attached as Schedule A. Scheduled Distribution means, with respect to any Pledged Security, for each Due Date, the scheduled payment in Cash of principal and/or interest and/or fees due on such Due Date with respect to such Pledged Security, determined in accordance with the assumptions specified in Section 1.2. Second Currency has the meaning specified in Section 14.13. Secured Parties means the Trustee, for the benefit of the Rated Noteholders, the Collateral Advisor and the Initial Hedge Counterparty. Securities Account has the meaning specified in Section 8-501(a) of the UCC. Securities Act means the U.S. Securities Act of 1933, as amended. Securities Intermediary has the meaning specified in Section 8-102(a)(14) of the UCC. Security has the meaning specified in Section 8-102(a)(15) of the UCC. Semi-Annual Pay Security means a security that provides for periodic payments of interest in Cash semiannually. 46

Processed and formatted by SEC Watch - Visit SECWatch.com

Semi-Annual Pay Security Interest Reserve Amount means, with respect to each Collateral Debt Security that is a Semi-Annual Pay Security, as of any Calculation Date, the amount equal to (i) the amount of interest received by the Issuer on the most recent payment date with respect to such Semi-Annual Pay Security multiplied by (ii) (A) six (6) minus the number of months since the most recent payment date with respect to such Semi-Annual Pay Security (rounded up to the nearest whole number) divided by (B) six (6); provided that for any Semi-Annual Pay Security with respect to which no scheduled interest payments remain, the Semi-Annual Pay Security Interest Reserve Amount shall be zero. Senior Collateral Advisory Fee means with respect to each Payment Date, a senior fee equal to the sum of (a) the Monitoring Fee and (b) the Senior Structuring Fee payable to the Collateral Advisor pursuant to the Collateral Advisory Agreement; provided that the Senior Collateral Advisory Fee will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Senior Collateral Advisory Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Senior Collateral Advisory Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Senior Collateral Advisory Fee accrued but not paid prior to the resignation or removal of the Collateral Advisor shall continue to be payable to the Collateral Advisor on the Payment Date immediately following the effectiveness of such resignation or removal. Senior Structuring Fee means, with respect to each Payment Date, an amount equal to 0.05% per annum of the Fee Basis Amount payable to the Collateral Advisor pursuant to the Collateral Advisory Agreement. Single B Excess Percentage means, on any Measurement Date, the greater of (a) zero; and (b) (i) the aggregate Principal Balance of all Collateral Debt Securities with an S&P Rating lower than BB- and higher than CCC+ (expressed as a percentage of the CDS Principal Balance) minus (ii) 10%. Single B Principal Coverage Adjustment Percentage means, on any Measurement Date, the greater of (a) zero; and (b) (i) the Single B Excess Percentage minus (ii) the greater of (x) zero; and (y) (A) 5% minus (B) the Double B Excess Percentage. Sixty-Day Reinvestment Window means (i) with respect to Sale Proceeds received in respect of any Credit Risk Security, Defaulted Security, Equity Security, Withholding Tax Security, Credit-Improved Security or Written Down Security, the period from (and including) the date of receipt of such Sale Proceeds by the Issuer to (but including) the sixtieth (60th) calendar day thereafter and (ii) with respect to Collateral Principal Payments received in respect of any CPP Asset Type, the period from (and including) the date on which the cumulative amount of such Collateral Principal Payments for such CPP Asset Type equals or exceeds the Reinvestment Threshold Amount for such CPP Asset Type, to (but including) the sixtieth (60th) calendar day thereafter. Special Amortization Pro Rata Condition means with respect to any Payment Date that either: (A)

(I)(x) the aggregate CDS Principal Balance as of the related Calculation Date is at least equal to 50% of the aggregate CDS Principal Balance on the Closing Date and (y) the S&P CDO Monitor Test has been satisfied and (II) the Collateral Quality Tests (except the items specified in clauses (xiii), (xiv) and (xv) of the definition thereof) are satisfied; or

(B)

if clause (A) above is not satisfied, Rating Agency Confirmation has been provided by S&P with respect to the pro rata payment of principal of the Rated Notes. 47

Processed and formatted by SEC Watch - Visit SECWatch.com

Specified Currency has the meaning specified in Section 14.13. Specified Person has the meaning specified in Section 2.5(a). Specified Place has the meaning specified in Section 14.13. Specified Types means CMBS Securities, REIT Debt Securities, Real Estate CDO Securities and Real Estate Interests. Spread has the meaning specified in the definition of Reinvestment Criteria. 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 greater of zero and the excess, if any, of the Weighted Average Spread for such date over 1.87%, and (b) the aggregate Principal Balance of all Floating Rate Collateral Debt Securities and Deemed Floating Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities or Deferred Interest PIK Bonds) and the denominator of which is the aggregate Principal Balance of all Collateral Debt Securities that are Fixed Rate Collateral Debt Securities (excluding Defaulted Securities, Written Down Securities, Deferred Interest PIK Bonds and Deemed Floating Rate Collateral Debt Securities). Stated Maturity Date means the Payment Date occurring in April 2040. Subordinate Collateral Advisory Fee means the fee payable to the Collateral Advisor at a per annum rate in arrears on each Payment Date pursuant to the Collateral Advisory Agreement, in an amount (as certified by the Collateral Advisor to the Trustee) equal to 0.20% of the Fee Basis Amount for such Payment Date; provided that the Subordinate Collateral Advisory Fee will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Subordinate Collateral Advisory Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Subordinate Collateral Advisory Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Subordinate Collateral Advisory Fee accrued but not paid prior to the resignation or removal of the Collateral Advisor shall continue to be payable to the Collateral Advisor on the Payment Date immediately following the effectiveness of such resignation or removal. Subordinate Interests has the meaning specified in Section 13.1(a), (b), (c), (d), (e) or (f), as applicable. Subpool means each of the groups of the Collateral Debt Securities designated by the Collateral Advisor in accordance with the Auction Procedures on which the Listed Bidders may provide a separate bid in an Auction. Substitute Collateral Debt Security means a debt obligation meeting the Eligibility Criteria acquired by or on behalf of the Issuer with Collateral Principal Proceeds or Sale Proceeds that are reinvested in accordance with the provisions of the Indenture. Substitute Party has the meaning specified in Section 16.1(d). Substitution Event means, with respect to the Hedge Agreement, the occurrence of any of the following: (a) so long as any Rated Notes are Outstanding and rated by S&P, the long-term rating of the Hedge Ratings Determining Party from S&P is withdrawn, suspended or downgraded below “BBB-”, or, if no long-term rating is available, the short-term rating from S&P of the Hedge Ratings Determining Party is withdrawn, suspended or downgraded below “A-3”, (b) the short-term rating of the Hedge Ratings 48

Processed and formatted by SEC Watch - Visit SECWatch.com

Determining Party from Fitch is “F2” or lower or, if the related Hedge Ratings Determining Party does not have a short-term rating, the longterm rating of the related Hedge Ratings Determining Party from Fitch is withdrawn, suspended or falls to below “BBB+”, or (c) the failure of the relevant Hedge Counterparty to take any of the actions specified in Section 16.1(b) within 30 days of the occurrence of a Collateralization Event. Synthetic Security means any swap transaction, debt security, security issued by a trust or similar vehicle or other investment, the returns on which (as determined by the Collateral Advisor) are linked to the credit performance of a reference obligation, but which may provide for a different maturity, payment date, interest rate, credit exposure or other credit or non-credit related characteristics from such reference obligation. Taxed Collateral Debt Security has the meaning specified in Section 7.7(e). Taxes means any present or future taxes, duties, assessments or governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by any governmental authority having power to tax. Tax Event means a new, or change in any, U.S. or foreign tax statute, treaty, regulation, rule, ruling, practice, procedure or judicial decision or interpretation, occurring in each case after the Closing Date, which results in (i) any portion of any payment due from any issuer or obligor under any Collateral Debt Security becoming properly subject to the imposition of U.S. or foreign withholding tax, which withholding tax is not compensated for by a “gross up” provision under the terms of the related Collateral Debt Security, (ii) any jurisdiction imposing net income, profits, or similar tax on the Issuer, (iii) the Issuer being required to deduct or withhold from any payment under a Hedge Agreement for or on account of any tax and the Issuer being obligated to make a gross up payment (or otherwise pay additional amounts) to the Hedge Counterparty, or (iv) a Hedge Counterparty being required to deduct or withhold from any payment under a Hedge Agreement for or on account of any tax for whatever reason if such Hedge Counterparty is not required to pay to the Issuer such additional amount as is necessary to 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 where the sum of the amount of (i) such a tax or taxes imposed on the Issuer or withheld from payments to the Issuer to the extent the Issuer receives less than the full amount that the Issuer would have received had no such deduction occurred, and (ii) such gross up payments required to be made by the Issuer to the extent they exceed the amounts that the Issuer would have been required to pay had no deduction or withholding been required, in the aggregate, equals ten percent (10%) or more of the amount of aggregate interest payments on all of the related Collateral Debt Securities during the related Due Period. Tax Redemption has the meaning specified in Section 9.1(b). Tax Subsidiary has the meaning specified in Section 7.7(e). Temporary Ramp-Up Security means each security that is listed on Schedule C hereto that (i) is a direct unsecured debt obligation of the Federal National Mortgage Corporation or the Federal Home Loan Mortgage Corporation, (ii) bears interest at a fixed rate, (iii) is acquired by the Issuer on the Closing Date in furtherance of interest rate hedging of the Issuer’s portfolio by being sold on or prior to the Effective Date in conjunction with the acquisition of one or more Ramp-Up Collateral Debt Securities that are Fixed Rate Collateral Debt Securities and (iv) is rated in the highest rating category by at least one nationally recognized rating agency. 49

Processed and formatted by SEC Watch - Visit SECWatch.com

Tenant Lease Loan Interests means securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities) on the cash flow from a commercial mortgage loan made to finance the acquisition, construction and improvement of properties leased to corporate tenants (or on the cash flow from such leases). Three-Year Period means the period beginning on the Closing Date and up to and including the Payment Date in April, 2008. Transaction Documents means the Indenture, the Collateral Advisory Agreement, the Account Control Agreement, the Hedge Agreement, the Corporate Services Agreement, the Collateral Administration Agreement and the Income Note Paying Agency Agreement. Trust Officer means, when used with respect to the Trustee, any Officer within the Corporate Trust Office working on the transaction described in this Indenture and (or any successor group of the Trustee) authorized to act for and on behalf of the Trustee, including any vice president, assistant vice president or other Officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such Officers, respectively, or to whom any corporate trust matter is referred at the Corporate Trust Office because of such person’s knowledge of and familiarity with the particular subject. Trustee means Wells Fargo Bank, National Association, and any successors or assigns, in its capacity as trustee under this Indenture. Trustee Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by or otherwise owing to the Trustee during the preceding Due Period in accordance with the Indenture, other than the Trustee Fee, including, without limitation, any expenses or indemnities incurred by the Trustee (and the Bank) in any of its capacities (including in its capacity as Collateral Administrator, Calculation Agent, Note Paying Agent, Income Note Paying Agent and Registrar). Trustee Fee means, with respect to any Payment Date, the fee payable to the Trustee in an aggregate amount equal to 0.0180% per annum of the CDS Principal Balance as of the first day of the related Due Period; provided that in no event shall, so long as any Class of Rated Notes remains Outstanding, such fee be an annual amount less than U.S.$40,000. UCC means the Uniform Commercial Code as in effect in the State of New York. Underlying Instrument means the agreement pursuant to which a Pledged Security has been issued or created and each other agreement that governs the terms of or secures the obligations represented by such Pledged Security or of which the holders of such Pledged Security are the beneficiaries. Uninvested Proceeds means, at any time, the net proceeds received by the Issuer on the Closing Date from the initial issuance of the Rated Notes and Income Notes, to the extent such proceeds have not theretofore been invested in Collateral Debt Securities. Uninvested Proceeds Account has the meaning specified in Section 10.4. United States or U.S. means the United States of America, including the States thereof and the District of Columbia. 50

Unregistered Securities has the meaning specified in Section 5.17(c). U.S. Person has the meaning given in Regulation S under the Securities Act. USA PATRIOT Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56 (2001). Weighted Average Fixed Rate Coupon means, as of any Measurement Date, the sum (rounded up to the next 0.001%): (a)

obtained by (i) multiplying the Principal Balance of each Fixed Rate Collateral Debt Security (except Collateral Debt Securities that are currently deferring interest) held in the portfolio as of such date by the then-current interest rate, (ii) summing the amounts determined pursuant to clause (i) for all Fixed Rate Collateral Debt Securities held in the portfolio as of such date and (iii) dividing such sum by the aggregate Principal Balance of all Fixed Rate Collateral Debt Securities held in the portfolio as of such date; provided that for purposes of calculating the Weighted Average Fixed Rate Coupon of Collateral Debt Securities that are Defaulted Securities, the Written Down Amount with respect to Written Down Securities and Equity Securities will be excluded, except for those Defaulted Securities that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument; plus

(b)

if the number obtained pursuant to the calculations in clause (a) is less than 6.15%, the Spread Excess.

Weighted Average Life means, on any Calculation Date with respect to all Collateral Debt Securities (excluding any Defaulted Securities), the number obtained by the Collateral Advisor by (i) summing the products obtained by multiplying (a) the Average Life at such time of each

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Debt Security by (b) the outstanding Principal Balance of such Collateral Debt Security and (ii) dividing such sum by the aggregate Principal Balance at such time of all Collateral Debt Securities. Weighted Average Life Test means a test that shall be satisfied as of any Measurement Date during any period set forth below if the Weighted Average Life of all Collateral Debt Securities as of such Measurement Date is less than or equal to the number of years set forth in the table below: As of an y C alculation Date O ccurrin g Du rin g th e Pe riod Be low

W e ighte d Ave rage Life (in Ye ars)

Closing Date – < 1.0 year >1.0 year – < 2.0 years >2.0 years – < 53.0 years >3.0 years – < 4.0 years >4.0 years – < 5.0 years >5.0 years – Stated Maturity Date

9 years 8 years 7 years 6 years 5 years 4 years

Weighted Average Spread means, as of any Measurement Date, the sum (rounded up to the next 0.001%) of: (a)

the number obtained by (i) summing the products obtained by multiplying (A) for each Floating Rate Collateral Debt Security (other than any Defaulted Security, Written Down Security or 51

Processed and formatted by SEC Watch - Visit SECWatch.com

Deferred Interest PIK Bond), the stated spread above LIBOR at which interest accrues on such Collateral Debt Security as of such date and, for each Deemed Floating Rate Collateral Debt Security (other than any Defaulted Security, Written Down Security or Deferred Interest PIK Bond), the Deemed Floating Spread by (B) the Principal Balance of such Collateral Debt Security as of such date and (ii) dividing such sum by the aggregate Principal Balance of all Floating Rate Collateral Debt Securities and all Deemed Floating Rate Collateral Debt Securities (excluding, in each case, all Defaulted Securities, Written Down Securities and Deferred Interest PIK Bonds, except for those Defaulted Securities that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument); plus (b)

if the number obtained pursuant to the calculations in clause (a) is less than 1.87%, the Fixed Rate Excess.

Withholding Tax Security means a Collateral Debt Security if: (i)

any payments thereon to the Issuer are subject to withholding tax imposed by any jurisdiction (other than U.S. backup withholding tax or other similar withholding tax); and

(ii)

under the underlying documentation with respect to such Collateral Debt Security, the issuer of or counterparty with respect to such Collateral Debt Security is not required to make “gross-up” payments to the Issuer that cover the full amount of such withholding tax on an after-tax basis.

Written Down Amount means, with respect to each Written Down Security, the amount by which the original Principal Balance of such Written Down Security is reduced as notified by or on behalf of the related issuer or trustee to the holders of such Written Down Security (including appraisal reductions on CMBS Securities). Written Down Security means any Collateral Debt Security as to which the aggregate par amount of such Collateral Debt Security and all other securities secured by the same pool of collateral that rank pari passu with or senior in priority of payment to such Collateral Debt Security exceeds the aggregate par amount (including reserved interest or other amounts available for overcollateralization) of all collateral securing such securities (excluding defaulted collateral); provided that the Issuer shall immediately send notice to S&P by facsimile and e-mail upon any Collateral Debt Security becoming a Written Down Security. 1.2.

ASSUMPTIONS AS TO COLLATERAL DEBT SECURITIES, FEES, ETC.

The provisions set forth in this Section 1.2 shall be applied in connection with all calculations required to be made pursuant to this Indenture with respect to Scheduled Distributions on any Pledged Security, or any payments on any other assets included in the Collateral, and with respect to the income that can be earned on Scheduled Distributions on such Pledged Securities and on any other amounts that may be received for deposit in the Collection Account. (a)

All calculations with respect to Scheduled Distributions on the Pledged Securities securing the Rated Notes shall be made by the Issuer or the Collateral Administrator on behalf of the Issuer using (in the case of the Collateral Debt Securities) the assumptions that (i) no Pledged Security defaults or is sold, (ii) prepayment of any Pledged Security during any month occurs at a rate equal to the average rate of prepayment during the period of six consecutive months immediately preceding the current month (or, with respect to any Pledged Security that has not been outstanding for at least six consecutive 52

Processed and formatted by SEC Watch - Visit SECWatch.com

calendar months, at the rate of prepayment assumed at the time of issuance of such Pledged Security), (iii) any clean-up call with respect to a Pledged Security will be exercised when economic to the Person or Persons entitled to exercise such call and (iv) no other optional redemption of any Pledged Security will occur except for those that have actually occurred or as to which irrevocable notice thereof shall have been given. (b)

For purposes of determining compliance with the Interest Coverage Tests, except as otherwise specified in the Interest Coverage Tests, there shall be excluded all payments in respect of Defaulted Securities and Deferred Interest PIK Bonds unless the Trustee or Collateral Advisor has actual knowledge such payments will be made in Cash and will be received on or before the Due Date therefor and all other scheduled payments (whether of principal, interest, fees or other amounts) including payments to the Issuer under any Hedge Agreement, as to which the Trustee or Collateral Advisor has actual knowledge will not be made in Cash or will not be received when due. For purposes of calculating the Class A Interest Coverage Ratio, the Class B Interest Coverage Ratio and the Class C Interest Coverage Ratio: (1)

the expected interest income on Collateral Debt Securities and Eligible Investments and the expected interest payable on the Rated Notes and amounts, if any, payable under the Hedge Agreement will be calculated using the interest rates applicable thereto on the applicable date of determination;

(2)

accrued original issue discount on Eligible Investments will be deemed to be a scheduled interest payment thereon due on the date such original issue discount is scheduled to be paid; and

(3)

it will be assumed that no principal payments are made on the Rated Notes during the applicable periods.

(c)

For each Due Period, the Scheduled Distribution on any Pledged Security (other than (i) a Defaulted Security, (ii) a Deferred Interest PIK Bond or (iii) an Equity Security, which, in each case except as otherwise provided herein, shall be assumed to have a Scheduled Distribution of zero and with respect to any Written Down Security, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount) shall be the sum of (x) the total amount of payments and collections in respect of such Pledged Security (including the proceeds of the sale of such Pledged Security received during the Due Period) that, if paid as scheduled, will be available in the Collection Account at the end of the Due Period for payment on the Rated Notes or other amounts payable pursuant to this Indenture and of certain expenses of the Issuer and the Co-Issuer plus (y) any such amounts received in prior Due Periods that were not disbursed on a previous Payment Date (provided that such sum shall be computed without regard to any amounts excluded from the determination of compliance with the Coverage Tests pursuant to Section 1.2(b)).

(d)

Subject to Section 1.2(b), each Scheduled Distribution receivable with respect to a Pledged Security shall be assumed to be received on the applicable Due Date, and each such Scheduled Distribution shall be assumed to be immediately deposited in the Collection Account and, except as otherwise specified, to earn interest at the Assumed Reinvestment Rate. All such funds shall be assumed to continue to earn interest until the date on which they are required to be available in the Collection Account for transfer to the Payment Account and application, in accordance with the terms hereof, to payments 53

Processed and formatted by SEC Watch - Visit SECWatch.com

of principal of or interest on the Rated Notes or other amounts payable pursuant to this Indenture.

1.3.

(e)

With respect to any Collateral Debt Security as to which any interest or other payment thereon is subject to withholding tax of any Relevant Jurisdiction, each Distribution thereon shall, for purposes of the Coverage Tests and each Collateral Quality Test, be deemed to be payable net of such withholding tax unless the issuer thereof or obligor thereon is required to make additional payments sufficient on an after tax basis to cover any withholding tax imposed on payments to the Issuer with respect thereto (including in respect of any such additional payment). On any date of determination, the amount of any Scheduled Distribution due on any future date shall be assumed to be made net of any such uncompensated withholding tax based upon withholding tax rates in effect on such date of determination.

(f)

For purpose of determining compliance with the Interest Coverage Tests, it will be assumed that any amount required to be paid for taxes, filing and registration fees on the Payment Date immediately following the relevant Due Period shall be equal to the aggregate amount for which the Trustee has received an invoice or demand for payment on or prior to the relevant Measurement Date.

(g)

Any reference in the definition of “Senior Collateral Advisory Fee” or “Subordinate Collateral Advisory Fee” in Section 1.1(a) to an amount calculated with respect to a period at a per annum rate shall be computed on the basis of a 360 day year and the actual number of days elapsed during the applicable Due Period.

(h)

Unless otherwise specified, test calculations that evaluate to a percentage will be rounded to the nearest one-hundredth, and test calculations that evaluate to a number or decimal will be rounded to the nearest one hundredth.

(i)

Unless otherwise specified, all calculations required to be made and all reports which are to be prepared pursuant to this Indenture with respect to the Collateral Debt Securities, shall be made on the basis of the date on which the Issuer makes a commitment to acquire or to sell an asset, as applicable (the trade date), not the settlement date for such sale.

(j)

For the purpose of determining fees constituting Administrative Expenses payable under the Priority of Payments hereunder, periods longer or shorter than a one-month period shall be prorated based on the number of days in such period.

RULES OF CONSTRUCTION Unless the context otherwise clearly requires: (a)

the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined;

(b)

whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms;

(c)

the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; 54

Processed and formatted by SEC Watch - Visit SECWatch.com

(d)

the word “will” shall be construed to have the same meaning and effect as the word “shall”;

(e)

any definition of or reference to any agreement, statute, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein);

(f)

any reference herein to any Person, or to any Person in a specified capacity, shall be construed to include such Person’s successors and assigns or such Person’s successors in such capacity, as the case may be;

(g)

all references in this instrument to designated “Sections”, “clauses” and other subdivisions are to the designated Sections, clauses and other subdivisions of this instrument as originally executed, and the words “herein”, “hereof’, “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Section, clause or other subdivision; and

(h)

unless otherwise stated to the contrary herein, any payments to be made by the Issuer (or by the Trustee on behalf of the Issuer) in respect of a Class of Notes shall be payable pari passu between any subclasses of such Class of Notes. ARTICLE II THE RATED NOTES

2.1.

FORMS GENERALLY (a)

The Class A Notes, the Class B Notes and the Class C Notes offered and sold in reliance on Regulation S (each, a Regulation S Note) shall be issued in fully Registered form without interest coupons substantially in the form of the note attached as Exhibit A-1 (each, a Regulation S Global Note) with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office in Minneapolis, Minnesota, as custodian for DTC and registered in the name of DTC or a nominee of DTC, duly executed by the Co-Issuers and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be.

(b)

The Class A Notes, the Class B Notes and the Class C Notes offered and sold in the United States pursuant to an exemption from the registration requirements of the Securities Act (Rule 144A Notes) shall be issued in fully Registered form without interest coupons substantially in the form of the note attached as Exhibit A-2 (each, a Rule 144A Global Note), with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for DTC and registered in the name of DTC or a nominee of DTC, 55

Processed and formatted by SEC Watch - Visit SECWatch.com

duly executed by the Co-Issuers and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be.

2.2.

(c)

Regulation S Global Notes and Rule 144A Global Notes may also be exchanged under the limited circumstances set forth in Section 2.4 for notes in definitive fully Registered form without interest coupons (each, a Definitive Class A-C Note), which may be either a Regulation S Definitive Class A-C Note or a Rule 144A Definitive Class A-C Note, with such legends as may be applicable thereto, which shall be duly executed by the Issuer and the Co-Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided.

(d)

The Class D Notes offered or sold in the United States or to U.S. Persons pursuant to Rule 144A or another applicable exemption from registration under the Securities Act shall be issued in the form of physical certificates in definitive fully Registered form without interest coupons substantially in the form of the certificated note attached as Exhibit B (each, a Definitive Class D Note) with such legends as may be applicable thereto, which shall be duly executed by the Issuer and the Co-Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided.

(e)

The Co-Issuers in issuing the Rated Notes may use “CUSIP” or “private placement” numbers (if then generally in use), and, if so, the Trustee will indicate the “CUSIP” or “private placement” numbers of the Rated Notes in notices of redemption and related materials as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Rated Notes or as contained in any notice of redemption and related materials.

AUTHORIZED AMOUNT; APPLICABLE PERIODIC INTEREST RATE; STATED MATURITY DATE; DENOMINATIONS (a)

The aggregate principal amount of Rated Notes which may be issued under this Indenture may not exceed U.S.$377,000,000, excluding Rated Notes issued upon registration of, transfer of, or in exchange for, or in lieu of, other Rated Notes pursuant to Section 2.4, 2.5 or 8.5.

(b)

Such Rated Notes shall be divided into nine Classes having designations, original principal amounts, original Applicable Periodic Interest Rates and Stated Maturities as follows:

De signation

Class A-1 Notes Class A-2A Notes Class A-2B Notes Class B Notes Class C-IA Notes

O rigin al Prin cipal Am ou n t

Applicable Pe riodic In te re st Rate

Rate d Note S tate d Maturity Date

U.S.$294,000,000 U.S.$15,000,000 U.S.$5,000,000 U.S.$17,000,000 U.S.$10,000,000

LIBOR + 0.28% LIBOR + 0.50% 5.042% LIBOR + 0.85% LIBOR + 1.25%

2040 2040 2040 2040 2040

56

Processed and formatted by SEC Watch - Visit SECWatch.com

De signation

Class C-1B Notes Class C-2A Notes Class C-2B Notes Class D Notes

O rigin al Prin cipal Am ou n t

Applicable Pe riodic In te re st Rate

Rate d Note S tate d Maturity Date

U.S.$6,000,000 U.S.$12,000,000 U.S.$2,000,000 U.S.$16,000,000

5.804% LIBOR 1.55% 6.135% 6.458%

2040 2040 2040 2040

The Rated Notes will be issuable in minimum denominations of U.S.$500,000 and, in each case, only in integral multiples of U.S.$1,000 in excess of such minimum denominations. After issuance, (x) a Rated Note may fail to be in compliance with the minimum denomination requirement as a result of the repayment of principal thereon in accordance with the Priority of Payments and (y) the Class B Notes, the Class C Notes or the Class D Notes may fail to be in an amount which is an integral multiple of U.S.$1,000 due to the addition to the principal amount thereof of deferred interest.

2.3.

(c)

Interest shall accrue on the Aggregate Outstanding Amount of each Class of Rated Notes (determined as of the first day of each Interest Period and after giving effect to any payment of principal occurring on such day) from the Closing Date and will be payable in arrears on each Payment Date. Interest on each Class of Rated Notes and interest on Defaulted Interest will be calculated in accordance with the definition of Periodic Interest.

(d)

The Rated Notes shall be redeemable as provided in Section 9.

(e)

The Depositary for the Global Notes shall initially be DTC.

(f)

The Rated Notes shall be numbered, lettered or otherwise distinguished in such manner as may be consistent herewith, determined by the Authorized Officers of the Co-Issuers executing such Rated Notes as evidenced by their execution of such Rated Notes.

EXECUTION, AUTHENTICATION, DELIVERY AND DATING (a)

The Rated Notes shall be executed on behalf of the Co-Issuers by an Authorized Officer of each of the Co-Issuers. The signatures of such Authorized Officers on the Rated Notes may be manual or facsimile (including in counterparts).

(b)

Rated Notes bearing the manual or facsimile signatures of individuals who were at any time the Authorized Officers of either of the Co-Issuers shall bind such Person, notwithstanding the fact that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Rated Notes or did not hold such offices at the date of issuance of such Rated Notes.

(c)

At any time and from time to time after the execution and delivery of this Indenture, the Co-Issuers may deliver Rated Notes executed by the Co-Issuers or the Issuer, as the case may be, to the Trustee or the Authenticating Agent for authentication, and the Trustee or the Authenticating Agent, upon Issuer Order, shall authenticate and deliver such Rated Notes as provided in this Indenture and not otherwise. 57

Processed and formatted by SEC Watch - Visit SECWatch.com

2.4.

(d)

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

(e)

Rated Notes issued upon transfer, exchange or replacement of other Rated Notes shall be issued in authorized denominations reflecting the original aggregate principal amount of the Rated Notes so transferred, exchanged or replaced, but shall represent only the current Aggregate Outstanding Amount of the Rated Notes so transferred, exchanged or replaced. In the event that any Rated Note is divided into more than one Rated Note in accordance with this Section 2, the original principal amount of such Rated Note shall be proportionately divided among the Rated Notes delivered in exchange therefor and shall be deemed to be the original aggregate principal amount of such subsequently issued Rated Notes.

(f)

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

REGISTRATION, TRANSFER AND EXCHANGE OF RATED NOTES (a)

Registration of Rated Notes. The Trustee is hereby appointed as the registrar hereunder (the Note Registrar). The Trustee is hereby appointed as a transfer agent with respect to the Rated Notes (the Note Transfer Agent). The Note Registrar shall (acting solely for this purpose as agent for the Issuer) keep a register (the Note Register) at the Corporate Trust Office in which, subject to such reasonable regulations as it may prescribe, the Note Registrar shall provide for the registration of Rated Notes and the registration of transfers of Rated Notes. Upon any resignation or removal of the Note Registrar, the Issuer (after consultation with the Collateral Advisor) shall propose a replacement for approval by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class. The Co-Issuers may not terminate the appointment of the Note Registrar or any Note Transfer Agent without the consent of each Holder of Rated Notes. Subject to this Section 2.4, upon surrender for registration of transfer of any Rated Notes at the office or agency of the CoIssuers to be maintained as provided in Section 7.2, the Co-Issuers shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Rated Notes of any authorized denomination and of a like aggregate principal amount. At the option of the Holder, Rated Notes may be exchanged for Rated Notes of like terms, in any authorized denominations and of like aggregate principal amount, upon surrender of the Rated Notes to be exchanged at such office or agency. Whenever any Rated Note is surrendered for exchange, the Co-Issuers shall execute and the Trustee shall authenticate and deliver the Rated Notes that the Rated Noteholder making the exchange is entitled to receive. 58

Processed and formatted by SEC Watch - Visit SECWatch.com

All Rated Notes issued and authenticated upon any registration of transfer or exchange of Rated Notes shall be the valid obligations of the Co-Issuers, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Rated Notes surrendered upon such registration of transfer or exchange. Every Rated Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Co-Issuers and the Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to a Holder for any registration of transfer or exchange of Rated Notes, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith and delivery charges, if any, not made by regular mail. (b)

Transfers of Class A Notes, Class B Notes and Class C Notes (1)

Subject to Section 2.4(b)(4), exchanges or transfers of beneficial interests in a Global Note may be made only in accordance with the rules and regulations of the Depositary and the transfer restrictions contained in the legend on such Global Note and exchanges or transfers of interests in a Global Note may be made only in accordance with the following: (i)

Subject to Section 2.4(b)(1)(ii) through (vi), transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor’s nominee.

(ii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Regulation S Global Note for a beneficial interest in a Rule 144A Global Note upon provision to the Trustee and the Co-Issuers of a written certification in the form of Exhibit C-1 (a Rule 144A Transfer Certificate).

(iii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Rule 144A Global Note for a beneficial interest in a Regulation S Global Note upon provision to the Trustee and the Co-Issuers of a written certification substantially in the form of Exhibit C-2 (a Regulation S Transfer Certificate).

(iv)

An owner of a beneficial interest in a Regulation S Global Note may transfer such interest in the form of a beneficial interest in such Regulation S Global Note without the provision of written certification; provided that (1) such transfer is made to a Person who is not a U.S. Person in an offshore transaction in reliance on an exemption from the registration requirements of the Securities Act under Regulation S and (2) the transferee, by purchase of such interest in such Regulation S Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Regulation S Transfer Certificate. 59

(v)

An owner of a beneficial interest in a Rule 144A Global Note may transfer such interest in the form of a beneficial interest in such Rule 144A Global Note without the provision of written certification; provided that the transferee, by purchase of such interest in such Rule 144A Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Rule 144A Transfer Certificate.

(vi)

In the event Definitive Class A-C Notes are issued pursuant to Section 2.4(b)(5), the Trustee shall cause the transfer of (i) any beneficial interest in a Global Note for a Definitive A-C Note that is a Regulation S Note (a Regulation S Definitive Note), upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any beneficial interest in a Global Note for a Definitive A-C Note that is a Rule 144A Note (a Rule 144A Definitive Note), upon provision to the Trustee, the Co-Issuers and the Note Registrar of a Rule 144A Transfer Certificate.

(2)

Subject to Section 2.4(b)(4), in the event Definitive Class A-C Notes are issued pursuant to Section 2.4(b)(5), the Trustee shall cause the transfer of (i) any Definitive A-C Note for a beneficial interest in a Regulation S Global Note, upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any Definitive A-C Note for a beneficial interest in a Rule 144A Global Note, upon provision to the Trustee and the Co-Issuers of a Rule 144A Transfer Certificate.

(3)

Upon acceptance for exchange or transfer of a beneficial interest in a Global Note for a Definitive A-C Note, or upon acceptance for exchange or transfer of a Definitive A-C Note for a beneficial interest in a Global Note, each as provided herein, the Trustee shall approve the instruction at the Depositary to adjust the principal amount of such Global Note on its records to evidence the date of such exchange or transfer and the change in the principal amount of such Global Note.

(4)

Subject to the restrictions on transfer and exchange set forth in this Section 2.4 and to any additional restrictions on

Processed and formatted by SEC Watch - Visit SECWatch.com

transfer or exchange specified in the Definitive Class A-C Notes, the Holder of any Definitive A-C Note may transfer or exchange the same in whole or in part (in a principal amount equal to the minimum authorized denomination or any larger authorized amount) by surrendering such Definitive A-C Note at the Corporate Trust Office or at the office of any Note Transfer Agent, together with (x) in the case of any transfer, an executed instrument of assignment and (y) in the case of any exchange, a written request for exchange. Following a proper request for transfer or exchange, the Trustee shall (provided it has available in its possession an inventory of Definitive Class A-C Notes), within five Business Days of such request if made at such Corporate Trust Office, or within ten Business Days if made at the office of a Note Transfer Agent (other than the Trustee), authenticate and make available at such Corporate Trust Office or at the office of such Note Transfer Agent, as the case may be, to the transferee (in the case of transfer) or Rated Noteholder (in the case of exchange) or send by first class mail (at the risk of the transferee in the case of transfer or Rated Noteholder in the case of exchange) to such address as the transferee or Rated Noteholder, as applicable, may request, a Definitive A-C Note or Notes, as the case may require, for a like 60

Processed and formatted by SEC Watch - Visit SECWatch.com

aggregate principal amount and in such authorized denomination or denominations as may be requested. The presentation for transfer or exchange of any Definitive Note shall not be valid unless made at the Corporate Trust Office or at the office of a Note Transfer Agent or by a duly authorized attorney-in-fact. Beneficial interests in Global Notes shall be exchangeable for Definitive Class A-C Notes only under the limited circumstances described in Section 2.4(b)(5). (5)

Interests in a Global Note deposited with or on behalf of the Depositary pursuant to Section 2.1 hereunder shall be transferred (A) to the Beneficial Owners thereof in the form of Definitive Class A-C Notes only if such transfer otherwise complies with this Section 2.4 (including Section 2.4(b)(1) and (2) and (1) the Depositary notifies the Issuer that it is unwilling or unable to continue as Depositary for the Rated Notes, (2) the Depositary ceases to be a “clearing agency” registered under the Exchange Act and a successor Depositary is not appointed by the Issuer within 90 days of such notice or (3) as a result of any amendment to or change in the laws or regulations of the Cayman Islands, or of any authority therein or thereof having power to tax, or in the interpretation or administration of such laws or regulations which become effective on or after the Closing Date, the Issuer, the Trustee or any Note Paying Agent becomes aware that it is or will be required to make any deduction or withholding from any payment in respect of the Global Notes which would not be required if the Global Notes were not represented by a global certificate or (B) to the purchaser thereof in the form of one or more Definitive Notes in accordance with the provisions of Section 2.4(b)(1).

(6)

If interests in any Global Note are to be transferred to the Beneficial Owners thereof in the form of Definitive Class A-C Notes pursuant to Section 2.4(b)(5), such Global Note shall be surrendered by the Depositary, or its custodian on its behalf, to the Corporate Trust Office or to the Note Transfer Agent located in Minneapolis, Minnesota and the Trustee shall authenticate and deliver without charge, upon such transfer of interests in such Global Note, an equal aggregate principal amount of Definitive Notes of authorized denominations. The Definitive Class A-C Notes transferred pursuant to this Section 2.4 shall be executed, authenticated and delivered only in the denominations specified in Section 2.2(b) and registered in such names as the Depositary shall direct in writing.

(7)

For so long as one or more Global Notes are Outstanding: (i)

the Trustee and its directors, officers, employees and agents may deal with the Depositary for all purposes (including the making of distributions on, and the giving of notices with respect to, the Global Notes);

(ii)

unless otherwise provided herein and subject to Section 2.4(b)(7)(i) above, the rights of Beneficial Owners shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such Beneficial Owners and the Depositary; 61

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

(iii)

for purposes of determining the identity of and principal amount of Rated Notes beneficially owned by a Beneficial Owner, the records of the Depositary shall be conclusive evidence of such identity and principal amount and the Trustee may conclusively rely on such records when acting hereunder;

(iv)

the Depositary will make book-entry transfers among the Depositary Participants of the Depositary and will receive and transmit distributions of principal of and interest on the Global Notes to such Depositary Participants; and

(v)

the Depositary Participants of the Depositary shall have no rights under this Indenture under or with respect to any of the Global Notes held on their behalf by the Depositary, and the Depositary may be treated by the Trustee and its agents, employees, officers and directors as the absolute owner of the Global Notes for all purposes whatsoever.

Transfers of Class D Notes. (1)

If a holder of a beneficial interest in a Definitive Class D Note wishes at any time to transfer its interest in such Definitive Class D Note, such holder may transfer or cause the transfer of such interest for an equivalent beneficial interest in one or more such Definitive Class D Notes as provided below. Upon receipt by the Issuer and the Note Registrar of (A) such holder’s Definitive Class D Note properly endorsed for assignment to the transferee and (B) a certificate in the form of Exhibit C-3 (a Definitive Class D Note Transfer Certificate) given by the transferee of such beneficial interest then the Note Registrar shall cancel such Definitive Class D Note, record the transfer in the Note Register and authenticate and deliver one or more Definitive Class D Notes bearing the same designation as the Definitive Class D Notes endorsed for transfer, registered in the names specified in the assignment described in clause (A) above, in principal amounts designated by the transferee (the Class and the aggregate of such amounts being the same as the beneficial interest in the Definitive Class D Notes surrendered by the transferor), and in the minimum denominations and integral multiples in excess thereof. In addition, the Note Registrar shall not register any transfer of Definitive Class D Notes to a proposed transferee of Definitive Class D Notes that has represented that it is a Benefit Plan Investor or a Controlling Person if the transfer would result in Benefit Plan Investors owning 25% or more of the value of the outstanding Definitive Class D Notes (as determined without regard to interests held by Controlling Persons, and otherwise contemplated by the applicable regulations under ERISA) immediately after such transfer, based on assurances received from investors. Without limiting the generality of the forgoing, the Note Registrar shall not register any transfer of Definitive Class D Notes represented by Regulation S Notes to a proposed transferee of such Definitive Class D Notes that has represented that it is or may become a Benefit Plan Investor or a Controlling Person. Without limiting the generality of the foregoing, a transfer of beneficial interests in a Definitive Class D Note will not be permitted unless an ERISA Restriction Certificate is obtained from each transferee of a Definitive Class D Note, for the benefit of the Issuer, the Trustee and the Initial Purchasers, (i) in the case of a Definitive Class D Note not represented by a Regulation S Note, regarding whether it is, or is not and will not 62

Processed and formatted by SEC Watch - Visit SECWatch.com

be, a Benefit Plan Investor or Controlling Person, or (ii) in the case of a Definitive Class D Note represented by a Regulation S Note, to the effect that it is not and will not be a Benefit Plan Investor or Controlling Person. Any purported transfer in violation of the foregoing requirements shall be null and void ab initio, and the Note Registrar shall not register any such purported transfer and shall not authenticate and deliver such Definitive Class D Notes. (2)

(d)

If a holder of a beneficial interest in one or more Definitive Class D Notes wishes at any time to exchange its interest in such Definitive Class D Notes for an interest in one or more such Definitive Class D Notes of different principal amounts, such holder may exchange or cause the exchange of such interest for an equivalent beneficial interest in the Definitive Class D Notes bearing the same designation as the Definitive Class D Notes endorsed for exchange as provided below. Upon receipt by the Note Registrar of (A) such holder’s Definitive Class D Notes properly endorsed for such exchange and (B) written instructions from such holder designating the number and principal amounts of the applicable Definitive Class D Notes to be issued (the aggregate principal amounts of such Definitive Class D Notes being the same as the Definitive Class D Notes surrendered for exchange), then the Note Registrar shall cancel such Definitive Class D Notes, record the exchange in the Note Register and authenticate and deliver one or more Definitive Class D Notes bearing the same designation endorsed for exchange, registered in the same names as the Definitive Class D Notes surrendered by such holder or such different names as are specified in the endorsement described in clause (A) above, in different principal amounts designated by such holder (the Class and the aggregate principal amounts being the same as the beneficial interest in the Definitive Class D Notes surrendered by such holder), and the minimum denominations and integral multiples in excess.

Denominations; Qualified Purchaser Status. No Person may hold a beneficial interest in any Rated Note except in a denomination authorized for the Rated Notes of such Class under Section 2.2(b). In addition, no transfer of a Rated Note (or any interest therein) may be made to any Person that is a U.S. Person unless such Person is (A) a Qualified Institutional Buyer (or, with respect to the Class D Notes only, an Institutional Accredited Investor) or an NS Purchaser) and (B) a Qualified Purchaser. In addition, no transfer of a Rated Note (or any interest therein) may be made to any Person that is a U.S. Person unless such Person (A) was not formed for the purpose of investing in either of the Co-Issuers (except when each beneficial owner of the purchaser is a Qualified Purchaser, (B) has received the necessary consent from its beneficial owners if it is a private investment company formed before April 30, 1996, (C) 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, (D) is not a pension, profit, sharing or other retirement trust fund or plan in which the partners, beneficiaries or participants, as applicable, may designate the particular investments to be made, and in a transaction that may be effected without loss of any applicable Investment Company Act exemption, (E) will provide notice to any subsequent transferee of the transfer restrictions provided in the legend, (F) will hold and transfer in a principal amount of not less than U.S.$500,000, for it or for each account for which it is acting and (G) will provide the Issuer from time to time such information as it may reasonably request in order to ascertain compliance with the foregoing. Any purported transfer that is not in compliance with this Section 2.4 or the legends on the Rated Notes 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 63

Processed and formatted by SEC Watch - Visit SECWatch.com

or any intermediary. If any purported transfer of Rated Notes or any beneficial interest therein to a purported transferee does not comply with the requirements set forth in this Section 2.4 or the legends on the Rated Notes, then the purported transferor of such Rated Notes or beneficial interest therein shall be required to cause the purported transferee to surrender the Rated Notes or any beneficial interest therein in return for a refund of the consideration paid therefor by such transferee (together with interest thereon) or to cause the purported transferee to dispose of such Rated Notes or beneficial interest promptly in one or more open market sales to one or more persons each of whom satisfies the requirements of this Section 2.4 and the legends on the Rated Notes and such purported transferor shall take, and shall cause such transferee to take, all further action necessary or desirable, in the judgment of the Trustee, to ensure that such Rated Notes or any beneficial interest therein are held by persons in compliance therewith. (e)

Requirement to Sell. (1)

If, notwithstanding the restrictions set forth in this Section 2.4, either of the Co-Issuers determines that any beneficial owner of a Rule 144A Note (A) is a U.S. Person and (B) is not a Qualified Institutional Buyer and also a Qualified Purchaser, either of the Co-Issuers may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Rated Note (or interest therein) to a Person that is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser, with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (x) upon written direction from the Issuer, the Trustee shall, and is hereby irrevocably authorized by such beneficial owner to cause its interest in such Rated Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9-611 of the UCC as applied to securities that are customarily sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser and (y) pending such transfer, no further payments will be made in respect of such Rated Note (or beneficial interest therein) held by such beneficial owner.

(2)

If, notwithstanding the restrictions set forth in this Section 2.4, either of the Co-Issuers determines that any beneficial owner of a Regulation S Note is (A) a U.S. Person or (B) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), either of the Co-Issuers may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Rated Note (or interest therein) to a Person that is not (1) a U.S. Person or (2) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (x) upon written direction from the Issuer, the Trustee shall, and is hereby irrevocably authorized by such beneficial owner to cause its interest in such Rated Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9-611 of the UCC as applied to securities that are customarily sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is neither (1) a U.S. Person nor (2) a Benefit 64

Processed and formatted by SEC Watch - Visit SECWatch.com

Plan Investor or a Controlling Person (for the purposes of ERISA) and (y) pending such transfer, no further payments will be made in respect of such Rated Note (or beneficial interest therein) held by such beneficial owner. (f)

Legends. Any Rated Note issued upon the transfer, exchange or replacement of Rated Notes shall bear such applicable legend set forth in the relevant Exhibit hereto unless there is delivered to the Trustee, the Note Registrar, the Issuer and the Co-Issuer such satisfactory evidence, which may include an Opinion of Counsel, as may be reasonably required by any of the Trustee, the Note Registrar, the Issuer and the Co-Issuer to the effect that neither such applicable legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A and to ensure that neither of the Co-Issuers nor the pool of Collateral becomes an investment company required to be registered under the Investment Company Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Issuer and the Co-Issuer, shall authenticate and deliver Rated Notes that do not bear such applicable legend.

(g)

Expenses; Acknowledgment of Transfer. Transfer, registration and exchange shall be permitted as provided in this Section 2.4 without any charge to the Rated Noteholder except for a sum sufficient to cover any tax or other governmental charge payable in connection therewith or the expenses of delivery (if any) not made by regular mail and payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith pursuant to Section 2.4(a). Registration of the transfer of a Rated Note by the Trustee shall be deemed to be the acknowledgment of such transfer on behalf of the Co-Issuers.

(h)

Surrender upon Final Payment. Upon final payment due on the date on which all outstanding unpaid principal of a Rated Note becomes due and payable as therein or herein provided, whether at the Stated Maturity Date or by declaration of acceleration, call for redemption or otherwise, the Holder thereof shall present and surrender such Rated Note at the Corporate Trust Office of the Trustee in Minneapolis, Minnesota.

(i)

Repurchase and Cancellation of Rated Notes. The Co-Issuers will not purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the Outstanding Rated Notes except upon the redemption of the Rated Notes in accordance with the terms of this Indenture and the Rated Notes. The Co-Issuers will promptly cancel all Rated Notes acquired by them pursuant to any payment, purchase, redemption, prepayment or other acquisition of Rated Notes pursuant to any provision of this Indenture and no Rated Notes may be issued in substitution or exchange for any such Rated Notes.

(j)

Compliance with Transfer Restrictions. Notwithstanding anything contained herein to the contrary, neither the Trustee nor the Note Registrar shall be responsible for ascertaining whether any transfer complies with the registration provisions of or exemptions from the Securities Act, applicable state securities laws, the rules of any Depositary, ERISA, the Code or the Investment Company Act; provided that if a certificate is specifically required by the express terms of this Section 2.4 to be delivered to the Trustee or the Note Registrar by a purchaser or transferee of a Rated Note, the Trustee or the Note Registrar, as the case may be, shall be under a duty to receive and examine the same to determine whether the transfer contemplated thereby substantially complies with the express terms of this Indenture and shall promptly notify the party delivering the same if such transfer does not comply with such terms. To the extent applicable to the Issuer, the Issuer shall impose additional restrictions to comply with the 65

Processed and formatted by SEC Watch - Visit SECWatch.com

USA PATRIOT Act, and any such transfer restrictions shall be binding on each Holder or Beneficial Owner of a Rated Note. The Issuer shall notify the Trustee and the Note Registrar of the imposition of any such transfer restrictions. (k)

2.5.

Physical Rated Notes. The Co-Issuers will promptly make available to the Trustee without charge a reasonable supply of Definitive Notes in definitive, fully Registered Form, without interest coupons.

MUTILATED, DEFACED, DESTROYED, LOST OR STOLEN RATED NOTES

If (a) any mutilated or defaced Rated Note is surrendered to a Note Transfer Agent, or if there shall be delivered to the Co-Issuers or the Issuer, the Trustee and the Note Transfer Agent (each, a Specified Person) evidence to their reasonable satisfaction of the destruction, loss or theft of any Rated Note, and (b) there is delivered to the Specified Persons such security or indemnity as may reasonably be required by them to save each of them harmless then, in the absence of notice to the Specified Persons that such Rated Note has been acquired by a bona fide purchaser, the Co-Issuers or the Issuer shall execute and shall direct the Trustee to authenticate, and upon Issuer Request the Trustee shall authenticate and deliver, in lieu of any such mutilated, defaced, destroyed, lost or stolen Rated Note, a new Rated Note of the same Class as such mutilated, defaced, destroyed, lost or stolen Rated Note, of like tenor (including the same date of issuance) and equal principal amount, registered in the same manner, dated the date of its authentication, bearing interest from the date to which interest has been paid on the mutilated, defaced, destroyed, lost or stolen Rated Note and bearing a number not contemporaneously outstanding. If, after delivery of such new Rated Note, a bona fide purchaser of the predecessor Rated Note presents for payment, transfer or exchange such predecessor Rated Note, the Specified Persons shall be entitled to recover such new Rated Note from the Person to whom it was delivered or any Person taking therefrom, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Specified Persons in connection therewith. In case any such mutilated, defaced, destroyed, lost or stolen Rated Note has become due and payable, the Co-Issuers or the Issuer in their or its (as applicable) discretion may, instead of issuing a new Rated Note, pay such Rated Note without requiring surrender thereof except that any mutilated Rated Note shall be surrendered. Upon the issuance of any new Rated Note under this Section 2.5, the Co-Issuers, the Trustee or any Note Transfer Agent may require the payment by the registered Holder thereof of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Rated Note issued pursuant to this Section 2.5 in lieu of any mutilated, defaced, destroyed, lost or stolen Rated Note, shall constitute an original additional contractual obligation of the Co-Issuers and such new Rated Note shall be entitled, subject to the second paragraph of this Section 2.5, to all the benefits of this Indenture equally and proportionately with any and all other Rated Notes duly issued hereunder. The provisions of this Section 2.5 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, defaced, destroyed, lost or stolen Rated Notes. 66

Processed and formatted by SEC Watch - Visit SECWatch.com

2.6.

PAYMENT OF PRINCIPAL AND INTEREST; RIGHTS PRESERVED (a)

Each Class of Rated Notes shall accrue interest during each Interest Period applicable to such Class in the manner and at the Applicable Periodic Interest Rate specified in Section 2.2. Interest on each Class of Rated Notes shall be due and payable on each Payment Date; provided that (i) interest on the Class A-2 Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A-1 Notes (together with any Defaulted Interest thereon), (ii) interest on the Class B Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), (iii) interest on the Class C-1 Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes and on the Class B Notes (together with any Defaulted Interest thereon), (iv) interest on the Class C-2 Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon) and on the Class C-1 Notes (together with any Defaulted Interest thereon), (v) interest on the Class D Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes, on the Class B Notes (together with any Defaulted Interest thereon) and on the Class C Notes (together with any Defaulted Interest thereon), and (vi) interest on all Rated Notes is subordinated in right of payment to the prior payment in full on each Payment Date of other amounts in accordance with Section 11.1. Except as provided in Section 5.5, no payment shall be made by the Co-Issuers hereunder other than on a Payment Date. So long as any Class A Notes are Outstanding, any Class B Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class B Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class B Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes or Class B Notes are Outstanding, any Class C-1 Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class C-1 Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class C-1 Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes or Class C-1 Notes are Outstanding, any Class C-2 Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class C-2 Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class C-2 Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, any Class D Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class D Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which 67

Processed and formatted by SEC Watch - Visit SECWatch.com

funds are available to pay such Class D Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. (b)

(c)

The principal of each Rated Note shall be payable no later than the Stated Maturity Date thereof unless the unpaid principal of such Rated Note becomes due and payable at an earlier date by declaration of acceleration, call for redemption or otherwise; provided that: (1)

so long as any Class A-1 Notes are Outstanding, except as provided in Section 9 and Section 11.1(b)(13) and (14), the payment of principal of the Class A-2 Notes, the Class B Notes, the Class C Notes and the Class D Notes (x) may only occur after principal of the Class A-1 Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A-1 Notes and other amounts payable in accordance with Section 11.1;

(2)

so long as any Class A Notes are Outstanding, except as provided in Section 9 and Section 11.1(b)(13) and (14), the payment of principal of the Class B Notes, the Class C Notes and the Class D Notes (x) may only occur after principal of the Class A Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and other amounts payable in accordance with Section 11.1;

(3)

so long as any Class A Notes or Class B Notes are Outstanding, except as provided in Section 11.1(b)(13) and (14), the payment of principal of the Class C Notes and the Class D Notes (x) may only occur after principal of the Class A Notes and Class B Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and Class B Notes and other amounts payable in accordance with Section 11.1;

(4)

so long as any Class A Notes, Class B Notes or Class C-1 Notes are Outstanding, except as provided in Section 9 and Section 11.1(b)(13) and (14), the payment of principal of the Class C-2 Notes and the Class D Notes (x) may only occur after principal of the Class A Notes, the Class B Notes and the Class C-1 Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes and the Class C-1 Notes and other amounts payable in accordance with Section 11.1;

(5)

so long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, except as provided in Section 9 and Section 11(b)(13) and (14), the payment of principal of the Class D Notes (x) may only occur after principal of the Class A Notes, the Class B Notes and the Class C Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes and the Class C Notes and other amounts payable in accordance with Section 11.1.

So long as the Coverage Tests are satisfied, principal will not be payable on any Class of Rated Notes except (i) upon the occurrence of a Redemption, (ii) in the case of any Class B Notes, Class C Notes or Class D Notes, to pay amounts in respect of the Class B 68

Processed and formatted by SEC Watch - Visit SECWatch.com

Cumulative Applicable Periodic Interest Shortfall Amount, the Class C Cumulative Applicable Periodic Interest Shortfall Amount or the Class D Cumulative Applicable Periodic Interest Shortfall Amount, as the case may be, in accordance with Section 11.1 and (iii) on each Payment Date, in accordance with Section 11.1. (d)

As a condition to the payment of any principal of or interest on any Rated Note without the imposition of withholding tax, any Note Paying Agent shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor 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 Internal Revenue Service Form W-8 (or applicable successor 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) or other certification acceptable to it to enable the Co-Issuers, the Trustee and any Note Paying Agent to determine their duties and liabilities with respect to any taxes or other charges that they may be required to pay, deduct or withhold in respect of such Rated Note or the Holder of such Rated Note under any present or future law or regulation of the Cayman Islands or the United States or any present or future law or regulation of any political subdivision thereof or taxing authority therein or to comply with any reporting or other requirements under any such law or regulation.

(e)

All payments made by the Issuer under the Rated Notes will be made without any deduction or withholding for or on the account of any tax unless such deduction or withholding is required by applicable law, as modified by the practice of any relevant governmental authority, then in effect. If the Issuer is so required to deduct or withhold, then neither the Issuer nor the Co-Issuer will be obligated to pay any additional amounts in respect of such withholding or deduction.

(f)

Payments in respect of principal of and interest on the Rated Notes shall be payable by wire transfer in immediately Available Funds to a Dollar account maintained by the Rated Noteholders in accordance with wire transfer instructions received by any Note Paying Agent on or before the Record Date or, if no wire transfer instructions are received by a Note Paying Agent, by a Dollar check drawn on a bank in the United States mailed to the address of such Rated Noteholder as it appears on the Note Register at the close of business on the Record Date for such payment.

(g)

The principal of and interest on any Rated Note which is payable on a Redemption Date or in accordance with Section 11.1 on a Payment Date and is punctually paid or duly provided for on such Redemption Date or Payment Date shall be paid to the Person in whose name that Rated Note (or one or more predecessor Rated Notes) is registered at the close of business on the Record Date for such payment. All such payments that are mailed or wired and returned to the Note Paying Agent shall be held for payment as herein provided at the office or agency of the Co-Issuers to be maintained as provided in Section 7.2. Payments to Holders of the Rated Notes of each Class shall be made in the proportion that the Aggregate Outstanding Amount of the Rated Notes of such Class registered in the name of each such Holder on the Record Date for such payment bears to the Aggregate Outstanding Amount of all Rated Notes of such Class on such Record Date. 69

(h)

Payment of any Defaulted Interest may be made in any other lawful manner in accordance with Section 11.1 if notice of such payment is given by the Trustee to the Co-Issuers and the Rated Noteholders, and such manner of payment shall be deemed practicable by the Trustee.

(i)

All reductions in the principal amount of a Rated Note (or one or more predecessor Rated Notes) effected by payments of installments of principal made on any Payment Date or Redemption Date shall be binding upon all future Holders of such Rated Note and of any Rated Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Rated Note.

(j)

Notwithstanding anything to the contrary herein, the obligations of the Co-Issuers or the Issuer, as the case may be, under the Rated Notes or this Indenture or arising in connection herewith are limited recourse obligations of the Co-Issuers or the Issuer, as the case may be, payable solely from the Collateral and following realization of the Collateral, all obligations of and all claims against the Co-Issuers or the Issuer, as the case may be, hereunder or arising in connection herewith shall be extinguished and shall not thereafter revive. No recourse shall be had against any Officer, member, director, employee, security holder or incorporator of the Co-Issuers or their respective successors or assigns for the payment of any amounts payable under the Rated Notes or this Indenture. It is understood that the foregoing provisions of this Section 2.6(j) shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or agreement which is part of the Collateral or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Rated Notes or secured by this Indenture until such Collateral has been realized, whereupon any outstanding indebtedness or obligation shall be extinguished. It is further understood that the foregoing provisions of this Section 2.6(j) shall not limit the right of any Person to name the Issuer or the Co-Issuer as a party defendant in any action or suit or in the exercise of any other remedy under the Rated Notes or this Indenture, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity.

(k)

Subject to the foregoing provisions of this Section 2.6 and the provisions of Sections 2.4 and 2.5, each Rated Note delivered

Processed and formatted by SEC Watch - Visit SECWatch.com

under this Indenture and upon registration of transfer of or in exchange for or in lieu of any other Rated Note shall carry the rights of unpaid interest and principal that were carried by such other Rated Note. ARTICLE III CONDITIONS PRECEDENT 3.1.

GENERAL PROVISIONS

The Rated Notes may be executed by the Co-Issuers and delivered to the Trustee for authentication and thereupon the same shall be authenticated and delivered by the Trustee (or an Authenticating Agent on its behalf) upon Issuer Request, upon receipt by the Trustee of the following: (a)

(1)

an Officer’s certificate of the Issuer, (A) evidencing the authorization by Board Resolution of the execution and delivery of, and the performance of the Issuer’s obligations under, each Transaction Document, in each case as may be amended on or prior to, and as in effect on, the Closing Date, and the execution, 70

Processed and formatted by SEC Watch - Visit SECWatch.com

authentication and delivery of the Rated Notes and specifying the Stated Maturity Date, the principal amount and the Applicable Periodic Interest Rate with respect to each Class of Rated Notes to be authenticated and delivered, and (B) certifying that (1) the attached copy of such Board Resolution is a true and complete copy thereof, (2) such resolutions have not been rescinded and are in full force and effect on and as of the Closing Date and (3) the Officers authorized to execute and deliver such documents hold the offices and have the signatures indicated thereon; and

(b)

(c)

(2)

an Officer’s certificate of the Co-Issuer (A) evidencing the authorization by Board Resolution of the execution and delivery of, and the performance of the Co-Issuer’s obligations under, this Indenture, as may be amended on or prior to, and as in effect on, the Closing Date, and the execution, authentication and delivery of the Rated Notes and specifying the Stated Maturity Date, the principal amount and the Applicable Periodic Interest Rate of each Class of Rated Notes to be authenticated and delivered, and (B) certifying that (1) the attached copy of such Board Resolution is a true and complete copy thereof, (2) such resolutions have not been rescinded and are in full force and effect on and as of the Closing Date and (3) the Officers authorized to execute and deliver such documents hold the offices and have the signatures indicated thereon;

(1)

either (A) a certificate of the Issuer, or other official document evidencing the due authorization, approval or consent of any governmental body or bodies, at the time having jurisdiction in the premises, together with an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee and the Initial Hedge Counterparty on which the Trustee and the Initial Hedge Counterparty are entitled to rely to the effect that no other authorization, approval or consent of any governmental body is required for the valid issuance of the Rated Notes, or (B) an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee and the Initial Hedge Counterparty to the effect that no such authorization, approval or consent of any governmental body is required for the valid issuance of the Rated Notes except as may have been given; and

(2)

either (A) a certificate of the Co-Issuer or other official document evidencing the due authorization, approval or consent of any governmental body or bodies, at the time having jurisdiction in the premises, together with an Opinion of Counsel to the Co-Issuer satisfactory in form and substance to the Trustee and the Initial Hedge Counterparty on which the Trustee and the Initial Hedge Counterparty are entitled to rely to the effect that no other authorization, approval or consent of any governmental body is required for the valid issuance of the Rated Notes, or (B) an Opinion of Counsel to the Co-Issuer satisfactory in form and substance to the Trustee and the Initial Hedge Counterparty that no such authorization, approval or consent of any governmental body is required for the valid issuance of the Rated Notes except as may have been given;

(1)

an opinion of Clifford Chance US LLP, special New York counsel to the Co-Issuers, dated the Closing Date, substantially in the form of Exhibit E-1;

(2)

an opinion of Walkers, special Cayman Islands counsel to the Issuer, dated the Closing Date, substantially in the form of Exhibit E-2; 71

Processed and formatted by SEC Watch - Visit SECWatch.com

(3)

an opinion of Kennedy Covington Lobdell & Hickman, L.L.P., counsel to the Trustee, dated the Closing Date, substantially in the form of Exhibit F;

(4)

an opinion of Thacher Profitt & Wood LLP, counsel to the Collateral Advisor, dated the Closing Date, substantially in the form of Exhibit G; and

(5)

an opinion of in-house counsel to the Initial Hedge Counterparty, dated the Closing Date, substantially in the form of Exhibit H;

(d)

an Officer’s certificate of the Issuer, stating that the Issuer is not in Default under this Indenture and that the issuance of the Rated Notes will not result in a breach of any of the terms, conditions or provisions of, or constitute a Default under, the Articles, any indenture or other agreement or instrument to which the Issuer is a party or by which it is bound, or any order of any court or administrative agency entered in any Proceeding to which the Issuer is a party or by which it may be bound or to which it may be subject; that no Event of Default shall have occurred and be continuing; that all of the representations and warranties contained herein are true and correct as of the Closing Date; that all conditions precedent provided in this Indenture relating to the authentication and delivery of the Rated Notes applied for (including in Section 3.2) have been complied with; and that all expenses due or accrued with respect to the Offering or relating to actions taken on or in connection with the Closing Date have been paid;

(e)

an Officer’s certificate of the Co-Issuer stating that the Co-Issuer is not in Default under this Indenture and that the issuance of the Rated Notes will not result in a breach of any of the terms, conditions or provisions of, or constitute a Default under, the Certificate of Incorporation or By-Laws of the Co-Issuer, any indenture or other agreement or instrument to which the Co-Issuer is a party or by which it is bound, or any order of any court or administrative agency entered in any Proceeding to which the Co-Issuer is a party or by which it may be bound or to which it may be subject; that no Event of Default shall have occurred and be continuing; that all of the representations and warranties contained herein are true and correct as of the Closing Date; that all conditions precedent provided in this Indenture relating to the authentication and delivery of the Rated Notes applied for have been complied with; and that all expenses due or accrued with respect to the Offering or relating to actions taken on or in connection with the Closing Date have been paid;

(f)

an Accountants’ Report (A) confirming the information with respect to each Collateral Debt Security (other than its price) set forth on a schedule setting forth each Collateral Debt Security and the information provided by the Issuer with respect to every other asset forming part of the Collateral, by reference to such sources as shall be specified therein, (B) confirming that, on the Closing Date, the Collateral Debt Securities set forth on Schedule A meet the Collateral Quality Tests (with the exception of the S&P CDO Monitor Test), (C) calculating each of the Coverage Tests as of the Closing Date and (D) specifying the procedures undertaken by them to review data and computations relating to the foregoing statement;

(g)

executed counterparts of this Indenture, the Account Control Agreement, the Collateral Administration Agreement, the Collateral Advisory Agreement and the other Transaction Documents; 72

Processed and formatted by SEC Watch - Visit SECWatch.com

3.2.

(h)

an executed copy of the initial Hedge Agreement and an executed copy of the Collateral Assignment of Hedge Agreement with respect thereto (and all acknowledgments thereto);

(i)

execution and delivery of the Financing Statement for filing against the Issuer with the Recorder of Deeds in the District of Columbia;; and

(j)

evidence of an entry having been made in the Issuer’s Register of Mortgages and Charges in respect of the charge.

SECURITY FOR THE RATED NOTES Prior to the issuance of the Rated Notes on the Closing Date, the Issuer shall cause the following conditions to be satisfied: (a)

Grant of Security Interest; Delivery of Collateral Debt Securities. The Grant pursuant to the Granting clauses of this Indenture of all of the Issuer’s right, title and interest in and to the Collateral and the transfer of all Collateral Debt Securities purchased by the Issuer on the Closing Date (as set forth in Schedule A) to the Trustee in the manner provided in Section 3.3(b).

(b)

Certificate of the Issuer. The delivery to the Trustee of a certificate of an Authorized Officer of the Issuer or the Collateral Advisor, for and on behalf of the Issuer, dated as of the Closing Date, to the effect that (x) the Issuer has no assets other than the Collateral, (y) the Issuer has no investments that do not qualify as Collateral Debt Securities or Eligible Investments and (z) in the case of each Collateral Debt Security identified on Schedule A and pledged to the Trustee for inclusion in the Collateral on the Closing Date: (1)

the Issuer is the owner of such Collateral Debt Security free and clear of any liens, claims or encumbrances of any nature whatsoever except for those which are being released on the Closing Date and except for those Granted pursuant to this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on such Collateral Debt Security prior to the first Payment Date and owed by the Issuer to the seller of such Collateral Debt Security;

(2)

the Issuer has acquired its ownership in such Collateral Debt Security in good faith without notice of any adverse claim (within the meaning given to such term by Section 8-102(a)(1) of the UCC), except as described in clause (1) above;

(3)

the Issuer has not assigned, pledged or otherwise encumbered any interest in such Collateral Debt Security (or, if any such interest has been assigned, pledged or otherwise encumbered, it has been released) other than interests Granted pursuant to this Indenture;

(4)

the Issuer has full right to Grant a security interest in and assign and pledge all of its right, title and interest in such Collateral Debt Security to the Trustee;

(5)

the information set forth with respect to such Collateral Debt Security on Schedule A is correct and each such Collateral Debt Security is transferred to the Trustee as required by Section 3.2(a) (or, if any such Collateral Debt Security is 73

Processed and formatted by SEC Watch - Visit SECWatch.com

not so transferred to the Trustee on the Closing Date, the Issuer has entered into a binding agreement to purchase such Collateral Debt Security for settlement within 10 days after the Closing Date);

3.3.

(6)

each such Collateral Debt Security satisfies the requirements of the definition of “Collateral Debt Security” and is not a Defaulted Security; and

(7)

upon Grant by the Issuer, the Trustee has a first priority perfected security interest in the Collateral (assuming that any Clearing Corporation, Securities Intermediary or other entity not within the control of the Issuer involved in the Grant of Collateral takes the actions required of it under Section 3.3(b) for perfection of that interest) and a “securities entitlement” (as defined in the UCC) with respect to Financial Assets.

(c)

Rating Letters. The delivery to the Trustee of an Officer’s certificate of the Issuer, to the effect that (i) attached thereto are true and correct copies of (A) a letter signed by Fitch confirming that the Class A-1 Notes have been rated “AAA”, the Class A-2 Notes have been rated at least “AA”, the Class B Notes have been rated at least “A-”, the Class C-1 Notes have been rated at least “BBB+”, the Class C-2 Notes have been rated at least “BBB” and the Class D Notes have been rated at least “BB” by Fitch and (B) a letter signed by S&P confirming that the Class A-1 Notes have been rated “AAA”, the Class A-2 Notes have been rated at least “AA”, the Class B Notes have been rated at least “A-”, the Class C-1 Notes have been rated at least “BBB+”, the Class C-2 Notes have been rated at least “BBB” and the Class D Notes have been rated at least “BB” by S&P and (ii) each such rating is in full force and effect on the Closing Date.

(d)

Accounts. The delivery by the Trustee of evidence of the establishment of the Payment Account, the Collection Account (including each Collateral Sub-Account established therein), the Expense Reserve Account, the Interest Reserve Account, the Collateral Account and the Uninvested Proceeds Account and, to be established on the Closing Date.

(e)

Funding Certificate. The delivery to the Trustee of a funding certificate (the Funding Certificate), duly executed by an Authorized Officer of the Issuer, relating to, among other things, the disposition of the proceeds of the issuance of the Rated Notes, dated the Closing Date, in substantially the form of Exhibit D hereto.

(f)

Purchases. The delivery to the Trustee of a certification of the Issuer that it shall have entered into one or more agreements to purchase, for settlement on or following the Closing Date in accordance with customary settlement procedures in the relevant markets, Collateral Debt Securities having an aggregate Principal Balance of not less than U.S.$340,000,000.

CUSTODIANSHIP; TRANSFER OF COLLATERAL DEBT SECURITIES AND ELIGIBLE INVESTMENTS (a)

The Trustee shall hold all Certificated Securities and Instruments in physical form at the office of a custodian appointed by it in Minnesota (together with any successor, the Custodian). Initially, such Custodian shall be Wells Fargo Bank, National Association with its address at Wells Fargo Center, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: CDO Trust Services—N-Star Real Estate CDO III. Any 74

Processed and formatted by SEC Watch - Visit SECWatch.com

successor custodian shall be a state or national bank or trust company that is not an Affiliatè of the Issuer or the Co-Issuer, has a long-term debt rating of at least “BBB+” by S&P and has a combined capital and surplus of at least U.S.$250,000,000. (b)

Each Collateral Debt Security, Equity Security and Eligible Investment shall be credited to the appropriate Account. Each time that the Issuer shall direct or cause the acquisition of any Collateral Debt Security, Equity Security or Eligible Investment, the Trustee (on behalf of the Issuer) shall, if such Collateral Debt Security, Equity Security or Eligible Investment has not already been transferred to the Collateral Account and credited thereto, cause the transfer of such Collateral Debt Security, Equity Security or Eligible Investment to the Custodian to be held in and credited to the Collateral Account for the benefit of the Trustee in accordance with the terms of this Indenture. The security interest of the Trustee in the funds or other property utilized in connection with such acquisition shall, immediately and without further action on the part of the Trustee, be released. The security interest of the Trustee shall nevertheless come into existence and continue in the Collateral Debt Security, Equity Security or Eligible Investment so acquired, including all rights of the Issuer in and to any contracts related to and proceeds of such Collateral Debt Security, Equity Security or Eligible Investment.

(c)

On the Closing Date, on each day thereafter, if any, that any Collateral is acquired or otherwise becomes subject to the lien of this Indenture and on the Effective Date, the Issuer represents and warrants to the Trustee as follows: (1)

This Indenture creates a valid and continuing security interest (as defined in the applicable Uniform Commercial Code) in the Collateral in favor of the Trustee on behalf and for the benefit of the Secured Parties, which security interest is prior to all other liens and security interests, and is enforceable as such as against creditors of and purchasers from the Issuer and, upon delivery of the Collateral Debt Securities and filing of the appropriate financing statements in the appropriate filing offices, the lien and security interest created by this Indenture shall be a perfected first priority security interest in favor of the Trustee for the benefit of the Secured Parties.

(2)

The Issuer owns and has good and marketable title to the Collateral free and clear of any liens, claims, encumbrances or defects of any nature whatsoever except for those which are being released on the Closing Date or on the date of purchase by the Issuer or those created pursuant to or contemplated under this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on any Collateral Debt Security prior to the first payment date and owed by the Issuer to the seller of such Collateral Debt Security.

(3)

The Issuer has acquired its ownership in each such Collateral Debt Security, or will acquire in the case of any Collateral Debt Securities which the Issuer has on or before the Closing Date committed to purchase but which will not have settled on or before the Closing Date or any additional Collateral Debt Securities or Substitute Collateral Debt Securities acquired by the Issuer after the Closing Date, in good faith without notice of any adverse claim, except as described in clause (2) above. 75

Processed and formatted by SEC Watch - Visit SECWatch.com

(4)

The Issuer (a) has delivered each such Collateral Debt Security, or will deliver any Collateral Debt Securities which the Issuer has on or before the Closing Date committed to purchase but which will not have settled on or before the Closing Date or any additional Collateral Debt Securities or Substitute Collateral Debt Securities acquired by the Issuer after the Closing Date, to the Trustee and (b) has not assigned, pledged, sold, granted a security interest in or otherwise encumbered any interest in such Collateral Debt Security other than interests granted pursuant to this Indenture.

(5)

The Issuer has full right to grant all security interests granted herein.

(6)

All Collateral is comprised of either “securities”, “instruments”, “tangible chattel paper”, “accounts”, “security entitlements” or “general intangibles”, in each case as defined in the applicable Uniform Commercial Code.

(7)

Each of the Accounts, and all subaccounts thereof, constitute securities accounts as defined in the applicable Uniform Commercial Code.

(8)

All items of the Collateral that constitute security entitlements have been and will have been credited to one of the securities accounts. The securities intermediary for each of the Accounts has agreed to treat all assets credited to the securities accounts as financial assets under the applicable Uniform Commercial Code.

(9)

Other than the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Collateral. The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer that include a description of collateral covering the Collateral other than any financing statement relating to the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder or that has been terminated. The Issuer is not aware of any judgment, Pension Benefit Guarantee Corporation lien or tax lien filings against it.

(10)

The Issuer has caused or will have caused, within ten (10) days of the Closing Date, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Collateral granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder that constitutes chattel paper, instruments, accounts, securities entitlements or general intangibles under the applicable Uniform Commercial Code, if any.

(11)

The Trustee or the Accountholder has in its possession all original copies of the instruments that constitute or evidence the Collateral, if any. The instruments, loan agreements and leases that constitute or evidence the Collateral do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties. All financing statements filed or to be filed against the Issuer in favor of the Trustee on behalf and for the benefit of the Secured Parties in connection herewith describing the Collateral contain a statement to the following effect: “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the 76

Processed and formatted by SEC Watch - Visit SECWatch.com

Trustee on behalf and for the benefit of (A) itself and for the benefit of the Noteholders, (B) the Collateral Advisor and (C) each Hedge Counterparty.” (12)

The authoritative copy of any chattel paper that constitutes or evidences the Collateral, if any, has been communicated to the Trustee and has no marks or notations indicating that it has been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties.

(13)

The Issuer has received or will receive all consents and approvals required by the terms of the underlying loan agreement, indenture or other underlying documentation, if any, relating to the Collateral to the transfer to the Trustee on behalf and for the benefit of the Secured Parties of its interest and rights in the Collateral hereunder.

(14)

The Issuer, the Accountholder and the Trustee have entered into the Account Control Agreement pursuant to which the Accountholder has agreed to comply with all instructions originated by the Trustee relating to the Accounts without further consent by the Issuer.

(15)

None of the Accounts is in the name of any person other than the Trustee, held on behalf and for the benefit of the Secured Parties. The Issuer has not consented to the Trustee or the Accountholder maintaining any of the Accounts to comply with entitlement orders or instructions of any Person other than the Trustee.

(16)

Notwithstanding any other provision of this Indenture or any other related Transaction Document, the representations in this Section 3.3(c) shall be continuing and deemed to be updated on any day a new item of Collateral is acquired, and remain in full force and effect until such time as all obligations under this Indenture and the Notes have been finally and fully paid and performed and shall survive the termination of this Indenture for any other reason.

(17)

The parties to this Indenture (i) shall not, without obtaining a Rating Agency Confirmation, waive any of the representations in this Section 3.3(c); (ii) shall provide each of the Rating Agencies with prompt written notice of any breach of the representations contained in this Section 3.3(c) upon becoming aware thereof; and (iii) shall not, without obtaining a Rating Agency Confirmation (as determined after any adjustment or withdrawal of the ratings following notice of such breach), waive a breach of any of the representations in this Section 3.3(c). ARTICLE IV SATISFACTION AND DISCHARGE

4.1.

SATISFACTION AND DISCHARGE OF INDENTURE

This Indenture shall be discharged and shall cease to be of further effect with respect to the Collateral securing the Rated Notes and the Rated Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Rated Notes, (iii) rights of Rated Noteholders to receive payments of principal thereof and interest thereon, (iv) the rights, 77

Processed and formatted by SEC Watch - Visit SECWatch.com

obligations and immunities of the Trustee hereunder, (v) the rights, obligations and immunities of the Collateral Advisor hereunder and under the Collateral Advisory Agreement and (vi) the rights of the Secured Parties as beneficiaries hereof with respect to the property deposited with the Trustee and payable to all or any of them; and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when: (a)

either: (1)

all Rated Notes theretofore authenticated and delivered (other than (A) Rated Notes which have been mutilated, defaced, destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.5 and (B) Rated Notes for whose payment funds have theretofore irrevocably been deposited in trust and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 7.3) have been delivered to the Trustee for cancellation; or

(2)

all Rated Notes not theretofore delivered to the Trustee for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity Date within one year, or (C) are to be called for redemption pursuant to Section 9.1 under an arrangement satisfactory to the Trustee for the giving of notice of redemption by the CoIssuers pursuant to Section 9.3 and the Issuer has irrevocably deposited or caused to be deposited with the Trustee, in trust for such purpose, Cash or non-callable direct obligations of the United States in an amount sufficient, according to the Priority of Payments as verified by a firm of nationally recognized Independent certified public accountants, to pay and discharge the entire indebtedness on all Rated Notes not theretofore delivered to the Trustee for cancellation, including all principal and interest (including Class B Cumulative Applicable Periodic Interest Shortfall Amount, Class C Cumulative Applicable Periodic Interest Shortfall Amount and Class D Cumulative Applicable Periodic Interest Shortfall Amount accrued to the date of such deposit (in the case of Rated Notes which have become due and payable) or to the Stated Maturity Date or the Redemption Date, as the case may be; provided that (x) such obligations are entitled to the full faith and credit of the United States and (y) this subclause (2) shall not apply if an election to act in accordance with the provisions of Section 5.5(a) shall have been made and not rescinded;

(b)

the Issuer has paid or caused to be paid all other sums payable hereunder (including amounts payable pursuant to the Hedge Agreement, the Income Note Paying Agency Agreement, the Corporate Services Agreement, the Collateral Advisory Agreement and the Collateral Administration Agreement) and no other amounts will become due and payable by the Issuer; and

(c)

the Co-Issuers have delivered to the Trustee and the Initial Hedge Counterparty Officer’s certificates and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the rights and obligations of the Co-Issuers, the Trustee and the Hedge Counterparty and, if applicable, the Rated Noteholders, as the case may be, under Sections 2.6, 4.1, 4.2, 5.9, 5.18, 6.7, 6.8, 7.1 and 7.3 shall survive. 78

Processed and formatted by SEC Watch - Visit SECWatch.com

4.2.

APPLICATION OF TRUST MONEY

All funds deposited with the Trustee pursuant to Section 4.1 for the payment of principal of and interest on the Rated Notes and amounts payable pursuant to the Hedge Agreement, the Collateral Advisory Agreement, the Income Note Paying Agency Agreement, the Corporate Services Agreement and the Collateral Administration Agreement shall be held in trust and applied by it in accordance with the provisions of the Rated Notes and this Indenture, including the Priority of Payments, for the payment either directly or through any Note Paying Agent, as the Trustee may determine, to the Person entitled thereto of the respective amounts in respect of which such funds has been deposited with the Trustee; but such funds need not be segregated from other funds except to the extent required herein or required by law. 4.3.

REPAYMENT OF FUNDS HELD BY NOTE PAYING AGENT

In connection with the satisfaction and discharge of this Indenture with respect to the Rated Notes, all funds then held by any Note Paying Agent other than the Trustee under the provisions of this Indenture shall, upon demand of the Co-Issuers, be paid to the Trustee to be held and applied pursuant to Section 7.3 and in accordance with the Priority of Payments and thereupon such Note Paying Agent shall be released from all further liability with respect to such funds. ARTICLE V EVENTS OF DEFAULT; REMEDIES 5.1.

EVENTS OF DEFAULT

Event of Default, is defined as any one of the following wherever used herein, means any one of the following events as set forth in Section 5.1(a) through (h) (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a)

a default for five (5) Business Days in the payment, when due and payable, of any interest on any Class A Note or, if there are no Class A Notes Outstanding, on any Class B Note or, if there are no Class A Notes or Class B Notes Outstanding, on any Class C-1 Note or, if there are no Class A Notes, Class B Notes or Class C-1 Notes Outstanding, on any Class C-2 Note or, if there are no Class A Notes, Class B Notes or Class C Notes Outstanding, on any Class D Note;

(b)

a default in the payment of any principal, when due and payable of any Rated Note (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent or the Note Registrar, such default continues for a period of five (5) Business Days);

(c)

the failure on any Payment Date to disburse amounts available in accordance with Section 11.1 (except as provided in Section 5.1(a) and (b) above) and a continuation of such failure for three (3) Business Days (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent or the Note Registrar, such default continues for a period of five (5) Business Days); 79

(d)

on any date of determination, the failure to maintain an aggregate principal amount of Collateral Debt Securities and Eligible Investments at least equal to 100% of the aggregate principal amount of the Outstanding Class A Notes;

(e)

the event that either of the Co-Issuers or the pool of Collateral becomes an investment company required to be registered under the Investment Company Act;

(f)

a default in the performance, or breach, of any other covenant (it being understood that non-compliance with any of the Coverage Tests or the Collateral Quality Tests will not constitute a default or breach) or warranty of either of the Co-Issuers under the Indenture of any representation or if any certificate or writing delivered pursuant thereto proves to be incorrect when made, which default or breach has a material adverse effect on the Rated Noteholders and continues for a period of thirty (30) days (or, in the case of a default, breach or failure of a representation or warranty regarding the Collateral, fifteen (15) days) of the earlier of knowledge by the Co-Issuers or the Collateral Advisor or notice to the Co-Issuers and the Collateral Advisor by the Trustee or to the Co-Issuers and the Collateral Advisor by the Holders of at least 25%, of the then Aggregate Outstanding Amount of the Rated Notes of any Class, specifying such default, breach or failure and requiring it to be remedied and stating that such notice is a “Notice of Default” under this Indenture;

(g)

the entry of a decree or order by a court having competent jurisdiction adjudging the Issuer or the Co-Issuer as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer or the Co-Issuer under the Bankruptcy Code or any other applicable law, or appointing a receiver, liquidator, assignee, or sequestrator (or other similar official) of the Issuer or the Co-Issuer or of any substantial part of its property; 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 ninety (90) consecutive days; or

Processed and formatted by SEC Watch - Visit SECWatch.com

(h)

the institution by the Issuer or the Co-Issuer of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, 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, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of the Issuer or the Co-Issuer or of any substantial part of its property, respectively, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of any action by the Issuer or the Co-Issuer in furtherance of any such action.

If either of the Co-Issuers shall obtain actual knowledge that an Event of Default shall have occurred and be continuing, such CoIssuer shall (unless the Trustee shall have provided notice of such Event of Default pursuant to Section 6.2) promptly notify the Trustee, the Rated Noteholders, the Hedge Counterparty, the Collateral Advisor and each Rating Agency in writing of such Event of Default. 5.2.

ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT (a)

If an Event of Default occurs and is continuing, the Trustee may or, if so directed by the Holders of a Majority in aggregate principal amount of the Outstanding Notes of the Controlling Class, will declare the principal of and accrued interest on all Notes to be 80

Processed and formatted by SEC Watch - Visit SECWatch.com

immediately due and payable (except that in the case of an Event of Default described in Section 5.1(g) or 5.1(h) above, such an acceleration will occur automatically). (b)

Any Hedge Agreement existing on or after such acceleration may not be terminated by the Issuer unless and until liquidation of the Collateral has commenced and annulment of such acceleration may no longer be affected.

(c)

At any time after such acceleration of maturity has been made and before a judgment or decree for payment of the amount due has been obtained by the Trustee as hereinafter provided in this Section 5, the Trustee may reverse such acceleration and its consequences if the Trustee determines that: (1)

the Issuer has paid or deposited with the Trustee funds sufficient to pay: (i)

all overdue installments of principal of and interest on the Notes (including interest upon the Class B Cumulative Applicable Periodic Interest Shortfall Amount, the Class C Cumulative Applicable Periodic Interest Shortfall Amount and the Class D Cumulative Applicable Periodic Interest Shortfall Amount, respectively, at the Applicable Periodic Interest Rate and, to the extent that payment of such interest is lawful, upon Defaulted Interest at the Applicable Periodic Interest Rate);

(ii)

any accrued and unpaid amounts (including termination payments, if any) payable by the Issuer pursuant to the Hedge Agreement;

(iii)

all unpaid taxes and Administrative Expenses, any accrued and unpaid Senior Collateral Advisory Fee, and other sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and

(2)

the Trustee has determined that all Events of Default of which it has actual knowledge, other than the nonpayment of the principal of or interest on the Rated Notes that have become due solely by such acceleration, have been cured; and

(3)

the Hedge Agreement in effect immediately prior to such acceleration shall remain in effect,

provided that the Trustee shall have obtained (and shall be entitled to rely upon) a certification of an Independent accounting firm of national reputation as to the sufficiency of the amounts in Section 5 .2(c)(1) above, which certification shall be conclusive evidence as to such sufficiency. In addition, the Trustee may, but is not required to, obtain, at the Issuer’s expense (and may rely upon), an Opinion of Counsel as to the matters in Sections 5.2(c)(2) and (3) above. At any such time as the Trustee shall reverse such acceleration and its consequences, the Trustee shall preserve the Collateral in accordance with the provisions of Section 5.5; provided that, if the conditions for liquidation of the Collateral are satisfied pursuant to Section 5.5, the Rated Notes may be accelerated pursuant to Section 5.2(a), notwithstanding any previous reversal of acceleration pursuant to this Section 5.2(b). No such reversal of acceleration shall affect any subsequent Default or impair any right consequent thereon. 81

Processed and formatted by SEC Watch - Visit SECWatch.com

5.3.

COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE

The Co-Issuers covenant that if a Default shall occur in respect of the payment of any principal of or interest on any Class A-1 Note, the payment of principal of or interest on any Class A-2 Note (but with respect to interest, only after the Class A-1 Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class B Note (but with respect to interest, only after the Class A Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class C-1 Note (but with respect to interest, only after the Class A Notes and Class B Notes and all interest accrued thereon have been paid in full) the payment of principal of or interest on any Class C-2 Note (but with respect to interest, only after the Class A Notes, the Class B Notes and the Class C-1 Notes and all interest accrued thereon have been paid in full) or the payment of principal of or interest on any Class D Note (but with respect to interest, only after the Class A Notes, the Class B Notes and the Class C Notes and all interest accrued thereon have been paid in full), the Co-Issuers will, upon demand of the Trustee or any affected Rated Noteholder, pay to the Trustee, for the benefit of the Holder of such Rated Note, the whole amount, if any, then due and payable on such Rated Note for principal and interest, with interest upon the overdue principal and, to the extent that payments of such interest shall be legally enforceable, upon overdue installments of interest, at the Applicable Periodic Interest Rate and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee and such Rated Noteholder and their respective agents and counsel. If the Issuer or the Co-Issuer fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may, and shall, upon the direction by a the Holders of Majority of the then Aggregate Outstanding Amount of the Notes of Controlling Class (and, if the action of the Issuer or the CoIssuer pursuant to such direction would have a material adverse effect on the Hedge Counterparty, the Initial Hedge Counterparty), prosecute such Proceeding to judgment or final decree, and may enforce the same against the Co-Issuers or any other obligor upon the Rated Notes and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the Collateral; provided that a Holder of a Rated Note may institute any proceeding if (i) such Holder previously has given to the Trustee written notice of an Event of Default, (ii) except in the case of a default in the payment of principal or interest, the Holders of at least 25% of the then Aggregate Outstanding Amount of the Notes of the Controlling Class have made a written request upon the Trustee to institute such proceedings in its own name as Trustee and such Holders have offered the Trustee reasonable indemnity, (iii) the Trustee has, for thirty (30) days after receipt of notice, request and offer of such indemnity, failed to institute any such proceeding and (iv) no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Secured Parties by such appropriate Proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law. The Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class may, in certain cases, waive any default with respect to such Notes, except (i) a default for more than five (5) Business Days in the payment, when due and payable, of any interest on any Note, (ii) a default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date, (iii) the failure on any Payment Date to disburse amounts available in the Collection Account in 82

Processed and formatted by SEC Watch - Visit SECWatch.com

accordance with Section 11.1 and continuation of such failure for a period of three (3) Business Days, (iv) certain events of bankruptcy or insolvency with respect to the Co-Issuers or (v) a default in respect of any provision of the Indenture that cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby. In case there shall be pending Proceedings relative to the Issuer or the Co-Issuer or any other obligor upon the Rated Notes or Hedge Agreement under the Bankruptcy Code or any other applicable bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer, the Co-Issuer or their respective property or such other obligor or its property, or in case of any other comparable Proceedings relative to the Issuer, the Co-Issuer or other obligor upon the Rated Notes or Hedge Agreement, or the creditors or property of the Issuer, the CoIssuer or such other obligor, the Trustee, regardless of whether the principal of any Rated Notes or Hedge Agreement shall then be due and payable as therein expressed or by declaration or otherwise and regardless of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.3, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (a)

to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Rated Notes or Hedge Agreement upon direction by a Majority of the Controlling Class, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee) and of the Rated Noteholders allowed in any Proceedings relative to the Issuer, the Co-Issuer or other obligor upon the Rated Notes or to the creditors or property of the Issuer, the Co-Issuer or such other obligor;

(b)

unless prohibited by applicable law and regulations, to vote on behalf of the Holders of the Rated Notes, upon the direction of such Holders, in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency Proceedings or person performing similar functions in comparable Proceedings; and

(c)

to collect and receive any amounts or other property payable to or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Rated Noteholders and of the Trustee on behalf of the Rated Noteholders and the Trustee; and any trustee, receiver or liquidator, custodian or other similar official is hereby authorized by each of the Rated Noteholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Rated Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other reasonable expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Rated Noteholder or the Initial Hedge Counterparty, any plan of reorganization, arrangement, adjustment or composition affecting the Rated Notes, the initial Hedge Agreement or the rights of any Holder thereof or the Initial Hedge Counterparty, or to authorize the Trustee to vote in respect of the claim of any Rated Noteholder or the Initial Hedge Counterparty in any such Proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. 83

Processed and formatted by SEC Watch - Visit SECWatch.com

In any Proceedings brought by the Trustee on behalf of the Holders, the Trustee shall be held to represent, subject to Section 6.17, all the Secured Parties if applicable, pursuant to Section 6.17. Notwithstanding anything in this Section 5.3 to the contrary, the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to this Section 5.3 except in accordance with Section 5.5(a). 5.4.

REMEDIES (a)

If an Event of Default shall have occurred and be continuing, and the Notes have been declared due and payable and such declaration and its consequences have not been rescinded and annulled, the Co-Issuers agree that, in addition to the requirements of Section 5.5(a), the Trustee may, after giving notice to the Noteholders, the Collateral Advisor, the Initial Hedge Counterparty and each Rating Agency, and with the consent of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class, and shall, upon written direction by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class, to the extent permitted by applicable law, exercise one or more of the following rights, privileges and remedies: (1)

institute Proceedings for the collection of all amounts then payable on the Notes or otherwise payable under this Indenture, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Collateral any amounts adjudged due;

(2)

institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Collateral;

(3)

exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Secured Parties hereunder; and

(4)

subject to Section 5.4(d) below, exercise any other rights and remedies that may be available at law or in equity;

provided that the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to this Section 5.4 except in accordance with Section 5.5(a). The Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking firm of national reputation as to the feasibility of any action proposed to be taken in accordance with this Section 5.4 and as to the sufficiency of the proceeds and other amounts receivable with respect to the Collateral to make the required payments of principal of and interest on the Notes and amounts due to the Initial Hedge Counterparty, which opinion shall be conclusive evidence as to such feasibility or sufficiency. (b)

If an Event of Default as described in Section 5.1(f) shall have occurred and be continuing, the Trustee may, and at the request of at least 25% of the Holders of the then Aggregate Outstanding Amount of the Notes of the Controlling Class shall, institute a Proceeding solely to compel performance of the covenant or agreement or to cure the 84

Processed and formatted by SEC Watch - Visit SECWatch.com

representation or warranty, the breach of which gave rise to the Event of Default under such Section, and enforce any equitable decree or order arising from such proceeding; provided that (i) such request does not conflict with any provision in the Indenture, (ii) the Trustee determines that such action will not involve the Trustee incurring any liability (unless the Trustee is indemnified to its satisfaction against any such liability) and (iii) the Trustee may take other action deemed proper by the Trustee, that is not inconsistent with such direction. (c)

Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the Initial Purchasers, the Placement Agent, any Hedge Counterparty, any Noteholder or Noteholders may bid for and purchase the Collateral or any part thereof and, upon compliance with the terms of sale, may hold, retain, possess or dispose of such property in its or their own absolute right without accountability. Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the receipt of the Trustee, or of the Officer making a sale under judicial proceedings, shall be a sufficient discharge to the purchaser or purchasers at any sale for its or their purchase price, and such purchaser or purchasers shall not be obliged to see to the application thereof. Any such sale, whether under any power of sale hereby given or by virtue of judicial proceedings, shall bind the Co-Issuers, the Trustee and the Noteholders, shall operate to divest all right, title and interest whatsoever, either at law or in equity, of each of them in and to the property sold, and shall be a perpetual bar, both at law and in equity, against each of them and their successors and assigns, and against any and all Persons claiming through or under them.

(d)

5.5.

Notwithstanding any other provision of this Indenture, the Trustee may not, prior to the date which is one year and one day, or if longer the applicable preference period then in effect, after the payment in full of all Notes, institute against, or join any other Person in instituting against, the Issuer or the Co-Issuer any bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceedings, or other proceedings under federal or state bankruptcy or similar laws (of any jurisdiction). Nothing in this Section 5.4 shall preclude, or be deemed to stop, the Trustee (i) from taking any action prior to the expiration of the aforementioned one year and one day period, or if longer the applicable preference period then in effect, in (A) any case or proceeding voluntarily filed or commenced by the Issuer or the Co-Issuer or (B) any involuntary insolvency proceeding filed or commenced by a Person other than the Trustee, or (ii) from commencing against the Issuer or the Co-Issuer or any of its properties any legal action which is not a bankruptcy, reorganization, arrangement, insolvency, moratorium, liquidation or similar proceeding.

PRESERVATION OF COLLATERAL (a)

If an Event of Default shall have occurred and be continuing when any Class of Rated Notes is Outstanding, the Trustee shall retain the Collateral securing the Rated Notes and the Hedge Agreement intact, collect and cause the collection of the proceeds thereof and make all payments and deposits and maintain all accounts in respect of the Collateral and the Rated Notes and the Hedge Agreement in accordance with Section 11.1 and the provisions of Sections 10, 12 and 13 unless: 85

Processed and formatted by SEC Watch - Visit SECWatch.com

(1)

the Trustee, pursuant to Section 5.5(c), determines (such determinations may be based upon a certificate from the Collateral Manager) that the anticipated proceeds of a sale or liquidation of the Collateral (after deducting reasonable expenses relating to such sale or liquidation) would be sufficient to discharge in full the Redemption Prices then due on the Rated Notes, any amounts required to be paid under the Hedge Agreement, all unpaid Administrative Expenses and any accrued and unpaid Senior Collateral Advisory Fee (to the extent not waived by the Collateral Advisor) and the Holders of a Majority of the then Aggregate Outstanding Amount of Notes of the Controlling Class agrees with such determination; or

(2)

the Holders of at least 662/3% of the Aggregate Outstanding Amount of the Rated Notes of the Controlling Class (and, unless it will be paid in full all amounts owing to it by the Issuer, the Initial Hedge Counterparty), subject to the provisions hereof, and subject to the Trustee determining that such action will not involve the Trustee incurring any liability, (unless the Trustee is indemnified to its satisfaction against any such liability) direct the sale and liquidation of the Collateral.

For purposes of Section 5.5(a)(2), if the Initial Hedge Counterparty shall fail to vote to direct the sale and liquidation of the Collateral within three Business Days after written notice from the Issuer or the Trustee requesting a vote pursuant to such Section 5.5(a)(2), the Initial Hedge Counterparty shall not be entitled to participate in the vote requested by such notice. The Trustee shall give written notice of the retention of the Collateral to the Issuer with a copy to the Co-Issuer, each Holder of the Controlling Class of Notes and the Initial Hedge Counterparty. So long as such Event of Default is continuing, any such retention pursuant to this Section 5.5(a) may be rescinded at any time when the conditions specified in clause Section 5.5(a)(1) or (2) exist. (b)

Nothing contained in Section 5.5(a) shall be construed to require the Trustee to preserve the Collateral securing the Rated Notes if prohibited by applicable law.

(c)

In determining whether the condition specified in Section 5.5(a)(1) exists, the Trustee shall obtain bid prices with respect to each security contained in the Collateral from two nationally recognized dealers (or if it is unable in good faith to obtain such bid prices from two nationally recognized dealers, one nationally recognized dealer), as specified by the Collateral Advisor in writing, which are Independent from each other and the Collateral Advisor, at the time making a market in such securities and shall compute the anticipated proceeds of sale or liquidation on the basis of the lower of such bid prices for each such security. In addition, for the purposes of determining issues relating to the execution of a sale or liquidation of the Pledged Securities and the execution of a sale or other liquidation thereof in connection with a determination whether the condition specified in Section 5.5(a)(1) exists, the Trustee may retain and rely on an opinion of an Independent investment banking firm of national reputation. The Trustee shall deliver to the Noteholders, the Initial Hedge Counterparty, the Rating Agencies and the Co-Issuers a report stating the results of any determination required pursuant to Section 5.5(a)(1) no later than ten (10) days after making such determination but in any event prior to the sale or liquidation of the Collateral. The Trustee shall make the determinations required by Section 5.5(a)(1) within thirty (30) days after an Event of Default and at the request of the Holders of a Majority of the then Aggregate Outstanding 86

Processed and formatted by SEC Watch - Visit SECWatch.com

Amount of the Notes of the Controlling Class at any time during which the Trustee retains the Collateral pursuant to Section 5.5(a)(1). In the case of each calculation made by the Trustee pursuant to Section 5.5(a)(1), the Trustee shall obtain a letter of an Independent certified public accountant confirming the accuracy of the computations of the Trustee and certifying their conformity to the requirements of this Indenture. In determining whether the Holders of the requisite percentage of any Class of Rated Notes or the requisite percentage of Income Noteholders have given any direction or notice or have agreed pursuant to Section 5.5(a), any Holder of a Rated Note of a Class or Income Notes who is also a Holder of Rated Notes of another Class or of Income Notes or any Affiliate of any such Holder shall be counted as a Holder of each such Rated Note and/or Income Note for all purposes. (d)

5.6.

If an Event of Default shall have occurred and be continuing at a time when no Rated Note is Outstanding, the Trustee shall retain the Collateral securing the Hedge Agreements and the Rated Notes intact, collect and cause the collection of the proceeds thereof and make and apply all payments and deposits and maintain all accounts in respect of the Collateral and the Rated Notes in accordance with Section 11.1 and the provisions of Section 10 and Section 12 unless a Majority of the Income Noteholders direct the sale and liquidation of the Collateral.

TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION

All rights of action and of asserting claims under this Indenture, or under any of the Rated Notes, may be enforced by the Trustee without the possession of any of Hedge Agreements or the Rated Notes or the production thereof in any trial or other Proceedings relative thereto, and any action or Proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the reasonable expenses, disbursements and compensation of the Trustee, each predecessor trustee and their respective agents and attorneys and counsel, shall be for the benefit of the Secured Parties and shall be applied as set forth in Section 5.7. 5.7.

APPLICATION OF FUNDS COLLECTED

Any funds collected by the Trustee with respect to the Hedge Agreements or the Rated Notes pursuant to this Section 5 and any funds that may then be held or thereafter received by the Trustee with respect to the Hedge Agreements or the Rated Notes hereunder shall be applied subject to Section 13.1 and in accordance with the provisions of Section 11.1(c), at the date or dates fixed by the Trustee. 5.8.

LIMITATION ON SUITS

Only the Trustee may pursue remedies available hereunder and no Holder of any Note shall have any right to institute any Proceedings, judicial or otherwise, with respect to this Indenture, or its Note or otherwise, for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a)

such Holder has previously given to the Trustee written notice of a continuing Event of Default;

(b)

except in the case of a default in the payment of principal or interest, the Holders or Holders of at least 25% of the then Aggregate Outstanding Amount of the Rated Notes of the Controlling Class shall have made a written request to the Trustee to institute Proceedings in respect of such Event of Default in its own name as Trustee hereunder and 87

Processed and formatted by SEC Watch - Visit SECWatch.com

such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (c)

the Trustee for thirty (30) days after its receipt of such notice, request and offer of indemnity has failed to institute any such Proceeding; and

(d)

no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class;

it being understood and intended that no one or more Holders of Rated Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders of the Notes of the same Class or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders of Notes of the same Class. In addition, any action taken by any one or more of the Holders of Notes shall be subject to and in accordance with Sections 13.1 and 11.1(d). Notwithstanding any other provisions of this Indenture but subject to Section 5.8(d), if the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of the Notes of the Controlling Class, each representing less than a Majority of the then Aggregate Outstanding Amount of Notes of this Controlling Class, the Trustee shall follow the instructions of the group representing the higher percentage of aggregate principal amount of Outstanding Notes of the Controlling Class. 5.9.

UNCONDITIONAL RIGHTS OF RATED NOTEHOLDERS TO RECEIVE PRINCIPAL AND INTEREST

Notwithstanding any other provision in this Indenture (other than Section 2.6(i)), the Holder of any Rated Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest (if any) on such Rated Note as such principal and/or interest become due and payable in accordance with Sections 13.1 and 11.1(c) and, subject to the provisions of Section 5.8, to institute proceedings for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. Holders of the Class B Notes, the Class C Notes and the Class D Notes shall have no right to institute proceedings for the enforcement of any such payment until such time as no Class of Rated Note that is senior to such Class of them remains Outstanding, which right shall be subject to the provisions of Section 5.8, and shall not be impaired without the consent of any such Holder. 5.10.

RESTORATION OF RIGHTS AND REMEDIES

If the Trustee or any Rated Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Rated Noteholder, then and in every such case the Co-Issuers, the Trustee and the Rated Noteholder shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Secured Parties shall continue as though no such Proceeding had been instituted. 5.11.

RIGHTS AND REMEDIES CUMULATIVE

No right or remedy herein conferred upon or reserved to the Trustee or to the Rated Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now 88

Processed and formatted by SEC Watch - Visit SECWatch.com

or hereafter existing by law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 5.12.

DELAY OR OMISSION NOT WAIVER

No delay or omission of the Trustee or any Rated Noteholder or the Initial Hedge Counterparty to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Section 5 or by law to the Trustee, the Rated Noteholders or the Initial Hedge Counterparty may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Rated Noteholders or the Initial Hedge Counterparty, as the case may be. 5.13.

CONTROL BY CONTROLLING CLASS

Notwithstanding any other provision of this Indenture (but subject to the proviso in the definition of “Outstanding” in Section 1.1(a)), the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class shall have the right to cause the institution of and direct the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or of any sale of the Collateral, in whole or in part, provided that:

5.14.

(a)

such direction shall not conflict with any rule of law or with this Indenture;

(b)

the Trustee may take any other action deemed proper by it that is not inconsistent with such direction; provided that, subject to Section 6.1, the Trustee need not take any action that it determines might involve it in liability (unless the Trustee has received an indemnity reasonably satisfactory to it against such liability as set forth below);

(c)

the Trustee shall have been provided with an indemnity reasonably satisfactory to it; and

(d)

any direction to the Trustee to undertake a Sale of the Collateral shall be made only pursuant to, and in accordance with, Sections 5.4 and 5.5.

WAIVER OF PAST DEFAULTS

The Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class may, in certain cases waive any past Default and its consequences, except: (a)

a Default for more than five (5) Business Days in the payment, when due and payable, of any interest on any Rated Note; or

(b)

a Default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date; or

(c)

the failure on any Payment Date to disburse amounts available in the Collection Account in accordance with Section 11.1 and the continuation of such failure for a period of three (3) Business Days; or

(d)

a Default arising under Section 5.1(g) or 5.1(h); or 89

(e)

a Default in respect of any provision of this Indenture that under Section 8.2 cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby.

In the case of any such waiver, (i) the Co-Issuers, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto, and (ii) the Trustee shall promptly give written notice of any such waiver to the Collateral Advisor and each Holder of Rated Notes. The Rating Agencies shall be notified by the Issuer of any such waiver. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. 5.15.

UNDERTAKING FOR COSTS

All parties to this Indenture agree, and each Holder of any Rated Note by its acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.15 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Rated Noteholder, or group of Rated

Processed and formatted by SEC Watch - Visit SECWatch.com

Noteholders, holding in the aggregate more than 10% in Aggregate Outstanding Amount of the Controlling Class, or to any suit instituted by any Rated Noteholder for the enforcement of the payment of the principal of or interest on any Rated Note on or after the Stated Maturity Date expressed in such Rated Note (or, in the case of redemption, on or after the applicable Redemption Date). 5.16.

WAIVER OF STAY OR EXTENSION LAWS

The Co-Issuers covenant (to the extent that they may lawfully do so) that they will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force (including but not limited to filing a voluntary petition under Chapter 11 of the Bankruptcy Code and by the voluntary commencement of a proceeding or the filing of a petition seeking winding up, liquidation, reorganization or other relief under any bankruptcy, insolvency, receivership or similar law now or hereafter in effect), which may affect the covenants, the performance of or any remedies under this Indenture; and the Co-Issuers (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 5.17.

SALE OF COLLATERAL (a)

The power to effect any sale (a Sale) of any portion of the Collateral pursuant to Sections 5.4 and 5.5 shall not be exhausted by any one or more Sales as to any portion of such Collateral remaining unsold, but shall continue unimpaired until the entire Collateral shall have been sold or all amounts secured by the Collateral shall have been paid. The Trustee hereby expressly waives its rights to any amount fixed by law as compensation for any Sale; provided that the Trustee shall be authorized to deduct the reasonable costs, 90

Processed and formatted by SEC Watch - Visit SECWatch.com

charges and expenses incurred by it in connection with such Sale from the proceeds thereof notwithstanding the provisions of Section 6.7.

5.18.

(b)

The Trustee may bid for and acquire any portion of the Collateral in connection with a public Sale thereof, by crediting all or part of the net proceeds of such Sale after deducting the reasonable costs, charges and expenses incurred by the Trustee in connection with such Sale notwithstanding the provisions of Section 6.7. The Rated Notes and the Hedge Agreement need not be produced in order to complete any such Sale, or in order for the net proceeds of such Sale to be credited against amounts owing on the Rated Notes. The Trustee may hold, lease, operate, manage or otherwise deal with any property so acquired in any manner permitted by law in accordance with this Indenture.

(c)

If any portion of the Collateral consists of securities not registered under the Securities Act (Unregistered Securities), the Trustee may, but shall not be required to, seek an Opinion of Counsel, or, if no such Opinion of Counsel can be obtained, with the consent of a Majority of the Controlling Class seek, a no-action position from the Commission or any other relevant federal or state regulatory authorities, regarding the legality of a public or private sale of such Unregistered Securities. In no event will the Trustee be required to register Unregistered Securities under the Securities Act.

(d)

The Trustee shall execute and deliver an appropriate instrument of conveyance transferring its interest in any portion of the Collateral in connection with a sale thereof. In addition, the Trustee is hereby irrevocably appointed the agent and attorneyin-fact of the Issuer to transfer and convey its interest in any portion of the Collateral in connection with a sale thereof, and to take all action necessary to effect such sale. No purchaser or transferee at such a sale shall be bound to ascertain the Trustee’s authority, to inquire into the satisfaction of any conditions precedent or see to the application of any funds.

ACTION ON THE RATED NOTES

The Trustee’s right to seek and recover judgment on the Rated Notes or under this Indenture shall not be affected by the seeking or obtaining of or application for any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Secured Parties shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer or the Co-Issuer. ARTICLE VI THE TRUSTEE 6.1.

CERTAIN DUTIES AND RESPONSIBILITIES (a)

Except during the continuance of an Event of Default: (1)

the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and 91

Processed and formatted by SEC Watch - Visit SECWatch.com

(2)

in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided that, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they substantially conform to the requirements of this Indenture and shall promptly, but in any event within three Business Days in the case of an Officer’s certificate furnished by the Issuer, notify the party delivering the same if such certificate or opinion does not conform. If a corrected form shall not have been delivered to the Trustee within 15 days after such notice from the Trustee, the Trustee shall promptly notify the Rated Noteholders and the Initial Hedge Counterparty.

(b)

In case an Event of Default actually known to the Trustee has occurred and is continuing, the Trustee shall, prior to the receipt of directions, if any, from a Majority of the Controlling Class, exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(c)

No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1)

This Section 6.1(c) shall not be construed to limit the effect of Section 6.1(a);

(2)

the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it shall be proven that the Trustee was negligent in ascertaining the pertinent facts;

(3)

the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Issuer or the Co-Issuer in accordance with this Indenture and/or a Majority (or such other percentage as may be required by the terms hereof) of the Aggregate Outstanding Amount of the Controlling Class (or other Class if required or permitted by the terms hereof) relating to the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;

(4)

no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers contemplated hereunder, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it (if the amount of such funds or risk or liability does not exceed the amount payable to the Trustee pursuant to Section 11.1(a)(1) net of the amounts specified in Section 6.8(a)(1), the Trustee shall be deemed to be reasonably assured of such repayment) unless such risk or liability relates to performance of its ordinary services, including under Section 5, under this Indenture; and 92

Processed and formatted by SEC Watch - Visit SECWatch.com

(5)

6.2.

the Trustee shall not be liable to the Rated Noteholders for any action taken or omitted by it at the direction of the Issuer, the Co-Issuer, the Collateral Advisor and/or the Holders of the Rated Notes under the circumstances in which such direction is required or permitted by the terms of this Indenture.

(d)

For all purposes under this Indenture, the Trustee shall not be deemed to have notice or knowledge of any Event of Default described in Section 5.1(e), 5.1(f), 5.1(g) or 5.1(h) unless a Trust Officer assigned to and working in the Corporate Trust Office has actual knowledge thereof or unless written notice of any event which is in fact such an Event of Default or such a Default, as the case may be, is received by the Trustee at the Corporate Trust Office. For purposes of determining the Trustee’s responsibility and liability hereunder, whenever reference is made in this Indenture to such an Event of Default or such a Default, as the case may be, such reference shall be construed to refer only to such an Event of Default or such a Default, as the case may be, of which the Trustee is deemed to have notice as described in this Section 6.1(d).

(e)

Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.

(f)

The Trustee shall, upon receipt of reasonable (but no less than three Business Days’) prior written notice, permit any representative of a Holder of a Rated Note or the Initial Hedge Counterparty, during the Trustee’s normal business hours, to examine all books of account, records, reports and other papers of the Trustee relating to the Rated Notes or the Hedge Agreement, to make copies and extracts therefrom (the reasonable out-of-pocket expenses incurred in making any such copies or extracts to be reimbursed to the Trustee by such Holder) and to discuss the Trustee’s actions, as such actions relate to the Trustee’s duties with respect to the Rated Notes or the Hedge Agreement, with the Trustee’s officers and employees responsible for carrying out the Trustee’s duties with respect to the Rated Notes; provided that under no circumstances shall the Initial Hedge Counterparty be permitted to review any documentation containing the names or other indicia of identity of any of the Noteholders unless any such information (including the number of shares held by such Noteholder) has been redacted from such documentation.

(g)

With respect to the security interests created hereunder, the Trustee acts as a fiduciary for the Rated Noteholders only, and serves as a collateral agent for the other Secured Parties.

NOTICE OF DEFAULT Promptly (and in no event later than three Business Days) after the occurrence of any Default actually known to a Trust Officer of the Trustee or after acceleration has been made pursuant to Section 5.2, the Trustee shall send to the Issuer, the Income Note Paying Agent, each Rating Agency (for so long as any Class of Rated Notes is Outstanding), the Collateral Advisor, the Initial Hedge Counterparty and to all Holders of Rated Notes, as their names and addresses appear on the Note Register, notice of all Defaults hereunder known to the Trustee, unless such Default shall have been cured or waived.

6.3.

CERTAIN RIGHTS OF TRUSTEE Except as otherwise provided in Sections 6.1 and 8: 93

Processed and formatted by SEC Watch - Visit SECWatch.com

(a)

the Trustee may rely and shall be protected in acting or refraining from acting in good faith and in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b)

any request or direction of the Issuer or the Co-Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or Issuer Order, as the case may be;

(c)

whenever in the administration of this Indenture the Trustee shall (i) deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer’s certificate or (ii) be required to determine the value of any Collateral or funds hereunder or the cashflows projected to be received therefrom, the Trustee may, in the absence of bad faith on its part, rely on reports of nationally recognized accountants, investment bankers or other Persons qualified to provide the information required to make such determination, including nationally recognized dealers in securities of the type being valued and securities quotation services;

(d)

as a condition to the taking or omitting of any action by it hereunder, the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in reliance thereon;

(e)

the Trustee shall be under no obligation to exercise or to honor any of the rights or powers vested in it by this Indenture at the request or direction of any of the Rated Noteholders pursuant to this Indenture, unless such Rated Noteholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might reasonably be incurred by it in compliance with such request or direction;

(f)

the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper documents, but the Trustee, in its discretion, may and, upon the written direction of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of any Class, the Initial Hedge Counterparty or any Rating Agency shall make such further inquiry or investigation into such facts or matters as it may see fit or as it shall be directed, and, the Trustee shall be entitled, on reasonable prior notice to the Co-Issuers, to examine the books and records of the Co-Issuers or the Collateral Advisor relating to the Rated Notes and the Collateral, personally or by agent or attorney at a time acceptable to the CoIssuers or the Collateral Advisor in their reasonable judgment during normal business hours; provided that the Trustee shall, and shall cause its agents, to hold in confidence all such information, except (i) to the extent disclosure may be required by law by any regulatory authority and (ii) to the extent that the Trustee, in its sole judgment, may determine that such disclosure is consistent with its obligations hereunder;

(g)

the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys; provided that the Trustee shall not be responsible for any misconduct or negligence on the part of any agent (other 94

Processed and formatted by SEC Watch - Visit SECWatch.com

than any Affiliate of the Trustee) appointed and supervised, or attorney appointed, with due care by it hereunder;

6.4.

(h)

the Trustee shall not be liable for any action it takes or omits to take in good faith that it reasonably and, after the occurrence and during the continuance of an Event of Default, prudently believes to be authorized or within its rights or powers hereunder;

(i)

nothing herein shall be construed to impose an obligation on the part of the Trustee to recalculate, evaluate or verify any report, certificate or information received from the Issuer or Collateral Advisor (unless and except to the extent otherwise expressly set forth herein or upon the request of the Initial Hedge Counterparty, a Rating Agency or a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class);

(g)

the Trustee shall not be responsible or liable for the actions or omissions of, or any inaccuracies in the records of, any nonAffiliated custodian, clearing agency, common depository, Euroclear or Clearstream or for the acts or omissions of the Collateral Advisor or either Co-Issuer;

(k)

to the extent any defined term hereunder, or any calculation required to be made or determined by the Trustee hereunder, is dependent upon or defined by reference to generally accepted accounting principles in the United States (GAAP), the Trustee shall be entitled to request and receive (and rely upon) instruction from the Issuer or the accountants appointed pursuant to 10.13 as to the application of GAAP in such connection, in any instance;

(1)

to the extent permitted by law, the Trustee shall not be required to give any bond or surety in respect of the execution of this Indenture or otherwise; and

(m)

the permissive right of the Trustee to take or refrain from taking any actions enumerated in this Indenture shall not be construed as a duty.

AUTHENTICATING AGENTS

If the Trustee so chooses the Trustee may appoint one or more Authenticating Agents with power to act on its behalf and subject to its direction in the authentication of Rated Notes in connection with issuance, transfers and exchanges under Sections 2.4, 2.5 and 8.5, as fully to all intents and purposes as though each such Authenticating Agent had been expressly authorized by those Sections to authenticate such Rated Notes. For all purposes of this Indenture, the authentication of Rated Notes by an Authenticating Agent pursuant to this Section 6.4 shall be deemed to be the authentication of Rated Notes “by the Trustee”. Any entity into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any entity succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, without the execution or filing of any further act on the part of the parties hereto or such Authenticating Agent or such successor entity. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and the Issuer. The Trustee may at any time terminate the agency of any Authenticating Agent by 95

Processed and formatted by SEC Watch - Visit SECWatch.com

giving written notice of termination to such Authenticating Agent and the Co-Issuers. Upon receiving such notice of resignation or upon such a termination, the Trustee shall promptly appoint a successor Authenticating Agent and shall give written notice of such appointment to the Co-Issuers. The Issuer agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services (provided, however, that, so long as an Authenticating Agent is the Trustee, or an Affiliate thereof, such compensation shall be payable by the Trustee, rather than by the Issuer), and reimbursement for its reasonable expenses relating thereto and the Trustee shall be entitled to be reimbursed for such payments, subject to Section 6.8. The provisions of Sections 2.8, 6.5 and 6.6 shall be applicable to any Authenticating Agent. 6.5.

NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF RATED NOTES

The recitals contained herein and in the Rated Notes, other than the Certificate of Authentication thereon, shall be taken as the statements of the Co-Issuers, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or sufficiency of this Indenture (except as may be made with respect to the validity of the Trustee’s obligations hereunder), of the Collateral or of the Rated Notes. The Trustee shall not be accountable for the use or application by the Co-Issuers of the Rated Notes or the proceeds thereof or any amounts paid to the Co-Issuers pursuant to the provisions hereof. 6.6.

MAY HOLD RATED NOTES

The Trustee, any Note Paying Agent, the Note Registrar or any other agent of the Co-Issuers, in its individual or any other capacity, may become the owner or pledgee of Rated Notes and, may otherwise deal with the Co-Issuers or any of their Affiliates, with the same rights it would have if it were not Trustee, Note Paying Agent, Note Registrar or such other agent. 6.7.

FUNDS HELD IN TRUST

Funds held by the Trustee hereunder shall be held in trust to the extent required herein. The Trustee shall be under no liability for interest on any funds received by it hereunder except as otherwise agreed upon with the Issuer and except to the extent of income or other gain on investments which are deposits in or certificates of deposit of the Trustee in its commercial capacity and income or other gain actually received by the Trustee on Eligible Investments. 6.8.

COMPENSATION AND REIMBURSEMENT (a)

The Issuer agrees: (1)

to pay the Trustee on each Payment Date the Trustee Fee, the Income Note Paying Agent Fee and reasonable compensation for all other services, including custodial services, rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

(2)

except as otherwise expressly provided herein, to reimburse the Trustee (subject to any written agreement between the Issuer and the Trustee) in a timely manner upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture or in the enforcement of any provision hereof and expenses related to 96

Processed and formatted by SEC Watch - Visit SECWatch.com

the maintenance and administration of the Collateral (including securities transaction charges and the reasonable compensation and expenses and disbursements of its agents and legal counsel and of any accounting firm or investment banking firm employed by the Trustee pursuant to Section 5.2, 5.4, 5.5, 6.3(c), 6.3(k), 10.11 or 10.13, except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith but only to the extent any such securities transaction charges have not been waived during a Due Period due to the Trustee’s receipt of a payment from a financial institution with respect to certain Eligible Investments); (3)

to indemnify the Trustee and its Officers, directors, employees and agents for, and to hold them harmless against, any loss, liability or expense incurred by it without negligence, willful misconduct or bad faith on their part, arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs and expenses (including reasonable counsel fees) of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties hereunder; and

(4)

to pay the Trustee reasonable additional compensation together with its expenses (including reasonable counsel fees) for any collection action taken pursuant to Section 6.14.

(b)

The Issuer may remit payment for such fees and expenses to the Trustee or, in the absence thereof, the Trustee may from time to time deduct payment of its fees and expenses hereunder from funds on deposit in the Expense Account pursuant to Section 11.1.

(c)

The Trustee hereby agrees not to cause the filing of a petition in bankruptcy against the Issuer for the non-payment to the Trustee of any amounts provided by this Section 6.8 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 Rated Notes issued under this Indenture.

(d)

The amounts payable to the Trustee pursuant to Sections 6.8(a)(2) through (4) (other than amounts received by the Trustee from financial institutions under Section 6.8(a)(2) above) shall not, except as provided by Section 11.1(a)(19), exceed on any Payment Date the limitation described in Section 11.1(a)(1) for such Payment Date; provided that (A) the Trustee shall not institute any proceeding for enforcement of such lien except in connection with an action pursuant to Section 5.3 or 5.4 for the enforcement of the lien of this Indenture for the benefit of the Secured Parties and (B) the Trustee may only enforce such a lien in conjunction with the enforcement of the rights of the Secured Parties in the manner set forth in Section 5.4.

The Trustee shall, subject to the Priority of Payments, receive amounts pursuant to this Section 6.8 and Section 11.1 only to the extent that the payment thereof will not result in an Event of Default and the failure to pay such amounts to the Trustee will not, by itself, constitute an Event of Default. Subject to Section 6.10, the Trustee shall continue to serve as Trustee under this Indenture notwithstanding the fact that the Trustee shall not have received amounts due it hereunder and hereby agrees not to cause the filing of a petition in bankruptcy against the Co-Issuers for the nonpayment to the Trustee of any amounts provided by this Section 6.8 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 Rated Notes issued under this Indenture. No direction by the Holders of a Majority of the then Aggregate Outstanding Amount of the 97

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes of the Controlling Class shall affect the right of the Trustee to collect amounts owed to it under this Indenture. The indemnifications in favor of the Trustee in this Section 6.8 shall (i) survive any resignation or removal of any Person acting as Trustee (to the extent of any indemnified liabilities, costs, expenses and other amounts arising or incurred prior to, or arising out of actions or omissions occurring prior to, such resignation or removal) and (ii) apply to the Trustee in its capacities as Custodian, Note Paying Agent, Rated Note Calculation Agent and Authenticating Agent. 6.9.

CORPORATE TRUSTEE REQUIRED; ELIGIBILITY

There shall at all times be a Trustee hereunder which shall be a bank, corporation or trust company 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.$250,000,000, subject to supervision or examination by federal or state banking authorities, having a rating of at least “BBB+” by S&P and having an office within the United States. If such entity publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.9, the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.9, it shall resign immediately in the manner and with the effect hereinafter specified in this Section 6. 6.10.

RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR (a)

No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Section 6 shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11.

(b)

The Trustee may resign at any time by giving 90 days prior written notice thereof to the Co-Issuers, the Rated Noteholders, the Initial Hedge Counterparty, the Collateral Advisor and each Rating Agency. Upon receiving such notice of resignation, or if the Trustee is removed or becomes incapable of acting, or if a vacancy shall occur in the office of the Trustee for any reason, the Issuer shall (after consultation with the Collateral Advisor) promptly propose a successor trustee for approval by the Holders of 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes. A proposed successor trustee approved in accordance with the preceding sentence shall be appointed by the Co-Issuers as successor trustee by written instrument, in duplicate, executed by an Authorized Officer of the Issuer and an Authorized Officer of the Co-Issuer, one copy of which shall be delivered to the Trustee so resigning and one copy to the successor trustee or trustees, together with a copy to each Rated Noteholder. If no successor trustee shall have been appointed and an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee or any Holder of a Rated Note or the Initial Hedge Counterparty on behalf of itself and all others similarly situated, subject to Section 5.15, may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c)

The Trustee may be removed at any time by an Act of the Holders of at least 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes delivered to the Trustee and to the Co-Issuers. 98

Processed and formatted by SEC Watch - Visit SECWatch.com

(d)

If at any time: (1)

the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by any Holder; or

(2)

the Trustee shall become incapable of acting or shall be adjudged as bankrupt or insolvent or a receiver or liquidator of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case (subject to Section 6.10(a)), (A) the Co-Issuers, by Issuer Order shall remove the Trustee, or (B) subject to Section 5.15, any Holder or the Initial Hedge Counterparty may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e)

6.11.

The Co-Issuers shall give prompt notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first class mail, postage prepaid, to each Rating Agency, the Initial Hedge Counterparty, the Collateral Advisor and the Holders as their names and addresses appear in the Note Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. If the Co-Issuers fail to mail such notice within ten days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Co-Issuers.

ACCEPTANCE OF APPOINTMENT BY SUCCESSOR

Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Co-Issuers and the retiring Trustee (with copies to the Initial Hedge Counterparty and the Collateral Advisor) an instrument accepting such appointment. Upon delivery of the required instruments, the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any other act, deed or conveyance, shall become vested with all the rights, powers, trusts, duties and obligations of the retiring Trustee; but, on request of the CoIssuers or a Majority of the then Aggregate Outstanding Amount of the Notes of any Class of Notes, the Initial Hedge Counterparty or the successor Trustee, such retiring Trustee shall, upon payment of its charges, fees, indemnities and expenses then unpaid, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and funds held by such retiring Trustee hereunder, subject nevertheless to its lien, if any, provided for in Section 6.8(d). Upon request of any such successor Trustee, the Co-Issuers shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless (a) at the time of such acceptance such successor shall be qualified and eligible under Section 6.9 and the other provisions of this Section 6 and (b) a Rating Agency Confirmation shall have been obtained with respect to the appointment of such successor Trustee shall have been satisfied. No appointment of a successor Trustee shall become effective if the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class objects to such appointment; and no appointment of a successor Trustee shall become effective until the date ten days after notice of such appointment has been given to each Rated Noteholder and each Rating Agency. 99

6.12.

MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF TRUSTEE

Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided such Person shall be otherwise qualified and eligible under this Section 6, without the execution or filing of any paper or any further act on the part of any of the parties hereto. The successor Trustee will notify each Rating Agency of any such merger, conversion or consolidation. In case any of the Rated Notes have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Rated Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Rated Notes. 6.13.

CO-TRUSTEES

At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any part of the Collateral may at the time be located, the Trustee shall have power to appoint one or more Persons to act as Co-trustee, jointly with the Trustee of all or any part of the Collateral, with the power to file such proofs of claim and take such other actions pursuant to Section 5.6 and to make such claims and enforce such rights of action on behalf of the Holders of the Rated Notes subject to the other provisions of this Section 6.13. The Co-Issuers shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint a Co-trustee. If the Co-Issuers do not join in such appointment within 15 days after the receipt by them of a request to do so, the Trustee shall have power to make such appointment. Should any written instrument from the Co-Issuers be required by any Co-trustee so appointed for more fully confirming to such Co-

Processed and formatted by SEC Watch - Visit SECWatch.com

trustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the CoIssuers. The Co-Issuers agree to pay (subject to the Priority of Payments) for any reasonable fees and expenses in connection with such appointment. Every Co-trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms: (a)

the Rated Notes shall be authenticated and delivered and all rights, powers, duties and obligations hereunder in respect of the custody of securities, funds and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely by the Trustee;

(b)

the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by the appointment of a Co-trustee shall be conferred or imposed upon and exercised or performed by the Trustee or by the Trustee and such Co-trustee jointly, as shall be provided in the instrument appointing such Co-trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by a Co-trustee; 100

Processed and formatted by SEC Watch - Visit SECWatch.com

6.14.

(c)

the Trustee at any time, by an instrument in writing executed by it, may accept the resignation of or remove any Co-trustee appointed under this Section 6.13. A successor to any Co-trustee so resigned or removed may be appointed in the manner provided in this Section 6.13;

(d)

no Co-trustee hereunder shall be personally liable by reason of any act or omission of the Trustee or any other Co-trustee hereunder;

(e)

the Trustee shall not be liable by reason of any act or omission of a Co-trustee;

(f)

any Act of Rated Noteholders delivered to the Trustee shall be deemed to have been delivered to each Co-trustee; and

(g)

each Co-trustee hereunder shall at the time of such acceptance satisfy the qualification required of a Trustee under Section 6.9 and the other provisions of this Section 6.

CERTAIN DUTIES RELATED TO DELAYED PAYMENT OF PROCEEDS; OTHER NOTICES

In the event that the Trustee shall not have received a payment with respect to any Pledged Security within two Business Days after its Due Date, the Trustee shall (i) notify the Issuer and Collateral Advisor in writing and (ii) promptly request the issuer of such Pledged Security, the trustee under the related Underlying Instrument or paying agent designated by either of them, as the case may be, to make such payment as soon as practicable after such request but in no event later than three Business Days after the date of such request. In the event that such payment is not made within such time period, the Trustee, subject to the provisions of Section 6.1(c)(4), shall, subject to the restrictions on the sale of Collateral Debt Securities set forth in Section 12.1, take such action as the Collateral Advisor shall direct in writing. Any such action shall be without prejudice to any right to claim a Default under this Indenture. The Trustee will promptly notify the Issuer if the Collateral Advisor has determined that (i) any Collateral Debt Security has become a Defaulted Security, a Deferred Interest PIK Bond, a Credit Risk Security or a Written Down Security or (ii) the Trustee has received an Equity Security in connection with any Collateral Debt Security. 6.15.

REPRESENTATIONS AND WARRANTIES OF THE BANK (a)

Organization. The Bank has been duly organized and is validly existing as a national banking association under the laws of the United States and has the power to conduct its business and affairs as a trustee.

(b)

Authorization; Binding Obligations. The Bank has the power and authority to perform the duties and obligations of Trustee, Note Registrar and Note Transfer Agent or any other capacity to which it is appointed under this Indenture. The Bank has taken all necessary action to authorize the execution, delivery and performance of this Indenture, and all of the documents required to be executed by the Bank pursuant hereto. This Indenture has been duly executed and delivered by the Bank. Upon execution and delivery by the Co-Issuers, this Indenture will constitute the legal, valid and binding obligation of the Bank enforceable in accordance with its terms.

(c)

Eligibility. The Bank is eligible under Section 6.9 to serve as Trustee hereunder.

(d)

No Conflict. Neither the execution, delivery and performance of this Indenture, nor the consummation of the transactions contemplated by this Indenture, (i) is prohibited by, or 101

Processed and formatted by SEC Watch - Visit SECWatch.com

requires the Bank to obtain any consent, authorization, approval or registration under, any law, statute, rule, regulation, judgment, order, writ, injunction or decree that is binding upon the Bank or any of its properties or assets, or (ii) will violate any provision of, result in any default or acceleration of any obligations under, result in the creation or imposition of any lien pursuant to, or require any consent under, any agreement to which the Bank is a party or by which it or any of its property is bound. (e)

6.16.

No Proceedings. There are no proceedings pending, or to the best knowledge of the Bank, threatened against the Bank before any federal, state or other governmental agency, authority, administrator or regulatory body, arbitrator, court or other tribunal, foreign or domestic, that could have a material adverse effect on the Collateral or any action taken or to be taken by the Bank under this Indenture.

EXCHANGE OFFERS, PROPOSED AMENDMENTS ETC.

The Collateral Advisor may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, take any of the following actions with respect to a Collateral Debt Security or Equity Security as to which an Offer has been made or as to which any consent, waiver, vote or exercise has been requested: (i) exchange such instrument for other securities or a mixture of securities and other consideration pursuant to such Offer (and in making a determination whether or not to exchange any security, none of the restrictions set forth in Section 12 shall be applicable); and (ii) give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Debt Security or Equity Security. In the event that the Trustee does not receive instruction from the Collateral Advisor, the Trustee shall have no obligation to take action with respect to such exchange or such request for consent, waiver, vote or exercise. In the event that the Trustee receives written notice of any proposed amendment, consent or waiver under the Underlying Instruments of any Collateral Debt Securities (before or after any default), the Trustee shall promptly deliver copies of such notice to the Issuer and the Collateral Advisor. The Collateral Advisor may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, with respect to a Collateral Debt Security as to which a consent or waiver under the Underlying Instruments of such Collateral Debt Security (before or after any default) has been proposed, give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Debt Security only in accordance with such Issuer Order. In the absence of any instruction from the Collateral Advisor, the Trustee shall not engage in any vote with respect to such Collateral Debt Security. 6.17.

FIDUCIARY FOR RATED NOTEHOLDERS ONLY; AGENT FOR OTHER SECURED PARTIES

With respect to the security interests created hereunder, the pledge of any portion of the Collateral to the Trustee is to the Trustee as representative of the Rated Noteholders and agent for other Secured Parties. In furtherance of the foregoing, the possession by the Trustee of any portion of the Collateral and the endorsement to or registration in the name of the Trustee of any portion of the Collateral (including without limitation as entitlement holder of the Collateral Account) are all undertaken by the Trustee in its capacity as representative of the Rated Noteholders and as agent for the other Secured Parties. The Trustee shall not by reason of this Indenture be deemed to be acting as fiduciary for the Initial Hedge Counterparty or the Collateral Advisor, provided that the foregoing shall not limit any of the express obligations of the Trustee under this Indenture. 6.18.

WITHHOLDING

If any withholding tax is imposed on the Issuer’s payment (or allocations of income) under the Rated Notes to any Rated Noteholder, such tax shall reduce the amount otherwise distributable to such 102

Processed and formatted by SEC Watch - Visit SECWatch.com

Rated Noteholder. The Trustee is hereby authorized and directed to retain from amounts otherwise distributable to any Rated Noteholder sufficient funds for the payment of any tax that is required to be withheld or deducted by the Issuer (but such authorization shall not prevent the Trustee from contesting any such tax in appropriate proceedings and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding tax imposed with respect to any Rated Noteholder shall be treated as Cash distributed to such Rated Noteholder at the time it is withheld by the Trustee and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution, the Trustee may in its sole discretion withhold such amounts in accordance with this Section 6.18. If any Rated Noteholder wishes to apply for a refund of any such withholding tax, the Trustee shall reasonably cooperate with such Rated Noteholder in making such claim so long as such Rated Noteholder agrees to reimburse the Trustee for any out-of-pocket expenses incurred. Nothing herein shall impose an obligation on the part of the Trustee to determine the amount of any tax or withholding obligation on the part of the Issuer or in respect of the Income Notes. ARTICLE VII COVENANTS 7.1.

PAYMENT OF PRINCIPAL AND INTEREST

The Co-Issuers will duly and punctually pay all principal (including the Class B Cumulative Periodic Interest Shortfall Amount and the Class C Cumulative Periodic Interest Shortfall Amount and the Class D Cumulative Periodic Interest Shortfall Amount), interest (including Defaulted Interest and interest thereon, if any) in accordance with the terms of the Rated Notes and this Indenture and amounts due under the Hedge Agreement in accordance with this Indenture. Amounts properly withheld under the Code or other applicable law by any Person from a payment to any Rated Noteholder of principal and/or interest shall be considered as having been paid by the Co-Issuers to such Rated Noteholder for all purposes of this Indenture. The Trustee shall, unless prevented from doing so for reasons beyond its reasonable control, give notice to each Rated Noteholder and each Rating Agency of any such withholding requirement no later than ten days prior to the date of the payment from which amounts are required to be withheld; provided that despite the failure of the Trustee to give such notice, amounts withheld pursuant to applicable tax laws shall be considered as having been paid by the Co-Issuers as provided above. 7.2.

MAINTENANCE OF OFFICE OR AGENCY

The Co-Issuers hereby appoint the Trustee as Note Paying Agent for the payment of principal of and interest on the Rated Notes. The Co-Issuers hereby appoint Wells Fargo Bank, National Association with an address at 9062 Old Annapolis Road, Columbia, Maryland 21045, Attn: CDO Trust Services—N-Star Real Estate CDO III, as the Co-Issuers’ agent where notices and demands to or upon the Co-Issuers in respect of the Rated Notes or this Indenture (except service of any and all process in any action or proceeding) may be served and where such Rated Notes may be surrendered for registration of transfer or exchange. The Issuer hereby appoints NCB Stockbroker Limited, 3 George’s Dock, Dublin 1, Ireland, as offshore Note Paying Agent and as the Issuer’s agent where notices and demands to or upon the Issuer in respect of any Rated Notes listed on the Irish Stock Exchange may be served and where such Rated Notes may be surrendered for registration of transfer or exchange. The Co-Issuers may at any time and from time to time, terminate the appointment of any such agent or appoint any additional agents for any or all of such purposes; provided that (A) the Co-Issuers 103

Processed and formatted by SEC Watch - Visit SECWatch.com

will maintain in the Borough of Manhattan, The City of New York, an office or agency where notices and demands to or upon the Co-Issuers in respect of the Rated Notes and this Indenture may be served, (B) no Note Paying Agent shall be appointed in a jurisdiction which subjects payments on the Rated Notes to withholding tax and (C) the Co-Issuers may not terminate the appointment of any Note Paying Agent without the consent of each Income Noteholder. The Co-Issuers shall give prompt written notice to the Trustee and each Rating Agency and the Rated Noteholders of the appointment or termination of any such agent and of the location and any change in the location of any such office or agency. If at any time the Co-Issuers shall fail to maintain any such required office or agency in the Borough of Manhattan, The City of New York or shall fail to furnish the Trustee with the address thereof, presentations and surrenders may be made at and notices and demands may be served on the Co-Issuers and Rated Notes may be presented and surrendered for payment to the Note Paying Agent at its office in Minnesota (and the Co-Issuers hereby appoint the same as their agent to receive such respective presentations, surrenders, notices and demands). For so long as any Class of Rated Notes is listed on the Irish Stock Exchange and such exchange shall so require, the Co-Issuers shall maintain a listing agent, a paying agent and an agent where notices and demands to or upon the Co-Issuers in respect of any Rated Notes listed on the Irish Stock Exchange may be served and where such Rated Notes may be surrendered for registration of transfer or exchange. 7.3.

FUNDS FOR RATED NOTE PAYMENTS TO BE HELD IN TRUST

All payments of amounts due and payable with respect to any Rated Notes that are to be made from amounts withdrawn from the Payment Account shall be made on behalf of the Co-Issuers by the Trustee or a Note Paying Agent with respect to payments on the Rated Notes. When the Co-Issuers shall have a Note Paying Agent that is not also the Note Registrar, they shall direct the Note Registrar to furnish, no later than the fifth calendar day after each Record Date a list, if necessary, in such form as such Note Paying Agent may reasonably request, of the names and addresses of the Holders and of the certificate numbers of individual Rated Notes held by each such Holder. The initial Note Paying Agent shall be as set forth in Section 7.2. Any additional or successor Paying Agents shall be appointed by Issuer Order with written notice thereof to the Trustee and the Rating Agencies; provided that so long as any Class of Rated Notes is rated by the Rating Agencies and with respect to any additional or successor Note Paying Agent for the Rated Notes, (a) the Note Paying Agent for the Rated Notes has a rating of not less than “AA-” and not less than “A-1+” by S&P or (b) a Rating Agency Confirmation from S&P shall have been obtained with respect to the appointment of such Note Paying Agent. In the event that (i) the Co-Issuers have actual knowledge that such successor Note Paying Agent ceases to have a rating of at least “AA-” and of “A-1+” by S&P or (ii) a Rating Agency Confirmation from S&P shall not have been obtained with respect to the appointment of such Note Paying Agent, the Co-Issuers shall promptly remove such Note Paying Agent and appoint a successor Note Paying Agent. The Co-Issuers shall not appoint any Note Paying Agent (other than an initial Note Paying Agent) that is not, at the time of such appointment, a depository institution or trust company subject to supervision and examination by federal and/or state and/or national banking authorities. The Co-Issuers shall cause each Note Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Note Paying Agent shall agree with the Trustee (and if the Trustee acts as Note Paying Agent, it hereby so agrees), subject to the provisions of this Section 7.3, that such Note Paying Agent will: (a)

allocate all sums received for payment to the Holders of Rated Notes for which it acts as Note Paying Agent on each Payment Date and Redemption Date among such Holders in 104

Processed and formatted by SEC Watch - Visit SECWatch.com

the proportion specified in the instructions set forth in the applicable Note Valuation Report or Redemption Date Statement or as otherwise provided herein, in each case to the extent permitted by applicable law; (b)

hold all amounts held by it for the payment of amounts due with respect to the Rated Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided;

(c)

if such Note Paying Agent is not the Trustee, immediately resign as a Note Paying Agent and forthwith pay to the Trustee all amounts held by it in trust for the payment of Rated Notes if at any time it ceases to meet the standards set forth above required to be met by a Note Paying Agent at the time of its appointment;

(d)

if such Note Paying Agent is not the Trustee, immediately give the Trustee notice of any Default by the Issuer or the CoIssuer (or any other obligor upon the Rated Notes) in the making of any payment required to be made; and

(e)

if such Note Paying Agent is not the Trustee at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all amounts so held in trust by such Note Paying Agent.

If the Co-Issuers shall have appointed a Note Paying Agent other than the Trustee, the Trustee shall deposit on or prior to the Business Day next preceding each Payment Date or Redemption Date, as the case may be, with such Note Paying Agent, if necessary, an aggregate amount sufficient to pay the amounts then becoming due (to the extent funds are then available for such purpose in the Collection Account, as the case may be), such amount to be held in trust for the benefit of the Persons entitled thereto. Any funds deposited with a Note Paying Agent (other than the Trustee) in excess of an amount sufficient to pay the amounts then becoming due on the Rated Notes with respect to which such deposit was made shall be paid over by such Note Paying Agent to the Trustee for application in accordance with Section 11. The Co-Issuers may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, direct any Note Paying Agent to pay, to the Trustee all amounts held in trust by such Note Paying Agent, such amounts to be held by the Trustee upon the same trusts as those upon which such amounts were held by such Note Paying Agent; and, upon such payment by any Note Paying Agent to the Trustee, such Note Paying Agent shall be released from all further liability with respect to such amounts. Except as otherwise required by applicable law, any funds deposited with the Trustee or any Note Paying Agent in trust for the payment of the principal of or interest on any Rated Note and remaining unclaimed for two years after the same has become due and payable shall be paid to the Co-Issuers on Issuer Request; and the Holder of such Rated 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 Note Paying Agent with respect to such trust funds (but only to the extent of the amounts so paid to the Co-Issuers) shall thereupon cease. The Trustee or such Note Paying Agent, before being required to make any such release of payment, may, but shall not be required to, adopt and employ, at the expense of the Co-Issuers, any reasonable means of notification of such release of payment, including mailing notice of such release to Holders whose Rated Notes have been called but have not been surrendered for redemption or whose right to or interest in amounts due and payable but not claimed is determinable from the records of any Note Paying Agent, at the last address of record of each such Holder. 105

Processed and formatted by SEC Watch - Visit SECWatch.com

7.4.

EXISTENCE OF CO-ISSUERS

The Issuer and the Co-Issuer shall maintain in full force and effect their existence and rights as an exempted company incorporated and registered under the laws of the Cayman Islands and as a corporation incorporated under the laws of the State of Delaware, respectively, and shall obtain and preserve their qualification to do business in each jurisdiction in which such qualifications are or shall be necessary to protect the validity and enforceability of this Indenture, the Rated Notes or any of the Collateral. The Issuer and the Co-Issuer shall ensure that all corporate or other formalities regarding their respective existences (including holding regular board of directors’ and shareholders’, or other similar, meetings) or registrations are followed. Neither the Issuer nor the CoIssuer shall take any action, or conduct its affairs in a mariner, that is likely to result in its separate existence being ignored or in its assets and liabilities being substantively consolidated with any other Person in a bankruptcy, reorganization or other insolvency proceeding. At least one director of the Issuer and of the Co-Issuer shall be Independent of other parties to the Transaction Documents. Without limiting the foregoing, (a) the Issuer shall not have any subsidiaries (other than the Co-Issuer and any Tax Subsidiary), (b) the Co-Issuer shall not have any subsidiaries and (c) the Issuer and the Co-Issuer shall not (i) have any employees, (ii) engage in any transaction with any shareholder that would constitute a conflict of interest or (iii) pay dividends, provided that the foregoing shall not prohibit the Issuer from entering into the transactions contemplated by the Corporate Services Agreement with the Administrator. 7.5.

PROTECTION OF COLLATERAL (a)

The Issuer shall from time to time, execute and deliver all such supplements and amendments hereto and all such Financing Statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action as may be necessary or advisable or desirable to secure the rights and remedies of the Secured Parties hereunder and to: (1)

Grant more effectively all or any portion of the Collateral;

(2)

maintain, preserve and perfect the lien (and the first priority nature thereof) of this Indenture or to carry out more effectively the purposes hereof;

(3)

perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations);

(4)

enforce any of the Pledged Securities or other instruments or property included in the Collateral;

(5)

preserve and defend title to the Collateral and the rights therein of the Trustee, the Initial Hedge Counterparty and the Holders of the Rated Notes against the claims of all Persons and parties; or

(6)

pay or cause to be paid any and all taxes levied or assessed upon all or any part of the Collateral.

The Issuer hereby designates the Trustee its agent and attorney-in-fact to execute any Financing Statement, continuation statement or other instrument delivered to it pursuant 106

Processed and formatted by SEC Watch - Visit SECWatch.com

to this Section 7.5, and the Trustee, as agent of the Issuer, agrees to file such continuation statements as are necessary to maintain perfection of the Collateral perfected by the filing of Financing Statements, provided that the Issuer retains ultimate responsibility to maintain the perfection of the Collateral perfected by the filing of Financing Statements and any failure of the Trustee to file continuation statements pursuant to this undertaking shall not result in any liability of the Trustee and the Trustee shall be entitled to indemnification pursuant to Section 6.8(a) with respect to any claim, loss, liability or expense incurred by the Trustee with respect to the filing of such continuation statements. The Trustee agrees that it will from time to time, at the direction of any Secured Party, execute and cause to be filed Financing Statements and continuation statements. The Issuer shall otherwise cause the perfection and priority of the security interest in the Collateral and the maintenance of such security interest at all times. Notwithstanding anything to the contrary herein, the right of a Secured Party to provide direction to the Trustee shall not impose upon the Trustee, as Secured Party, any obligation to provide any such direction. The Issuer agrees that a carbon, photographic, photostatic or other reproduction of this Indenture or of a Financing Statement is sufficient as an Indenture or a Financing Statement as the case may be. (b)

The Trustee shall not (i) except in accordance with Section 10.11(a) or (b), as applicable, remove any portion of the Collateral that consists of Cash or is evidenced by an Instrument, certificate or other writing (A) from the jurisdiction in which it was held at the date the most recent Opinion of Counsel was delivered pursuant to Section 7.6 (or from the jurisdiction in which it was held as described in the Opinion of Counsel delivered at the Closing Date pursuant to Section 3.1(c), if no Opinion of Counsel has yet been delivered pursuant to Section 7.6) or (B) from the possession of the Person who held it on such date or (ii) cause or permit ownership or the pledge of any portion of the Collateral that consists of book-entry securities to be recorded on the books of a Person (A) located in a different jurisdiction from the jurisdiction in which such ownership or pledge was recorded at such date or (B) other than the Person on whose books such ownership or pledge was recorded at such date, unless the Trustee shall have first received an Opinion of Counsel to the effect that the lien and security interest created by this Indenture with respect to such property will continue to be maintained after giving effect to such action or actions.

(c)

The Issuer shall pay or cause to be paid taxes, if any, levied on account of the beneficial ownership by the Issuer of any Pledged Securities that secure the Rated Notes; provided that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which disputed amounts or adequate reserves have been made or the failure of which to pay or discharge could not reasonably be expected to have a material adverse effect upon the ability of the Issuer to timely and fully perform any of its payment or other material obligations under this Indenture or upon the interests of the Rated Noteholders in the Collateral.

(d)

The Issuer shall enforce all of its material rights and remedies under the Transaction Documents to which it is a party.

(e)

Without at least thirty (30) days’ prior written notice to the Trustee, the Issuer shall not change its name, or the name under which it does business, from the name shown on the signature pages hereto. 107

Processed and formatted by SEC Watch - Visit SECWatch.com

7.6.

OPINIONS AS TO COLLATERAL

On or before May 31 in each calendar year, commencing in 2006, the Issuer shall furnish to the Trustee and each Rating Agency (with copies to the Initial Hedge Counterparty) an Opinion of Counsel (which shall include assumptions and qualifications substantially similar to those set forth in Exhibit E-1) stating that, in the opinion of such counsel, as of the date of such opinion, the lien and security interest created by this Indenture with respect to the Collateral remains a valid and perfected first priority lien and describing the manner in which such security interest shall remain perfected. 7.7.

PERFORMANCE OF OBLIGATIONS (a)

The Trustee shall notify the Issuer, the Initial Hedge Counterparty and each Rated Noteholder of any request for an amendment, waiver or supplement to any Underlying Instrument included in the Collateral or of any other notice of a vote in respect of any Collateral Debt Security included in the Collateral. The Issuer shall not enter into any such amendment, waiver or supplement; provided that, notwithstanding anything in this Section 7.7(a) to the contrary, the Issuer may enter into any amendment or waiver of or supplement to any such Underlying Instrument if such amendment, supplement or waiver: (1)

is required by the provisions of any Underlying Instrument or by applicable law (other than pursuant to an Underlying Instrument);

(2)

is necessary to cure any ambiguity, inconsistency or formal defect or omission in such Underlying Instrument; or

(3)

(x) is deemed necessary by the Issuer or the Collateral Advisor and does not materially and adversely affect the Secured Parties or (y) is effected pursuant to Section 6.16.

The Issuer shall be entitled to rely on an Opinion of Counsel as to material adverse effect and as to whether the entry into an amendment, supplement or waiver is permitted pursuant to this Indenture. (b)

The Issuer or the Co-Issuer may, with the prior written consent of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes and the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes and the Initial Hedge Counterparty, contract with other Persons, including the Collateral Administrator, the Collateral Advisor and the Bank, for the performance of actions and obligations to be performed by the Issuer or the Co-Issuer hereunder by such Persons. Notwithstanding any such arrangement, the Issuer or the Co-Issuer, as the case may be, shall remain liable for all such actions and obligations. In the event of such contract, the performance of such actions and obligations by such Persons shall be deemed to be performance of such actions and obligations by the Issuer or the Co-Issuer, as the case may be; and the Issuer or Co-Issuer, as the case may be, will punctually perform, and use its best efforts to cause such other Person to perform, all of their obligations and agreements contained in related agreement.

(c)

The Co-Issuers shall treat all acquisitions of Collateral Debt Securities as a “purchase” for tax, accounting and reporting purposes. 108

7.8.

(d)

Each of the Co-Issuers shall file, or cause to be filed, any tax returns, including information tax returns, required by any governmental authority.

(e)

In the event (i) a Collateral Debt Security becomes a Withholding Tax Security, or the ownership of a Collateral Debt Security would otherwise result in the Issuer being or becoming subject to U.S. tax on a net income basis or being or becoming subject to the U.S. branch profits tax (in either case, such Collateral Debt Security becoming a Taxed Collateral Debt Security), and (ii) the Issuer does not sell or otherwise dispose of all or a portion of such Taxed Collateral Debt Security in accordance with the provisions of Section 12.1(a)(3), the Collateral Advisor on behalf of the Issuer shall, within five (5) Business Days of such Collateral Debt Security becoming a Taxed Collateral Debt Security, set up a special purpose subsidiary (a Tax Subsidiary) to receive and hold any such Taxed Collateral Debt Security unless the Issuer has received an opinion of nationally recognized counsel that the Issuer can hold such Taxed Collateral Debt Security directly without causing the Issuer to be treated as engaged in a trade or business in the United States for United States federal income tax purposes. The Issuer shall cause the purposes and permitted activities of any such subsidiary to be restricted solely to the acquisition, holding and disposition of such Taxed Collateral Debt Security and shall require such subsidiary to distribute 100% of the proceeds of any sale of such Taxed Collateral Debt Security, net of any tax liabilities, to the Issuer.

NEGATIVE COVENANTS (a)

The Issuer will not and, with respect to Section 7.8(a)(3), (4), (5) and (9), the Co-Issuer will not: (1)

intentionally operate so as to be subject to U.S. federal income taxes on its net income;

Processed and formatted by SEC Watch - Visit SECWatch.com

(2)

sell, assign, participate, transfer, exchange or otherwise dispose of, or pledge, mortgage, hypothecate or otherwise encumber (or permit such to occur or suffer such to exist), any part of the Collateral, except as expressly permitted by this Indenture;

(3)

claim any credit on, make any deduction from, or dispute the enforceability of, the payment of the principal or interest (or any other amount) payable in respect of the Rated Notes (other than amounts required to be paid, deducted or withheld in accordance with any applicable law or regulation of any governmental authority) or assert any claim against any present or future Rated Noteholder by reason of the payment of any taxes levied or assessed upon any part of the Collateral;

(4)

(A) incur or assume or guarantee any indebtedness, other than the Rated Notes and this Indenture and the transactions contemplated hereby; (B) issue any additional class of securities other than the Income Notes; or (C) issue any additional shares of stock;

(5)

(A) take any action that would impair the validity or effectiveness of this Indenture or any Grant hereunder or the lien of this Indenture, amend hypothecate, subordinate, terminate, discharge or release any Person from any covenants or obligations with respect to this Indenture or the Rated Notes, except 109

Processed and formatted by SEC Watch - Visit SECWatch.com

as may be permitted hereby, (B) create or extend any lien, charge, adverse claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) on or to the Collateral or any part thereof, any interest therein or the proceeds thereof, or (C) take any action that would cause the lien of this Indenture not to constitute a valid first priority security interest in the Collateral;

7.9.

(6)

use any of the proceeds of the Rated Notes issued hereunder (A) to extend “purpose credit” within the meaning given to such term in Regulation U or (B) to purchase or otherwise acquire any Margin Stock;

(7)

permit the aggregate book value of all Margin Stock held by the Issuer on any date to exceed the net worth of the Issuer on such date (excluding any unrealized gains and losses) on such date;

(8)

dissolve or liquidate in whole or in part, except as permitted hereunder; or

(9)

except for any agreements involving the purchase and sale of Collateral Debt Securities having customary purchase or sale terms and documents with customary loan trading documentation (but not excepting the Hedge Agreement), enter into any agreements unless such agreements contain “non-petition” and “limited recourse” provisions with respect to the Issuer.

(b)

Except as permitted by this Indenture, the Issuer will not do business under any other name other than the name set forth in the Articles and neither the Issuer nor the Trustee shall acquire any Collateral after the Closing Date, sell, transfer, exchange or otherwise dispose of Collateral, or enter into or engage in any business with respect to any part of the Collateral.

(c)

The Co-Issuer will not invest any of its assets in “securities” (as such term is defined in the Investment Company Act), and will keep all of its assets in Cash.

STATEMENT AS TO COMPLIANCE

On or before May 31 in each calendar year commencing in 2006, or immediately if there has been a Default in the fulfillment of an obligation under this Indenture, the Issuer shall deliver to the Trustee, the Income Note Paying Agent, each Rated Noteholder making a written request therefor, the Irish Paying Agent, the Initial Hedge Counterparty, the Collateral Advisor and each Rating Agency a certificate of the Issuer stating, as to each signer thereof, that: (a)

the Officer executing such certificate has conducted a review of the activities of the Issuer and of the Issuer’s performance under this Indenture during the 12-month period ending on December 31 of such year (or from the Closing Date until December 31, 2005, in the case of the first such certificate) based on reports and other information delivered to such Officer by the Trustee, the Collateral Advisor and the Collateral Administrator and a review of the Accountant’s Reports prepared pursuant to Section 10.10 and such other materials as such Officer deems appropriate; and

(b)

to the best of knowledge of the Issuer, based on such review, the Issuer has fulfilled all of its material obligations under this Indenture throughout the period, or, if there has been a Default in the fulfillment of any such obligation, specifying each such Default known to 110

Processed and formatted by SEC Watch - Visit SECWatch.com

such Officer and the nature and status thereof, including actions undertaken to remedy the same. 7.10.

CO-ISSUERS MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS (a)

The Issuer shall not consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any Person, unless permitted by Cayman Islands law and unless: (1)

the Issuer shall be the surviving entity, or the Person (if other than the Issuer) formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall be an exempted limited liability company organized and existing under the laws of the Cayman Islands or such other jurisdiction outside the United States as may be approved by a Majority of each Class and the Initial Hedge Counterparty, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, the Initial Hedge Counterparty and each Rated Noteholder, the due and punctual payment of the principal of and interest on all Rated Notes and the performance of every covenant of this Indenture and the Hedge Agreement on the part of the Issuer to be performed or observed, all as provided herein;

(2)

each Rating Agency and the Initial Hedge Counterparty shall have received written notification from the Issuer of such consolidation, merger, transfer or conveyance and the identity of the surviving entity and a Rating Agency Confirmation shall have been obtained with respect to the consummation of such transaction;

(3)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have agreed with the Trustee (A) to observe the same legal requirements for the recognition of such formed or surviving entity as a legal entity separate and apart from any of its Affiliates as are applicable to the Issuer with respect to its Affiliates and (B) not to consolidate or merge with or into any other Person or transfer or convey the Collateral or all or substantially all of its assets to any other Person except in accordance with the provisions of this Section 7.10;

(4)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have delivered to the Trustee, the Initial Hedge Counterparty and each Rating Agency an Officer’s certificate and an Opinion of Counsel each stating that such Person shall be duly organized, validly existing and (if applicable) in good standing in the jurisdiction in which such Person is organized; that such Person has sufficient power and authority to assume the obligations set forth in Section 7.10(a)(1) above and to execute and deliver an indenture supplemental hereto for the purpose of assuming such obligations; that such Person has duly authorized the execution, delivery and performance of an indenture supplemental hereto for the purpose of assuming such obligations and that such supplemental indenture is a valid, legal and binding obligation of such Person, enforceable in accordance with its terms, 111

Processed and formatted by SEC Watch - Visit SECWatch.com

subject only to bankruptcy, reorganization, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); that, immediately following the event which causes such Person to become the successor to the Issuer, (A) such Person has good and marketable title, free and clear of any lien, security interest or charge, other than the lien and security interest of this Indenture, to the Collateral; (B) the Trustee continues to have a valid perfected first priority security interest in the Collateral securing all of the Rated Notes; (C) such Person has received an Opinion of Counsel to the effect that such Person will not be subject to net income tax or be treated as engaged in a trade or business within the United States for U.S. federal income tax purposes and such other matters as the Trustee, the Initial Hedge Counterparty or any Rated Noteholder may reasonably require;

(b)

(5)

immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(6)

the Issuer shall have delivered to the Trustee, the Initial Hedge Counterparty and each Rated Noteholder an Officer’s certificate and an Opinion of Counsel each stating that such consolidation, merger, transfer or conveyance and such supplemental indenture comply with this Section 7, that all conditions precedent in this Section 7 provided for relating to such transaction have been complied with and that no adverse tax consequences will result therefrom to any Rated Noteholder or the Initial Hedge Counterparty; and

(7)

the Issuer shall have delivered to the Trustee an Opinion of Counsel stating that after giving effect to such transaction, neither of the Co-Issuers will be required to register as an investment company under the Investment Company Act.

The Co-Issuer shall not consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any Person, unless: (1)

the Co-Issuer shall be the surviving corporation, or the Person (if other than the Co-Issuer) formed by such consolidation or into which the Co-Issuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, the due and punctual payment of the principal of and interest on all Rated Notes and the performance of every covenant of this Indenture on the part of the Co-Issuer to be performed or observed, all as provided herein;

(2)

each Rating Agency shall have received written notification from the Co-Issuer of such consolidation, merger, transfer or conveyance and the identity of the surviving entity and a Rating Agency Confirmation shall have been obtained with respect to the consummation of such transaction;

(3)

if the Co-Issuer is not the surviving corporation, the Person formed by such consolidation or into which the CoIssuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall have agreed with the Trustee (A) to observe the same legal requirements for the recognition of such formed or surviving corporation as a legal entity separate and 112

Processed and formatted by SEC Watch - Visit SECWatch.com

apart from any of its Affiliates as are applicable to the Co-Issuer with respect to its Affiliates and (B) not to consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any other Person except in accordance with the provisions of this Section 7.10;

7.11.

(4)

if the Co-Issuer is not the surviving corporation, the Person formed by such consolidation or into which the CoIssuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall have delivered to the Trustee and each Rating Agency an Officer’s certificate and an Opinion of Counsel each stating that such Person shall be duly organized, validly existing and (if applicable) in good standing in the jurisdiction in which such Person is organized; that such Person has sufficient power and authority to assume the obligations set forth in Section 7.10(b)(1) above and to execute and deliver an indenture supplemental hereto for the purpose of assuming such obligations; that such Person has duly authorized the execution, delivery and performance of an indenture supplemental hereto for the purpose of assuming such obligations and that such supplemental indenture is a valid, legal and binding obligation of such Person, enforceable in accordance with its terms, subject only to bankruptcy, reorganization, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and such other matters as the Trustee or any Rated Noteholder may reasonably require;

(5)

immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(6)

the Co-Issuer shall have delivered to the Trustee and each Rated Noteholder an Officer’s certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance or transfer and such supplemental indenture comply with this Section 7 and that all conditions precedent in this Section 7 provided for relating to such transaction have been complied with and that no adverse tax consequences will result therefrom to any Rated Noteholder;

(7)

after giving effect to such transaction, neither of the Co-Issuers will be required to register as an investment company under the Investment Company Act; and

(8)

after giving effect to such transaction, the outstanding stock of the Co-Issuer will not be beneficially owned by any Person other than the Issuer.

SUCCESSOR SUBSTITUTED

Upon any consolidation or merger, or transfer or conveyance of all or substantially all of the assets of the Issuer or the Co-Issuer, in accordance with Section 7.10, the Person formed by or surviving such consolidation or merger (if other than the Issuer or the Co-Issuer), or, the Person to which such transfer or conveyance is made, shall succeed to, and be substituted for, and may exercise every right and power of, and shall be bound by each obligation or covenant of, the Issuer or the Co-Issuer, as the case may be, under this Indenture with the same effect as if such Person had been named as the Issuer or the Co-Issuer, as the case may be, herein. In the event of any such consolidation, merger, transfer or conveyance, the Person named as the “Issuer” or the “Co-Issuer” in the first paragraph of this Indenture or any successor which shall theretofore have become such in the manner prescribed in this Section 7 may 113

Processed and formatted by SEC Watch - Visit SECWatch.com

be dissolved, wound-up and liquidated at any time thereafter, and such Person thereafter shall be released from its liabilities as obligor and maker on all the Rated Notes and from its obligations under this Indenture. 7.12.

NO OTHER BUSINESS

The Issuer shall not engage in any business or activity other than (i) issuing and selling the Rated Notes pursuant to this Indenture, (ii) issuing and selling the Income Notes in accordance with the Income Note Paying Agency Agreement (iii) issuing the Ordinary Shares pursuant to the Issuer Charter, (iv) acquiring, pledging, holding and disposing of, solely for its own account, Collateral Debt Securities, Eligible Investments and other Collateral described in clauses (a) to (e) of the granting clauses hereof, (vi) holding the capital stock of the CoIssuer and (vi) such other activities that are incidental thereto and connected therewith. The Co-Issuer shall not engage in any business or activity other than issuing and selling the Rated Notes pursuant to this Indenture and such other activities incidental thereto or connected therewith. The Issuer shall not hold itself out as a derivatives dealer willing to enter into either side of, or to offer to enter into, assume, offset, assign or otherwise terminate positions in (i) interest rate, currency, equity or commodity swaps or caps or (ii) derivative financial instruments (including options, forward contracts, short positions and similar instruments) in any commodity, currency, share of stock, partnership or trust, note, bond, debenture or other evidence of indebtedness, swap or cap. The foregoing shall not limit the ability of the Issuer to enter into Hedge Agreements. Furthermore, the Issuer shall not hold itself out, whether through advertising or otherwise, as a bank, insurance company or finance company, or as originating loans, lending funds, making a market in loans or other assets or selling loans or other assets to customers. The Issuer will not amend the Issuer Charter and the Co-Issuer will not amend its Certificate of Incorporation or By-Laws, if such amendment would result in the rating (including any private or confidential rating) of any Class of Rated Notes being reduced or withdrawn. The Issuer shall not engage in any business or activity or hold any asset that would cause the Issuer to be engaged in a U.S. trade or business for U.S. federal income tax purposes, except as the result of ownership of Equity Securities or securities received in an Offer in accordance with the provisions of this Indenture. 7.13.

CHANGE OR WITHDRAWAL OF RATING

The Issuer shall promptly notify the Trustee in writing and upon receipt of such notice the Trustee shall promptly notify the Rated Noteholders and the Initial Hedge Counterparty if at any time the rating of any Class of Rated Notes has been, or is known will be, changed or withdrawn. 7.14.

REPORTING

At any time when the Co-Issuers are not subject to Section 13 or 15(d) of the Exchange Act and are not exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, upon the request of a Holder or Beneficial Owner of a Rated Note or Income Note, the Co-Issuers shall promptly furnish or cause to be furnished Rule 144A Information to such Holder or Beneficial Owner, to a prospective purchaser of such Rated Note or Income Note designated by such Holder or Beneficial Owner or to the Trustee for delivery to such Holder or Beneficial Owner or a prospective purchaser designated by such Holder or Beneficial Owner, as the case may be, in order to permit compliance by such Holder or Beneficial Owner with Rule 144A under the Securities Act in connection with the resale of such Rated Note or Income Note by such Holder or Beneficial Owner. 7.15.

RATED NOTE CALCULATION AGENT (a)

The Issuer hereby agrees that for so long as any of the Rated Notes remain Outstanding the Issuer will at all times cause there to be an agent appointed to calculate LIBOR in 114

Processed and formatted by SEC Watch - Visit SECWatch.com

respect of each Interest Period in accordance with the terms of Schedule B (the Rated Note Calculation Agent), which agent shall be a financial institution, subject to supervision or examination by federal or state authority, having a rating of at least “BBB+” by S&P and having an office within the United States. Whenever the Note Calculation Agent is required to act or exercise judgment, it will do so in good faith and in a commercially reasonable manner. The Issuer has initially appointed the Trustee as Rated Note Calculation Agent for purposes of determining LIBOR for each Interest Period. If the Rated Note Calculation Agent is unable or unwilling to act as such or is removed by the Issuer, the Issuer (after consultation with the Collateral Advisor) will propose a leading bank which is engaged in transactions in Dollar deposits in the international Eurodollar market and which does not control or is not controlled by or under common control with the Co-Issuers or any of their Affiliates as a replacement Rated Note Calculation Agent for approval by Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes. The Rated Note Calculation Agent may not resign its duties without a successor having been duly appointed. (b)

7.16.

As soon as possible after 11:00 a.m. (London time) on each LIBOR Calculation Date, but in no event later than 11:00 a.m. (New York time) on the London Banking Day immediately following each LIBOR Calculation Date, the Rated Note Calculation Agent will calculate LIBOR for the next Interest Period and the Periodic Interest payable for such Interest Period in respect of the Outstanding Rated Notes, rounded to the nearest cent, with half a cent being rounded upward, on the related Payment Date to be given to the Co-Issuers, the Trustee, the Collateral Advisor, the Depositary, Euroclear, Clearstream, the Note Paying Agent and the Irish Paying Agent. The Rated Note Calculation Agent will also specify to the Co-Issuers and the Collateral Advisor the quotations upon which the Applicable Periodic Interest Rate for each Class of Rated Notes is based, and in any event the Rated Note Calculation Agent must notify the Co-Issuers and the Collateral Advisor before 5:00 p.m. (New York time) on each applicable LIBOR Calculation Date if it has not determined and is not in the process of determining LIBOR with respect to the Rated Notes and the Periodic Interest with respect to each Class of Rated Notes, together with its reasons for the delay. The Irish Paying Agent also will cause the Applicable Periodic Interest Rate for each Interest Period for each Class of Rated Notes listed on the Irish Stock Exchange, the amount of interest payable in respect of each Class of Rated Notes listed on the Irish Stock Exchange and each Payment Date to be delivered to the Company Announcements Office of the Irish Stock Exchange as soon as possible after the Irish Paying Agent has received notice from the Rated Note Calculation Agent of such Applicable Periodic Interest Rates and amounts.

LISTING

The Issuer will use its commercially reasonable efforts to obtain and maintain the listing of each Class of Rated Notes on the Irish Stock Exchange. 7.17.

AMENDMENT OF CERTAIN DOCUMENTS

The Issuer will not agree to any amendment to or modification of the Corporate Services Agreement, the Collateral Advisory Agreement, the Account Control Agreement or the Hedge Agreement at any time without obtaining Rating Agency Confirmation with respect to any such modification and will not amend, modify or waive any “non-petition” or “limited recourse” provisions of any Transaction 115

Processed and formatted by SEC Watch - Visit SECWatch.com

Document to which it is a party without obtaining a Rating Agency Confirmation with respect to such modification. The Trustee shall provide each of the Initial Hedge Counterparty, the Holders of Rated Notes of the Controlling Class, the Collateral Advisor and the Rating Agencies with a copy of any such amendment or modification within 10 Business Days before effecting such amendment or modification. Prior to entering into any waiver in respect of the any of the foregoing agreements, the Issuer will provide to each Rating Agency and the Trustee with written notice of such waiver. 7.18.

PURCHASE OF COLLATERAL; INFORMATION REGARDING COLLATERAL; RATING CONFIRMATION (a)

The Issuer will use reasonable efforts to purchase or enter into agreements to purchase, on or before the Effective Date, Collateral Debt Securities having an aggregate Principal Balance, together with the aggregate Principal Balance of all Eligible Investments purchased with Collateral Principal Collections, of not less than U.S.$400,000,000 (assuming, for these purposes, settlement (in accordance with customary settlement procedures in the relevant markets) of all agreements entered into by the Issuer to acquire Collateral Debt Securities scheduled to settle on or following the Effective Date).

(b)

The Issuer (or the Collateral Advisor on behalf of the Issuer) shall cause to be delivered to the Trustee on the Effective Date an amended Schedule A listing all Collateral Debt Securities purchased on or before the Effective Date, which schedule will supersede any prior Schedule A delivered to the Trustee.

(c)

On or before the Effective Date, the Issuer (or the Collateral Advisor on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Rated Notes of the Controlling Class, the Initial Hedge Counterparty and each Rating Agency (in addition to any such Officer’s Certificate, the information set forth in such Officer’s Certificate shall also be provided to S&P in a form that complies with S&P’s Preferred Format) demonstrating compliance by the Issuer with its obligations under Section 7.18(a) and satisfaction of each applicable Collateral Quality Test (with the exception of S&P’s CDO Monitor Test), and Coverage Test or, if on the Effective Date, the Issuer shall be in default in the performance of its obligations under this Section 7.18 or any of the Collateral Quality Tests (with the exception of S&P’s CDO Monitor Test) or the specified Coverage Tests shall fail to be satisfied, the Issuer (or the Collateral Advisor on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Rated Notes of the Controlling Class, the Initial Hedge Counterparty and each Rating Agency specifying the details of such default or failure; provided that the failure to satisfy any of the Collateral Quality Tests or Coverage Tests does not constitute an Event of Default but such failure may result in a Rating Confirmation Failure.

(d)

No later than fifteen (15) Business Days after the Effective Date, the Issuer (or the Collateral Advisor on its behalf) shall deliver or cause to be delivered to the Trustee an accountant’s certificate (the Accountant’s Certificate) (i) confirming the information with respect to each Collateral Debt Security set forth on the amended schedule delivered pursuant to Section 7.18(b) as of the Effective Date, and the information provided by the Issuer with respect to every other asset included in the Collateral, (ii) certifying as of the Effective Date the procedures applied and their associated findings with respect to the Coverage Tests and the Collateral Quality Tests and (iii) specifying the procedures undertaken to review data and computations relating to the foregoing clause (ii) held by the Issuer on the Effective Date. 116

Processed and formatted by SEC Watch - Visit SECWatch.com

(e)

The Issuer (or the Collateral Advisor on its behalf) shall request in writing that each of the Rating Agencies confirm in writing (a Rating Confirmation), within thirty (30) Business Days after the Effective Date, the ratings (including any private or confidential ratings) assigned by it on the Closing Date to the Rated Notes. In the event that the Issuer fails to obtain a Rating Confirmation within 30 days after the Effective Date (a Rating Confirmation Failure), Collateral Interest Collections and, to the extent Collateral Interest Collections are insufficient therefor, Collateral Principal Collections shall be applied on the first Payment Date and any succeeding Payment Dates, as applicable as provided in Section 11.1 to the extent necessary for each of the Rating Agencies to provide a Rating Confirmation.

(f)

No later than fifteen (15) Business Days following the Effective Date, the Trustee shall (i) run the S&P CDO Monitor and report to S&P whether or not the S&P CDO Monitor Test has been satisfied and (ii) report the S&P scenario default and break-even default rate for each Class of Notes. ARTICLE VIII SUPPLEMENTAL INDENTURES

8.1.

SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF RATED NOTEHOLDERS

Without the consent of the Holders of any Rated Notes, the Initial Hedge Counterparty (except as specified below) or the Income Noteholders, the Co-Issuers, when authorized by Board Resolutions, and the Trustee, at any time and from time to time subject to the requirement provided below in this Section 8.1 with respect to the ratings of the Rated Notes and subject to Section 8.3, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for certain limited purposes including, inter alia, to: (a)

evidence the succession of another Person to the Issuer or the Co-Issuer and the assumption by any such successor Person of the covenants of the Issuer or the Co-Issuer herein and in the Rated Notes pursuant to Section 7.10 or 7.11;

(b)

add to the covenants of the Co-Issuers or the Trustee for the benefit of the Holders of all of the Rated Notes;

(c)

pledge any additional property to the Trustee;

(d)

add to the conditions, limitations or restrictions on the authorized amount, terms and purposes of the issue, authentication and delivery of the Rated Notes;

(e)

effect the appointment of a successor;

(f)

reduce the permitted minimum denomination of the Rated Notes;

(g)

take any action necessary or advisable to prevent the Issuer, any Note Paying Agent or the Trustee from being subject to withholding or other taxes, fees or assessments or to prevent the Issuer from being treated as engaged in a U.S. trade or business or otherwise being subjected to U.S. federal, state or local income tax on a net income tax basis; provided that such action will not cause the Noteholders to experience any material change to the timing, character or source of income from the Notes and will not be 117

Processed and formatted by SEC Watch - Visit SECWatch.com

considered a significant modification resulting in an exchange for purposes of section 1.1001-3 of the U.S. Treasury regulations; (h)

modify the restrictions on and procedures for resale and other transfer of the Rated 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 (in addition to that provided under Section 3(c)(7) thereunder) or to remove restrictions on resale and transfer to the extent not required thereunder;

(i)

grant, convey, transfer, assign, mortgage or pledge any property to or with the Trustee for the benefit of the Secured Parties;

(j)

correct or amplify the description of any property at any time subject to the lien of this Indenture, or to better assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations) or to subject to the lien of this Indenture any additional property;

(k)

make any change required by the stock exchange on which any Class of Rated Note is listed, if any, in order to permit or maintain such listing;

(1)

correct, amend, cure any manifest error, inconsistency, defect or ambiguity or correct any typographical error in this Indenture;

(m)

modify this Indenture to conform the terms herein to the terms set forth in the then current Offering Circular;

(n)

modify any provision (other than in respect of a Reserved Matter), with respect to restrictions upon the Issuer’s rights to acquire and dispose of Collateral Debt Securities and other assets, that the Issuer or the Collateral Advisor determines to be necessary or desirable in order for the Issuer to maintain any desired exemption from registration of the Issuer under the Investment Company Act or of the Notes under the Securities Act;

(o)

with the consent of the Collateral Advisor, modify the calculation of the Collateral Quality Tests and the definitions applicable thereto to correspond with published or written changes in the guidelines, methodology or standards established by the Rating Agencies;

(p)

agree to any modification of the Indenture or any other Transaction Document (other than in respect of a Reserved Matter), which is, in the opinion of the Trustee, proper to make if, in the opinion of the Trustee (based upon an opinion of counsel), such modification will not have a material adverse effect on the interests of Holders of any Class or Classes of Notes or the Initial Hedge Counterparty and which is of a formal, minor or technical nature or is to correct a manifest error.

In addition, the Trustee may, but is not obligated to, without the consent of the Rated Noteholders or of the Holders of any relevant Class or Classes of Rated Notes, agree to any modification of any other Transaction Document which is of a formal, minor or technical nature or is to correct a manifest error and which is, in the opinion of the Trustee, proper to make, in the opinion of the Trustee (based upon an opinion of counsel); provided such modification will not have a material adverse effect on the interests of 118

Processed and formatted by SEC Watch - Visit SECWatch.com

the Initial Hedge Counterparty or the Holders of any Class or Classes of Notes. For so long as any Rated Notes are Outstanding, no such supplemental indenture shall be effective unless and until Rating Agency Confirmation has been received. The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. Without obtaining the requisite consents of the applicable parties pursuant to this Section 8.1, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of the Initial Hedge Counterparty, any Holder of Rated Notes or of the Income Noteholders would be materially and adversely affected thereby. Unless notified by (i) a Majority of the then Aggregate Outstanding Amount of any Class of Rated Notes that such Class will be materially and adversely affected, (ii) a Majority of the aggregate principal amount of Income Notes Outstanding that the Income Noteholders will be materially and adversely affected or (iii) the Initial Hedge Counterparty (with respect to the Initial Hedge Counterparty, only to the extent that its right to payments in accordance with the Priority of Payments is adversely affected), the Trustee shall be entitled to rely upon an Opinion of Counsel as to whether the interests of any Holder of Rated Notes or of Income Notes would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the Income Note Paying Agent). The Collateral Advisor will not be bound by any supplemental indenture that affects the obligations of the Collateral Advisor unless the Collateral Advisor has consented thereto (which consent will not be unreasonably withheld). The Co-Issuers will not consent to any supplemental indenture that would have a material adverse effect on the Initial Hedge Counterparty without the consent of the Initial Hedge Counterparty. At the cost of the Co-Issuers, the Trustee shall provide to the Rated Noteholders, the Income Note Paying Agent, the Initial Hedge Counterparty and each Rating Agency a copy of any proposed supplemental indenture at least 10 days prior to the execution thereof by the Trustee and, for so long as any Rated Notes are Outstanding, request a Rating Agency Confirmation from each Rating Agency with respect to such supplemental indenture. As soon as practicable after the execution by the Trustee and the Issuer of any such supplemental indenture, the Trustee shall provide to the Rated Noteholders, the Income Note Paying Agent, the Initial Hedge Counterparty and each Rating Agency a copy of the executed supplemental indenture. For so long as any Rated Notes are Outstanding, no supplemental indenture shall be effective unless and until a Rating Agency Confirmation from each Rating Agency has been received. 8.2.

SUPPLEMENTAL INDENTURES WITH CONSENT OF RATED NOTEHOLDERS

Except as provided below, with the prior written consent of the Initial Hedge Counterparty (but only if the right of the Initial Hedge Counterparty to payments in accordance with the Priority of Payments is adversely affected), the Holders of not less than a majority of the aggregate principal amount of the Outstanding Rated Notes of each Class (in principal amount) adversely affected thereby and the written consent of Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes (if materially and adversely affected thereby), the Trustee and the Co-Issuers may execute a supplemental indenture to add provisions to, or change in any manner or eliminate any provisions of, the Indenture or modify in any manner the rights of the Holders of the Rated Notes of such Class or of the Income Notes or the Hedge Counterparty under the Indenture. With the written consent of the Holders of not less than 75% of the then Aggregate Outstanding Amount of each adversely affected Class of Rated Notes and the written consent of 75% of the Holders of 119

Processed and formatted by SEC Watch - Visit SECWatch.com

the aggregate principal amount of the Outstanding Income Notes if materially and adversely affected thereby (which consent shall be evidenced by an Officer’s certificate of the Issuer certifying that such consent has been obtained), Rating Agency Confirmation and the written consent of the Initial Hedge Counterparty (which shall be required only if the right of the Initial Hedge Counterparty to payments in accordance with the Priority of Payments is adversely affected), the Trustee and Co-Issuers may, subject to Section 8.3, enter into one or more indentures supplemental hereto in order to: (a)

change the applicable Stated Maturity Date of the Rated Notes or scheduled redemption of the principal of or the due date of any installment of interest on the Rated Notes, reduce the principal amount thereof or the rate of interest thereon, or the Redemption Price with respect thereto, or change the earliest date on which Rated Notes 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 the Rated Notes or change any place where, or the coin or currency in which, Rated Notes or the principal thereof or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity Date thereof (or, in the case of redemption, on or after the Redemption Date);

(b)

reduce the percentage, in principal amount, of Holders of Rated Notes of each Class, or the percentage of Income Noteholders, whose consent is required for the authorization of any supplemental indenture or for any waiver of compliance with certain provisions of the Indenture or certain defaults thereunder or their consequences;

(c)

impair or adversely affect the Collateral other than as permitted by the Indenture;

(d)

permit the creation of any security interest ranking prior to or on a parity with the security interest of the Indenture with respect to any part of the Collateral or terminate such security interest on any property at any time subject thereto (other than in accordance with the Indenture) or deprive the Holder of any Rated Note or the Initial Hedge Counterparty of the security afforded by the security interest of the Indenture;

(e)

reduce the percentage of the aggregate principal amount of Holders of Rated Notes of each Class whose consent is required to request the Trustee to preserve the Collateral or rescind the Trustee’s election to preserve the Collateral pursuant to Section 5.5 or to sell or liquidate the Collateral pursuant to Section 5.4 or 5.5;

(f)

modify any of the provisions of this Section 8.2, except to increase the percentage of the aggregate principal amount of Outstanding Rated Notes of each Class whose Holders’ consent is required for any such action or to provide that other provisions of the Indenture cannot be modified or waived without the written consent of the Holders of 75% of the then Aggregate Outstanding Amount of each affected Class of Rated Notes Outstanding or the Initial Hedge Counterparty;

(g)

modify the definition of the term “Outstanding” or Section 11.1;

(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 or principal of any Rated Note on any Payment Date or to affect the right of the Holders of Rated Notes or the Initial Hedge Counterparty to the benefit of any provisions for the redemption of such Rated Notes contained therein;

(i)

modify provisions related to the bankruptcy or insolvency of the Co-Issuers; or 120

(j)

modify provisions stating that the obligations of the Co-Issuers are joint and several limited recourse obligations of the CoIssuers payable solely from the Collateral in accordance with the terms of the Indenture (Section 8.2(a) through (j) collectively, the Reserved Matters).

The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. Not later than 15 Business Days prior to the execution of any proposed supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Co-Issuers, shall mail to the Rated Noteholders, Income Note Paying Agent, the Initial Hedge Counterparty, the Collateral Advisor and each Rating Agency a copy of such proposed supplemental indenture (or a description of the substance thereof) and shall request Rating Agency Confirmation with respect to such supplemental indenture. If any Class of Rated Notes is then rated by any Rating Agency, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, Rating Agency Confirmation would not be received with respect to such supplemental indenture, unless each Holder of Rated Notes of each Class whose rating will be reduced or withdrawn has, after notice that the proposed supplemental indenture would result in such reduction or withdrawal of the rating of the Class of Rated Notes held by such Holder, consented to such supplemental indenture. Without having obtained the consent of the applicable parties pursuant to this Section 8.2, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of the Initial Hedge Counterparty, any Holder of Rated Notes or of the Income Noteholders would be materially and adversely affected thereby. Unless notified by (i) the Holders of a Majority of the then Aggregate Outstanding Amount of any Class of Rated Notes that such Class will be materially and adversely affected or (ii) the Holders of a Majority of

Processed and formatted by SEC Watch - Visit SECWatch.com

aggregate principal amount of the Income Notes that the Income Noteholders will be materially and adversely affected, the Trustee shall be entitled to rely upon an Opinion of Counsel as to whether the interests of any Holder of Rated Notes or of the Income Noteholders would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the Income Note Paying Agent). It shall not be necessary for any Act of Rated Noteholders or any consent of Income Noteholders under this Section 8.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act or consent shall approve the substance thereof. Promptly after the execution by the Co-Issuers and the Trustee of any supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Co-Issuers, shall mail or make available to the Rated Noteholders, the Income Note Paying Agent (for forwarding to the Income Noteholders), the Initial Hedge Counterparty, the Collateral Advisor and each Rating Agency a copy thereof. Any failure of the Trustee to publish or mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. In addition, the Issuer shall cause to be delivered a copy of the executed supplemental indenture to the Repository for posting on the Repository in the manner described in Section 14.3. 8.3.

EXECUTION OF SUPPLEMENTAL INDENTURES

In executing or accepting the additional trusts created by any supplemental indenture permitted by this Section 8 or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Sections 6.1 and 6.3) shall be fully protected in relying in good faith 121

Processed and formatted by SEC Watch - Visit SECWatch.com

upon an Opinion of Counsel, stating that the execution of such supplemental indenture is authorized, or permitted by this Indenture and that all conditions precedent thereto have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or indemnities under this Indenture or otherwise. Such supplemental indenture will not be binding on the Collateral Advisor to the extent that it reduces the rights or increases the obligations of the Collateral Advisor, unless such supplemental indenture is consented to in writing by the Collateral Advisor. 8.4.

EFFECT OF SUPPLEMENTAL INDENTURES

Upon the execution of any supplemental indenture under this Section 8, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Rated Notes theretofore and thereafter authenticated and delivered hereunder shall be bound thereby. 8.5.

REFERENCE IN RATED NOTES TO SUPPLEMENTAL INDENTURES

Rated Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Section 8 may, and if required by the Trustee shall, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Co-Issuers shall so determine, new Rated Notes, so modified as to conform in the opinion of the Trustee and the Co-Issuers to any such supplemental indenture, may be prepared and executed by the Co-Issuers and authenticated and delivered by the Trustee in exchange for Outstanding Rated Notes. ARTICLE IX REDEMPTION OF RATED NOTES 9.1.

REDEMPTION OF RATED NOTES

The Rated Notes will be subject to redemption in whole but not in part at their respective Redemption Prices, in each case, in accordance with the procedures, and subject to the satisfaction of the conditions, in Section 9.2 below, in the following circumstances: (a)

on or after the Payment Date occurring in April 2010 and continuing until the Stated Maturity Date (the Call Period), at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes (an Optional Redemption);

(b)

on any Payment Date following the occurrence and during the continuation of a Tax Event, (i) at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes or (ii) subject to the satisfaction of the Income Note Redemption Approval Condition, at the direction of the Holders of a Majority of the then Aggregate Outstanding Amount of the Controlling Class (such a redemption, a Tax Redemption); and

(c)

automatically and without any direction by any Person, (i) if the Notes have not been redeemed in full on or after the Payment Date occurring in April 2017, and (ii) if any of the conditions set forth in Sections 9.2(a) through (d) below have not been met or if the highest bidder fails to pay the purchase price within six (6) Business Days following such 122

Processed and formatted by SEC Watch - Visit SECWatch.com

Payment Date, the Payment Date thereafter, unless the Notes are redeemed in full prior to the next Auction Date (such a redemption, an Auction Call Redemption). 9.2.

REDEMPTION PROCEDURES; AUCTION

In connection with any Redemption, the Trustee and the Collateral Advisor will, in accordance with the procedures set forth in Schedule E (the Auction Procedures) and at the expense of the Issuer, conduct an auction (an Auction) of the Collateral Debt Securities included in the Collateral on a date (each such date, an Auction Date) occurring no later than ten (10) Business Days prior to any scheduled Redemption Date. Any of the Initial Purchasers, the Placement Agent, the Collateral Advisor, the Income Noteholders, the Trustee or their respective Affiliates may, but will not be required to, bid at the Auction. (a)

(b)

Any Redemption will be subject to the satisfaction of each of the following conditions: (1)

the related Auction has been conducted in accordance with the Auction Procedures;

(2)

the Trustee has received bids for the Collateral Debt Securities (or for each of the related Subpools) from at least two Qualified Bidders (including the winning Qualified Bidder) identified on a list of qualified bidders provided by the Collateral Advisor to the Trustee;

(3)

the Collateral Advisor certifies that the Highest Auction Price would result in the Sale Proceeds from the Collateral Debt Securities (or the related Subpools) for a purchase price (paid in cash) plus the Balance of all Eligible Investments and cash held by the Issuer plus any termination payments payable by a Hedge Counterparty to the Issuer (in excess of any amounts payable by the Issuer to a Hedge Counterparty) resulting from the termination of the Hedge Agreement pursuant to the Redemption being at least equal to the sum of (i) the aggregate Redemption Prices of the Notes plus (ii) any accrued but unpaid fees and expenses of the Issuer pursuant to Section 11.1(b)(1) and (15) through (17) (including any termination payments payable by the Issuer resulting from the termination of the Hedge Agreement pursuant to the Redemption) plus (iii) (a) in connection with a Tax Redemption at the direction of the Controlling Class and (b) an Auction Call Redemption, any additional amounts necessary to satisfy the Income Note Redemption Approval Condition; and

(4)

the bidder(s) who offered the Highest Auction Price for the Collateral Debt Securities (or the related Subpools) enter(s) into a written agreement with the Issuer (which the Issuer will execute if the conditions set forth above and in the Indenture are satisfied, which execution will constitute certification by the Issuer that such conditions have been satisfied) that obligates the highest bidder(s) (or the highest bidder for each Subpool) to purchase all of the Collateral Debt Securities (or the relevant Subpool) and provides for payment in full (in Cash) of the purchase price to the Trustee on or prior to the sixth Business Day following the relevant Auction Date.

In addition, any Optional Redemption requires the occurrence of the following: (1)

at least four (4) Business Days before the scheduled Redemption Date, the Collateral Advisor has furnished to the Trustee evidence, in form satisfactory to 123

Processed and formatted by SEC Watch - Visit SECWatch.com

the Trustee, that the Collateral Advisor on behalf of the Issuer has entered into a binding agreement or agreements with an institution or institutions (or guarantor or guarantors of the obligations): (A) with regard to which Rating Agency Confirmation has been received; or (B) whose long-term unsecured debt obligations (other than such obligations whose rating is based on the credit of a person other than such institution) have a credit rating from Fitch, if rated by Fitch, of “Fl” and of at least “A-1” from S&P; and in each case, to sell, not later than the Business Day immediately preceding the scheduled Redemption Date, in immediately available funds, all or part of the Collateral Debt Securities at a purchase price (paid in Cash) which together with the Balance of all Eligible Investments and Cash held by the Issuer will be at least equal to the sum of (i) the aggregate Redemption Prices of the Notes plus (ii) any accrued but unpaid fees and expenses of the Issuer pursuant to Section 11.1(b)(1) and (15) through (17) (including any termination payments payable by the Issuer resulting from the termination of the Hedge Agreement pursuant to the Redemption); or (2)

prior to selling any Collateral Debt Securities or any other collateral, the Collateral Advisor certifies that the expected proceeds from such sale will, in the aggregate, equal or exceed, in each case, the sum of (A) any amounts payable in connection with an Optional Redemption pursuant to Section 9.2 of the Notes plus (B) all expenses of such redemption and all other administrative fees and expenses payable on the related Redemption Date.

Provided that all of the conditions set forth in Section 9.2(a) through (d) have been met, the Trustee will sell and transfer the Collateral Debt Securities (or each related Subpool), without representation, warranty or recourse, to the bidder(s) who offered the Highest Auction Price for the Collateral Debt Securities (or the related Subpools) in accordance with and upon completion of the Auction Procedures. If any of the conditions set forth in Section 9.2(a) through (d) are not met, (i) the Redemption will not occur on the Payment Date following the relevant Auction Date, (ii) the Trustee will give notice of the withdrawal of the Redemption, (iii) subject to clause (iv) below, the Trustee will decline to consummate such sale and may not solicit any further bids or otherwise negotiate any further sale of Collateral Debt Securities in relation to such Auction and (iv) unless the Rated Notes are redeemed in full prior to the next succeeding Auction Date, the Trustee will conduct another Auction on the next succeeding Auction Date. The Trustee will deposit the purchase price for the Collateral Debt Securities in the Collection Account, and the Rated Notes and, to the extent funds are available therefor, the Income Notes, will be redeemed on the Payment Date immediately following the relevant Auction Date in the order of priorities set forth in Section 11.1. Any Redemption will only be effected on a Payment Date. Installments of principal and interest due on or prior to a Redemption Date shall continue to be payable to the Holders of such Rated Notes as of the relevant Record Dates according to their terms. 9.3.

RECORD DATE; NOTICE TO TRUSTEE OF REDEMPTION (a)

The Issuer shall set the Redemption Date and the applicable Record Date and give notice thereof to the Trustee pursuant to Section 9.3(b) below and shall issue an Issuer Request to the Trustee for the provision of the information necessary for the Issuer to compile the Redemption Date Statement in accordance with Section 10.10(b).

(b)

In the event of any Redemption, the Issuer shall, at least 45 days (but not more than 90 days) prior to the Redemption Date, notify the Trustee and the Initial Hedge Counterparty 124

Processed and formatted by SEC Watch - Visit SECWatch.com

of such Redemption Date, the applicable Record Date, the principal amount of each Class of Notes to be redeemed on such Redemption Date and the Redemption Price of such Notes. 9.4.

NOTICE OF REDEMPTION

Notice of Redemption will be given by first-class mail, postage prepaid, mailed not less than eight (8) Business Days prior to the applicable Redemption Date, to the Initial Hedge Counterparty, each Rating Agency and each Holder of Rated Notes at such Holder’s address in the Note Register maintained by the Note Registrar in accordance with the provisions of this Indenture and to the Collateral Advisor. Rated Notes called for Redemption must be surrendered at the office of any Note Paying Agent appointed pursuant to this Indenture in order to receive the Redemption Price. The Issuer will also deliver notice of Redemption to the Irish Paying Agent if and so long as any Class of Rated Notes to be redeemed is listed on the Irish Stock Exchange. All notices of redemption shall state: (a)

the applicable Redemption Date;

(b)

the applicable Record Date;

(c)

the Redemption Price;

(d)

that all the Notes of the relevant Class are being redeemed in full and that interest on the applicable principal amount of Notes shall cease to accrue on the date specified in the notice; and

(e)

the place or places where such Rated Notes are to be surrendered for payment of the Redemption Price, which shall be the office or agency of the Note Paying Agent to be maintained as provided in Section 7.2.

Notice of redemption shall be given by the Co-Issuers or, at the Co-Issuers’ request, by the Trustee in the name and at the expense of the Co-Issuers. Failure to give notice of redemption, or any defect therein, to any Holder of any Note selected for redemption shall not impair or affect the validity of the redemption of any other Notes. 9.5.

NOTICE OF WITHDRAWAL

With regard to an Optional Redemption or a Tax Redemption, any notice of redemption may be withdrawn by the Issuer up to the fourth Business Day prior to the Redemption Date by written notice to the Trustee and the Collateral Advisor only if the Collateral Advisor is unable to deliver such sale agreement or agreements or certifications, as the case may be, in form satisfactory to the Trustee. With regard to any Redemption, notice of any withdrawal pursuant to Section 9.2 shall be given by the Trustee to each Holder of Rated Notes at such Holder’s address in the Note Register maintained by the Note Registrar by overnight courier guaranteeing next day delivery (or second day delivery outside the United States) sent not later than the third Business Day prior to such Redemption Date. In addition, the Trustee will, if any Class of Rated Notes to have been redeemed is listed on the Irish Stock Exchange, deliver a notice of such withdrawal to the Irish Stock Exchange not less than three (3) Business Days prior to such Redemption Date. 125

9.6.

RATED NOTES PAYABLE ON REDEMPTION DATE

Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after the Redemption Date (unless the Issuer shall default in the payment of the Redemption Price) such Rated Notes shall cease to bear interest. Upon final payment on a Note to be redeemed, the Holder shall present and surrender such Note at the place specified in the notice of redemption on or prior to such Redemption Date; provided that if there is delivered to the Co-Issuers (i) such security or indemnity as may be required by them to save each of them harmless and (ii) an undertaking thereafter to surrender such Note, then, in the absence of notice to the Co-Issuers that the applicable Note has been acquired by a bona fide purchaser, such final payment shall be made without presentation or surrender. Installments of interest on Rated Notes of a Class so to be redeemed whose Stated Maturity Date is on or prior to the Redemption Date shall be payable to the Holders of such Rated Notes, or one or more predecessor Rated Notes, registered as such at the close of business on the relevant Record Date according to the terms and provisions of Section 2.6(e). If any Rated Note called for redemption shall not be paid upon surrender thereof for redemption, the principal thereof shall, until paid, bear interest from the Redemption Date at the Applicable Periodic Interest Rate for each successive Interest Period the Rated Note remains Outstanding. 9.7.

SPECIAL AMORTIZATION

Amounts constituting Collateral Principal Collections that are (i) Sale Proceeds not reinvested in Substitute Collateral Debt Securities during the applicable Sixty-Day Reinvestment Window (“Unreinvested Sale Proceeds”), (ii) Collateral Principal Payments not reinvested in Substitute Collateral Debt Securities during the applicable Sixty-Day Reinvestment Window (“Unreinvested Collateral Principal Payments”), or

Processed and formatted by SEC Watch - Visit SECWatch.com

(iii) Collateral Principal Payments for any CPP Asset Type that are below the Reinvestment Threshold Amount and as to which the Cash Release Conditions are satisfied (“Unaccumulated Collateral Principal Payments”) shall, in each case, be applied to the payment of principal on the Notes on the next succeeding Payment Date in accordance with Section 11.1(b)(13)(iii) hereof. If on any Payment Date the Issuer is obligated to make payments of principal on the Notes pursuant to Section 11.1(b)(13)(iii), then such payments of principal shall be made: (i) pro rata to the respective Classes of the Rated Notes pursuant to Section 11.1(b)(13)(iii)(1) of the Priority of Principal Payments (a “Special Amortization”) if the Special Amortization Pro Rata Condition is satisfied, a Special Amortization Notice is delivered by the Collateral Advisor to the Issuer and the Trustee and certain other criteria specified in the Indenture are complied with; or (ii) sequentially to the respective Classes of the Rated Notes pursuant to Section 11.1(b)(13)(iii)(2) of the Priority of Principal Payments if the criteria for a Special Amortization are not satisfied. In order for amounts to be applied for a Special Amortization on any Payment Date, the Collateral Advisor is required to deliver, to each of the Trustee and each Rating Agency, advance written notice (which may be included in the related Note Report) (each, a “Special Amortization Notice”) specifying the identity and principal amount of each Class of Rated Notes to be paid pursuant to such Special Amortization and (i) in the case of the Unreinvested Sale Proceeds, that the Collateral Advisor has been unable to identify for purchase by the Issuer Substitute Collateral Debt Securities that comply with the Replacement Criteria and the other applicable requirements of the Indenture, (ii) in the case of Unreinvested Collateral Principal Payments, that the Collateral Advisor has been unable to identify for 126

Processed and formatted by SEC Watch - Visit SECWatch.com

purchase by the Issuer Substitute Collateral Debt Securities that comply with the Reinvestment Criteria and the other applicable requirements of the Indenture, and (iii) in the case of Unaccumulated Collateral Principal Payments, that the Collateral Advisor has determined that identification of Substitute Collateral Debt Securities of the required CPP Asset Type for purchase by the Issuer, assuming that such Collateral Principal Payments were to accumulate to the level of the Reinvestment Trigger Amount, would not be practicable, that the Cash Release Conditions are satisfied and that all other Indenture requirements for such Special Amortization are complied with. On each Payment Date on which a Special Amortization occurs, each related Hedge Agreement will be terminated in part in accordance with the terms and conditions thereof, including compliance with any applicable requirement that the Issuer receive Rating Agency Confirmation from S&P, and any amounts due and payable pursuant to such Hedge Agreement in connection with such termination thereof will be paid on such Payment Date in accordance with the terms thereof subject to this Indenture. ARTICLE X ACCOUNTS, ACCOUNTINGS AND RELEASES 10.1.

10.2.

COLLECTION OF FUNDS (a)

Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all funds and other property payable to or receivable by the Trustee pursuant to this Indenture, including all payments due on the Pledged Securities, in accordance with the terms and conditions of such Pledged Securities. The Trustee shall segregate and hold all such funds and property received by it in trust for the Secured Parties and shall apply such funds as provided in this Indenture.

(b)

Each of the parties hereto hereby agrees to cause the Custodian or any other Securities Intermediary that holds any funds or other property for the Issuer or the Co-Issuer in an Account to agree with the parties hereto that (1) each Account is a Securities Account in respect of which the Trustee is the Entitlement Holder, (2) each Account is held by a financial institution that has a combined capital and surplus of at least U.S.$250,000,000 and being subject to supervision or examination by federal or state banking authority, (3) the Cash, Securities and other property credited to any Account is to be treated as a Financial Asset under Article 8 of the UCC and (4) the securities intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC) for that purpose will be the State of New York. In no event may any Financial Asset held in any Account be registered in the name of, payable to the order of, or specially Indorsed to, the Issuer unless such Financial Asset has also been Indorsed in blank or to the Custodian or other Securities Intermediary that holds such Financial Asset in such Account. Each Account shall be held and maintained at an office located in Minneapolis, Minnesota or Columbia, Maryland.

GENERAL PROVISIONS APPLICABLE TO ACCOUNTS

The Payment Account, Collateral Account, Uninvested Proceeds Account, Collection Account (including each Collateral SubAccount therein), Expense Reserve Account, each Hedge Counterparty 127

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Account and Interest Reserve Account shall remain at all times with a financial institution having a long-term debt rating of at least “BBB+” by S&P.

10.3.

(a)

The Trustee agrees to give the Issuer prompt notice (with a copy to the Hedge Counterparty, the Collateral Advisor, each Rating Agency and the Income Note Paying Agent) if any Account or any funds on deposit therein, or otherwise standing to the credit of any Account, shall become subject to any writ, order, judgment, warrant of attachment, execution or similar process.

(b)

The Collateral Advisor shall direct the Trustee to invest and reinvest any funds on deposit in any of the Accounts (other than the Payment Account). In the event that the Collateral Advisor has not delivered investment instructions to the Trustee or after the occurrence of an Event of Default, the Trustee shall invest and reinvest any funds on deposit in any Account (other than the Payment Account) as fully as practicable in investments described in clause (vii) of the definition of Eligible Investments maturing not later than the earlier of (i) 30 days after the date of such investment or (ii) the Business Day immediately preceding the next Payment Date. With respect to each Account, all interest and other income from Eligible Investments purchased with funds on deposit in such Account shall be deposited in such Account, any gain realized from such investments shall be credited to such Account, and any loss resulting from such investments shall be charged to such Account. Any gain or loss with respect to an Eligible Investment shall be allocated in such a manner as to increase or decrease, respectively, Collateral Principal Collections and/or Collateral Interest Collections in the proportion that the amount of Collateral Principal Collections and/or Collateral Interest Collections used to acquire such Eligible Investment bears to the purchase price thereof. The Trustee shall not in any way be held liable by reason of any insufficiency of any such Account resulting from any loss relating to any such investment. Nothing herein shall be deemed to relieve the Bank or its Affiliates from any duties or liabilities with respect to investments in obligations of the Bank or any Affiliate thereof.

(c)

All funds deposited from time to time in the Collection Account, the Expense Reserve Account or the Interest Reserve Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided.

COLLATERAL ACCOUNT

The Trustee shall, prior to the Closing Date, cause the Custodian to establish a Securities Account which shall be designated as the “Collateral Account”, which shall be in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties and into which the Trustee shall from time to time deposit Collateral. All Collateral from time to time deposited in, or otherwise standing to the credit of, the Collateral Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided. The Co-Issuers shall not have any legal, equitable or beneficial interest in the Collateral Account other than in accordance with the Priority of Payments. 10.4.

UNINVESTED PROCEEDS ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Uninvested Proceeds Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties, into which the Trustee shall deposit all Uninvested Proceeds (other than the organizational and structuring fees and expenses of the Co-Issuers 128

Processed and formatted by SEC Watch - Visit SECWatch.com

(including, without limitation, the legal fees and expenses of counsel to the Co-Issuers, Citigroup and the Collateral Advisor), the expenses of offering the Rated Notes and the Income Notes and amounts deposited in the Expense Reserve Account on such date). On or prior to the Effective Date, the Collateral Advisor on behalf of the Issuer may direct the Trustee to, and upon such direction the Trustee shall, apply funds in the Uninvested Proceeds Account to purchase additional Collateral Debt Securities and, pending such investment in additional Collateral Debt Securities, such funds will be invested in Eligible Investments, as directed by the Collateral Advisor, with stated maturities no later than the Business Day immediately preceding the next Payment Date. The Trustee shall transfer any Uninvested Proceeds remaining on deposit in the Uninvested Proceeds Account on the Effective Date to the Collection Account to be treated as Collateral Principal Collections on the first Payment Date and distributed in accordance with the Priority of Payments. 10.5.

COLLECTION ACCOUNT AND CPP SUB-ACCOUNTS (a)

(b)

Collection Account (1)

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Collection Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. The Trustee shall cause to be established two sub-accounts of the Collection Account. The Trustee shall deposit Collateral Principal Collections into one sub-account (the Collateral Principal Collections Sub-Account) and Collateral Interest Collections into the other sub-account. The Trustee shall cause to be established within the Collateral Principal Collections Sub-Account seven further sub-accounts, six of which shall constitute the “CPP Sub-Accounts”. At the direction of the Issuer (or the Collateral Advisor on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Collection Account (including the Collateral Principal Collection Sub-Account and each CPP Sub-Account) in Eligible Investments or Substitute Collateral Debt Securities in accordance with the requirements and limitations contained in Section 12.1(c).

(2)

The Trustee, within one Business Day after receipt of any Distribution or other proceeds that are not Cash shall so notify the Issuer and the Issuer shall sell such Distribution or other proceeds for Cash in accordance with Section 12.1.

(3)

The Trustee shall transfer to the Payment Account for application pursuant to Section 11.1(a) and in accordance with the calculations and the instructions contained in the Note Valuation Report prepared by the Issuer pursuant to Section 10.10(a), on or prior to the Business Day prior to each Payment Date, funds on deposit in the Collection Account (including reinvestment income) other than Collections received after the end of the Due Period with respect to such Payment Date.

(4)

The Trustee shall withdraw and apply amounts on deposit in the Collection Account in accordance with any Redemption Date Statement delivered to the Trustee in connection with the redemption of Rated Notes pursuant to Section 9.1.

CPP Sub-Accounts. The Trustee shall, prior to the Closing Date, cause to be established, within the Collateral Principal Collections Sub-Account (and as 129

Processed and formatted by SEC Watch - Visit SECWatch.com

sub-sub-accounts of the Collection Account) six Securities Accounts to be designated each individually as a “CPP SubAccount” and all collectively as the “CPP Sub-Accounts”. Each CPP Sub-Account shall be established in the name of the Trustee as Entitlement Holder and held in trust for the benefit of the Secured Parties. Each CPP Sub-Account shall contain Collateral Principal Payments received from time to time with respect to the Collateral Debt Securities of one particular CPP Asset Type. The CPP Sub-Accounts shall be named respectively as follows: (i) “CPP Sub-Account – REIT Debt SecuritiesFixed Rate”, (ii) “CPP Sub-Account – REIT Debt Securities - Floating Rate”, (iii) “CPP Sub-Account — CMBS Securities Fixed Rate”, (iv) “CPP Sub-Account – CMBS Securities – Floating Rate”, (v) “CPP Sub-Account – Real Estate CDO Securities - Fixed Rate”, and (vi) “CPP Sub-Account – Real Estate CDO Securities - Floating Rate”. During the Reinvestment Period, the Trustee will deposit the Collateral Principal Payments received by it with respect to all Collateral Debt Securities of a particular CPP Asset Type into the CPP Sub-Account for such CPP Asset Type. 10.6.

EXPENSE RESERVE ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Expense Reserve Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. On the Closing Date, the Trustee shall deposit into the Expense Reserve Account an amount equal to U.S.$25,000 together with an amount sufficient to pay any outstanding fees and expenses of the Issuer in relation to the offering of the Rated Notes and the Income Notes which are not paid on the Closing Date. At the direction of the Issuer (or the Collateral Advisor on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Expense Reserve Account in Eligible Investments. Any amounts held in the Expense Reserve Account in excess of U.S.$25,000 on the day which is 60 days following the Closing Date (or, if such day is not a Business Day, the next following Business Day) shall be transferred by the Trustee into the Uninvested Proceeds Account. Thereafter, the Trustee shall transfer to the Expense Reserve Account from the Payment Account amounts required to be deposited therein pursuant to Section 11.1(a) and in accordance with the calculations and the instruction contained in the Note Valuation Report prepared by the Issuer pursuant to Section 10.10(a). Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be to pay (on any day other than a Payment Date) accrued and unpaid Administrative Expenses of the Co-Issuers; provided that the Trustee shall deposit all amounts remaining on deposit in the Expense Reserve Account at the time when substantially all of the Issuer’s assets have been sold or otherwise disposed of into the Collections Account for application as Collateral Interest Collections on the immediately succeeding Payment Date. 10.7.

INTEREST RESERVE ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Interest Reserve Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Interest Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. At the direction of the Issuer (or the Collateral Advisor on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Interest Reserve Account in Eligible Investments. On each Payment Date, in accordance with the Priority of Payments, the Trustee will deposit the Interest Reserve Amount, if any, into the Interest Reserve Account. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Interest 130

Processed and formatted by SEC Watch - Visit SECWatch.com

Reserve Account shall be to deposit into the Payment Account, on the Business Day prior to each Payment Date, the Balance of the Interest Reserve Account (including reinvestment income) for distribution as Collateral Interest Collections in accordance with the Priority of Payments on the related Payment Date. 10.8.

PAYMENT ACCOUNT

The Trustee shall, prior to the Closing Date, establish a Securities Account which shall be designated as the “Payment Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Payment Account shall be held in trust by the Trustee for the benefit of the Secured Parties. Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Payment Account shall be to pay the interest on and the principal of the Rated Notes in accordance with their terms and the provisions of this Indenture and, upon Issuer Order, to pay Administrative Expenses and other amounts specified therein, each in accordance with the Priority of Payments. The Co-Issuers shall not have any legal, equitable or beneficial interest in the Payment Account other than in accordance with the Priority of Payments. 10.9.

REPORTS BY TRUSTEE

The Trustee shall supply, in a timely fashion to each Rating Agency (so long as any Rated Notes are rated by such Rating Agency), the Initial Hedge Counterparty, the Holders of Rated Notes of the Controlling Class, the Collateral Advisor, the Income Note Paying Agent, the Initial Purchasers, the Placement Agent and the Issuer any information regularly maintained by the Trustee that each such Person may from time to time request with respect to the Pledged Securities or the Accounts reasonably needed to complete the Note Valuation Report or to provide any other information reasonably available to the Trustee by reason of its acting as Trustee hereunder and required to be provided by Section 10.10. The Trustee shall forward to the Collateral Advisor, the Holders of Rated Notes of the Controlling Class, or upon request therefor, any Holder of a Rated Note shown on the Note Register, the Initial Purchasers, the Placement Agent, the Initial Hedge Counterparty or the Income Note Paying Agent, copies of notices and other writings received by it from the issuer of any Collateral Debt Security or from any Clearing Agency with respect to any Collateral Debt Security advising the holders of such security of any rights that the holders might have with respect thereto (including notices of calls and redemptions of securities) as well as all periodic financial reports received from such issuer and Clearing Agencies with respect to such issuer; provided that the Trustee shall not disclose any unpublished S&P Rating assigned by S&P with respect to any Collateral Debt Security without the prior consent of S&P. So long as any Class of Rated Notes is listed on the Irish Stock Exchange, the Irish Paying Agent shall notify the Irish Stock Exchange not later than the Business Day preceding each Payment Date of the amount of principal payments to be made on the Rated Notes of each Class on such Payment Date, any Class B Cumulative Applicable Periodic Interest Shortfall Amount, any Class C Cumulative Periodic Interest Shortfall Amount, any Class D Cumulative Periodic Interest Shortfall Amount and the Aggregate Outstanding Amount of the Rated Notes of each Class and as a percentage of the original Aggregate Outstanding Amount of the Rated Notes of such Class after giving effect to the principal payments, if any, on such Payment Date. As promptly as possible following the delivery of each Note Valuation Report to the Trustee pursuant to Section 10.10(a) or (b), as applicable, the Issuer shall cause a copy of such report to be delivered the Repository for posting on the Repository in the manner described in Section 14.3. In 131

Processed and formatted by SEC Watch - Visit SECWatch.com

connection therewith, each of the Co-Issuers acknowledges and agrees that each Note Valuation Report shall be posted to the Repository for use in the manner described in the section headed “Terms of Use” on the Repository. 10.10.

ACCOUNTINGS (a)

Payment Date Accounting. The Issuer shall, not later than the related Payment Date and after the reconciliation process described in this Section 10.10, render an accounting (a Note Valuation Report), determined as of each Calculation Date, and deliver the Note Valuation Report to each Rating Agency, the Trustee and the Collateral Advisor and make available via the Trustee’s internet website, initially located at www.cdolink.com to the Trustee, the Irish Paying Agent, the Initial Hedge Counterparty, the Income Note Paying Agent, each Note Transfer Agent, Citigroup and, upon written request therefor, any Holder of a Rated Note shown on the Note Register. The Note Valuation Report shall contain the following information (which shall, in the case of any Note Valuation Report delivered to S&P, be presented in a form that complies with S&P’s Preferred Format) determined, unless otherwise specified below, as of the related Calculation Date: (1)

the calculation showing compliance with each of the Coverage Tests, accompanied by a list setting forth the applicable maximum or minimum value, percentage or ratio which must be maintained pursuant to this Agreement with respect to each of the Coverage Tests and a list setting forth the results of the calculation of each of the Coverage Tests with respect to the Collateral Debt Securities, the calculation showing whether the S&P CDO Monitor Test is satisfied (including the weighted average rating, the default measure, variability measure and correlation measure, the scenario default rate and/or such other information required to be computed with respect to the S&P CDO Monitor Test), and the calculation showing the Fitch Weighted Average Rating Factor, the Weighted Average Fixed Rate Coupon, the Weighted Average Spread, the Weighted Average Life and the S&P Weighted Average Recovery Rate;

(2)

the estimated remaining Average Life of each of the Collateral Debt Securities;

(3)

the Applicable Periodic Interest Rate in respect of each Class of Notes and the amount of Periodic Interest payable to the Holders of the Notes for such Payment Date (in the aggregate and by Class);

(4)

the amount (if any) payable to each Hedge Counterparty pursuant to the related Hedge Agreement;

(5)

the amount (if any) payable by each Hedge Counterparty pursuant to the related Hedge Agreement:

(6)

the Aggregate Fees and Expenses payable on the next Payment Date on an itemized basis;

(7)

the Aggregate Fees and Expenses paid during a period of twelve (12) months ending on the next Payment Date on an itemized basis;

(8)

for the Collection Account: 132

Processed and formatted by SEC Watch - Visit SECWatch.com

(9)

(10)

(i)

the Balance on deposit in the Collection Account, the Collateral Principal Collections Sub-Account and each of the respective CPP Sub-Accounts at the end of the related Due Period;

(ii)

the nature and source of any Collections in the Collection Account, the Collateral Principal Collections SubAccount and each of the respective CPP Sub-Accounts, including Collections received since the date of the last Note Valuation Report;

(iii)

the amounts payable from the Collection Account in accordance with the priority set forth in Section 11.1 on the next Payment Date; and

(iv)

the Balance remaining in the Collection Account immediately after all payments and deposits to be made on such Payment Date;

(v)

the Balance on deposit in the Collateral Principal Collections Sub-Account and each of the respective CPP SubAccounts.

for the Interest Reserve Account: (i)

the balance on deposit in the Interest Reserve Account at the end of the related Due Period;

(ii)

the amount payable from the Interest Reserve Account pursuant to the Priority of Payments on the next Payment Date;

(iii)

the Interest Reserve Amount to be paid into the Interest Reserve Account on the next Payment Date; and

(iv)

the Balance remaining in the Interest Reserve Account immediately after all payments and deposits to be made on such Payment Date;

for the Expense Reserve Account: (i)

the amount to be paid into the Expense Reserve Account on the next Payment Date; and

(ii)

the Balance remaining in the Expense Reserve Account immediately after all payments and deposits to be made on such Payment Date;

(11)

the Hedge Receipt Amount or the Hedge Payment Amount for the related Payment Date, and for each Hedge Agreement, the outstanding notional amount of such Hedge Agreement and the amounts, if any, scheduled to be received or paid, as the case may be, by the Issuer pursuant to such Hedge Agreement for the related Payment Date, separately stating the portion payable in accordance with Section 11.1;

(12)

the amount of Income Note Excess Funds on the related Payment Date;

(13)

the amount of the Senior Collateral Advisory Fee and the amount of the Subordinate Collateral Advisory Fee; 133

Processed and formatted by SEC Watch - Visit SECWatch.com

(14)

such other information as the Collateral Advisor, the Initial Purchasers, the Placement Agent, the Trustee, S&P, Fitch or any Hedge Counterparty may reasonably request;

(15)

with respect to each Collateral Debt Security, the Principal Balance, the annual coupon rate or spread to the relevant floating rate index, the frequency of coupon payments, the amount of principal payments received, the maturity date, the issuer, the country in which the issuer is incorporated or organized, the S&P Industry Classification Group, the Fitch Industry Classification Group, the S&P Recovery Rate, the S&P Rating and the Fitch Rating (provided that if any Fitch Rating for any Collateral Debt Security is an “estimated” or “shadow” rating, such rating shall be identified as “estimated” or “shadow rated”, shall be disclosed with an asterisk in the place of the applicable estimated or shadow rating and shall include the date as of which such rating was first provided by Fitch to the Issuer); and any S&P Rating which is determined from an implied rating, a credit estimate, a confidential rating or another non-public rating, shall not be distinguished and shall either (i) be reported in a single column with the public ratings of S&P (without distinguishing the source) or (ii) be reported in a separate column labeled “Non-public and Implied S&P Rating.”

(16)

the Principal Balance, the maturity date, the S&P Rating, the Fitch Rating and the issuer of each Eligible Investment included in the Collateral;

(17)

(A) the identity and Principal Balance of each Collateral Debt Security that became a Credit Risk Security, a Defaulted Security, an Equity Security, a Written Down Security, a Withholding Tax Security, a Deferred Interest PIK Bond, (B) the date, as provided by the Collateral Advisor, on which any Collateral Debt Security became a Credit Risk Security, a Defaulted Security, an Equity Security, a Written Down Security or a Withholding Tax Security, (C) the date by which the Issuer or the Collateral Advisor is required to declare its intention to sell or to hold such Collateral Debt Security, (D) whether the Collateral Advisor has directed the Issuer to sell or not to sell such Collateral Debt Security, and (E) the date by which any such sale must occur;

(18)

the identity of each Collateral Debt Security that was upgraded or downgraded or placed on watch for upgrade or downgrade by any Rating Agency since the date of the last Note Valuation Report;

(19)

the Principal Balance and identity of each Collateral Debt Security that was released for sale indicating the reason for such sale and the amount and identity of each Collateral Debt Security that was granted since the date of the last Note Valuation Report;

(20)

the identity and Principal Balance of each Collateral Debt Security that was a Credit Risk Security, a Defaulted Security, an Equity Security, a Written Down Security, a Withholding Tax Security or a Deferred Interest PIK Bond;

(21)

the purchase price of each Pledged Security granted and the sale price of each Pledged Security subject to a sale since the date of the last Note Valuation Report; and whether such Pledged Security is a Collateral Debt Security, an Eligible Investment or proceeds in the Collection Account; 134

(22)

the amount of Purchased Accrued Interest;

(23)

a description of any transactions with the Collateral Advisor, the Issuer, the Collateral Administrator and the Trustee and any Affiliates thereof;

(24)

the Class A-1 Note Break-Even Default Rate, the Class A-2A Note Break-Even Default Rate, the Class A-2A Note Break-Even Default Rate, the Class B Note Break-Even Default Rate, the Class C-1A Note Break-Even Default Rate, the Class C-1B Note Break-Even Default Rate, the Class C-2A Note Break-Even Default Rate, the Class C-2B Note Break-Even Default Rate and the Class D Note Break-Even Default Rate;

(25)

the Class A-1 Note Default Differential, the Class A-2A Note Default Differential, the Class A-2B Note Default Differential, the Class B Note Default Differential, the Class C-lA Note Default Differential, the Class C-1B Note Default Differential, the Class C-2A Note Default Differential, the Class C-2B Note Default Differential and the Class D Note Default Differential; and

(26)

the Class A-1 Note Scenario Default Rate, the Class A-2A Note Scenario Default Rate, the Class A-2B Note Scenario Default Rate, the Class B Note Scenario Default Rate, the Class C-lA Note Scenario Default Rate, the Class C-1B Note Scenario Default Rate, the Class C-2A Note Scenario Default Rate, the Class C-2B Note Scenario Default Rate and the Class D Note Scenario Default Rate.

Upon receipt of each Note Valuation Report, the Trustee and the Collateral Advisor shall compare the information contained therein to the information contained in their respective records with respect to the Collateral and shall, within two (2) Business Days after receipt of such Note Valuation Report, notify each of the Issuer, the Initial Hedge Counterparty, the Collateral Advisor, the Trustee, Fitch and S&P if the information contained in the Note Valuation Report does not conform to the information maintained by the Trustee or the Collateral Advisor as

Processed and formatted by SEC Watch - Visit SECWatch.com

applicable, with respect to the Collateral, and detail any discrepancies. In the event that any discrepancy exists, the Trustee and the Issuer, or the Collateral Advisor shall attempt to promptly resolve the discrepancy. If such discrepancy cannot be promptly resolved, the Trustee shall within five (5) Business Days after discovery of such discrepancy cause the Independent Accountants of recognized international reputation to review such Note Valuation Report and the Trustee’s and the Collateral Advisor’s records to determine the cause of such discrepancy. If such review reveals an error in the Note Valuation Report or the records of the Trustee or the Collateral Advisor, as the case may be, such item shall be revised accordingly and, as so revised, shall be utilized in making further calculations. Subject to the terms of this Agreement, the Trustee shall be entitled to rely on the information supplied by the Collateral Advisor in relation to the preparation of the Note Valuation Report and shall not be liable for the accuracy or completeness of such information or the lack thereof. In addition to the foregoing information, each Note Valuation Report shall include a statement to the following effect: “The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act), or under any state securities laws, and the Co-Issuers have not been and will not be registered under the United States Investment Company Act of 1940, as amended (the 1940 Act). Each Holder of the Notes, other than those Holders that are not “U.S. persons” (U.S. Person) within the meaning of Regulation S (Regulation S) under the Securities Act and have 135

Processed and formatted by SEC Watch - Visit SECWatch.com

acquired their Notes outside the United States pursuant to Regulation S, is required to be both (i) (A) with respect to any Rated Note, a “qualified institutional buyer” as defined in Rule 144A under the Securities Act (Qualified Institutional Buyer), (B) solely with respect to the Class D Notes, either (1) an “accredited investor” as defined in paragraphs (1), (2), (3) or (7) of Rule 501(A) under the Securities Act (each an Institutional Accredited Investor) or (2) any of NS CDO Holdings III, LLC, NS Advisors, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(A) under the Securities Act (each of the foregoing, a Permitted NS Purchaser) or (C) solely with respect to the Income Notes, a Permitted NS Purchaser and a “qualified purchaser” (Qualified Purchaser) within the meaning of Section 3(c)(7) of the 1940 Act, purchasing for its own account or for the account of another Qualified Purchaser, that can make all of the representations in the Indenture applicable to a holder that is a U.S. Person. The beneficial interest in the Notes may be transferred only to a transferee that meets both of the criteria in clauses (i) and (ii) above and can make all of the representations in the Indenture applicable to a Holder that is a U.S. Person, except that any such transfer in reliance on Regulation S can be made only to a transferee that is not a U.S. Person. The Issuer has the right to compel any Holder that does not meet the qualifications and the transfer restrictions set forth in the Indenture to sell its interest in the Notes, or may sell such interest on behalf of such owner, pursuant to the Indenture.” (b)

(c)

Redemption Date Instructions. Not less than five Business Days after receiving an Issuer Request requesting information regarding a redemption pursuant to Section 9.1 of the Rated Notes of a Class as of a proposed Redemption Date set forth in such Issuer Request, the Trustee shall provide the necessary information (to the extent it is available to the Trustee) to the Issuer, and the Issuer shall compute the following information and provide such information in a statement (the Redemption Date Statement) delivered to the Trustee: (1)

the Aggregate Outstanding Amount of the Rated Notes of the Class or Classes to be redeemed as of such Redemption Date;

(2)

the amount of accrued interest due on such Rated Notes as of the last day of the Interest Period immediately preceding such Redemption Date; and

(3)

the amount in the Collection Account available for application to the redemption of such Rated Notes.

If the Trustee shall not have received any accounting provided for in this Section 10.10 on the first Business Day after the date on which such accounting is due to the Trustee, the Trustee shall use reasonable efforts to cause such accounting to be made by the applicable Payment Date or Redemption Date. To the extent the Trustee is required to provide any information or reports pursuant to this Section 10.10 as a result of the failure of the Issuer to provide such information or reports, the Trustee shall be entitled to retain an Independent certified public accountant in connection therewith and the reasonable costs incurred by the Trustee for such Independent certified public accountant shall be reimbursed pursuant to Section 6.8. The Trustee will make the Note Valuation Report available via its internet website initially located at www.cdolink.com. All information made available on the Trustee’s website will be restricted and the Trustee will only provide access to such reports to those parties entitled thereto pursuant to the Indenture. In connection with providing access to its website, the Trustee may require registration and the acceptance of a disclaimer. 136

Processed and formatted by SEC Watch - Visit SECWatch.com

Questions regarding the Trustee’s website can be directed to the Trustee’s customer service desk at phone number 301-8156600. 10.11.

10.12.

RELEASE OF SECURITIES (a)

If no Event of Default has occurred and is continuing and subject to Section 12, the Issuer shall, in connection with any sale required pursuant to Section 12.1, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the settlement date for any sale of a security certifying that the conditions set forth in Section 12.1 are satisfied, direct the Trustee to release such security from the lien of this Indenture against receipt of payment therefor.

(b)

The Issuer shall, if notified that the issuer of the Pledged Security requires delivery of such Pledged Security as a condition to redemption or payment in full, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the date set for redemption or payment in full of a Pledged Security, certifying that such security is being redeemed or paid in full, direct the Trustee or, at the Trustee’s instructions, the Custodian, to deliver such security, if in physical form, duly endorsed, or, if such security is a Clearing Corporation Security, to cause it to be presented, to the appropriate paying agent therefor on or before the date set for redemption or payment, in each case against receipt of the redemption price or payment in full thereof.

(c)

The Trustee shall deposit any proceeds received by it from the disposition of a Pledged Security in the appropriate CPP Sub-Account.

(d)

The Trustee shall, upon receipt of an Issuer Order at such time as there are no Rated Notes Outstanding and all obligations of the Co-Issuers hereunder have been satisfied, release the Collateral from the lien of this Indenture.

(e)

The Issuer may retain agents (including the Collateral Advisor) to assist the Issuer in preparing any notice or other report required under Section 10.11 and this Section 10.12.

REPORTS BY INDEPENDENT ACCOUNTANTS (a)

At the Closing Date the Issuer (or the Collateral Advisor on its behalf) shall appoint a firm of Independent certified public accountants of recognized national reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Indenture. Upon any resignation by such firm, the Issuer shall (after consultation with the Collateral Advisor) propose a replacement firm meeting the criteria set forth in the preceding sentence for approval by a Majority of the Controlling Class. Upon approval by a Majority of the Controlling Class, the Issuer shall promptly appoint such firm by Issuer Order delivered to the Trustee, the Initial Hedge Counterparty, the Collateral Advisor and each Rating Agency. If the Issuer shall fail to appoint a successor to a firm of Independent certified public accountants which has resigned within 30 days after such resignation, the Issuer shall promptly notify the Trustee of such failure in writing. The fees of such Independent certified public accountants and its successor shall be payable by the Issuer as provided in Section 11.1.

(b)

On or before May 31 of each year (commencing with May 31, 2006), the Issuer shall cause to be delivered to the Trustee, the Income Note Paying Agent and each Rating 137

Processed and formatted by SEC Watch - Visit SECWatch.com

Agency an Accountants’ Report specifying the procedures applied and their associated findings with respect to the Note Valuation Reports and any Redemption Date Statements prepared in the preceding year. At least 60 days prior to the Payment Date in May 2006 (and, if at any time a successor firm of Independent certified public accountants is appointed, prior to the Payment Date in August following the date of such appointment), the Issuer shall deliver to the Trustee an Accountant’s Report specifying in advance the procedures that such firm will apply in making the aforementioned findings throughout the term of its service as accountants to the Issuer. The Trustee shall promptly forward a copy of such Accountant’s Report to the Initial Hedge Counterparty, the Rating Agencies, the Income Note Paying Agent and each Holder of Class A Notes (or, if no Class A Notes are Outstanding, each Holder of Class B Notes or, if no Class B Notes are Outstanding, each Holder of Class C Notes), at the address shown on the Note Register. The Issuer shall not approve the institution of such procedures if a Majority of the Controlling Class or the Collateral Advisor, by notice to the Issuer and the Trustee within 30 days after the date of the related notice to the Trustee, object thereto. (c)

10.13.

Any statement delivered to the Trustee pursuant to Section 10.12(b) above shall be made available by the Trustee to any Holder of a Rated Note shown on the Note Register upon written request therefor.

REPORTS TO RATING AGENCIES

In addition to the information and reports specifically required to be provided to the Rating Agencies, the Income Note Paying Agent, the Holders of Rated Notes of the Controlling Class, and the Initial Hedge Counterparty pursuant to the terms of this Indenture, the Income Note Paying Agency Agreement or the Hedge Agreement (as the case may be), the Issuer shall provide or procure to provide the Rating Agencies and the Initial Hedge Counterparty with (a) all information or reports delivered to the Trustee hereunder and (b) such additional information as the Rating Agencies, the Income Note Paying Agent or the Initial Hedge Counterparty may from time to time reasonably request and such information may be obtained and provided without unreasonable burden or expense. The Issuer shall promptly notify the Trustee, the Income Note Paying Agent and the Initial Hedge Counterparty if the rating of any Class of Rated Notes has been, or it is known by the Issuer that such rating will be, changed or withdrawn. The Issuer shall notify each Rating Agency in the case of (i) termination or amendment of any Transaction Document or organizational document of the Issuer or Co-Issuer, (ii) termination or change of party to any of the Transaction Documents or (iii) material breach of any of the Transaction Documents by any party thereto. 10.14.

TAX MATTERS

The Issuer and the Co-Issuer agree to treat, and hereby notify the Trustee to treat, and, by accepting a Rated Note, each Holder of the Rated Notes agrees to treat, the Rated Notes, for U.S. federal, state and local income tax purposes, as indebtedness of the Issuer (and not as obligations of the Co-Issuer), to report all income (or loss) in accordance with such treatment and not to take any action inconsistent with such treatment except as otherwise required by any taxing authority under applicable law. The Issuer agrees not to elect to be treated as other than a corporation for U.S. federal income tax purposes. 10.15.

TAX INFORMATION

The Issuer will furnish to any Holder of Rule 144A Definitive Notes (or its designee), Rule 144A Global Notes (or its designees), and Definitive Class D Notes (or its designee), upon the request of any 138

Processed and formatted by SEC Watch - Visit SECWatch.com

such Holder, the necessary information, and will permit such Holder reasonable access to its books of account, in order to allow such Holder to make a “qualifying electing fund” election pursuant to Section 1295 of the Code. The Issuer shall provide on a timely basis to any holder of a beneficial interest in Rule 144A Definitive Notes (or its designee), Rule 144A Global Notes (or its designees), and Definitive Class D Notes (or its designee), upon written request therefor certifying that it is such a holder, (i) all information that a U.S. shareholder making a “qualified electing fund” election (as defined in the Code) is required to obtain for U.S. federal income tax purposes and (ii) a “PFIC Annual Information Statement” as described in Treasury Regulation 1.1295-1 (or any successor Internal Revenue Service release or Treasury Regulation), including all representations and statements required by such statement, and will take any other steps necessary to facilitate such election by a holder of a beneficial interest in any Rule 144A Definitive Notes, Rule 144A Global Notes, and Definitive Class D Notes. The Issuer shall also provide, upon request of a Holder of, or a holder of a beneficial interest in, any Rule 144A Definitive Notes, Rule 144A Global Notes, and Definitive Class D Notes, any information that such Holder or holder of a beneficial interest reasonably requests to assist such Holder or holder of a beneficial interest with regard to any filing requirements the Holder or holder of a beneficial interest may have as a result of the controlled foreign corporation rules under the Code. The cost and expense of the preparation and delivery of the PFIC Annual Information Statement shall be at the expense of the Issuer. ARTICLE XI APPLICATION OF MONIES 11.1.

DISBURSEMENTS OF FUNDS FROM PAYMENT ACCOUNT; PRIORITY OF PAYMENTS (a)

Collateral Interest Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Rated Notes in connection with an Event of Default, in accordance with a Note Valuation Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Interest Collections, to the extent of Available Funds in the Collection Account, will be applied by the Trustee in the following order of priority: (1)

to pay, in the following order: (i)

taxes and filing fees and registration fees (including, without limitation, annual return fees) payable by the Co-Issuers, if any; and then,

(ii)

pro rata the amount of any due and unpaid Trustee Fee and Income Note Paying Agent Fee; and then,

(iii)

the amount of any due and unpaid fees to the Administrator; and then,

(iv)

the amount of any due and unpaid Trustee Expenses; and then,

(v)

the amount of any due and unpaid fees and expenses of the Rating Agencies; and then,

(vi)

the amount of any due and unpaid expenses of the Administrator and any due and unpaid Administrative Expenses not included in (iii), (iv) and 139

Processed and formatted by SEC Watch - Visit SECWatch.com

(v) above, including amounts payable to the Collateral Advisor under the Collateral Advisory Agreement but excluding the Collateral Advisory Fee; and then, (vii)

to deposit to the Expense Reserve Account the amount needed to bring the amount on deposit therein to U.S.$25,000 (unless the Collateral Advisor directs that a lesser amount be deposited to the Expense Reserve Account);

provided that the cumulative amount paid under (iii) through (vii) above (excluding any Administrative Expenses due or accrued with respect to the actions taken on or prior to the Closing Date and accounting fees that the Trustee is required to pay (other than certain accountants’ fees related to annual reviews) and fees the Trustee pays in connection with any Event of Default and any default of the Collateral Debt Securities) may not exceed U.S.$250,000 in the aggregate in any consecutive 12-month period; (2)

to pay the Senior Collateral Advisory Fee with respect to such Payment Date and any Senior Collateral Advisory Fee with respect to a previous Payment Date that was not paid on a previous Payment Date;

(3)

to pay any Hedge Counterparty, any amounts due to such Hedge Counterparty under any Hedge Agreement, pro rata, including any termination payments other than any termination payments payable under Section 11.1(a)(20) below;

(4)

to pay Periodic Interest on the Class A-1 Notes and any Defaulted Interest;

(5)

to pay Periodic Interest on the Class A-2 Notes and any Defaulted Interest;

(6)

if either of the Class A Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal of the Class A-1 Notes then Outstanding until such Class A Coverage Test is satisfied as of such Calculation Date or until the Class A-1 Notes are paid in full, and then to pay principal of the Class A-2 Notes then Outstanding until such Class A Coverage Test is satisfied as of such Calculation Date or until the Class A-2 Notes are paid in full; provided that for purposes of determining if the Class A Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(6), the denominator of the Class A Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Class A Notes to be made pursuant to this Section 11.1(a)(6);

(7)

to pay an amount equal to the Interest Reserve Amount for deposit into the Interest Reserve Account;

(8)

if a Ratings Confirmation Failure occurs, on each Payment Date commencing with the Payment Date immediately following the Effective Date, to pay principal on the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C-1 Notes, the Class C-2 Notes and the Class D Notes, in that order, in the amounts necessary for each Rating Agency to confirm its respective ratings of the Notes assigned on the Closing Date or until each Class of Notes is paid in full; 140

Processed and formatted by SEC Watch - Visit SECWatch.com

(9)

to pay Periodic Interest on the Class B Notes and, if no Class A Notes are Outstanding, any Defaulted Interest on the Class B Notes;

(10)

if either of the Class B Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal of the most senior Class of Notes then Outstanding until such Class B Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class B Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class B Coverage Test is satisfied or until the Class B Notes are paid in full; provided that for purposes of determining if the Class B Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(10), the denominator of the Class B Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to any of the clauses above and pursuant to this Section 11.1(a)(10) on the related Payment Date; provided, further, that with respect to the Class B Notes, payment of principal not constituting Class B Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class B Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(11)

to pay the Class B Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(12)

to pay Periodic Interest on the Class C-1 Notes and, if no Class A Notes and no Class B Notes are Outstanding, any Defaulted Interest on the Class C-1 Notes;

(13)

to pay Periodic Interest on the Class C-2 Notes and, if no Class A Notes, no Class B Notes and no Class C-1 Notes are Outstanding, any Defaulted Interest on the Class C-2 Notes;

(14)

if either of the Class C Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class B Cumulative Applicable Periodic Interest Shortfall Amount, Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount or Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class C Coverage Test is satisfied or until the Class C-1 Notes and then the Class C-2 Notes, in that order, are paid in full; provided that for purposes of determining if the Class C Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(14), the denominator of the Class C Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes pursuant to any of the clauses above and pursuant to this Section 11.1(a)(14) on the related Payment Date; provided, further, that with respect to (i) the Class B Notes, payment of principal not constituting Class B Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting Class B Cumulative Applicable Periodic Interest Shortfall Amount, if any; 141

Processed and formatted by SEC Watch - Visit SECWatch.com

(ii) the Class C-1 Notes, payment of principal not constituting Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (iii) the Class C-2 Notes, payment of principal not constituting Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; (15)

to pay the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(16)

to pay the Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(17)

to pay Periodic Interest on the Class D Notes and, if no Class A Notes, no Class B Notes and no Class C Notes are Outstanding, any Defaulted Interest on the Class D Notes;

(18)

if either of the Class D Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class B Cumulative Applicable Periodic Interest Shortfall Amount, Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount or Class D Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class D Coverage Test is satisfied or until the Class D Notes are paid in full; provided that for purposes of determining if the Class D Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(18), the denominator of the Class D Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes pursuant to any of the clauses above and pursuant to this Section 11.1(a)(18) on the related Payment Date; provided, further, that with respect to (i) the Class B Notes, payment of principal not constituting the Class B Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class B Cumulative Applicable Periodic Interest Shortfall Amount, if any; (ii) the Class C-1 Notes, payment of principal not constituting the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any; (iii) the Class C-2 Notes, payment of principal not constituting the Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (iv) the Class D Notes, payment of principal not constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any; 142

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

(19)

to pay the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(20)

to pay termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, pro rata, if such termination occurred solely as the result of an event of default or a termination event with respect to any Hedge Counterparty as Defaulting Party or sole Affected Party, as the case may be;

(21)

to pay, in the following order: (i)

any due and unpaid Trustee Fee, Trustee Expenses and any due Income Note Paying Agent Fee and unpaid Administrative Expenses, including amounts payable to the Collateral Advisor under the Collateral Advisory Agreement but excluding the Collateral Advisory Fee, in each case, in the same order of priority as provided in Section 11.1(a)(1) above and to the extent not paid in full under Section 11.1(a)(1) above without regard to any limitation on any maximum amounts payable on such date contained therein; and

(ii)

on a pro rata basis, any due and unpaid expenses and other liabilities of the Co-Issuers to the extent not paid under clause (1) above, whether as a result of an amount limitation imposed thereunder or otherwise;

(22)

to pay the Subordinate Collateral Advisory Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Advisory Fee with respect to a previous Payment Date that was not paid on a previous Payment Date;

(23)

after the Payment Date occurring in April 2017, to pay from remaining Collateral Interest Collections on any Payment Date the principal on the Class D Notes, until paid in full, then the principal on the Class C-2 Notes, until paid in full, then the principal of the Class C-1 Notes, until paid in full, then the principal on the Class B Notes, until paid in full, then the principal on the Class A-2 Notes until paid in full and then the principal on the Class A-1 Notes until paid in full; and

(24)

all Income Note Excess Funds to the Income Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Income Note Paying Agency Agreement.

Collateral Principal Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Rated Notes in connection with an Event of Default, in accordance with a Note Valuation Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Principal Collections, to the extent of Available Funds in the Collection Account, will be applied by the Trustee in the following order of priority: (1)

to the payment of the amounts referred to in Section 11.1(a)(1) through (5), in the same order of priority specified therein, but only to the extent not paid in full thereunder; 143

Processed and formatted by SEC Watch - Visit SECWatch.com

(2)

if either of the Class A Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(6) are insufficient to cause the Class A Coverage Tests to be satisfied, to pay principal of the Class A-1 Notes then Outstanding until such Class A Coverage Test is satisfied as of such Calculation Date or until the Class A-1 Notes are paid in full, and then to pay principal of the Class A-2 Notes then Outstanding until such Class A Coverage Test is satisfied as of such Calculation Date or until the Class A-2 Notes are paid in full; provided that for purposes of determining if the Class A Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(2), the denominator of the Class A Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Class A Notes made pursuant to any clause or subclause of Section 11.1(a) and pursuant to this Section 11.1(b)(2); provided, further, that the numerator of the Class A Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections applied pursuant to Section 11.1(b)(1) and pursuant to this Section 11.1(b)(2) on the related Payment Date;

(3)

If the Class A Notes are no longer Outstanding, to pay, in the following order, Periodic Interest on the Class B Notes and any Defaulted Interest on the Class B Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(9) are insufficient to pay such amounts in full;

(4)

if either of the Class B Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(10) are insufficient to cause the Class B Coverage Tests to be satisfied, to pay principal of the most senior Class of Notes then Outstanding until such Class B Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class B Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class B Coverage Test is satisfied or until the Class B Notes are paid in full; provided that for purposes of determining if the Class B Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(4), the denominator of the Class B Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to any clause or subclause of Section 11.1(a) on the related Payment Date and pursuant to Section 11.1(b)(2) above and this clause (4); provided, further, that the numerator of the Class B Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections applied pursuant to any of the clauses above and pursuant to this Section 11.1(b)(4) on the related Payment Date; provided, further, that with respect to the Class B Notes, payments of principal not constituting Class B Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class B Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(5)

If the Class A Notes are no longer Outstanding, the Class B Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that the amounts paid pursuant to Section 11.1(a)(11) are insufficient to pay such amounts in full thereunder; 144

(6)

If the Class A Notes and the Class B Notes are no longer Outstanding, to pay Periodic Interest on the Class C-1 Notes and any Defaulted Interest on the Class C-1 Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(12) are insufficient to pay such amounts in full thereunder;

(7)

If the Class A Notes, the Class B Notes, and the Class C-1 Notes are no longer Outstanding, to pay Periodic Interest on the Class C-2 Notes and any Defaulted Interest on the Class C-2 Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(13) are insufficient to pay such amounts in full thereunder;

(8)

if either of the Class C Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(14) are insufficient to cause the Class C Coverage Tests to be satisfied, to pay principal (including any Class B Cumulative Applicable Periodic Interest Shortfall Amount, Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount or Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount as applicable) of the most senior Class of Notes then Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class C Coverage Test is satisfied or until the Class C-1 Notes and then the Class C-2 Notes, in that order are paid in full; provided that for purposes of determining if the Class C Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(8), the denominator of the Class C Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes made pursuant to any clause or subclause of Section 11.1(a) on the related Payment Date and pursuant to any clause above and this Section 11.1(b)(8); provided, further, that for purposes of determining if the Class C Principal Coverage Test is satisfied, the numerator of the Class C Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections to be applied pursuant to any clause above and this Section 11.1(b)(8) on the related Payment Date; and provided, further, that with respect to (i) the Class B Notes, payment of principal not

Processed and formatted by SEC Watch - Visit SECWatch.com

constituting Class B Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting Class B Cumulative Applicable Periodic Interest Shortfall Amount; (ii) the Class C-1 Notes, payment of principal not constituting Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (iii) the Class C-2 Notes, payment of principal not constituting Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; (9)

If the Class A Notes and the Class B Notes are no longer Outstanding, to pay, in the following order: (i)

the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that the amounts paid pursuant to Section 11.1(a)(15) are insufficient to pay such amounts in full thereunder; and 145

Processed and formatted by SEC Watch - Visit SECWatch.com

(ii)

if the Class A Notes, Class B Notes and the Class C-1 Notes are no longer Outstanding, the Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that the amounts paid pursuant to Section 11.1(a)(16) are insufficient to pay such amounts in full thereunder;

(10)

If the Class A Notes, the Class B Notes and the Class C Notes are no longer Outstanding, to pay Periodic Interest on the Class D Notes and any Defaulted Interest on the Class D Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(17) are insufficient to pay such amounts in full thereunder;

(11)

If either of the Class D Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that amounts paid pursuant to Section 11.1(a)(18) of Section 11.1(a) are insufficient to cause the Class D Coverage Tests to be satisfied, to pay principal (including any Class B Cumulative Applicable Periodic Interest Shortfall Amount, Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount or Class D Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class D Coverage Test is satisfied or until the Class D Notes are paid in full; provided that for purposes of determining if the Class D Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(11), the denominator of the Class D Principal Coverage Ratio shall be determined after giving effect to any payment of principal on the Notes made pursuant to any clause or subclause of Section 11.1(a) on the related Payment Date and pursuant to any clause or subclause above and this Section 11.1(b)(11); provided, further, that for purposes of determining if the Class D Principal Coverage Test is satisfied, the numerator of the Class D Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections to be applied pursuant to any clause or subclause above and this Section 11.1(b)(11) on the related Payment Date; and provided, further, that with respect to (i) the Class B Notes, payment of principal not constituting Class B Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class B Cumulative Applicable Periodic Interest Shortfall Amount; (ii) the Class C-1 Notes, payment of principal not constituting Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any; (iii) the Class C-2 Notes, payment of principal not constituting Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (iv) the Class D Notes, payment of principal not constituting Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(12)

if the Class A Notes, the Class B Notes, and the Class C Notes are no longer Outstanding, to pay the Class D Cumulative Applicable Periodic Interest 146

Processed and formatted by SEC Watch - Visit SECWatch.com

Shortfall Amount, to the extent that amounts paid pursuant to Section 11.1(a)(19) of Section 11.1(a) are insufficient to pay such amounts in full thereunder; (13)

to pay, in the following order: (i)

(ii)

on each Payment Date through and including the last Payment Date during the Reinvestment Period, to pay to the Collection Account: (A)

to the extent the accumulated Collateral Principal Payments for a CPP Asset Type have not reached an aggregate amount that is equal to or greater than the Reinvestment Threshold Amount, (x) if the Issuer, acting through the Collateral Advisor, delivers notice that the Cash Release Conditions are satisfied with respect to such Collateral Principal Payments for such CPP Asset Type, then to apply all such Collateral Principal Payments in accordance with subclause (iii) below or (y) in the absence of such notice, then to hold such amounts for further accumulation and eventual reinvestment or application hereunder on a later Payment Date; and

(B)

to the extent the accumulated Collateral Principal Payments for a CPP Asset Type have reached an aggregate amount that is equal to or greater than the Reinvestment Threshold Amount with respect to such CPP Asset Type; 1)

during the Sixty-Day Reinvestment Window applicable to such Collateral Principal Payments for such CPP Asset Type, to remain available in the applicable CPP SubAccount for application to the purchase of one or more Substitute Collateral Debt Securities in an aggregate amount equal to the lesser of (x) the amount of such Collateral Principal Payments and (y) the amount of such funds available in the Collection Account; or

2)

after the Sixty-Day Reinvestment Window applicable to such Collateral Principal Payments for such CPP Asset Type, then to apply any remaining amount of such Collateral Principal Payments in accordance with subclause (iii) below;

on each Payment Date through and including the last Payment Date during the Three-Year Period, with respect to the Sale Proceeds received in respect of any Credit Risk Security, Defaulted Security, Equity Security, Withholding Tax Security or Written Down Security, to pay to the Collection Account, (A)

during the Sixty-Day Reinvestment Window applicable to such Sale Proceeds, to remain available for application to the purchase of one or more Substitute Collateral Debt Securities, an aggregate amount equal to the lesser of (x) such Sale Proceeds 147

Processed and formatted by SEC Watch - Visit SECWatch.com

and (y) the amount of such funds available in the Collection Account, or (B)

(iii)

(A) on each Payment Date through and including the last Payment Date during the Reinvestment Period, to pay each Class of Rated Notes in full, pro rata, if the Special Amortization Pro Rata Condition is satisfied; and (B)

(14)

after the Sixty-Day Reinvestment Window applicable to such Sale Proceeds, to apply any remaining amount of such Sale Proceeds in accordance with subclause (iii) below;

otherwise, if the Special Amortization Pro Rata Condition is not satisfied, to pay: 1)

first to the Class A-1 Notes, until the Class A-1 Notes have been paid in full;

2)

second, to the Class A-2 Notes, until the Class A-2 Notes have been paid in full;

3)

third, to the Class B Notes, until the Class B Notes have been paid in full;

4)

fourth, to the Class C-1 Notes, until the Class C-1 Notes have been paid in full;

5)

fifth, to the Class C-2 Notes, until the Class C-2 Notes have been paid in full; and

6)

sixth, to the Class D Notes, until the Class D Notes have been paid in full;

after the end of the Reinvestment Period, to pay each Class of Rated Notes: (i)

first to the Class A-1 Notes, until the Class A-1 Notes have been paid in full;

(ii)

second, to the Class A-2 Notes, until the Class A-2 Notes have been paid in full;

(iii)

third, to the Class B Notes, until the Class B Notes have been paid in full;

(iv)

fourth, to the Class C-1 Notes, until the Class C-1 Notes have been paid in full;

(v)

fifth, to the Class C-2 Notes, until the Class C-2 Notes have been paid in full; and

(vi)

sixth, to the Class D Notes, until the Class D Notes have been paid in full; 148

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

(15)

to pay termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, pro rata, if such termination occurred solely as the result of an event of default or a termination event with respect to any Hedge Counterparty as Defaulting Party or sole Affected Party, as the case may be, to the extent that the amounts paid pursuant to Section 11.1(a)(20) are insufficient to pay such amounts in full thereunder;

(16)

to pay, in the following order: (i)

any due and unpaid Trustee Fee, Trustee Expenses, and any due Income Note Paying Agent Fee and any other unpaid Administrative Expenses, including amounts payable to the Collateral Advisor under the Collateral Advisory Agreement but excluding the Collateral Advisory Fee, in each case, in the same order of priority as provided in Section 11.1(b)(1) above and to the extent not paid in full under clause (1) above and to the extent that the amounts paid pursuant to Section 11.1(a)(1) and (21) are insufficient to pay such amounts in full thereunder; and

(ii)

on a pro rata basis, any due and unpaid expenses and other liabilities of the Co-Issuers to the extent not paid under Section 11.1(b)(1) above and to the extent that the amounts paid pursuant to Section 11.1(a)(1) and (21) are insufficient to pay such amounts in full thereunder, whether as a result of an amount limitation imposed thereunder or otherwise;

(17)

to pay the Subordinate Collateral Advisory Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Advisory Fee with respect to a previous Payment Date that was not paid on a previous Payment Date, to the extent that the amounts paid pursuant to Section 11.1(a)(22) are insufficient to pay such amounts in full thereunder; and

(18)

all Income Note Excess Funds to the Income Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Income Note Paying Agency Agreement.

If an Event of Default has occurred and is continuing, on the date or dates determined by the Trustee, the Trustee will pay, from all collections from, and proceeds of the sale or liquidation of, the Collateral, in the following order: (1)

amounts corresponding to the amounts set forth in clauses Section 11.1(a)(1) through (3), and (to the extent not covered by Section 11.1(a)(1) through (3)) Section 11.1(b)(1);

(2)

the Periodic Interest on the Class A-1 Notes (including Defaulted Interest on such Class A-1 Notes, if any);

(3)

the Periodic Interest on the Class A-2 Notes (including Defaulted Interest on such Class A-2 Notes, if any);

(4)

outstanding principal on the Class A-1 Notes until paid in full;

(5)

outstanding principal on the Class A-2 Notes until paid in full; 149

Processed and formatted by SEC Watch - Visit SECWatch.com

(6)

the Periodic Interest on the Class B Notes (including Defaulted Interest on the Class B Notes, if any) and then outstanding principal on the Class B Notes (including the Class B Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(7)

the Periodic Interest on the Class C-1 Notes (including Defaulted Interest on the Class C-1 Notes, if any) and then outstanding principal on the Class C-1 Notes (including Class C-1 Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(8)

the Periodic Interest on the Class C-2 Notes (including Defaulted Interest on the Class C-2 Notes, if any) and then outstanding principal on the Class C-2 Notes (including Class C-2 Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(9)

the Periodic Interest on the Class D Notes (including Defaulted Interest on the Class D Notes, if any) and then outstanding principal on the Class D Notes (including Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(10)

amounts corresponding to the amounts set forth in Section 11.1(a)(20) through (22), and Section 11.1(b)(15) through (17); and

(11)

to the Income Note Paying Agent, any remaining amounts for distributions on the Income Notes as set forth in Section 11.1(a)(24) and Section 11.1(b)(18).

(d)

Not later than 12:00 p.m., New York time, on or before the Business Day preceding each Payment Date, the Issuer shall, pursuant to Section 10, remit or cause to be remitted to the Trustee for deposit in the Payment Account an amount of Cash sufficient to pay the amounts described in Section 11.1(a) and 11.1(b) required to be paid on such Payment Date.

(e)

If, on any Payment Date, the amount available in the Payment Account from amounts received in the related Due Period is insufficient to make the full amount of the disbursements required by the statements furnished by the Issuer pursuant to Section 10.11(b), the Trustee shall make the disbursements called for in the order and according to the priority set forth under Section 11.1(a) and 11.1(b), subject to Section 13.1, to the extent funds are available therefor.

(f)

Except as otherwise expressly provided in this Section 11.1, if on any Payment Date the amount of funds is insufficient to make the full amount of the disbursements required by any clause or subclause of Section 11.1(a) or 11.1(b) to different Persons, the Trustee shall make the disbursements called for by such clause or subclause ratably in accordance with the respective amounts of such disbursements then due and payable to the extent funds are available therefor.

(g)

With respect to principal payments of the Class B Notes and Class C Notes in connection with a mandatory redemption pursuant to Section 11.1(a)(10), (14) or (18) and pursuant to Section 11.1(b)(4), (8) or (11), payment of principal not constituting the Class B Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class B Cumulative Applicable Periodic Interest Shortfall Amount, if 150

Processed and formatted by SEC Watch - Visit SECWatch.com

any, and payment of principal not constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any. (h)

Any amounts to be paid to the Income Note Paying Agent pursuant to Section 11.1(a)(24) or to Section 11.1(b)(18) will be released from the lien of this Indenture.

(i)

No Collateral Principal Collections will be paid to a Class of Rated Notes in accordance with the Priority of Payments on a Payment Date if, after giving effect to such payment, any Principal Coverage Test for a more Senior Class of Rated Notes would have failed. ARTICLE XII PURCHASE AND SALE OF COLLATERAL DEBT SECURITIES

12.1.

SALE OF COLLATERAL DEBT SECURITIES (a)

Sale of Collateral Debt Securities. (1)

Subject to the satisfaction of the conditions specified in Section 10.11 as applicable, if the Collateral Advisor, on behalf of the Issuer, pursuant to this Article 12, shall direct the Trustee to sell any Temporary Ramp-Up Security, Defaulted Security, Equity Security, Credit Risk Security, Written Down Security or Withholding Tax Security, the Trustee shall sell in the manner directed by the Collateral Advisor, any Temporary Ramp-Up Security, Defaulted Security, Equity Security, Credit Risk Security, Written Down Security or Withholding Tax Security.

(2)

During the Ramp-Up Period, and in any event, no later than the Effective Date, the Collateral Advisor shall direct the Issuer to sell or otherwise dispose of all Temporary Ramp-Up Securities. Sale Proceeds received with respect to Temporary Ramp-Up Securities shall be reinvested only in Ramp-Up Collateral Debt Securities that are Fixed Rate Collateral Debt Securities, provided that any Sale Proceeds received with respect to Temporary Ramp-Up Securities that are not reinvested in Fixed Rate Collateral Debt Securities, other than not more than U.S.$500,000 of such Sale Proceeds that may be reinvested in Substitute Collateral Debt Securities that are not Fixed Rate Collateral Debt Securities, shall be treated as Collateral Principal Collections and shall be applied by the Issuer to the making of payments on the Notes, subject to and in accordance with the Priority of Payments, on the Payment Date immediately following the Effective Date.

(3)

The Collateral Advisor shall direct the Issuer to sell or otherwise dispose of any Collateral Debt Security that is an Equity Security as soon as practicable after such Collateral Debt Security becomes an Equity Security. The Collateral Advisor may direct the Issuer to sell or otherwise dispose of all or a portion of any Collateral Debt Security that is a Defaulted Security, a Written Down Security or a Withholding Tax Security; provided that the Collateral Advisor shall have (i) certified that such Collateral Debt Security is a Defaulted Security, a Written Down Security or a Withholding Tax Security and (ii) declared within five (5) Business Days following such Collateral Debt Security becoming a 151

Processed and formatted by SEC Watch - Visit SECWatch.com

Defaulted Security, a Written Down Security or a Withholding Tax Security whether it has elected to direct the Issuer to sell or otherwise dispose of all or a specified portion of such Collateral Debt Security. No such sale or other disposition is permitted for the primary purpose of recognizing gains or decreasing losses resulting from market value changes, or if the Issuer or the Collateral Advisor believes that any such sale or other disposition would result, and no such sale or disposition does result, in the reduction or withdrawal of the then-current rating on any Class of Rated Notes by any Rating Agency. If the Collateral Advisor elects to direct the Issuer to sell or otherwise dispose of any Defaulted Security, Written Down Security or Withholding Tax Security as described above, such Collateral Debt Security (or specified portion thereof) is required to be sold or otherwise disposed of within twelve (12) months following such election. If the Collateral Advisor does not elect within such five (5) Business Days to direct the Issuer to sell or otherwise dispose of any Defaulted Security, Written Down Security or Withholding Tax Security, such Collateral Debt Security shall not be sold or otherwise disposed of and shall remain part of the Collateral. Any decision by the Collateral Advisor to sell or not to sell any Collateral Debt Security within five (5) Business Days of such Collateral Debt Security first becoming either a Defaulted Security or a Written Down Security or a Withholding Tax Security shall not thereafter be changed by the Collateral Advisor or the Issuer for any reason. (4)

The Collateral Advisor may direct the Issuer to sell or otherwise dispose of all or any portion of any Collateral Debt Security that is a Credit Risk Security; provided that the Collateral Advisor shall have (i) certified that a Credit Risk Event has occurred and (ii) declared within five (5) Business Days following the occurrence of any such Credit Risk Event that it has elected to direct the Issuer to sell or otherwise dispose of all or a portion of such Collateral Debt Security. No such sale or other disposition is permitted for the primary purpose of recognizing gains or decreasing losses resulting from market value changes, or if the Issuer or the Collateral Advisor believes that any such sale or other disposition would result, and no such sale or disposition does result, in the reduction or withdrawal of the then-current rating on any Class of Rated Notes by any Rating Agency. If the Collateral Advisor elects to direct the Issuer to sell or otherwise dispose of any Credit Risk Security as described above, such Collateral Debt Security is required to be sold or otherwise disposed of as soon as reasonably practicable and in any event within 30 days following such election. If the Collateral Advisor does not elect within such five (5) Business Days following any Credit Risk Event to direct the Issuer to sell or otherwise dispose of any Collateral Debt Security, such Credit Risk Security shall not be sold or otherwise disposed of and shall remain part of the Collateral, unless a subsequent Credit Risk Event occurs with respect to such Collateral Debt Security (or such Collateral Debt Security subsequently becomes a Defaulted Security, Written Down Security or Withholding Tax Security) and the Collateral Advisor shall have made the certifications and declarations described above.

(5)

In the event of a Redemption, the Collateral Advisor shall direct the Trustee to sell Collateral Debt Securities without regard to the foregoing limitations; provided that the Sale Proceeds therefrom and other amounts available therefor will be at least sufficient to pay certain expenses, including all amounts due under any Hedge Agreements, and redeem, in whole but not in part, the Notes at 152

Processed and formatted by SEC Watch - Visit SECWatch.com

the applicable Redemption Prices; and provided, further, that such Sale Proceeds are used to make such a Redemption. (6)

(b)

The Collateral Advisor shall sell any Collateral Debt Security pursuant to this Section 12 only at a price that, in its judgment, is not substantially less than the market value of such Collateral Debt Security at the time of such sale.

Reinvestment of Sale Proceeds and Replacement of Collateral Debt Securities. Following the Closing Date and during (i) the Ramp-Up Period, subject to the Ramp-Up Criteria, and (ii) the Three-Year Period, and subject to the satisfaction of the Eligibility Criteria and the Replacement Criteria in all cases during the periods set forth in (i) and (ii) above, the Collateral Advisor, acting on behalf of the Issuer shall be required, on a best efforts basis, to instruct the Trustee, within the Sixty-Day Reinvestment Window, to reinvest Sale Proceeds received at any time from the sale of Collateral Debt Securities that are Defaulted Securities, Equity Securities, Credit Risk Securities, Written Down Securities or Withholding Tax Securities in Substitute Collateral Debt Securities with an aggregate purchase price up to the amount of the Sale Proceeds; provided, however, that prior to any such acquisition of Substitute Collateral Debt Securities by or on behalf of the Issuer in the manner described above, the following conditions are satisfied on the date of such acquisition: (1)

the cumulative amount reinvested in Substitute Collateral Debt Securities with Sale Proceeds received in the manner specified above does not exceed the Five Percent Limit;

(2)

any such acquisition is not for the primary purpose of recognizing gains or decreasing losses resulting from market value changes;

(3)

neither the Issuer nor the Collateral Advisor believes that any such acquisition will result, and no such acquisition does result, in a reduction or withdrawal of the then-current rating on any Class of Rated Notes by any Rating Agency;

(4)

the rating by any Rating Agency on (A) the Class A Notes is one or more notches below the rating assigned to the Class A Notes by such Rating Agency on the Closing Date; or (B) any other Class of Rated Notes is two or more notches below the rating assigned to such Class of Rated Notes by such Rating Agency on the Closing Date; and

(5)

the Replacement Criteria are satisfied;

In addition, on each date of purchase of a Substitute Collateral Debt Security, each of the Coverage Tests and the Collateral Quality Tests will be required to remain satisfied after giving effect to the purchase of such Substitute Collateral Debt Security (which date of purchase shall be deemed to be the date on which the Issuer enters into commitments to purchase such Substitute Collateral Debt Security), or, if immediately prior to giving effect to such purchase any of the foregoing tests was not satisfied, no such tests that were not satisfied shall be made worse after giving effect to such proposed purchase and no such Coverage Tests or Collateral Quality Tests that were satisfied shall fail to be satisfied after giving effect to such purchase. 153

If all such Sale Proceeds related to the sale of any Defaulted Securities, Equity Securities, Credit Risk Securities, Written Down Securities or Withholding Tax Securities are not reinvested in Substitute Collateral Debt Securities as described above for any reason within the Sixty Day Reinvestment Window, the Issuer will be obligated to reinvest such Sale Proceeds in Eligible Investments until the next succeeding Payment Date, at which time the Trustee on behalf of the Issuer will distribute such Sale Proceeds in accordance with Section 11.1 of this Indenture. (c)

Collateral Debt Security Principal Payments and Reinvestment Criteria. Prior to the end of the Reinvestment Period, the Issuer will use its best efforts to reinvest the Collateral Principal Payments in the applicable CPP Sub-Account which were in such CPP SubAccount at the time the Reinvestment Threshold Amount was satisfied for any particular CPP Asset Type in accordance with the Reinvestment Criteria during the Sixty-Day Reinvestment Window following any date on which the amount of Collateral Principal Payments in such CPP Sub-Account becomes equal to or greater than the Reinvestment Threshold Amount. To the extent accumulated Collateral Principal Payments for any CPP Asset Type that are on deposit with the Trustee and as to which the Reinvestment Trigger Date has not occurred are below the Reinvestment Threshold Amount, within five (5) Business Days subsequent to receipt of any Collateral Principal Payment for such CPP Asset Type, in the event the Collateral Advisor on behalf of the Issuer determines that any reinvestment in Substitute Collateral Debt Securities of the same CPP Asset Type (i) would not at such time be practicable on commercially reasonably terms or (ii) would decrease compliance with any of the Coverage Tests or the Collateral Quality Tests of the portfolio of the Collateral Debt Securities ((i) and (ii) collectively, the Cash Release Conditions), the Issuer will have the right to elect that all (but not less than all) of such Collateral Principal Payments not be accumulated for reinvestment in Substitute Collateral Debt Securities and instead be reinvested in Eligible Investments until the next succeeding Payment Date, whereupon the Issuer will distribute such Collateral Principal Payments in accordance with the Priority of Payments. Where the Cash Release Conditions are not satisfied, such Collateral Principal Payments will be held in the applicable CPP SubAccount corresponding to such CPP Asset Type until the Reinvestment Threshold Amount for the applicable CPP Asset Type is

Processed and formatted by SEC Watch - Visit SECWatch.com

satisfied, and prior to such time will not be distributed. If accumulated Collateral Principal Payments exceed the Reinvestment Threshold Amount for a CPP Asset Type, the Collateral Advisor will be required to use its best efforts to direct the Issuer to reinvest, within 60 calendar days of the Reinvestment Trigger Date, such Collateral Principal Payments in Substitute Collateral Debt Securities (which shall in all cases satisfy the Eligibility Criteria) in accordance with the Reinvestment Criteria; provided, however, that Collateral Principal Payments comprised of Collateral Principal Collections from Substitute Collateral Debt Securities may not be invested further in Substitute Collateral Debt Securities and must instead be reinvested in Eligible Investments until the next succeeding Payment Date, whereupon the Issuer will distribute such Collateral Principal Payments as Collateral Principal Collections in accordance with Section 11.1 hereof; and provided, further, that (i) Collateral Principal Payments may not be reinvested in any Substitute Collateral Debt Securities to the extent that on any date the cumulative amount of proceeds from Collateral Principal Payments that have been reinvested through such date would exceed an amount equal to 35% of the CDS Principal Balance as of the Effective Date, in which case the Issuer will distribute 154

Processed and formatted by SEC Watch - Visit SECWatch.com

such excess of Collateral Principal Payments (and any subsequent Collateral Principal Payments) in accordance with Section 11.1(b), and (ii) a reinvestment of any Collateral Principal Payment in any Substitute Collateral Debt Security is only permitted to occur on any date if (A) any such acquisition is not for the primary purpose of recognizing gains or decreasing losses resulting from market value changes and (B) neither the Issuer nor the Collateral Advisor believes that any such acquisition will result, and no such acquisition does result, in a reduction or withdrawal of the then-current rating on any Class of Rated Notes by any Rating Agency. Unless otherwise notified by the Collateral Advisor, the Trustee will be entitled to act on the basis that no such acquisition will result in a reduction or withdrawal of the then-current rating on any Class of Rated Note by any Rating Agency. In addition, on each date of purchase of a Substitute Collateral Debt Security, each of the Coverage Tests and the Collateral Quality Tests will be required to remain satisfied after giving effect to the purchase of such Substitute Collateral Debt Security (which date of purchase shall be deemed to be the date on which the Issuer enters into commitments to purchase such Substitute Collateral Debt Security), or if immediately prior to giving effect to such purchase any of the foregoing tests was not satisfied, no such tests that were not satisfied shall be made worse after giving effect to such proposed purchase and no such Coverage Tests or Collateral Quality Tests that were satisfied shall fail to be satisfied after giving effect to such purchase. If all Collateral Principal Payments for which the Reinvestment Trigger Date has occurred are not reinvested in Substitute Collateral Debt Securities as described above for any reason within the Sixty-Day Reinvestment Window, then such Collateral Principal Payments will be required to be reinvested in Eligible Investments until the Business Day immediately preceding the next succeeding Payment Date, whereupon the Issuer will be required to transfer such amounts to the Payment Account (which amounts will at such time become fungible with all other amounts contained in the Payment Account) and distribute such amounts in accordance with Section 11.1(b). In the event of an Optional Redemption, Auction Call Redemption or Tax Redemption of the Notes in whole, but not in part, the Collateral Advisor will direct the Trustee to sell Collateral Debt Securities without regard to the foregoing limitations; provided that such sales are conducted in accordance with the Auction Procedures and Section 9.2. 12.2.

PORTFOLIO CHARACTERISTICS

Except as provided in Section 12.3(c), a security will be eligible for inclusion in the Collateral as a Pledged Collateral Debt Security only if, as evidenced by an Officer’s certificate from the Collateral Advisor to the Trustee, each of the following eligibility criteria is satisfied immediately after the Issuer Grants such Collateral Debt Security to the Trustee (collectively, the Eligibility Criteria): (a)

it is issued by an issuer incorporated or organized under the laws of the United States, the Bahamas, Bermuda, the Cayman Islands, the British Virgin Islands, the Netherlands Antilles, Jersey, Guernsey or Luxembourg or, it is issued by a Qualifying Foreign Obligor;

(b)

it is U.S. Dollar-denominated, and it is not convertible into, or payable in, any other currency; 155

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

it is one of the Specified Types of Collateral Debt Securities;

(d)

it has an S&P Rating (which rating does not include a “p”, “pi”, “q”, “t” or “r” subscript) and a Fitch Rating;

(e)

the acquisition, ownership, enforcement and disposition of such security will not cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or otherwise to be subject to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation (other than as attributable to property received in connection with a foreclosure, as permitted under the Transaction Documents);

(f)

the payments on such security are not subject to withholding tax unless the issuer thereof or the obligor thereon is required to make additional payments sufficient to cover any withholding tax imposed at any time on payments made to the Issuer with respect thereto;

(g)

its acquisition would not cause the Issuer or the pool of Collateral to be required to register as an investment company under the Investment Company Act;

(h)

it is not a security that is ineligible under its Underlying Instruments to be purchased by the Issuer and pledged to the Trustee;

(i)

it is not an insurance-linked debt instrument containing a provision pursuant to which the issuer’s obligation to pay interest or principal is deferred or forgiven in the event of loss due to certain natural catastrophes specified in the Underlying Instruments;

(j)

it provides for the payment of principal at not less than par upon maturity;

(k)

its Underlying Instruments do not obligate the Issuer to make any future advances or any other payment except the purchase price thereof;

(1)

it is not a security with respect to which, in the reasonable judgment of the Collateral Advisor, the timely repayment of principal and interest is subject to substantial non-credit related risks;

(m)

it is not an Interest Only Security;

(n)

it is not a security issued by an Emerging Market Issuer;

(o)

it is not a security that has an S&P Rating lower than “B-” or a Fitch Rating lower than “B-”at the time of purchase;

(p)

it is not a security that has, at the time of purchase, any deferred or capitalized interest;

(q)

it is not a security that, at the time it is purchased, is a Credit Risk Security, a Defaulted Security, a Written Down Security or a Deferred Interest PIK Bond;

(r)

it is not a Synthetic Security;

(s)

at the time the security is purchased by the Issuer: 156

Processed and formatted by SEC Watch - Visit SECWatch.com

(1)

it is not a security issued by an issuer located in a country that imposes foreign exchange controls that effectively limit the availability or use of U.S. Dollars to make when due the scheduled payments of principal and interest on such security;

(2)

it is not, and does not provide for conversion or exchange into, Margin Stock at any time over its life;

(3)

it is not an obligation which (1) was incurred in connection with a merger, acquisition, consolidation or sale of all or substantially all of the assets of a person or entity or similar transaction (except in the case of one REIT Debt Security acquired on or before the Closing Date for an amount not exceeding U.S.$8,000,000) and (2) by its terms is required to be repaid within one year of the incurrence thereof with proceeds from additional borrowings or other refinancing;

(4)

it is not the subject of (1) any offer by the issuer of such security or by any other person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related underlying instruments) or to convert or exchange such security into or for cash, securities or any other type of consideration or (2) any solicitation by an issuer of such security or any other person to amend, modify or waive any provision of such security or any related underlying instrument, and has not been called for redemption;

(5)

it is not an Equity Security;

(6)

it is not a security that by the terms of its underlying instruments provides for conversion or exchange (whether mandatory or at the option of the issuer or the holder thereof) into equity capital at any time prior to its maturity;

(7)

it is not a financing by a debtor-in-possession in any insolvency proceeding;

(8)

it is not a first loss tranche of any securitization that does not have an S&P Rating (as defined in clause (i) of the definition of S&P Rating) that addresses the obligation of the obligor (or guarantor, if applicable) to pay principal of and interest on the relevant Collateral Debt Security in full, which ratings are monitored on an ongoing basis by the relevant Rating Agency;

(9)

it is not a security that provides for the payment of interest in cash less frequently than semi-annually;

(10)

if it is a mezzanine loan secured by ownership interests in entities owning commercial properties (each, a Mezzanine Loan), (a) the Mezzanine Loan is subject to servicing, custodial and/or similar arrangements customary for Mezzanine Loans as determined by the Collateral Advisor in its reasonable discretion, (b) the requirements set forth in the Indenture regarding the representations and warranties with respect to the underlying mortgaged property and the Mezzanine Loan have been met and (c) the terms of the Underlying Instruments are consistent with the terms of similar Underlying Instruments with 157

Processed and formatted by SEC Watch - Visit SECWatch.com

respect to Mezzanine Loans as determined by the Collateral Advisor in its reasonable discretion; and (11)

if it is a Deemed Floating Rate Collateral Debt Security, the Deemed Floating Asset Hedge entered into with respect to such Deemed Floating Rate Collateral Debt Security conforms to all requirements set forth in the definition of “Deemed Floating Asset Hedge”;

provided that notwithstanding anything to the contrary herein, the Issuer may, while attempting to dispose of property acquired in foreclosure or similar circumstances, make an election under Section 882(d) of the Code to treat the income related to real property located in the United States as income that is effectively connected with a U.S. trade or business; provided further that except for property acquired by the Issuer in foreclosure or similar circumstances and for property expressly permitted to be acquired by the Issuer, the Issuer may not purchase, acquire or hold (whether as part of a unit with a Collateral Debt Security, in exchange for a Collateral Debt Security or otherwise) any asset unless the underlying documents for such asset specify, or the Issuer has received advice of tax counsel of nationally recognized standing in the United States experienced in such matters to the effect that, under the relevant facts and circumstances with respect to such transaction, for U.S. federal income tax purposes, (i) the obligation or security is indebtedness, (ii) all obligors and issuers of asset are classified as corporations (and no elections have been made to the contrary), (iii) no obligor on or issuer of the asset is engaged in the conduct of a trade or business within the United States, or (iv) all obligors and issuers of the asset qualify as “grantor trusts”, and all of the assets of the obligors and issuers of the asset consist of obligations or securities that the Issuer could have directly acquired and held as assets (but for restrictions related to withholding taxes) and, notwithstanding anything to the contrary herein, the Issuer shall not purchase, acquire or hold any asset the gain from the disposition of which will be subject to U.S. federal income or withholding tax under Section 897 or Section 1445 of the Code and the Treasury regulations promulgated thereunder. 12.3.

CONDITIONS APPLICABLE TO ALL TRANSACTIONS INVOLVING SALE OR GRANT (a)

Any transaction effected under Section 5, Section 9, Section 10.2 or Section 12.1 shall be conducted on an arms’ length basis and if effected with the Issuer, the Trustee, the Collateral Advisor or any Affiliate of any of the foregoing, shall be effected in a secondary market transaction on terms at least as favorable to the Rated Noteholders as would be the case if such Person were not so Affiliated; provided that any disposition of a Collateral Debt Security in accordance with Section 12.1 shall be deemed to comply with this Section 12.3(a). The Trustee shall have no responsibility to oversee compliance with this clause by the other parties.

(b)

Upon any purchase or substitution pursuant to this Section 12, all of the Issuer’s right, title and interest to the Pledged Security or Securities shall be, and hereby is, Granted to the Trustee pursuant to this Indenture, such Pledged Security or Securities shall be registered in the name of the Trustee, and, if applicable, the Trustee shall receive such Pledged Security or Securities. The Trustee shall receive, not later than the date of delivery of any Pledged Security pursuant to a purchase under this Section 12, (a) an Officer’s Certificate of the Collateral Advisor certifying (1) compliance with the Reinvestment Criteria in accordance with Section 12.1(d), (2) that the Collateral Debt Security to be sold constitutes an Equity Security, a Defaulted Security, a Credit Risk Security, a Withholding Tax Security or a Written Down Security and (3) that any security to be purchased satisfies the definition of Collateral Debt Security and (b) an 158

Processed and formatted by SEC Watch - Visit SECWatch.com

Officer’s Certificate of the Collateral Advisor on behalf of the Issuer containing the statements set forth in Section 3.2(b)(2) through (4), (6) and (7). (c)

Notwithstanding anything contained in this Section 12 to the contrary, the Issuer shall, subject to Section 12.3(d), have the right to effect any transaction to which the Initial Hedge Counterparty and Holders of Rated Notes evidencing 100% of the Aggregate Outstanding Amount of each Class of Rated Notes, and each Income Noteholder has consented, and of which each Rating Agency has been notified in advance.

(d)

Except as specifically provided in this Indenture, in no event may the Issuer (i) engage in any business or activity that would cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or (ii) acquire or hold any asset that is an equity interest in an entity that is treated as a partnership engaged in a U.S. trade or business for U.S. federal income tax purposes or the acquisition or ownership of which otherwise would subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation. The foregoing shall not, however, preclude the Issuer from holding Equity Securities or securities received in an Offer pending their sale in accordance with Section 12.1(c). ARTICLE XIII SECURED PARTIES’ RELATIONS

13.1.

SUBORDINATION

(a)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Rated Notes agree for the benefit of the Initial Hedge Counterparty that the Rated Notes and the Issuer’s rights in and to the Collateral (solely with respect to all amounts payable to such Initial Hedge Counterparty pursuant to Section 11.1(a)(3)), the Subordinate Interests) shall be subordinate and junior to the rights of such Hedge Counterparty with respect to payments to be made to such Initial Hedge Counterparty pursuant to the initial Hedge Agreement to the extent and in the manner set forth in Section 11.1(a)(3) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived all amounts payable to the Initial Hedge Counterparty pursuant to Section 11.1(a)(3) shall be paid in Cash or, to the extent the Initial Hedge Counterparty consents, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests.

(b)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class A-2 Notes, the Class B Notes, the Class C Notes and the Class D Notes agree for the benefit of the Holders of the Class A-1 Notes that the Class A-2 Notes, the Class B Notes, the Class C Notes and the Class D Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A-1 Notes, the Subordinate Interests) shall be subordinate and junior to the Class A-1 Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A-1 Notes shall be paid in full in Cash or, to the extent a Majority of the Class A-1 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and 159

Processed and formatted by SEC Watch - Visit SECWatch.com

the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A-1 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A-1 Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (c)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class C Notes and the Class D Notes agree for the benefit of the Holders of the Class A Notes and the Class B Notes that the Class C Notes and the Class D Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes and the Class B Notes the Subordinate Interests) shall be subordinate and junior to the Class A Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes and the Class B Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes and the Class B Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co- Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes and the Class B Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(d)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class C Notes and the Class D Notes agree for the benefit of the Holders of the Class A Notes and the Class B Notes that the Class C Notes and the Class D Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes and the Class B Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes and the Class B Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes and the Class B Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes and the Class B Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes and the Class B Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(e)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class C-2 Notes and the Class D Notes agree for the benefit of the 160

Processed and formatted by SEC Watch - Visit SECWatch.com

Holders of the Class A Notes, the Class B Notes and the Class C-1 Notes that the Class A Notes, the Class B Notes and the Class C1 Notes and the Issuer’s rights in and to the Collateral (with respect to the Class C-2 Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes and the Class C-1 Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes and the Class C-1 Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, the Class B Notes and the Class C-1 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes and the Class C-1 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes and the Class C-1 Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (f)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class D Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes and the Class C Notes that the Class D Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes and the Class C Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes and the Class C Notes shall be paid in full in Cash or, to the extent a Majority of each of Class A Notes, the Class B Notes and the Class C Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes and the Class C Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes and the Class C Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(g)

In the event that notwithstanding the provisions of this Indenture, any Holder of any Subordinate Interests shall have received any payment or distribution in respect of such Subordinate Interests contrary to the provisions of this Indenture, then, unless and until all amounts payable to the Initial Hedge Counterparty pursuant to Section 11.1(a)(3) or to the Class A Notes, the Class B Notes, the Class C Notes or the Class D Notes as the case may be, shall have been paid in full in Cash or, to the extent the Initial Hedge Counterparty or a Majority of the Class A Notes, the Class B Notes, the Class C Notes or the Class D Notes, as the case may be, consent, other than in Cash in accordance with this Indenture, such payment or distribution shall be received and held in trust for the benefit of, and shall forthwith be paid over and delivered to, the Trustee, which shall pay and 161

Processed and formatted by SEC Watch - Visit SECWatch.com

deliver the same to such Initial Hedge Counterparty or the Holders of the Class A Notes, the Class B Notes, the Class C Notes or the Class D Notes, as the case may be, in accordance with this Indenture; provided that, if any such payment or distribution is made other than in Cash, it shall be held by the Trustee as part of the Collateral and subject in all respects to the provisions of this Indenture, including this Section 13.1. (h)

13.2.

Each Holder of Subordinate Interests agrees with the Initial Hedge Counterparty and all Holders of the Class A Notes, the Class B Notes, the Class C Notes or the Class D Notes, as the case may be, that such Holder of Subordinate Interests shall not demand, accept, or receive any payment or distribution in respect of such Subordinate Interests in violation of the provisions of this Indenture including this Section 13.1; provided that after all amounts payable pursuant to Section 11.1(a)(3) and all amounts payable in respect of the Class A Notes, the Class B Notes, the Class C Notes or the Class D Notes, as the case may be, have been paid in full, the Holders of Subordinate Interests shall be fully subrogated to the rights of the Initial Hedge Counterparty or the Holders of the Class A Notes, the Class B Notes, the Class C Notes or the Class D Notes, as the case may be. Nothing in this Section 13.1 shall affect the obligation of the Issuer to pay Holders of Subordinate Interests. STANDARD OF CONDUCT

In exercising any of its or their voting rights, rights to direct and consent or any other rights as a Secured Party under this Indenture, subject to the terms and conditions of this Indenture, including Section 5.9, a Secured Party or Secured Parties shall not have any obligation or duty to any Person or to consider or take into account the interests of any Person and shall not be liable to any Person for any action taken by it or them or at its or their direction or any failure by it or them to act or to direct that an action be taken, without regard to whether such action or inaction benefits or adversely affects any Secured Party, the Issuer, or any other Person. ARTICLE XIV MISCELLANEOUS 14.1.

FORM OF DOCUMENTS DELIVERED TO TRUSTEE

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Advisor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Authorized Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Advisor or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer, the Co-Issuer, the Collateral Advisor or any other Person, stating that the information with respect to such factual matters is in the possession of the Issuer, the Co-Issuer, the Collateral Advisor or such other 162

Processed and formatted by SEC Watch - Visit SECWatch.com

Person, unless such Authorized Officer of the Issuer, the Co-Issuer or the Collateral Advisor or such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Any Opinion of Counsel may also be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Advisor, stating that the information with respect to such matters is in the possession of the Issuer, the Co-Issuer or the Collateral Advisor, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture it is provided that the absence of the occurrence and continuation of a Default is a condition precedent to the taking of any action by the Trustee at the request or direction of the Issuer or the Co-Issuer, then notwithstanding that the satisfaction of such condition is a condition precedent to the Co-Issuers’ rights to make such request or direction, the Trustee shall be protected in acting in accordance with such request or direction if it does not have actual knowledge of the occurrence and continuation of such Default as provided in Section 6.1(d). 14.2.

ACTS OF RATED NOTEHOLDERS (a)

Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Rated Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Rated Noteholders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action or actions embodied therein and evidenced thereby) are herein sometimes referred to as the Act of the Rated Noteholders, signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Co-Issuers, if made in the manner provided in this Section 14.2.

(b)

The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Trustee deems sufficient.

(c)

The principal amount and registered numbers of Rated Notes held by any Person, and the date of his holding the same, shall be proved by the Note Register.

(d)

Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Rated Notes shall bind the Holder (and any transferee thereof) of such Rated Note and of every Rated Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Co-Issuers in reliance thereon, whether or not notation of such action is made upon such Rated Note. 163

14.3.

NOTICES, ETC., TO TRUSTEE, THE CO-ISSUERS AND THE RATING AGENCIES

Any request, demand, authorization, direction, notice, consent, waiver or Act of Rated Noteholders or other documents provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a)

the Trustee or the Income Note Paying Agent by any Rated Noteholder or by the Issuer or the Co-Issuer shall be sufficient for every purpose hereunder if in writing and sent by facsimile in legible form and confirmed by overnight courier service guaranteed next day delivery to the Trustee or the Income Note Paying Agent addressed to it at 9062 Old Annapolis Road, Columbia, Maryland 21045, Attn: CDO Trust Services—N-Star III, telephone number 410-884-2000, fax number 410-715-3748 or at any other address previously furnished in writing to the Co-Issuers or Rated Noteholder by the Trustee or Income Note Paying Agent;

(b)

the Issuer by the Trustee or by any Rated Noteholder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, to the Issuer addressed to it at c/o Walkers SPV Limited, P.O. Box 908 GT, Walker House, Mary Street, George Town, Grand Cayman, Cayman Islands, Attention: The Directors, or at any other address previously furnished in writing to the Trustee by the Issuer;

(c)

the Co-Issuer by the Trustee or by any Rated Noteholder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, to the Co-Issuer addressed to it at c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19711, Attention: Donald Puglisi, Esq., facsimile no. 302-738-7210, or at any other address previously furnished in writing to the Trustee by the Co-Issuer;

Processed and formatted by SEC Watch - Visit SECWatch.com

(d)

the Rating Agencies by the Co-Issuers or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, (i) in the case of Fitch, addressed to Fitch Ratings, One State Street Plaza, New York, New York 10041, facsimile no. 212-558-2618, Attention: CDO Surveillance (e-mail: [email protected]); and (ii) in the case of S&P, addressed to S&P, 55 Water Street, 41st Floor, New York, New York, 10041, Attention: CDO Surveillance and all Note Valuation Reports shall be sent to S&P electronically at [email protected]; or

(e)

the Initial Hedge Counterparty by the Co-Issuers or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, hand delivered or sent by overnight courier service or by facsimile in legible form to the Initial Hedge Counterparty addressed to it at the address specified in the initial Hedge Agreement or at any other address previously furnished in writing to the Issuer or the Trustee by the Initial Hedge Counterparty;

(f)

the Collateral Advisor by the Co-Issuers or by the Trustee or a Majority of the Controlling Class, or by the Collateral Administrator shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and sent by facsimile 164

Processed and formatted by SEC Watch - Visit SECWatch.com

in legible form and confirmed by overnight courier service guaranteed next day delivery, or by electronic mail (where expressly provided herein) to the Collateral Advisor addressed to it at the address specified in the Collateral Advisory Agreement or at any other address previously furnished in writing to the Co-Issuers or the Trustee by the Collateral Advisor; (g)

the Income Note Paying Agent by the Trustee in writing sent by facsimile confirmed by overnight courier guaranteed next day delivery;

(h)

Citigroup by the Co-Issuers, the Collateral Advisor or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by telecopy in legible form, to Citigroup addressed to Citigroup Global Markets, Inc., 390 Greenwich Street, 4th Floor, New York, NY 10013, telecopy no. 212-723-8671, Attention: Global Structured Products; and

(i)

to the Repository by the Issuer pursuant to this Indenture shall be made available to the Repository by electronic mail as a pdf (portable document format) file to CDO Library, c/o The Bond Market Association, 360 Madison Avenue (18th Floor), New York, NY 10017; Electronic mail address: [email protected].

Delivery of any request, demand, authorization, direction, notice, consent, waiver or Act of Rated Noteholders or other documents made as provided above will be deemed effective: (i) if in writing and delivered in person or by overnight courier service, on the date it is delivered; (ii) if sent by facsimile transmission, on the date that transmission is received by the recipient in legible form (as evidenced by the sender’s written record of a telephone call to the recipient in which the recipient acknowledged receipt of such facsimile transmission); and (iii) if sent by mail, on the date that mail is delivered or its delivery is attempted; in each case, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Business Day. 14.4.

NOTICES AND REPORTS TO RATED NOTEHOLDERS; WAIVER

Except as otherwise expressly provided herein, where this Indenture provides for a report to Holders or for a notice to Holders of Rated Notes of any event, such notice shall be sufficiently given to Holders of Rated Notes if in writing and mailed, first-class postage prepaid, to each Holder of a Rated Note affected by such event, at the address of such Holder as it appears in the Note Register, not earlier than the earliest date and not later than the latest date, prescribed for the giving of such report or notice and such report or notice shall be in the English language. Notwithstanding any provision to the contrary contained herein or in any agreement or document related hereto, any report, statement or other information to be provided by the Trustee may be provided by providing access to the Trustee’s website containing such information. Such reports and notices will be deemed to have been given on the date of such mailing. The Trustee will deliver to the Holder of any Rated Note shown on the Note Register any readily available information or notice requested to be so delivered, at the expense of the Issuer. In addition, for so long as any Class of Rated Notes is listed on the Irish Stock Exchange and so long as the rules of such exchange so require, notices to the Holders of such Rated Notes shall also be given by the Trustee to the Irish Paying Agent for delivery to the Company Announcements Office of the Irish Stock Exchange. 165

Processed and formatted by SEC Watch - Visit SECWatch.com

Neither the failure to mail any notice, nor any defect in any notice so mailed, to any particular Holder of a Rated Note shall affect the sufficiency of such notice with respect to other Holders of Rated Notes. Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Rated Noteholders shall be filed with the Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In the event that, by reason of the suspension of the regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Rated Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. 14.5.

EFFECT OF HEADINGS AND TABLE OF CONTENTS The Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

14.6.

SUCCESSORS AND ASSIGNS

All covenants and agreements in this Indenture by the Co-Issuers shall bind their respective successors and assigns, whether so expressed or not. Written notice of any assignment shall be promptly provided by the Issuer to the Initial Hedge Counterparty, the Holders of Notes of the Controlling Class and each Rating Agency. 14.7.

SEVERABILITY

In case any provision in this Indenture or in the Rated Notes shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 14.8.

BENEFITS OF INDENTURE

The Rated Noteholders, the Initial Hedge Counterparty and each Income Noteholder is an express third-party beneficiary of this Indenture. Nothing in this Indenture or in the Rated Notes, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the Rated Noteholders, the Initial Hedge Counterparty and each Income Noteholder, any benefit or any legal or equitable right, remedy or claim under this Indenture. 14.9.

GOVERNING LAW This Indenture and each Rated Note shall be governed by, and construed in accordance with, the law of the State of New York.

14.10.

SUBMISSION TO JURISDICTION

The Co-Issuers hereby irrevocably submit to the non-exclusive jurisdiction of the Supreme Court of the State of New York sitting in Manhattan and the U.S. District Court for the Southern District of 166

Processed and formatted by SEC Watch - Visit SECWatch.com

New York, and any court of appeal therefrom, in any action or proceeding arising out of or relating to the Rated Notes or this Indenture, and the Co-Issuers hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in such New York State or federal court. The Co-Issuers hereby irrevocably waive, to the fullest extent that they may legally do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The Co-Issuers hereby irrevocably appoint and designate CT Corporation, 111 Eighth Avenue, 13th Floor, New York, New York 10011, or any other Person having and maintaining a place of business in the State of New York whom the Co-Issuers may from time to time hereafter designate as the true and lawful attorney and duly authorized agent for acceptance of service of legal process of the Co-Issuers. The Co-Issuers agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 14.11.

COUNTERPARTS

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 14.12.

WAIVER OF JURY TRIAL

EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING. Each party hereby (i) certifies that no representative, agent or attorney of the other has represented, expressly or otherwise, that the other would not, in the event of a Proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it has been induced to enter into this Indenture by, among other things, the mutual waivers and certifications in this paragraph. 14.13.

JUDGMENT CURRENCY

This is an international financing transaction in which the specification of Dollars (the Specified Currency), and the specification of the place of payment, as the case may be (the Specified Place), is of the essence, and the Specified Currency shall be the currency of account in all events relating to payments of or on the Rated Notes. The payment obligations of the Co-Issuers under this Indenture and the Rated Notes shall not be discharged by an amount paid in another currency or in another place, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on conversion to the Specified Currency and transfer to the Specified Place under normal banking procedures does not yield the amount of the Specified Currency at the Specified Place. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder or the Rated Notes in the Specified Currency into another currency (the Second Currency), the rate of exchange which shall be applied shall be that at which in accordance with normal banking procedures the Trustee could purchase the Specified Currency with the Second Currency on the Business Day next preceding that on which such judgment is rendered. The obligation of the Co-Issuers in respect of any such sum due from the Co-Issuers hereunder shall, notwithstanding the rate of exchange actually applied in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by the Trustee of any sum adjudged to be due hereunder or under the Rated Notes in the Second Currency the Trustee may in accordance with normal banking procedures purchase and transfer to the Specified Place the Specified Currency with the amount of the Second Currency so adjudged to be due; and the Co-Issuers hereby, as a separate obligation and notwithstanding any such judgment (but subject to the Priority of Payments as if such separate obligation in respect of each Class of Rated Notes constituted additional principal owing in respect of such Class of Rated Notes), agree to indemnify the Trustee and each Rated Noteholder against, and to pay the Trustee or such Rated Noteholder, as the case may be, on demand in the Specified Currency, any difference 167

Processed and formatted by SEC Watch - Visit SECWatch.com

between the sum originally due to the Trustee or such Rated Noteholder, as the case may be, in the Specified Currency and the amount of the Specified Currency so purchased and transferred. 14.14.

CONFIDENTIAL TREATMENT OF DOCUMENTS

Except as otherwise provided in this Indenture or as required by law or as required to maintain the listing of the Class A Notes, Class B Notes, the Class C Notes and the Class D Notes on the Irish Stock Exchange, this Indenture and the Hedge Agreement shall be treated by the Trustee and the Collateral Advisor as confidential. The Trustee shall provide a copy of this Indenture to the Income Note Paying Agent and to any Holder of a beneficial interest in any Rated Note upon written request therefor certifying that it is such a Holder. ARTICLE XV ASSIGNMENT OF AGREEMENTS, ETC. 15.1.

ASSIGNMENT

The Issuer, in furtherance of the covenants of this Indenture and as security for the Rated Notes and amounts payable to the Rated Noteholders hereunder and the performance and observance of the provisions hereof, hereby assigns, transfers, conveys and sets over to the Trustee, for the benefit of the Secured Parties, all of the Issuer’s estate, right, title and interest in, to and under the Corporate Services Agreement, the Collateral Advisory Agreement and the Hedge Agreement, including (i) the right to give all notices, consents and releases thereunder, (ii) the right to give all notices of termination, including the commencement, conduct and consummation of proceedings at law or in equity, (iii) the right to receive all notices, accountings, consents, releases and statements thereunder and (iv) the right to do any and all other things whatsoever that the Issuer is or may be entitled to do thereunder; provided that nothing herein shall obligate the Trustee to determine independently whether “cause” exists for the removal of the Collateral Advisor pursuant to the Collateral Advisory Agreement. For the avoidance of doubt, in no event shall the Trustee be required to perform the obligations of the Collateral Advisor under the Collateral Advisory Agreement. 15.2.

NO IMPAIRMENT

The assignment made hereby is executed as collateral security, and the execution and delivery hereby shall not in any way impair or diminish the obligations of the Issuer under the provisions of the Corporate Services Agreement, the Collateral Advisory Agreement or the Hedge Agreement. 15.3.

TERMINATION, ETC.

Upon the redemption and cancellation of the Rated Notes and the payment of all other Secured Obligations and the release of the Collateral from the lien of this Indenture, this assignment and all rights herein assigned to the Trustee for the benefit of the Secured Parties shall cease and terminate and all the estate, right, title and interest of the Trustee in, to and under the Corporate Services Agreement, the Collateral Advisory Agreement and the Hedge Agreement shall revert to the Issuer and no further instrument or act shall be necessary to evidence such termination and reversion. 15.4.

ISSUER AGREEMENTS, ETC

The Issuer represents that it has not executed any other assignment of the Collateral Administration Agreement, the Collateral Advisory Agreement or any Hedge Agreement. The Issuer 168

Processed and formatted by SEC Watch - Visit SECWatch.com

agrees that this assignment is irrevocable, and that it will not take any action which is inconsistent with this assignment or make any other assignment inconsistent herewith. The Issuer will, from time to time upon the request of the Trustee, execute all instruments of further assurance and all such supplemental instruments with respect to this assignment as the Trustee may reasonably specify. ARTICLE XVI HEDGE AGREEMENT 16.1.

HEDGE AGREEMENT On the Closing Date (or any date on which the Issuer enters into a replacement Hedge Agreement), (i) the Hedge Counterparty entering into such Hedge Agreement shall satisfy the Hedge Counterparty Ratings Requirement and (ii) the Issuer shall assign such Hedge Agreement to the Trustee pursuant to this Indenture and the Collateral Assignment of Hedge Agreement. (a)

The Trustee shall, on behalf of the Issuer and in accordance with the Note Valuation Report, pay amounts due to the Hedge Counterparty under the Hedge Agreement on any Payment Date in accordance with Section 11.1.

(b)

If a Collateralization Event occurs, the Hedge Counterparty shall within 30 days of the occurrence of such Collateralization Event either (i) enter into a Credit Support Annex and post collateral of such types, in such amounts and at such times as are sufficient to maintain the then-current rating of each Class of Rated Notes by each Rating Agency, (ii) find a replacement Hedge Counterparty as permitted under the Hedge Agreement that satisfies the Hedge Counterparty Ratings Requirement, (iii) obtain a guarantor with such form of guarantee meeting S&P’s then-current published criteria with respect to guarantees for the obligations of the Hedge Counterparty under the Hedge Agreement with a long-term issuer credit rating from S&P of at least “A+” or a short term issuer credit rating from S&P of at least “A-1” and with a long-term unsecured debt rating from Fitch of at least “A” and a short-term unsecured debt rating from Fitch, if rated by Fitch, of at least “F1 “ or (iv) take such other steps as each Rating Agency that has downgraded the Hedge Counterparty may require (as confirmed to the Collateral Advisor in writing) to ensure that the then-current ratings on the Rated Notes by either Rating Agency are not reduced or withdrawn. If the Hedge Counterparty has not, within 30 days of the occurrence of such Collateralization Event, taken any of the actions required above, a Substitution Event will be deemed to have occurred and any action is taken at its own expense.

(c)

If at any time a Substitution Event has occurred and is continuing, then the Hedge Counterparty will, (x) in the case of a Substitution Event referred to in sub-clause (b) of the definition thereof, within thirty (30) days following such Substitution Event or (y) in the case of a Substitution Event referred to in sub-clause (a) and (c) of the definition thereof, within ten (10) Business Days following such Substitution Event, assign its rights and obligations under the Hedge Agreement, at no cost to the Issuer, to a party (the Substitute Party) selected by the Hedge Counterparty that (i) satisfies the Hedge Counterparty Ratings Requirement, (ii) with respect to which a Rating Agency Confirmation has been obtained and (iii) that assumes all of the Hedge Counterparty’s obligations under the Hedge Agreement pursuant to an agreement satisfactory to the Issuer. If the Hedge Counterparty fails to assign its rights and obligations under the Hedge Agreement to a Substitute Party within 30 days following such Substitution Event 169

Processed and formatted by SEC Watch - Visit SECWatch.com

(in the case of a Substitution Event referred to in sub-clauses (b) of the definition thereof) or within ten (10) Business Days following such Substitution Event (in the case of a Substitution Event referred to in sub-clauses (a) and (c) of the definition thereof), then (x) the Hedge Counterparty shall, while it continues in good faith to search for an eligible Substitute Party, post and maintain, or continue to maintain, as the case may be, collateral in accordance with a Credit Support Annex of such types, in such amounts and at such times as are sufficient to maintain the then-current rating of each Class of Rated Notes by each Rating Agency, and (y) the Issuer shall have the right to terminate the Hedge Agreement with all costs of such termination to be paid by the Hedge Counterparty. (d)

The Issuer may, after the Closing Date, enter into additional Hedge Agreements (including one or more Deemed Floating Asset Hedges) with additional Hedge Counterparties as the Issuer may elect in its sole discretion, in each case (i) subject to Rating Agency Confirmation, (ii) in the event a proposed additional Hedge Agreement has an initial notional amount which exceeds U.S.$25,000,000, with the prior consent of Bank of America, N.A. (so long as it continues to act as the Initial Hedge Counterparty), and (iii) in the case of additional Hedge Counterparties, with the delivery to the Issuer of an Opinion of Counsel to the additional Hedge Counterparty; provided that the Issuer will not be required to obtain Rating Agency Confirmation in connection with entering into any Deemed Floating Asset Hedges which are Form-Approved Hedge Agreements with a Hedge Counterparty that satisfies the Hedge Counterparty Ratings Requirement.

(e)

The Trustee shall, prior to the Closing Date in respect of the initial Hedge Agreement, cause the Custodian to establish a segregated, non-interest bearing Securities Account which shall be designated as a “Hedge Counterparty Collateral Account” with respect to the Hedge Counterparty in respect of which the Trustee shall be the Entitlement Holder and which the Trustee shall hold in trust for the benefit of the Secured Parties. The Trustee shall deposit all collateral received from such Hedge Counterparty under the Hedge Agreement in such Hedge Counterparty Collateral Account. Any and all funds at any time on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be held in trust by the Trustee for the benefit of the Secured Parties. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be (i) for application to obligations of the Hedge Counterparty to the Issuer under the Hedge Agreement that are not paid when due (whether when scheduled or upon early termination) or (ii) to return collateral to the Hedge Counterparty when and as required by the Hedge Agreement in each case upon the direction of the Issuer pursuant to an Issuer Order. No assets credited to any Hedge Counterparty Collateral Account shall be considered an asset of the Issuer for purposes of any of the Coverage Tests unless and until the Issuer or the Trustee on its behalf is entitled to foreclose on such assets in accordance with the terms of the Hedge Agreement.

(f)

Upon its receipt of notice that the Hedge Counterparty has defaulted in the payment when due of its obligations to the Issuer under any Hedge Agreement (or, if earlier, when the Trustee becomes aware of such default) the Trustee shall make a demand on such Hedge Counterparty, or any guarantor, if applicable, demanding payment forthwith. The Trustee shall give notice to the Rated Noteholders and each Rating Agency upon the continuance of the failure by such Hedge Counterparty to perform its obligations for two Business Days following a demand made by the Trustee on such Hedge Counterparty. 170

Processed and formatted by SEC Watch - Visit SECWatch.com

(g)

If at any time the Hedge Agreement becomes subject to early termination due to the occurrence of an “event of default” or a “termination event” (each as defined in the Hedge Agreement) solely attributable to the Hedge Counterparty or other comparable event, the Issuer and the Trustee shall take such actions (following the expiration of any applicable grace period) to enforce the rights of the Issuer and the Trustee thereunder and under the Collateral Assignment of Hedge Agreement as may be permitted by the terms of such Hedge Agreement and consistent with the terms hereof, and shall apply any proceeds of any such actions (including the proceeds of the liquidation of any collateral pledged by the Hedge Counterparty) to enter into a replacement Hedge Agreement on substantially identical terms or on such other terms as to which each Rating Agency shall have provided a Rating Agency Confirmation with a Substitute Party with respect to which the Hedge Counterparty Ratings Requirement is satisfied and each Rating Agency shall have provided a Rating Agency Confirmation. If the Issuer is the sole non-Affected Party or the sole non-Defaulting Party with respect to such “event of default” or “termination event”, the Issuer will (with the assistance of the Collateral Advisor) obtain quotations with respect to such replacement Hedge Agreement from five prospective counterparties Independent from the Issuer, the Collateral Advisor and each other that satisfy the Hedge Counterparty Ratings Requirement and with respect to which a Rating Agency Confirmation shall have been obtained and enter into a replacement Hedge Agreement with the prospective counterparty that provides the lowest quotation (if the Issuer is required to make a payment to such replacement counterparty) or the highest quotation (if such replacement counterparty is required to make a payment to the Issuer).

(h)

The Issuer shall notify each Rating Agency if at any time the Hedge Counterparty is required to post collateral or assign its rights and obligations in and under the Hedge Agreement.

(i)

The Hedge Agreement may not be amended or modified at any time other than to effect the appointment of a substitute Hedge Counterparty or to effect a modification which is of a formal, minor or technical nature or is to correct a manifest error and which, in the opinion of the Trustee (based upon an Opinion of Counsel) would not have a material adverse effect on the interests of Holders of the Rated Notes or of Holders of any Class or Classes of Rated Notes or the Holders of the Income Notes; provided that the Issuer has obtained Rating Agency Confirmation with respect to any such modification. The Trustee shall provide the Collateral Advisor and the Rating Agencies with a copy of any such modification within 10 Business Days before effecting such modification.

(j)

The Issuer shall enter into a Hedge Agreement only if the payments from the Hedge Counterparty thereunder are not subject to withholding tax or if the Hedge Counterparty shall be required in accordance with the terms of the Hedge Agreement to pay additional amounts to the Issuer sufficient to cover any withholding tax due on payments made by the Hedge Counterparty to the Issuer under such Hedge Agreement, subject to the Issuer making customary payee tax representations and providing customary tax documentation. The Issuer shall not enter into any Hedge Agreement the acquisition (including the manner of acquisition), ownership, enforcement or disposition of which would subject the Issuer to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation.

(k)

The Issuer will not terminate or amend any Hedge Agreement without receiving Rating Agency Confirmation with respect to such termination or amendment. 171

Processed and formatted by SEC Watch - Visit SECWatch.com

IN WITNESS WHEREOF, we have set our hands as of the date first above written.

Executed as a Deed by N-STAR REAL ESTATE CDO III LTD., as Issuer

By: Name: Title:

/s/ Derrie Boggess Derrie Boggess Director

N-STAR REAL ESTATE CDO III CORP., as Co-Issuer

By:

/s/ Donald J. Puglisi Name: Donald J. Puglisi Title: President

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee

By:

Randall S. Reids Name: Randall S. Reids Title: Vice President

Exhibit 10.11 Dated as of June 14, 2005

N-STAR REL CDO IV LTD., as Issuer N-STAR REL CDO IV CORP., as Co-Issuer NS ADVISORS, LLC. As Advancing Agent and WELLS FARGO BANK, NATIONAL ASSOCIATION as Trustee

INDENTURE

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS S e ction

Page

PRELIMINARY STATEMENT

1

GRANTING CLAUSES

1

ARTICLE I Definitions and Interpretation 1.1. Definitions 1.2. Assumptions as to Collateral Interests, Fees, Etc. 1.3. Rules of Construction

3 3 46 48

ARTICLE II The Indenture Issued Notes 2.1. Forms Generally 2.2. Authorized Amount; Applicable Periodic Interest Rate; Stated Maturity Date; Denominations 2.3. Execution, Authentication, Delivery and Dating 2.4. Registration, Transfer and Exchange of Indenture Issued Notes 2.5. Mutilated, Defaced, Destroyed, Lost or Stolen Indenture Issued Notes 2.6. Payment of Principal and Interest; Rights Preserved

48 48 49 50 51 60 61

ARTICLE III Conditions Precedent 3.1. General Provisions 3.2. Security for the Indenture Issued Notes 3.3. Custodianship; Transfer of Collateral Interests and Eligible Investments

66 66 68 70

ARTICLE IV Satisfaction and Discharge 4.1. Satisfaction and Discharge of Indenture 4.2. Application of Trust Money 4.3. Repayment of Funds Held by Note Paying Agent

73 73 74 74

ARTICLE V Events of Default; Remedies 5.1. Events of Default 5.2. Acceleration of Maturity; Rescission and Annulment 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee 5.4. Remedies 5.5. Preservation of Collateral 5.6. Trustee May Enforce Claims Without Possession 5.7. Application of Funds Collected 5.8. Limitation on Suits 5.9. Unconditional Rights of Rated Noteholders to Receive Principal and Interest 5.10. Restoration of Rights and Remedies 5.11. Rights and Remedies Cumulative 5.12. Delay or Omission Not Waiver 5.13. Control by Controlling Class 5.14. Waiver of Past Defaults 5.15. Undertaking for Costs 5.16. Waiver of Stay or Extension Laws 5.17. Sale of Collateral 5.18. Action on the Rated Notes

74 74 76 77 79 81 83 83 83 84 84 84 84 84 85 85 86 86 87

i

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

ARTICLE VI The Trustee 6.1. Certain Duties and Responsibilities 6.2. Notice of Default 6.3. Certain Rights of Trustee 6.4. Authenticating Agents 6.5. Not Responsible for Recitals or Issuance of Rated Notes 6.6. May Hold Rated Notes 6.7. Funds Held in Trust 6.8. Compensation and Reimbursement 6.9. Corporate Trustee Required; Eligibility 6.10. Resignation and Removal; Appointment of Successor 6.11. Acceptance of Appointment by Successor 6.12. Merger, Conversion, Consolidation or Succession to Business of Trustee 6.13. Co-Trustees 6.14. Certain Duties Related to Delayed Payment of Proceeds; Other Notices 6.15. Representations and Warranties of the Bank 6.16. Exchange Offers, Proposed Amendments etc. 6.17. Fiduciary for Rated Noteholders Only; Agent For Other Secured Parties 6.18. Withholding

87 87 89 89 91 91 92 92 92 93 94 95 95 96 97 97 98 98 98

ARTICLE VII Covenants 7.1. Payment of Principal and Interest 7.2. Maintenance of Office or Agency 7.3. Funds for Rated Note Payments to be Held in Trust 7.4. Existence of Co-Issuers 7.5. Protection of Collateral 7.6. Opinions as to Collateral 7.7. Performance of Obligations 7.8. Negative Covenants 7.9. Statement as to Compliance 7.10. Co-Issuers May Consolidate, Etc., Only on Certain Terms 7.11. Successor Substituted 7.12. No Other Business 7.13. Change or Withdrawal of Rating 7.14. Reporting 7.15. Rated Note Calculation Agent 7.16. Listing 7.17. Amendment of Certain Documents 7.18. Purchase of Collateral; Information Regarding Collateral; Rating Confirmation

99 99 99 100 102 102 104 104 105 106 107 110 110 110 111 111 112 112 112

ARTICLE VIII Supplemental Indentures 8.1. Supplemental Indentures Without Consent of Rated Noteholders 8.2. Supplemental Indentures with Consent of Rated Noteholders 8.3. Execution of Supplemental Indentures 8.4. Effect of Supplemental Indentures 8.5. Reference in Indenture Issued Notes to Supplemental Indentures

113 113 116 118 118 119

ii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

ARTICLE IX Redemption of Rated Notes 9.1. Redemption of Rated Notes 9.2. Redemption Procedures; Auction 9.3. Record Date; Notice to Trustee of Redemption 9.4. Notice of Redemption 9.5. Notice of Withdrawal 9.6. Rated Notes Payable on Redemption Date 9.7. Special Amortization

119 119 119 121 121 122 122 123

ARTICLE X Accounts, Accountings and Releases 10.1. Collection of Funds 10.2. General Provisions Applicable to Accounts 10.3. Collateral Account 10.4. Uninvested Proceeds Account 10.5. Collection Account 10.6. Expense Reserve Account 10.7. Interest Reserve Account 10.8. Earn-Out Asset Account 10.9. Payment Account 10.10. Reports by Trustee 10.11. Accountings 10.12. Release of Securities 10.13. Reports by Independent Accountants 10.14. Reports to Rating Agencies 10.15. Tax Matters 10.16. Tax Information 10.17. Interest Advances

123 123 124 125 125 125 126 127 127 127 128 129 133 134 135 135 136 136

ARTICLE XI Application of Monies 11.1. Disbursements of Funds from Payment Account; Priority of Payments

139 139

ARTICLE XII Purchase and Sale of Collateral Interests 12.1. Sale of Collateral Interests 12.2. Portfolio Characteristics 12.3. Conditions Applicable to all Transactions Involving Sale or Grant

151 151 152 156

ARTICLE XIII Secured Parties’ Relations 13.1. Subordination 13.2. Standard of Conduct

157 157 159

ARTICLE XIV Miscellaneous 14.1. Form of Documents Delivered to Trustee 14.2. Acts of Rated Noteholders 14.3. Notices, Etc., to Trustee, the Co-Issuers and the Rating Agencies 14.4. Notices and Reports to Rated Noteholders; Waiver 14.5. Effect of Headings and Table of Contents 14.6. Successors and Assigns 14.7. Severability 14.8. Benefits of Indenture

160 160 160 161 163 163 163 164 164

iii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

14.9. 14.10. 14.11. 14.12. 14.13. 14.14.

164 164 164 164 165 165

Governing Law Submission to Jurisdiction Counterparts Waiver of Jury Trial Judgment Currency Confidential Treatment of Documents

ARTICLE XV Assignment of Agreements, Etc. 15.1. Assignment 15.2. No Impairment 15.3. Termination, Etc. 15.4. Issuer Agreements, Etc

165 165 166 166 166

ARTICLE XVI Hedge Agreements 16.1. Hedge Agreement

166 166

Schedules Schedule A Schedule B Schedule C Schedule D Schedule E Schedule F Schedule G Schedule H Schedule I Schedule J-1 Schedule J-2

Schedule of Collateral Interests as of the Closing Date LIBOR Formula Moody’s Recovery Rate Matrix S&P’s Recovery Rate Matrix Auction Procedures S&P’s Notching Criteria S&P’s Types of Asset-Backed Securities ineligible for Notching S&P’s Industry Classification Groups S&P’s Shadow Rating Grid Form of S&P’s Representations, Warranties and Covenants for Commercial Mortgage Loans, Subordinate Mortgage Loan Interests And Mezzanine Loans Form of S&P’s Representations, Warranties and Covenants for Credit Lease Loans and Tenant Lease Loan Interests

Exhibits Exhibit A-1 Exhibit A-2 Exhibit B Exhibit C-1 Exhibit C-2 Exhibit C-3 Exhibit C-4 Exhibit D Exhibit E-1 Exhibit E-2 Exhibit F Exhibit G Exhibit H

Form of Regulation S Global Note Form of Rule 144A Global Note Form of Certificated Note Form of Rule 144A Transfer Certificate Form of Regulation S Transfer Certificate Form of Certificated Note Transfer Certificate Form of ERISA Restriction Certificate Form of Funding Certificate Form of Opinion of Thacher Proffitt & Wood LLP Form of Opinion of Walkers Form of Opinion of Kennedy Covington Lobdell & Hickman, L.L.P. Form of Opinion of Thacher Proffitt & Wood LLP Rated Noteholder’s Certificate iv

Processed and formatted by SEC Watch - Visit SECWatch.com

THIS INDENTURE dated as of June 14, 2005 among: N-STAR REL CDO IV LTD., an exempted company incorporated and existing under the law of the Cayman Islands; N-STAR REL CDO IV CORP., a corporation organized and existing under the law of the State of Delaware; NS ADVISORS, LLC a limited liability company organized and existing under the law of the State of Delaware; and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, organized under the law of the United States, as trustee. PRELIMINARY STATEMENT The Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) and the Issuer (in the case of the Class F Notes) are duly authorized to execute and deliver this Indenture to provide for the issuance of the Indenture Issued Notes as provided in this Indenture. All covenants and agreements made by the Co-Issuers herein are for the benefit and security of the Secured Parties. The Co-Issuers are entering into this Indenture, and the Trustee is accepting the trusts created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. All things necessary to make this Indenture a valid agreement of the Co-Issuers in accordance with its terms have been done. GRANTING CLAUSES The Issuer hereby Grants to the Trustee, for the benefit and security of the Secured Parties, all of its right, title and interest in, to and under, in each case, whether now owned or existing, or hereafter acquired or arising, the following property (other than the Excepted Property) (a) the Collateral Interests listed on Schedule A, the Collateral Interests acquired after the Closing Date and any Equity Interests which, in each case, are delivered to the Trustee (directly or through a Securities Intermediary) after the Closing Date pursuant to the terms hereof and all payments thereon or with respect thereto, (b) the Collection Account (including each Sub-Account established therein), the Interest Reserve Account, the Payment Account, the Expense Reserve Account, the Collateral Account, the Uninvested Proceeds Account, the Earn-Out Asset Account, all amounts credited to such accounts, and Eligible Investments purchased with funds credited to such accounts and all income from the investment of funds therein, (c) the rights of the Issuer under each of the Transaction Documents to which the Issuer is a party and all payments to the Issuer thereunder or with respect thereto, (d) all Cash or other property delivered to the Trustee (directly or through a Securities Intermediary) and (e) all proceeds, whether voluntary or involuntary, of and to any of the property of the Issuer described in the preceding clauses (collectively, the Collateral). Such Grants are made to the Trustee to hold in trust, to secure the Indenture Issued Notes equally and ratably without prejudice, priority or distinction between any such Indenture Issued Note and any other such Indenture Issued Note by reason of difference in time of issuance or otherwise, except as expressly provided in this Indenture, and to secure (i) the payment of all amounts due on the Indenture Issued Notes and under any Hedge Agreement and the Collateral Management Agreement in accordance with their respective terms, (ii) the payment of all other sums payable under this Indenture and (iii) compliance with the provisions of this Indenture, any Hedge Agreement and the Collateral Management Agreement, all as provided in this Indenture (collectively, the Secured Obligations).

Processed and formatted by SEC Watch - Visit SECWatch.com

Except to the extent otherwise provided in this Indenture, the Issuer does hereby constitute and irrevocably appoint the Trustee the true and lawful attorney of the Issuer, with full power (in the name of the Issuer or otherwise), to exercise all rights of the Issuer with respect to the Collateral held for the benefit and security of the Secured Parties and to ask, require, demand, receive, settle, compromise, compound and give acquittance for any and all moneys and claims for moneys due and to become due under or arising out of any of the Collateral held for the benefit and security of the Secured Parties, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Trustee may deem to be necessary or advisable in the premises. The power of attorney granted pursuant to this Indenture and all authority hereby conferred are granted and conferred solely to protect the Trustee’s interest in the Collateral held for the benefit and security of the Secured Parties and shall not impose any duty upon the Trustee to exercise any power. This power of attorney shall be irrevocable as one coupled with an interest prior to the payment in full of all the obligations secured hereby. Except to the extent otherwise provided in this Indenture, this Indenture shall constitute a security agreement under the law of the State of New York. Upon the occurrence of any Event of Default and in addition to any other rights available under this Indenture or any other instruments included in the Collateral held for the benefit and security of the Secured Parties or otherwise available at law or in equity, the Trustee shall have all rights and remedies of a secured party on default under the law of the State of New York and other applicable law to enforce the assignments and security interests contained herein and, in addition, shall have the right, subject to compliance with any mandatory requirements of applicable law, to sell or apply any rights and other interests assigned or pledged hereby in accordance with the terms hereof at public or private sale. It is expressly agreed that anything therein contained to the contrary notwithstanding, the Issuer shall remain liable under any instruments included in the Collateral to perform all the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and except as otherwise expressly provided herein, the Trustee shall not have any obligations or liabilities under such instruments by reason of or arising out of this Indenture, nor shall the Trustee be required or obligated in any manner to perform or fulfill any obligations of the Issuer under or pursuant to such instruments or to make any payment, to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim, or to take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. The designation of the Trustee in any transfer document or record is intended and shall be deemed, first, to refer to the Trustee as custodian on behalf of the Issuer and second, to refer to the Trustee as secured party on behalf of the Secured Parties, provided that the Grant made by the Issuer to the Trustee pursuant to the granting clauses hereof shall apply to any Collateral bearing such designation. The Trustee acknowledges such Grants, accepts the trust hereunder in accordance with the provisions hereof, and agrees to perform the duties herein in accordance with the required standard of care set forth herein such that the interests of the Secured Parties may be protected. Each of the Secured Parties hereby agrees and acknowledges that it shall not have any claim on the funds and property from time to time deposited in or credited to the Income Note Distribution Account and the proceeds thereof. 2

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE I DEFINITIONS AND INTERPRETATION 1.1. DEFINITIONS Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Indenture. Whenever any reference is made to an amount the determination of which is governed by Section 1.2, the provisions of Section 1.2 shall be applicable to such determination or calculation, whether or not reference is specifically made to Section 1.2, unless some other method of calculation or determination is expressly specified in the particular provision. In addition, terms defined in Article 9 of the UCC and used but not capitalized herein have the meanings assigned thereto in Article 9 of the UCC. Account means any of the Collection Account (including each Collateral Sub-Account established therein), the Collateral Account, the Uninvested Proceeds Account, the Payment Account, the Interest Reserve Account and the Expense Reserve Account (including each Collateral Sub-Account established therein). Account Control Agreement means that certain Account Control Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, among the Issuer, the Trustee and the Custodian. Accountants’ Report means a report of a firm of Independent certified public accountants of recognized national reputation appointed by the Issuer (or the Collateral Manager on its behalf) on the Closing Date pursuant to Section 10.13(a), which may be the firm of Independent accountants that reviews or performs procedures with respect to the financial reports prepared by the Issuer. Act has the meanings specified in Section 14.2. Administrative Expenses means amounts (including any applicable indemnities) due from, or accrued for, the account of the Co-Issuers with respect to any Payment Date to (i) the Trustee for Trustee Expenses and the Trustee Interest Advance Fee and the Underlying Trustee for Underlying Trust Expenses; (ii) the PAA Issued Note Paying Agent pursuant to the Paying Agency Agreement; (iii) the Collateral Administrator pursuant to the Collateral Administration Agreement; (iv) the independent accountants, agents and counsel of the Co-Issuers for fees and expenses (including, without limitation, tax reports); (v) the Rating Agencies for fees and expenses in connection with any Class of Notes rated by each such Rating Agency (including, without limitation, expenses for credit estimates and ongoing surveillance of the ratings of the Notes); (vi) the Administrator pursuant to the Corporate Services Agreement; (vii) the Collateral Manager and its counsel for fees, expenses and indemnities under the Transaction Documents to the extent set forth therein (including, without limitation, amounts payable under the Collateral Management Agreement but excluding the Collateral Management Fee); (viii) any other Person in respect of any governmental fee, charge or tax (including all filing, registration and annual return fees payable to the Cayman Islands’ government and registered office fees); (ix) any servicer of any Collateral Interest owned directly by the Issuer or to Wachovia pursuant to the Servicing Agreement (to the extent payment of such amounts is not otherwise provided for in the Servicing Agreement); (x) to the Advancing Agent for the Advancing Agent Fee; and (xi) any other Person in respect of any other fees or expenses permitted under the Indenture and the documents delivered pursuant to or in connection with this Indenture, the Paying Agency Agreement, the Collateral Management Agreement and the Notes; 3

Processed and formatted by SEC Watch - Visit SECWatch.com

provided that Administrative Expenses may not include any amounts due or accrued with respect to the actions taken on, or prior to, the Closing Date. Administrator means Walkers SPV Limited and any successor thereto appointed under the Corporate Services Agreement. Advancing Agent means NS Advisors, LLC and any successor or successors thereto. Advancing Agent Fee means, a per annum fee payable to the Advancing Agent on each Payment Date in accordance with the Priority of Payments equal to 0.00125% of the outstanding principal amount of the Class A Notes and the Class B Notes immediately prior to such Payment Date. Affected Party has the meaning given to such term in the standard form 1992 ISDA Master Agreement (Multicurrency-Cross Border). Affiliate means any person, directly or indirectly through one or more intermediaries, controlling, controlled by or under common control with the person; provided that (i) with respect to the Issuer, “Affiliate” shall be deemed not to include Walkers SPV Limited or any entity which Walkers SPV Limited controls and (ii) control of a person shall mean the power, direct or indirect, (a) to vote more than 50% of the securities having ordinary voting power for the election of directors of such person or (b) to direct or cause the direction of the management and policies of such person whether by contract or otherwise. Agent Members means members of, or participants in, the Clearing Agencies. Aggregate Fees and Expenses means, on any Payment Date, the sum of (i) the Trustee Fee with respect to such Payment Date and any unpaid Trustee Fee accrued with respect to a previous Payment Date, (ii) the PAA Issued Note Paying Agent Fee with respect to such Payment Date and any unpaid PAA Issued Note Paying Agent Fee accrued with respect to a previous Payment Date (iii) the Senior Collateral Management Fee and all expenses of the Collateral Manager payable by the Issuer pursuant to the Collateral Management Agreement with respect to such Payment Date and any unpaid Senior Collateral Management Fee and unpaid expenses of the Collateral Manager accrued with respect to a previous Payment Date, (iv) the Trustee Expenses and other expenses (including other Administrative Expenses) of the Co-Issuer (including the fees to be paid to the Irish Stock Exchange), (v) taxes payable by the Co-Issuers, if any, (vi) the trustee fees with respect to the Underlying Trust and (vii) all other expenses of the Co-Issuers (including, without limitation, Administrative Expenses) payable on such Payment Date pursuant to Sections 11.1(a)(1) and 11.1(b)(1) (in each case to the extent not included in clauses (i) through (vi) above). Aggregate Outstanding Amount means, when used with respect to any of the Rated Notes at any time, the aggregate principal amount of such Rated Notes Outstanding at such time. Except as otherwise provided herein, (i) the Aggregate Outstanding Amount of any Class C Notes at any time shall include the Class C Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class C Notes at such time, (ii) the Aggregate Outstanding Amount of any Class D Notes at any time shall include the Class D Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class D Notes at such time, (iii) the Aggregate Outstanding Amount of any Class E Notes at any time shall include the Class E Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class E Notes at such time, (iv) the Aggregate Outstanding Amount of any Class F Notes at any time shall include the Class F Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class F Notes at such time and (v) the Aggregate Outstanding Amount of any Class G Notes at any time shall include the 4

Processed and formatted by SEC Watch - Visit SECWatch.com

Class G Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class G Notes at such time. Applicable Periodic Interest Rate means, for any Interest Period, (i) with respect to the Class A Notes, the applicable Class A Note Interest Rate, (ii) with respect to the Class B Notes, the applicable Class B Note Interest Rate, (iii) with respect to the Class C Notes, the applicable Class C Note Interest Rate, (iv) with respect to the Class D Notes, the applicable Class D Note Interest Rate, (v) with respect to the Class E Notes, the applicable Class E Note Interest Rate, (vi) with respect to the Class F Notes, the applicable Class F Note Interest Rate and (vii) with respect to the Class G Notes, the applicable Class G Note Interest Rate. Applicable Recovery Rate means, with respect to any Collateral Interest on any Measurement Date, the lesser of the Moody’s Recovery Rate and the S&P’s Recovery Rate applicable to such Collateral Interest on such date. Articles means the Amended and Restated Memorandum and Articles of Association of the Issuer, filed under the Companies Law (2004 Revision) of the Cayman Islands, as modified and supplemented and in effect from time to time. Asset-Backed Securities are debt securities that entitle the holders thereof to receive payments that depend primarily on the cash flow from (i) a specified pool of financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities (including, for the avoidance of doubt, leases) or (ii) real estate mortgages, either fixed or revolving, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to the holders of such securities. Asset Transfer Agreement means that certain Asset Transfer Agreement, dated as of June 14, 2005, as the same may be amended or supplemented from time to time, among the Seller, the Depositor and Northstar Realty Finance Corp. Assumed Reinvestment Rate means, with respect to any Account or fund securing the Indenture Issued Notes, the greater of (i) LIBOR minus 0.5% and (ii) zero. Auction has the meaning specified in Section 9.2. Auction Call Redemption has the meaning specified in Section 9.1(c). Auction Date has the meaning specified in Section 9.2; provided that, for the purposes of Section 5.5, “Auction Date” means the date upon which an Auction of the Collateral Interests is conducted in connection with an Event of Default. Auction Procedures has the meaning specified in Section 9.2. Auction Purchase Agreement has the meaning specified in Schedule E. Authenticating Agent means, with respect to the Indenture Issued Notes or any Class of the Indenture Issued Notes, the Person designated by the Trustee, if any, to authenticate such Indenture Issued Notes on behalf of the Trustee pursuant to Section 6.4. 5

Authorized Officer means (i) with respect to the Issuer, any Officer of the Issuer who is authorized to act for the Issuer in matters relating to, and binding upon, the Issuer, (ii) with respect to the Co-Issuer, any Officer who is authorized to act for the Co-Issuer in matters relating to, and binding upon, the Co-Issuer, (iii) with respect to the Collateral Manager, any officer of the Collateral Manager who is authorized to act for the Collateral Manager in matters relating to, and binding upon, the Collateral Manager, (iv) with respect to the Trustee or any other bank or trust company acting as trustee of an express trust or as custodian, a Trust Officer, (v) with respect to the PAA Issued Note Paying Agent, any officer who is authorized to act for the PAA Issued Note Paying Agent in matters relating to, and binding upon, the PAA Issued Note Paying Agent and (vi) with respect to the Advancing Agent, any Officer of the Advancing Agent who is authorized to act for the Advancing Agent in matters relating to, and binding upon, the Advancing Agent. 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. Available Funds means, with respect to any Payment Date, the amount of any positive balance of Cash or Eligible Investments in the Collection Account as of the Calculation Date relating to such Payment Date and, with respect to any other date, such amount as of that date. Average Life means, on any Calculation Date with respect to any Collateral Interest, the quotient obtained by the Collateral Manager by dividing (i) the sum of the products of (a) the number of years (rounded to the nearest one tenth thereof) from such Calculation Date to the respective dates of each successive distribution of principal of such Collateral Interest (assuming that (1) no Collateral Interests default or are sold and (2) any optional redemption of the Collateral Interests occurs in accordance with their respective terms) and (b) the respective amounts of principal of such scheduled distributions by (ii) the sum of all successive scheduled distributions of principal on such Collateral Interest. Balance means at any time, with respect to Cash or Eligible Investments in any Account at such time, the aggregate of the (i) current balance

Processed and formatted by SEC Watch - Visit SECWatch.com

of Cash, demand deposits, time deposits, certificates of deposit and federal funds; (ii) principal amount of interest-bearing corporate and government securities, money market accounts and repurchase obligations; and (iii) purchase price (but not greater than the face amount) of non-interest-bearing government and corporate securities and commercial paper. Bank means Wells Fargo Bank, National Association, a national banking association organized under the laws of the United States, in its individual capacity and not as Trustee. Bankruptcy Code means the U.S. Bankruptcy Code, Title 11 of the United States Code, as amended or where the context requires, the applicable insolvency provisions of the laws of the Cayman Islands. Beneficial Owner means, with respect to any Global Note, each Person that appears on the records of a Clearing Agency (other than each such Clearing Agency to the extent that it is an accountholder with the other Clearing Agency for the purpose of operating the “bridge” between them) as entitled to a particular amount of Indenture Issued Notes by reason of an interest in a Global Note (for all purposes other than with respect to the payment of principal of and interest on the Indenture Issued Notes, the right to which will be vested, as against the Issuer and the Trustee, solely in the Person in whose name the Global Note is registered in the Note Register (in the case of the Rated Notes) or the PAA Issued Note Register (in the case of the Class Notes or the Income Notes)); provided that the Trustee and the PAA Issued Note Paying Agent may conclusively rely upon the certificate of a Clearing Agency as to the identity of such Persons holding an interest in a Global Note. Benefit Plan Investor means (i) an “employee benefit plan” (as defined in Section 3(3) of ERISA), whether or not subject to Title I of ERISA, including without limitation governmental plans, foreign plans 6

Processed and formatted by SEC Watch - Visit SECWatch.com

and church plans, (ii) a “plan” (as defined in Section 4975(e)(1) of the Code), whether or not subject to Section 4975 of the Code, including, without limitation, individual retirement accounts and Keogh plans or (iii) an entity whose underlying assets include plan assets by reason of such an employee benefit plan’s or plan’s investment in such entity, including, without limitation, as applicable, an insurance company general account. Bill of Sale means that certain Bill of Sale, dated June 14th, 2005, as the same may be amended or supplemented from time to time, between the Depositor and the Issuer. Board of Directors means, with respect to the Issuer, the directors of the Issuer duly appointed in accordance with the Articles, and, with respect to the Co-Issuer, the directors of the Co-Issuer duly appointed by the shareholders of the Co-Issuer. Board Resolution means, with respect to the Issuer or the Co-Issuer, a resolution of the Board of Directors of the Issuer or the Co-Issuer, as the case may be. Business Day means any day that is not a Saturday, Sunday or other day on which commercial banking institutions in New York, New York, Minneapolis, Minnesota, Columbia, Maryland or any other cities in which the Corporate Trust Office of the Trustee or the Advancing Agent is located are authorized or obligated by law or executive order to be closed; provided that, if any action is required of the Irish Paying Agent, solely for purposes of determining when such action of the Irish Paying Agent is required, days on which commercial banking institutions in Dublin, Ireland are authorized or obligated by law or executive order to be closed will also be considered in determining whether such day is a “Business Day;” provided, further that if any action is required of the Issuer (or of the Administrator on its behalf), solely for purposes of determining when such action of the Issuer is required, days on which commercial banking institutions in the Cayman Islands are authorized or obligated by law or executive order to be closed will also be considered in determining whether such day is a “Business Day.” Buy/Sell Interest means a pari passu Participation Interest for which one of the participants has exercised its right to purchase its corresponding participant’s interest, or sell its interest to such corresponding participant for the same price, in accordance with the related Underlying Instrument. Calculation Date means, with respect to any Payment Date, the last day of the related Due Period. Call Period has the meaning specified in Section 9.1(a) hereof. Cash means such funds denominated with currency of the United States as at the time shall be legal tender for payment of all public and private debts, including funds credited to a deposit account or a Securities Account. Cash Release Conditions has the meaning specified in Section 12.1(c). Certificate of Authentication has the meaning specified in Section 2.3(f). Certificated Class A-E Note has the meaning specified in Section 2.1(c). Certificated Class F Note has the meaning specified in Section 2.1(d). Certificated Class F Note Transfer Certificate has the meaning specified in Section 2.4(c)(1) 7

Processed and formatted by SEC Watch - Visit SECWatch.com

Certificated Income Notes means Income Notes issued in the form of physical certificates in definitive, fully registered form. Certificated Note means any Rated note or Income Note issued in the form of physical certificates in certificated, fully registered form. Certificated Security has the meaning specified in Section 8-102(a)(4) of the UCC. Class means any class of the Notes, consisting of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Income Notes. Class A Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class A Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class A Notes. Class A Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class A Note Scenario Default Rate from the Class A Note Break-Even Default Rate. Class A Note Interest Rate means LIBOR plus 0.35%. Class A Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class A Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class A Notes means the U.S.$185,000,000 aggregate principal amount of Class A Floating Rate Notes Due 2040. Class B Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class B Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class B Notes. Class B Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class B Note Scenario Default Rate from the Class B Note Break-Even Default Rate. Class B Note Interest Rate means LIBOR plus 0.45%. Class B Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class B Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class B Notes means the U.S.$32,600,000 aggregate principal amount of Class B Floating Rate Notes Due 2040. Class C Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class C Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes or Class B Notes are Outstanding and funds are not available in accordance with the 8

Processed and formatted by SEC Watch - Visit SECWatch.com

Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class C Notes. Class C Coverage Tests means the Interest Coverage Test and the Principal Coverage Test applied with respect to the Class C Notes. Class C Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class C Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments, to reduce such sum. Class C Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class C Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class C Notes. Class C Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class C Note Scenario Default Rate from the Class C Note Break-Even Default Rate. Class C Note Interest Rate means LIBOR plus 0.75%. Class C Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class C Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class C Notes means the U.S.$31,800,000 aggregate principal amount of Class C Floating Rate Notes Due 2040. Class D Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class D Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes or Class C Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class D Notes. Class D Coverage Tests means the Interest Coverage Test and the Principal Coverage Test applied to the Class D Notes. Class D Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class D Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments to reduce such sum. Class D Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class D Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class D Notes. 9

Processed and formatted by SEC Watch - Visit SECWatch.com

Class D Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class D Note Scenario Default Rate from the Class D Note Break-Even Default Rate. Class D Note Interest Rate means LIBOR plus 1.60%. Class D Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class D Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class D Notes means the U.S.$38,600,000 aggregate principal amount of Class D Floating Rate Notes Due 2040. Class E Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class E Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class E Notes. Class E Coverage Tests means the Interest Coverage Test and the Principal Coverage Test applied to the Class E Notes. Class E Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class E Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments, to reduce such sum. Class E Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class E Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class E Notes. Class E Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class E Note Scenario Default Rate from the Class E Note Break-Even Default Rate. Class E Note Interest Rate means LIBOR plus 1.75%. Class E Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class E Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class E Notes means the U.S.$12,000,000 aggregate principal amount of Class E Floating Rate Notes Due 2040. Class F Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class F Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class F Notes. 10

Processed and formatted by SEC Watch - Visit SECWatch.com

Class F Coverage Tests means the Interest Coverage Test and the Principal Coverage Test applied to the Class F Notes. Class F Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class F Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments, to reduce such sum. Class F Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class F Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class F Notes. Class F Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class F Note Scenario Default Rate from the Class F Note Break-Even Default Rate. Class F Note Interest Rate means 7.00%. Class F Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class F Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class F Notes means the U.S.$20,000,000 aggregate principal amount of Class F Fixed Rate Notes Due 2040. Class G Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class G Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class F Notes. Class G Coverage Tests means the Interest Coverage Test and the Principal Coverage Test applied to the Class G Notes. Class G Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class G Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments, to reduce such sum. Class G Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class G Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class G Notes. Class G Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class G Note Scenario Default Rate from the Class G Note Break-Even Default Rate. Class G Note Interest Rate means 7.00%. 11

Processed and formatted by SEC Watch - Visit SECWatch.com

Class G Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class G Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class G Notes means the U.S.$20,000,000 aggregate principal amount of Class G Fixed Rate Notes Due 2040. Clearing Agency means DTC, Euroclear or Clearstream. Clearing Corporation has the meaning specified in Section 8-102(a)(5) of the UCC. Clearstream means Clearstream Banking, société anonyme. Closing Date means June 14, 2005. CMBS means commercial mortgage-backed securities issued pursuant to a transaction in which one or more classes of such securities have been (and are) rated “AAA” or its equivalent by one or more of S&P, Moody’s or Fitch (unless Rating Agency Confirmation is received), which securities are backed by obligations (including certificates of participations in obligations) that are principally secured by mortgages on real property or interests therein having a multifamily or commercial use. Code means the Internal Revenue Code of 1986, as amended. Co-Issuer means N-Star REL CDO IV Corp., a corporation organized under the law of the State of Delaware, unless a successor Person shall have become the Co-Issuer pursuant to the applicable provisions of this Indenture, and thereafter Co-Issuer shall mean such successor Person. Co-Issuers means the Issuer and Co-Issuer. Collateral has the meaning specified in the Granting Clauses. Collateral Administration Agreement means the Collateral Administration Agreement, dated June 14, 2005, by and among the Issuer, the Collateral Manager and the Collateral Administrator, as the same may be amended and modified from time to time in accordance with its terms. Collateral Administrator means Wells Fargo Bank, National Association, solely in its capacity as Collateral Administrator under the Collateral Administration Agreement, unless a successor Person shall have become the Collateral Administrator pursuant to the applicable provisions of Collateral Administration Agreement, in which case Collateral Administrator shall mean such successor Person. Collateral Interest means an item of Collateral which satisfies the Eligibility Criteria specified in Section 12.2. Collateral Interest Collections means, with respect to any Due Period and the related Payment Date, without duplication, the sum of (i) all cash payments of interest with respect to any Collateral Interests and Eligible Investments included in the Collateral ((A) including any Sale Proceeds of a Collateral Interest sold at price equal to or greater than its Principal Balance representing unpaid interest accrued thereon to the date of the sale thereof to the extent not treated as Collateral Principal Collections at the option of the Collateral Manager, but (B) excluding all funds received on an Impaired Interest (including any unpaid interest) and any unpaid interest accrued on a Deferred Interest PIK Bond or a Written Down Interest to the date of sale) which are received during the related Due Period (excluding any Purchased 12

Processed and formatted by SEC Watch - Visit SECWatch.com

Accrued Interest), (ii) all payments on Eligible Investments purchased with Collateral Interest Collections, (iii) payments received or scheduled to be received from a Hedge Counterparty under any Hedge Agreement on the related Payment Date, excluding any payments received from a Hedge Counterparty upon reduction of the notional amount and any termination payments (provided that so long as the Notes are Outstanding, any termination payments received from a Hedge Counterparty will be used to enter into a substitute Hedge Agreement to the extent required to maintain the then-current rating of the Notes by each Rating Agency), (iv) all amendment and waiver fees, all late payment fees and all other fees and commissions received during the related Due Period (other than fees and commissions received in connection with the sale, restructuring, workout or default of Collateral Interests or in connection with Impaired Interests or Written Down Interests) (excluding any payments representing exit fees, extension fees or prepayment premiums paid in connection with Commercial Mortgage Loans), (v) the Principal Balance of any Eligible Investments purchased with Collateral Interest Collections, (vi) all interest accrued on the Closing Date on Collateral Interests included in the Collateral, (vii) any amounts on deposit in the Interest Reserve Account, (viii) at the option of the Collateral Manager, any amount on deposit in the Expense Reserve Account in excess of U.S.$300,000, (ix) commitment fees on unfunded amounts and other similar fees (in each case, net of applicable withholding taxes) actually received by the Issuer during the related Due Period in respect of any Earn-Out Assets, (x) any Uninvested Proceeds remaining on deposit in the Uninvested Proceeds Account on the Effective Date, if Rating Agency Confirmation to treat such Uninvested Proceeds as Collateral Interest Collections has been obtained and (xi) all proceeds from the foregoing; provided, however, that Collateral Interest Collections shall not include the funds and other property (including, without limitation, the paid-up share capital of the Issuer) with respect to the Income Notes and the bank account in which such funds and the proceeds thereof are held); provided, further, that Collateral Interest Collections shall not include principal of any Collateral Interest representing capitalized interest after the date of purchase thereof by the Issuer. Collateral Interest Principal Balance means, prior to the Effective Date, U.S.$400,000,000, and thereafter, the aggregate Principal Balance of the sum of (i) Collateral Interests included in the Collateral (including any Collateral Interests that have become Impaired Interests or Written Down Interests) and (ii) Eligible Investments, in each case, purchased with the proceeds of the issuance of the Notes or thereafter with Collateral Principal Collections. Collateral Manager means NS Advisors, LLC, a Delaware limited liability company, unless a successor Person shall have become Collateral Manager pursuant to the applicable provisions of the Collateral Management Agreement, in which case Collateral Manager shall mean such successor Person. Collateral Management Agreement means the Collateral Management Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, between the Issuer and the Collateral Manager. Collateral Management Fee means the Senior Collateral Management Fee and the Subordinate Collateral Management Fee. Collateral Principal Collections means, with respect to any Due Period and the related Payment Date, all amounts received by the Issuer during such Due Period that do not constitute Collateral Interest Collections; provided, however, that Collateral Principal Collections shall include principal of any Collateral Interest representing capitalized interest after the date of purchase thereof by the Issuer. Collateral Principal Collections Sub-Account has the meaning specified in Section 10.5(a)(1) hereof. 13

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Principal Payments means, with respect to any Due Period and the related Payment Date, Collateral Principal Collections other than Sale Proceeds and any amounts received in respect of Eligible Investments. Collateral Quality Tests will be satisfied if, as of any Measurement Date, the Collateral Interests comply, in the aggregate, with all of the requirements set forth below (collectively, the “Collateral Quality Tests”): (1)

the aggregate Principal Balance of all Collateral Interests that are CMBS (other than Rake Bonds) does not exceed 15% of the Collateral Interest Principal Balance;

(2)

the aggregate Principal Balance of all Collateral Interests that are Tenant Lease Interests with an S&P Rating below “BBB” does not exceed 15% of the Collateral Interest Principal Balance;

(3)

the aggregate Principal Balance of all Collateral Interests that are REIT Debt Securities with an S&P Rating below “BBB” does not exceed 7.5% of the Collateral Interest Principal Balance;

(4)

the aggregate Principal Balance of all Collateral Interests that are Real Estate CDO Securities does not exceed 5% of the Collateral Interest Principal Balance;

(5)

the aggregate Principal Balance of all Collateral Interests that are Mezzanine Loans does not exceed 50% of the Collateral Interest Principal Balance;

(6)

the Moody’s Maximum Weighted Average Rating Factor Test is satisfied;

(7)

(i) the Weighted Average Fixed Rate Coupon as of such date equals or exceeds 5.00% and (ii) the Weighted Average Spread as of such date equals or exceeds 4.00%;

(8)

the Weighted Average Life Test is satisfied;

(9)

The maximum property concentration limits (by Aggregate Collateral Balance) for Collateral Interests other than CMBS that are not Rake Bonds (and including CMBS that are Rake Bonds) are as follows: (i)

not more than 40% of the Collateral Interest Principal Balance may be related to Mortgaged Properties which are each of office, retail and multifamily properties;

(ii)

not more than 35% of the Collateral Interest Principal Balance may be related to Mortgaged Properties which are each of industrial and hospitality properties;

(iii)

not more than 10% of the Collateral Interest Principal Balance may be related to Mortgaged Properties which are condominium conversion properties;

(iv)

not more than 5% of the Collateral Interest Principal Balance may be related to Mortgaged Properties which are healthcare properties;

(v)

not more than 5% of the Collateral Interest Principal Balance may be related to Mortgaged Properties which are self-storage properties; and

(vi)

not more than 5% of the Collateral Interest Principal Balance may be related to Mortgaged Properties which in the aggregate are any property type other than those specified in clauses (i) through (v) above;

(10) the Aggregate Collateral Balance of all Collateral Interests (other than CMBS) backed or otherwise invested in Mortgaged Properties located in any single U.S. state does not exceed 25% of the 14

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Interest Principal Balance, except that up to 50% of the Collateral Interest Principal Balance may relate to New York, up to 40% of the Collateral Interest Principal Balance may relate to California, up to 35% of the Collateral Interest Principal Balance may relate to Florida and up to 30% of the Collateral Interest Principal Balance may relate to Washington D.C.; (11)

the Herfindahl Score of the Collateral Interests is at least 20;

(12)

the aggregate Principal Balance of all Collateral Interests that represent obligations of any single obligor or group of affiliated obligors does not exceed 8.5% of the Collateral Interest Principal Balance;

(13)

the aggregate Principal Balance of all Collateral Interests that consist of CMBS issued in any single calendar year does not exceed 75% of the Collateral Interest Principal Balance;

(14)

the aggregate Principal Balance of all Fixed Rate Collateral Interests does not exceed 20% of the Collateral Interest Principal Balance; provided that no more than 40% of the Collateral Interests shall consist of Fixed Rate Collateral Interests if (i) the Issuer enters into corresponding Hedge Agreements priced at a rate of 4.05% or (ii) Rating Agency Confirmation is obtained with respect to an additional Fixed Rate Collateral Interest acquired without a corresponding Hedge Agreement;

(15)

the amount on deposit in the Earn-Out Asset Account does not exceed 7.5% of the Collateral Interest Principal Balance;

(16)

the aggregate Principal Balance of all Collateral Interests that provide for the payment of interest less frequently than monthly does not exceed 10% of the Collateral Interest Principal Balance;

(17

the aggregate Principal Balance of all Collateral Interests that consist of Floating Rate Collateral Interests does not exceed 90% of the Collateral Interest Principal Balance;

(18)

the S&P CDO Monitor Test is satisfied; and

(19)

the S&P Minimum Average Recovery Rate Test is satisfied.

Collateral Sub-Account means any sub-account established within an Account. Collection Account means the Securities Account designated the “Collection Account” and established in the name of the Trustee pursuant to Section 10.5, including the Collateral Principal Collections Sub-Account. Collections means, with respect to any Payment Date, the sum of (i) the Collateral Interest Collections collected during the applicable Due Period and (ii) the Collateral Principal Collections collected during the applicable Due Period. Commercial Mortgage Loans means commercial mortgage loans whether such commercial mortgage loans are Collateral Interests or underlie or comprise the other types of Collateral Interests (as the context may require). Commission means the United States Securities and Exchange Commission. 15

Controlling Class means the Class A Notes voting as a single Class, so long as any Class A Notes are Outstanding, then the Class B Notes, so long as any Class B Notes are Outstanding, then the Class C Notes voting as a single Class, so long as any Class C Notes are Outstanding, then the Class D Notes, so long as any Class D Notes are Outstanding, then the Class E Notes, so long as any Class E Notes are Outstanding, then the Class F Notes, so long as any Class F Notes are Outstanding and then the Class G Notes, so long as any Class G Notes are Outstanding, in each case, based on the then Aggregate Outstanding Amount thereof. Controlling Person any other person (other than a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of the Issuer, a person who provides investment advice for a fee (direct or indirect) with respect to the assets of the Issuer, or any “affiliate” (within the meaning of 29 C.F.R. Section 2510.3-101(f)(3)) of any such person. Corporate Services Agreement means that certain Corporate Services Agreement, dated as of June 14, 2005, as the same may be amended or supplemented from time to time, between the Issuer and the Administrator. Corporate Trust Office means the designated corporate trust office of the Trustee, currently located at: (i) for note transfer purposes, Wells Fargo Center, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 66749, Attention: CDO Trust Services – N-Star REL CDO IV and (ii) for all other purposes, 9062 Old Annapolis Road, Columbia, Maryland 21045. Attention: CDO Trust Services – N-Star REL CDO IV, telephone number 410-884-2000, fax number 410-715-3748, or such other address as the Trustee may designate from time to time by notice to the Rated Noteholders, the Income Noteholders, the Collateral Manager and the Co-Issuers or the principal corporate trust office of any successor Trustee.

Processed and formatted by SEC Watch - Visit SECWatch.com

Coverage Tests means the Class C Coverage Tests, the Class D Coverage Tests, the Class E Coverage Tests, the Class F Coverage Tests and the Class G Coverage Tests. Credit Lease Loans means mortgage loans secured by mortgages on commercial real estate properties that are subject to a lease to a single tenant. Credit Risk Interest means any Collateral Interest which, in the Collateral Manager’s reasonable business judgment, has a significant risk of declining in credit quality or over time may become an Impaired Interest. Cumulative Applicable Periodic Interest Shortfall Amount means the Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Periodic Interest Shortfall Amount, Class F Cumulative Applicable Periodic Interest Shortfall Amount and Class G Cumulative Applicable Periodic Interest Shortfall Amount. Cure Advance means, amounts advanced by a Holder of Income Notes pursuant to the Paying Agency Agreement to permit the Issuer to exercise its right to cure payment defaults with respect to any Senior Loan related to a Collateral Interest in accordance with the applicable underlying instrument. Current Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Interests and the proceeds of the disposition thereof held as Cash and (b) Eligible Investments purchased with proceeds of the disposition of Pledged Collateral Interests, existing immediately prior to the sale, maturity or other disposition of a Pledged Collateral Interest or immediately prior to the acquisition of a Pledged Collateral Interest, as the case may be. 16

Processed and formatted by SEC Watch - Visit SECWatch.com

Custodian has the meaning specified in Section 3.3(a). Daily Official List means the Daily Official List of the Irish Stock Exchange. Deemed Floating Asset Hedge means, with respect to a Fixed Rate Collateral Interest, an interest rate swap having (i) a notional schedule equal to the Principal Balance as it is reduced by expected amortization of such Fixed Rate Collateral Interest over time and (ii) payment dates identical to the Payment Dates of the Issuer under this Indenture; provided that, (x) at the time of entry into the Deemed Floating Asset Hedge, (i) the expected principal payments on the Fixed Rate Collateral Interest comprising a Deemed Floating Rate Collateral Interest will not extend beyond 10 years after the effective date thereof and (ii) the scheduled notional amount of such Deemed Floating Asset Hedge at any time is equal to the expected principal amount of the related Fixed Rate Collateral Interest (as calculated at such time), (y) the Rating Agencies and the Trustee are notified prior to the Issuer’s entry into a Deemed Floating Asset Hedge, and each will be provided with the identity of the proposed hedge counterparty and copies of the hedge documentation and notional schedule and (z) such Deemed Floating Asset Hedge is priced at then-current market rates. In the event any Deemed Floating Asset Hedge is not a Form-Approved Hedge Agreement, the Collateral Manager will provide prior written notice to S&P of the Issuer’s entry into such Deemed Floating Asset Hedge and will obtain Rating Agency Confirmation from S&P with respect to the entry of the Issuer into such Deemed Floating Asset Hedge. Deemed Floating Rate Collateral Interest means a Fixed Rate Collateral Interest the interest rate of which is hedged into a Floating Rate Collateral Interest using a Deemed Floating Asset Hedge; provided that at the time of entry into the Deemed Floating Asset Hedge the Average Life of such Deemed Floating Rate Collateral Interest would not increase or decrease by more than one year from its expected average life if it were to prepay at either 50% or 150% of its pricing speed. Deemed Floating Spread means the difference between the stated rate at which interest accrues on each Fixed Rate Collateral Interest that comprises a Deemed Floating Rate Collateral Interest (excluding all Impaired Interests and Deferred Interest PIK Bonds) and the fixed rate that the Issuer agrees to pay on the Deemed Floating Asset Hedge at the time such swap is executed. Default means any Event of Default or any occurrence that, with notice or the lapse of time or both, would become an Event of Default. Defaulting Party has the meaning given to such term in the standard form 1992 ISDA Master Agreement (Multicurrency –Cross Border). Defaulted Interest means any interest due and payable in respect of any Class A Note or any Class B Note or, if no Class A Notes or Class B Notes are Outstanding, in respect of any Class C Note or, if no Class C Notes are Outstanding, in respect of any Class D Note, or if no Class D Notes are Outstanding, in respect of any Class E Note, or if no Class E Notes are Outstanding, in respect of any Class F Note, or if no Class F Notes are Outstanding, in respect of any Class G Note and any interest on such Defaulted Interest that (in each case) is not punctually paid or duly provided for on the applicable Payment Date (including the applicable Stated Maturity Date) of the applicable Rated Note. Deferred Interest PIK Bond means a PIK Bond with respect to which interest has been deferred or capitalized or does not pay interest when scheduled (other than an Impaired Interest) for each consecutive payment date occurring over a period of the lesser of (i) six months or (ii) two consecutive payment dates, but only until such time as payment of interest on such PIK Bond has resumed and all capitalized and deferred interest and any interest thereon has been paid in cash in accordance with the terms of the Underlying Instruments. 17

Processed and formatted by SEC Watch - Visit SECWatch.com

Deferred Interest PIK Bond Amount means, with respect to each Deferred Interest PIK Bond in the Collateral, the lesser of (i) the product of the Principal Balance of such Deferred Interest PIK Bond and the Applicable Recovery Rate of such Deferred Interest PIK Bond and (ii) the product of the Principal Balance of such Deferred Interest PIK Bond and the Market Value of such Deferred Interest PIK Bond. Depositary means, with respect to the Indenture Issued Notes issued in the form of one or more Global Notes, the Person designated as Depositary pursuant to Section 2.2(e), or any successor thereto, appointed pursuant to the applicable provisions of this Indenture. Depositary Participant means a broker, dealer, bank or other financial institution or other Person for whom from time to time the Depositary effects book-entry transfers and pledges of notes deposited with the Depositary. Depositor means N-Star REL CDO Depositor Corp. and any successors or assigns, in its capacity as depositor under the Master Trust Agreement. Deutsche Bank means Deutsche Bank Securities Inc. Distribution means any payment of principal, interest or fee or any dividend or premium payment made on, or any other distribution in respect of, an obligation or security. Dollar or U.S.$ means currency of the United States as at the time shall be legal tender for all debts, public and private. DTC means The Depository Trust Company, a New York corporation, and its nominees and their respective successors. Due Date means each date on which a Distribution is due on a Pledged Security. Due Period means, with respect to each Payment Date, the period beginning on the day following the last day of the preceding Due Period relating to the preceding Payment Date (or, in the case of the Due Period that is applicable to the first Payment Date, beginning on the Closing Date) and ending at the close of business on the fourth (4th) Business Day preceding such Payment Date. Earn-Out Asset means, a Collateral Interest that (a) requires the Issuer to make one or more future advances to the obligor under the Underlying Instruments relating thereto, subject to satisfaction of conditions precedent therein, (b) specifies a maximum amount that can be borrowed on one or more fixed borrowing dates and (c) does not permit the re-borrowing of any amount previously repaid by the obligor thereof; provided, however, that any such Earn-Out Asset will be an Earn-Out Asset only until all commitments by the Issuer to make advances to the obligor thereof expire or are terminated or reduced to zero. Earn-Out Asset Account means the Securities Account designated the “Earn-Out Asset Account” and established in the name of the Trustee pursuant to Section 10.8. Effective Date means the date that is the earliest of (i) the 180th day following the Closing Date, (ii) the date on which the Issuer has purchased Collateral Interests with amounts on deposit in the Uninvested Proceeds Account having an aggregate par amount of U.S.$100,000,000 or (iii) such earlier date (if any) that is designated by the Collateral Manager by notice to the Trustee under the Indenture; provided that the Collateral Manager has received Rating Agency Confirmation on such date; provided, further, that 18

Processed and formatted by SEC Watch - Visit SECWatch.com

in the event that such day does not fall on a Business Day, the Effective Date shall be the next succeeding Business Day. Eligibility Criteria has the meaning specified in Section 12.2. Eligible Investments means any U.S. dollar denominated investment that, at the time it is delivered to the Trustee, is one or more of the following obligations or securities, including, without limitation, those investments for which the Trustee or an Affiliate of the Trustee provides services: (i)

cash;

(ii)

direct Registered obligations of, and Registered obligations the timely payment of principal of and interest on which is fully and expressly guaranteed by, the United States of America, or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America;

(iii)

demand and time deposits in, interest bearing trust accounts and certificates of deposit of, bankers’ acceptances issued by, or federal funds sold by any depository institution or trust company (including the Trustee) incorporated under the laws of the United States of America or any state thereof and subject to the supervision and examination by federal and/or state banking authorities so long as the commercial paper and/or debt obligations of such depository institution or trust company (or, in the case of the principal depository institution in a holding company system, the commercial paper or debt obligations of such holding company) at the time of such investment or contractual commitment providing for such investment have a credit rating of: (a)

in the case of long-term debt obligations, not less than “Aa2” by Moody’s and “AAA” by S&P; or

(b)

in the case of commercial paper and short-term debt obligations including time deposits, P-1 by Moody’s and “A-1” by S&P (provided that, in the case of commercial paper and short-term debt obligations with a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment a long-term credit rating of not less than “AA+” by S&P);

(iv)

Registered securities other than mortgage-backed securities bearing interest or sold at a discount issued by any corporation under the laws of the United States of America or any state thereof that have a credit rating of “AA+” by S&P at the time of such investment or contractual commitment providing for such investment;

(v)

unleveraged repurchase obligations (if treated as debt for tax purposes by the issuer) with respect to any security described in clause (ii) above, entered into with a depository institution or trust company (acting as principal) described in clause (iii) or entered into with broker-dealers registered with the Commission (acting as principal) whose short-term debt has a credit rating of “P-1” by Moody’s and “A-1+” by S&P at the time of such investment in the case of any repurchase obligation for a security having a maturity not more than 183 days from the date of its issuance or whose long-term debt has a credit rating of at least “Aa2” by Moody’s and “AA+” by S&P at the time of such investment in the case of any repurchase obligation for a security having a maturity more than 183 days from the date of its issuance;

(vi)

commercial paper or other short-term obligations having at the time of such investment a credit rating of “P-1” by Moody’s and “A1+” by S&P that are registered and are either bearing interest 19

Processed and formatted by SEC Watch - Visit SECWatch.com

or are sold at a discount from the face amount thereof and that have a maturity of not more than 183 days from its date of issuance; provided that in the case of commercial paper with a maturity of longer than 91 days, the issuer of such commercial paper (or, in the case of a principal depository institution in a holding company system, the holding company of such system), if rated by the Rating Agencies, must have at the time of such investment a long-term credit rating of at least “Aa2” by Moody’s and “AA+” by S&P; (vii)

money market funds with respect to any investments described in clauses (ii) through (vi) above having, at the time of such investment, a credit rating of not less than “AAA” by Moody’s “AAA/AAAm/AAAm-G” by S&P (if such funds are rated by S&P), respectively (including those for which the Trustee is investment manager or advisor), provided that such fund or vehicle is formed and has its principal office outside the United States; and

(viii)

any other investments for which Rating Agency Confirmation is received;

provided that (a) Eligible Investments purchased with funds in the Collection Account will be held until maturity except as otherwise specifically provided herein and will include only such obligations or securities as mature no later than the Business Day prior to the Payment Date next succeeding the date of investment in such obligations or securities, unless such Eligible Investments are investments of the type described in clause (i) or (iii) above, in which event such Eligible Investments may mature on such Payment Date and (b) none of the foregoing obligations or securities will constitute Eligible Investments if all, or substantially all, of the remaining amounts payable thereunder will consist of interest and not principal payments, if such security is purchased at a price in excess of 100% of par, if such security is subject to substantial non-credit related risk, as determined by the Collateral Manager in its judgment, if any income from or proceeds of disposition of the obligation or security is or will be subject to deduction or withholding for or on account of any withholding or similar tax or, from the time, if any, that the Issuer is no longer a Qualified REIT Subsidiary, the acquisition (including the manner of acquisition), ownership, enforcement or disposition of the obligation or security will subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation. Eligible SPV Jurisdiction means Bahamas, Bermuda, the Cayman Islands, the Channel Islands, the Netherlands Antilles, Luxembourg or any other similar jurisdiction (so long as Rating Agency Confirmation is obtained in connection with the inclusion of such other jurisdiction) generally imposing either no or nominal taxes on the income of companies organized under the laws of such jurisdiction. Emerging Market Issuer means a sovereign or non-sovereign issuer located in a country that is in Latin America, Asia, Africa, Eastern Europe or the Caribbean or in a country the dollar-denominated sovereign debt obligations of which are rated lower than “Aa2” by Moody’s and lower than “AA” by S&P; provided that an issuer of Asset-Backed Securities located in any Eligible SPV Jurisdiction shall not be an Emerging Market Issuer for purposes hereof if the underlying collateral of such Asset-Backed Securities consists solely of obligations of obligors located in the United States and Qualifying Foreign Obligors. Entitlement Holder has the meaning specified in Section 8-102(a)(7) of the UCC. Entitlement Order has the meaning specified in Section 8-102(a)(8) of the UCC. Equity Interest means any security that does not entitle the holder thereof to receive periodic payments of interest and one or more installments of principal acquired by the Issuer as a result of the exercise or conversion of Collateral Interests, in conjunction with the purchase of Collateral Interests or in exchange for a Collateral Interest. 20

Processed and formatted by SEC Watch - Visit SECWatch.com

ERISA means the U.S. Employee Retirement Income Security Act of 1974, as amended. ERISA Restriction Certificate means the ERISA Restriction Certificate substantially in the form set forth in Exhibit C-4 hereto. Euroclear means Euroclear Bank S.A/N.V., as operator of the Euroclear system. Event of Default has the meaning specified in Section 5.1. Excepted Property means the U.S.$ 1,000 of capital contributed to the Issuer in respect of the Issuer’s Ordinary Shares in accordance with the Articles and U.S.$ 1,000 representing a profit fee to the Issuer. Exchange Act means the United States Securities Exchange Act of 1934, as amended. Expense Reserve Account means the Securities Account designated the “Expense Reserve Account” and established in the name of the Trustee pursuant to Section 10.6. Fee Basis Amount means an amount equal, for any Payment Date, to the average of the aggregate Collateral Interest Principal Balance (excluding the aggregate Principal Balance of Impaired Interests) on the first day of the related Due Period and the aggregate Collateral Interest Principal Balance (excluding the aggregate Principal Balance of Impaired Interests) on the last day of such Due Period. Financial Asset has the meaning specified in Section 8-102(a)(9) of the UCC. Financing Statement means a financing statement relating to the Collateral naming the Issuer as debtor and the Trustee on behalf of the Secured Parties as secured party. Fixed Rate Collateral Interest means any Collateral Interest which bears a fixed rate of interest. Fixed Rate Notes means the Class F Notes and Class G Notes. Floating Rate Collateral Interest means any Collateral Interest that bears interest based upon a floating rate index. Floating Rate Notes means, collectively, the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes. Form-Approved Hedge Agreement means a Hedge Agreement relating to a specific Hedge Counterparty with respect to which (a) the related Collateral Interest could be purchased by the Issuer without any required action by the Rating Agencies and (b) the documentation of which conforms in all material respects to a form for which Rating Agency Confirmation was previously obtained (as certified to the Trustee by the Collateral Manager) for use of such form by the Issuer; provided that (i) such Form-Approved Hedge Agreement shall not provide for any upfront payments to be made to any Hedge Counterparty, (ii) any revised Form-Approved Hedge Agreement with respect to a particular Hedge Counterparty shall be approved by each of the Rating Agencies at least 10 days prior to the initial use thereof as evidenced by Rating Agency Confirmation, (iii) any Rating Agency may withdraw its consent to the use of a particular Form-Approved Hedge Agreement by written notice to the Trustee, the Collateral Manager and the relevant Hedge Counterparty (provided that such withdrawal of consent shall not affect any existing Hedge Agreement entered into with such Hedge Counterparty) and (iv) the Issuer (or the Collateral Manager on its behalf) shall deliver to the Trustee and each Rating Agency a copy of each Form-Approved Hedge Agreement specifying the Hedge Counterparty to which it relates upon 21

Processed and formatted by SEC Watch - Visit SECWatch.com

receipt of Rating Agency Confirmation with respect thereto, and the Trustee’s records (when taken together with any correspondence received from the Rating Agencies pursuant to clause (ii)) shall be conclusive evidence of such form. GAAP has the meaning specified in Section 6.3(k). Global Notes means the Rule 144A Global Notes and the Regulation S Global Notes. Grant means to grant, bargain, sell, warrant, alienate, remise, demise, release, convey, assign, transfer, mortgage, pledge, create and grant a security interest in and right of set-off against, deposit, set over and confirm. A Grant of the Pledged Securities, or of any other instrument, shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate continuing right to claim for, collect, receive and receipt for principal, interest and fee payments in respect of the Pledged Securities or such other instruments, and all other amounts payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto. Hedge Agreement means the interest rate protection agreement, as amended from time to time, together with any replacement hedge agreement on substantially identical terms (or that otherwise satisfies the conditions of Section 16.1), entered into pursuant to Section 16.1 or a Deemed Floating Asset Hedge. The Hedge Agreement shall provide that any amount payable to the Hedge Counterparty thereunder shall be subject to the Priority of Payments and that any amount payable upon the early termination or liquidation thereof shall be payable only on a Payment Date in accordance with the Priority of Payments. Hedge Counterparty means (a) any hedge counterparty (or any permitted assignee or successor) under a Hedge Agreement that satisfies the Hedge Counterparty Ratings Requirement and (b) any substitute or additional parties therefore appointed in accordance with Section 16.1. Hedge Counterparty Collateral Account means each Securities Account designated the “Hedge Counterparty Collateral Account” and established in the name of the Trustee pursuant to Section 16.1(d). Hedge Counterparty Ratings Requirement means, with respect to any Hedge Ratings Determining Party: (a) either (x) the short-term rating of such Hedge Ratings Determining Party is not lower than “A-1” by Standard & Poor’s or (y) if such Hedge Ratings Determining Party does not have a short-term rating from Standard & Poor’s, the long-term rating of such Hedge Ratings Determining Party by Standard & Poor’s is not lower than “A+” and (b) (x) a rating on the short-term unsecured, unsubordinated debt obligations of the Hedge Ratings Determining Party of “P-1” by Moody’s and a rating on the long-term unsecured, unsubordinated debt obligations of the Hedge Ratings Determining Party of at least “A1” by Moody’s or (y) if there is no short-term rating by Moody’s, a rating on the long-term unsecured, unsubordinated debt obligations of the Hedge Ratings Determining Party of at least “Aa3” by Moody’s; provided, that any rating shall be reduced by one subcategory to the extent it is on credit watch with negative implications by Moody’s. Hedge Payment Amount means, with respect to any Hedge Agreement and any Payment Date, the amount, if any, then payable by the Issuer to such Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement. Hedge Ratings Determining Party means (a) unless clause (b) applies with respect to the Hedge Agreement, the Hedge Counterparty or any transferee thereof or (b) any Affiliate of the Hedge 22

Processed and formatted by SEC Watch - Visit SECWatch.com

Counterparty or any transferee thereof that unconditionally and absolutely guarantees (with the form of such guarantee meeting S&P’s thencurrent published criteria with respect to guarantees) the obligations of the Hedge Counterparty or such transferee, as the case may be, under the Hedge Agreement. For the purpose of this definition, no direct or indirect recourse against one or more shareholders of the Hedge Counterparty or any such transferee (or against any Person in control of, or controlled by, or under common control with, any such shareholder) shall be deemed to constitute a guarantee, security or support of the obligations of the Hedge Counterparty or any such transferee. Hedge Receipt Amount means, with respect to any Hedge Agreement and any Payment Date, the amount, if any, then payable to the Issuer by the related Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement. Herfindahl Index means an index calculated by the Collateral Manager by dividing (i) one by (ii) the sum of, with respect to each Commercial Mortgage Loan comprising or underlying a Collateral Interest, (x) the principal balance of such Collateral Interest divided by (y) the aggregate principal balance of all Collateral Interests, raised to the second power. For purposes of calculating the Herfindahl Index, all Collateral Interests from a single issue of CMBS shall be treated as a single Collateral Interest and each $12,000,000 increment of Cash in any Account shall be treated as a single Collateral Interest. Herfindahl Score means a measurement of the diversity of a pool of loans of unequal size calculated in accordance with the Herfindahl Index. Highest Auction Price means, in connection with a Redemption, the bid or bids for the Collateral Interests resulting in the highest auction price of one or more Subpools of Collateral Interests. Holder or Noteholder means (i) with respect to any Rated Note, any Rated Noteholder, (ii) with respect to any Income Note, any Income Noteholder and (iii) with respect to any Indenture Issued Note, any Indenture Issued Noteholder, as the context may require. Impaired Interests Amount means the sum, with respect to each Impaired Interest in the Collateral, of the lesser of (i) the product of the Principal Balance of such Impaired Interest and the Applicable Recovery Rate of such Impaired Interest and (ii) the product of the Principal Balance of such Impaired Interest and the Market Value of such Impaired Interest. Impaired Interest means any Collateral Interest or any other security included in the Collateral which (a) is not a CMBS and foreclosure or a payment default (whether or not declared) with respect to the related Commercial Mortgage Loan has occurred or (b) is a CMBS and the published rating from of such Collateral Interest has been downgraded, qualified or withdrawn by any Rating Agency from the ratings that were in place as of the Closing Date (or, in the case of additional Collateral Interests, the date of purchase by the Issuer). Income Note Distribution Account means the account designated the “Income Note Distribution Account” and established by the PAA Issued Note Paying Agent in the name of the PAA Issued Note Paying Agent for the benefit of the Issuer pursuant to the Paying Agency Agreement. Income Note Excess Funds means all remaining Collateral Interest Collections and Collateral Principal Collections as set forth in Section 11.1(a)(27) and 11.1(b)(23). Income Noteholder means, with respect to any Income Note, the Person in whose name such Income Note is registered in the Income Note Register. 23

Processed and formatted by SEC Watch - Visit SECWatch.com

Income Notes means the U.S.$60,000,000 Income Notes Due 2040. Income Notes Stated Amount means U.S.$60,000,000. Indenture means this instrument and, if from time to time supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, as so supplemented or amended. Indenture Issued Notes means, collectively, the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes. Indenture Issued Noteholder means, with respect to any Indenture Issued Note, the Person in whose name such Note is registered; provided that Beneficial Owners or Agent Members will have no rights under the Indenture with respect to Global Notes, and the Indenture Issued Noteholder may be treated by the Issuer and the Trustee (and any agent of any of the foregoing) as the owner of such Global Notes for all purposes whatsoever. Independent means, as to any Person, any other Person (including, in the case of an accountant, or lawyer, a firm of accountants or lawyers and any member thereof) who (i) does not have and is not committed to acquire any material direct or any material indirect financial interest in such Person or in any Affiliate of such Person, (ii) is not connected with such Person as an Officer, employee, promoter, underwriter, voting trustee, partner, director or Person performing similar functions and (iii) if required to deliver an opinion or certificate to the Trustee pursuant to this Indenture, states in such opinion or certificate that the signer has read this definition and that the signer is Independent within the meaning hereof. “Independent” when used with respect to any accountant may include an accountant who audits the books of such Person if in addition to satisfying the criteria set forth above the accountant is independent with respect to such Person within the meaning of Rule 101 of the Code of Ethics of the American Institute of Certified Public Accountants. Initial Hedge Agreement means the first Hedge Agreement (other than a Deemed Floating Asset Hedge) entered into by the Issuer in connection with this transaction; provided that Rating Agency Confirmation is received with respect thereto. Initial Hedge Counterparty means the Hedge Counterparty with respect to the Initial Hedge Agreement. Initial Payment Date means the Payment Date occurring in July, 2005. Initial Purchasers means Deutsche Bank Securities Inc, Citigroup Global Markets Inc. and Wachovia Capital Markets, LLC, each as an initial purchaser of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes. Instrument has the meaning specified in Section 9-102(a)(47) of the UCC. Interest Advance has the meaning specified in Section 10.17. Interest Coverage Amount means, as of any Measurement Date, an amount equal to (i) the amount received or scheduled to be received as Collateral Interest Collections during the related Due Period, less (ii) the amounts scheduled to be paid on the related Payment Date pursuant to Section 11(a)(1) through (3) and (to the extent not covered by Section 11(a)(1) through (3)) Section 11(b)(1) and, for purposes of calculating the Interest Coverage Ratios, any amounts scheduled to be paid to the Interest Reserve Account on the related Payment Date pursuant to Section 11.1(a)(6); provided that (a) following the date 24

Processed and formatted by SEC Watch - Visit SECWatch.com

on which a Collateral Interest becomes an Impaired Interest, scheduled Collateral Interest Collections shall not include any amount scheduled to be received on Impaired Interests or any amount scheduled to be received on securities that are currently deferring interest until (1) such amounts are actually received in Cash or (2) the cumulative aggregate amounts actually received on an Impaired Interest exceed the Principal Balance of such Impaired Interest, (b) the expected interest income on Floating Rate Collateral Interests and Eligible Investments shall be calculated using the then-current interest rate applicable thereto and (c) with respect to any Written Down Interest, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount. Interest Coverage Ratio means, on any Measurement Date for any Class of Notes, the ratio (expressed as a percentage) of (x) to (y), where (x) is equal to the Interest Coverage Amount as of such Measurement Date and where (y) is the sum of the Periodic Interest for such Class and each Senior Class of Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Interest Reserve Account for the Payment Date immediately following such Measurement Date. Interest Coverage Test means, for any Class of Notes Outstanding, a test that is satisfied as of any Measurement Date when the applicable Interest Coverage Ratio is equal to or greater than the applicable Required Coverage Rates. Interest Only Security means any security that by its terms provides for periodic payments of interest and does not provide for the repayment of a stated principal amount. Interest Period means (i) with respect to the Initial Payment Date, the period from and including the Closing Date to but excluding the Initial Payment Date and (ii) thereafter with respect to each Payment Date, the period beginning on the first day following the end of the preceding Interest Period and ending on (and including) the day before the next Payment Date. Interest Reserve Account means the account established by the Trustee, held in the name of the Trustee for the benefit and on behalf of the Secured Parties and into which the Trustee will deposit, on each Payment Date, the Interest Reserve Amount, if any, in accordance with the Priority of Payments. Interest Reserve Amount means, as of any Calculation Date, the sum of (i) the aggregate Quarterly Pay Security Interest Reserve Amounts and (ii) the aggregate amount of Semi-Annual Pay Security Interest Reserve Amounts. Investment Advisers Act means the United States Investment Advisers Act of 1940, as amended. Investment Company Act means the U.S. Investment Company Act of 1940, as amended, and the rules thereunder. Irish Listing Agent means NCB Stockbrokers Limited. Irish Paying Agent means NCB Stockbrokers Limited. Issue means Collateral Interests issued by the same issuer secured by the same collateral pool. Issuer means N-Star REL CDO IV Ltd., an exempted company incorporated and existing under the law of the Cayman Islands, unless a successor Person shall have become the Issuer pursuant to the applicable provisions of this Indenture, and thereafter “Issuer” shall mean such successor Person. 25

Issuer Order and Issuer Request mean, respectively, a written order or a written request, which may be in the form of a standing order or request in each case dated and signed in the name of the Issuer (or, as expressly provided herein, the Collateral Manager on its behalf) by an Authorized Officer of the Issuer (or, as expressly provided herein, the Collateral Manager) and (if appropriate) the Co-Issuer, as the context may require or permit. LIBOR means, with respect to each Interest Period (other than the first Interest Period), a floating rate equal to the London interbank offered rate for one-month U.S. Dollar deposits determined in the manner described in Schedule B. LIBOR for the first Interest Period is 3.25358%. LIBOR Calculation Date has the meaning specified in Schedule B. Listed Bidders has the meaning specified in Schedule E. London Banking Day has the meaning specified in Schedule B. Majority means (a) with respect to any Class or Classes of Rated Notes, the Holders of more than 50% of the Aggregate Outstanding Amount of the Rated Notes of such Class or Classes of Rated Notes, as the case may be and (b) with respect to Income Notes, the Holders of more than 50% Income Notes Stated Amount.

Processed and formatted by SEC Watch - Visit SECWatch.com

Margin Stock means “margin stock” as defined under Regulation U issued by the Board of Governors of the Federal Reserve System. Market Value means, on any date of determination, the average of three or more bid-side prices expressed as a percentage of the par amount, obtained from independent, nationally recognized financial institutions in the relevant market for one or more Collateral Interests, each unaffiliated with each other and the Collateral Manager, as certified by the Collateral Manager (to the extent that such bid-side prices may be obtained by the Collateral Manager using its commercially reasonable efforts and commercially reasonable business judgment). If three or more bid-side prices cannot be so obtained, then the Market Value on such date of determination will be the lower of two bid-side prices, if two bid-side prices are obtained in the manner described above, and the sole bid-side price if only one bid-side price is obtained in the manner described above. If no bids can be obtained in the manner described above, the Market Value will be the price, expressed as a percentage of the par amount, determined by the Collateral Manager in its commercially reasonable judgment. Master Trust Agreement means that certain Master Trust Agreement, dated as of June 14, 2005, as the same may be amended or supplemented from time to time, between the Depositor and the Underlying Trustee. Measurement Date means any of the following: (a) the Effective Date; (b) any date after the Effective Date upon which the Issuer disposes or acquires (which date of acquisition shall be deemed to be the date on which the Issuer enters into commitments to acquire such Collateral Interest) any Collateral Interest; (c) each Calculation Date; (d) the last Business Day of each calendar month (other than the calendar month preceding the month in which a Calculation Date occurs and any calendar month prior to and including the month in which the Effective Date occurs); and (e) with reasonable notice to the Issuer, the Collateral Manager and the Trustee, any other Business Day that any Rating Agency or Holders of more than 50% of the then Aggregate Outstanding Amount of any Class of Rated Notes requests to be a “Measurement Date”; 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 day that is a Business Day. 26

Processed and formatted by SEC Watch - Visit SECWatch.com

Mezzanine Loans means mezzanine loans secured by ownership interests in entities owning commercial properties. Moneyline Telerate Page 3750 means the display page so designated on Moneyline Telerate Service (or such other page as may replace that page on that service, or such other service as may be nominated as the information vendor, for the purposes of displaying rates comparable to LIBOR). Monitoring Fee means, with respect to each Payment Date, an amount equal to 0.10% per annum of the Fee Basis Amount payable to the Collateral Manager pursuant to the Collateral Management Agreement. Moody’s means Moody’s Investors Service, Inc. and any successor or successors thereto. Moody’s Maximum Weighted Average Rating Factor Test means a test that will be satisfied on any Measurement Date if the Moody’s Tranched Weighted Average Rating Factor of the Collateral Interests is equal to or less than 4,000. Moody’s Rating means, with respect to any Collateral Interest: (i)

if such Collateral Interest is rated by Moody’s, such rating;

(ii)

if such Collateral Interest is not rated by Moody’s, then the Moody’s Rating of such Collateral Interest shall be deemed to be the rating thereof as may be assigned by Moody’s upon the request of the Issuer or the Collateral Administrator, provided that the Collateral Administrator may, consistent with Moody’s published criteria for underwriting and tranching of commercial real estate loans, use its estimated tranched ratings for Collateral Interests representing up to 10% of the Collateral Interest Principal Balance represented by Commercial Mortgage Loans, Subordinate Mortgage Loan Interests, and Mezzanine Loans; provided that the Collateral Manager shall submit such Collateral Interests for a Moody’s estimated rating with 30 days of acquisition;

(iii)

with respect to the CMBS that are CMBS conduit securities (i.e., CMBS representing interests in a pool of commercial mortgage loans), if such Collateral Interest is not rated by Moody’s, and no other security or obligation of the issuer or the obligor is rated by Moody’s and neither the Issuer nor the Collateral Administrator obtains a Moody’s Rating for such Collateral Interest pursuant to clause (ii) above, then the Moody’s Rating of such Collateral Interest may be determined using any one of the following methods: (a) if such Collateral Interest is rated by both S&P and Fitch or if such Collateral Interest is only rated by either S&P or Fitch but Moody’s has rated other classes in the same transaction then the Moody’s Rating will be 2 subcategories lower than the lowest Moody’s equivalent rating then outstanding on the Collateral Interest; or (b) if such Collateral Interest is only rated by one rating agency, then the Issuer or the Collateral Administrator on behalf of the Issuer may request that Moody’s assign a rating for such Collateral Interest, which shall be such Collateral Interest’s Moody’s Rating.

(iv)

with respect to the Collateral Interests that are REIT Debt Securities or other corporate debt securities, if such Collateral Interest is not rated by Moody’s, and no other security or obligation of the issuer or the obligor is rated by Moody’s and neither the Issuer nor the Collateral Administrator obtains a Moody’s Rating for such Collateral Interest 27

Processed and formatted by SEC Watch - Visit SECWatch.com

pursuant to clause (ii) above, then the Moody’s Rating of such Collateral Interest may be determined using any one of the following methods: (a) if such Collateral Interest is rated at least “BBB” by S&P, then the Moody’s Rating of such Collateral Interest will be one subcategory below the Moody’s equivalent of the rating assigned by S&P; or (b) if such Collateral Interest is rated “BB+” or below by S&P, then the Moody’s Rating of such Collateral Interest will be two subcategories below the Moody’s equivalent of the rating assigned by S&P. Notwithstanding the foregoing, Collateral Interests representing no more that 20% of the Collateral Interest Principal Balance may be rated pursuant to clauses (iii) and (iv) above and no single Collateral Interest Principal Balance that represents more than 5% of the Collateral Interest Principal Balance can be rated pursuant to clause (iii) or (iv) above. Moody’s Rating Factor means with respect to any Collateral Interest, the number set forth in the table below opposite the Moody’s Rating of such Collateral Interest. Moody’s Rating

Moody’s Rating Factor

Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca or lower

1 10 20 40 70 120 180 260 360 610 940 1,350 1,766 2,220 2,720 3,490 4,770 6,500 8,070 10,000

Moody’s Recovery Rate means, with respect to a Collateral Interest on any Measurement Date, an amount equal to the percentage for such Collateral Interest set forth in the Moody’s Recovery Rate Matrix attached as Schedule C hereto) in (x) the applicable table and (y) the row in such table opposite the Moody’s Rating (determined in accordance with procedures prescribed by Moody’s for such Collateral Interest on the date of its purchase by the Issuer or, in the case of an Impaired Interest, the Moody’s Rating immediately prior to default). Moody’s Tranched Weighted Average Rating Factor means, on any Measurement Date the number obtained by dividing (i) the sum of the series of products obtained for any Collateral Interest that by multiplying (a) the tranched principal balance on such Measurement Date of each such Collateral Interest by (b) its respective Moody’s Rating Factor on such Measurement Date by (ii) the aggregate tranched principal balance on such Measurement Date of all Collateral Interests and rounding the result up to the nearest whole number. Mortgaged Property means the multifamily or commercial property or properties securing the Commercial Mortgage Loans. Nonrecoverable Advance means any Interest Advance previously made or proposed to be made which, in the judgment of the Advancing Agent or the Trustee, as applicable, will not be ultimately recoverable from subsequent payments or collections with respect to the Collateral Interests. Any determination of 28

Processed and formatted by SEC Watch - Visit SECWatch.com

recoverability by the Advancing Agent or the Trustee, as applicable, shall be subject to the standard set forth in Section 10.17. Northstar Subsidiary shall have the meaning ascribed to such term in the S&P Letter. Note Paying Agent means any Person authorized by the Issuer to pay the principal of or interest on any Indenture Issued Notes on behalf of the Issuer as specified in Section 7.2. Note Payment Sequence means the application of Collections to pay principal on the Rated Notes in the following order, in each case until paid in full: (i) Class A Notes, (ii) Class B Notes, (iii) Class C Notes, (iv) Class D Notes, (v) Class E Notes, (vi) Class F Notes and (vii) Class G Notes. Note Register and Note Registrar have the respective meanings specified in Section 2.4(a). Note Transfer Agent has the meaning specified in Section 2.4(a). Note Valuation Report has the meaning specified in Section 10.11(a). Notes means the Rated Notes and the Income Notes. Offer means, with respect to any security, (a) any offer by the issuer of such security or by any other Person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related Underlying Instruments) or to convert or exchange such security into or for Cash, securities or any other type of consideration or (b) any solicitation by the issuer of such security or any other Person to amend, modify or waive any provision of such security or any related Underlying Instrument. Offering means the offering of the Rated Notes (other than the Class F Notes and the Class G Notes) under the Offering Circular. Offering Circular means the Offering Circular, prepared and delivered on or prior to the Closing Date in connection with the offer and sale of the Rated Notes (other than the Class F Notes and the Class G Notes), as amended or supplemented from time to time. Officer means, (a) with respect to the Issuer, the Co-Issuer and any corporation, the Chairman of the Board of Directors (or, with respect to the Issuer, any director), the President, any Vice President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of such entity; and (b) with respect to any bank or trust company acting as trustee of an express trust or as custodian, any Trust Officer. Opinion of Counsel means a written opinion addressed to the Trustee and each Rating Agency (each, a Recipient), in form and substance reasonably satisfactory to each Recipient, of an attorney at law admitted to practice before the highest court of any state of the United States or the District of Columbia (or the Cayman Islands, in the case of an opinion relating to the laws of the Cayman Islands), which attorney may, except as otherwise expressly provided in this Indenture, be inside or outside counsel for the Issuer or the Co-Issuer, as the case may be, and which attorney shall be reasonably satisfactory to the Trustee. Whenever an Opinion of Counsel is required hereunder, such Opinion of Counsel may rely on opinions of other counsel who are so admitted and so satisfactory which opinions of other counsel shall accompany such Opinion of Counsel and shall either be addressed to each Recipient or shall state that each Recipient shall be entitled to rely thereon. 29

Processed and formatted by SEC Watch - Visit SECWatch.com

Optional Redemption has the meaning specified in Section 9.1(a). Ordinary Shares means the 1,000 ordinary shares, par value U.S.$1.00 per share issued by the Issuer. Outstanding means with respect to the Notes as of any Measurement Date, any and all Notes theretofore authenticated and delivered under the Indenture and the Paying Agency Agreement other than Notes cancelled, redeemed, exchanged or replaced in accordance with the terms of the Indenture or the Paying Agency Agreement, as applicable; provided that in determining whether the Holders of the requisite percentage of Notes have given any direction, notice, consent, approval or objection, any Notes held or beneficially owned by the Collateral Manager or any of its Affiliates or by an account or fund for which the Collateral Manager or any of its Affiliates acts as the investment advisor with discretionary authority will be disregarded with respect to any vote or consent relating to the removal, termination, substitution or replacement of the Collateral Manager or the assignment by the Collateral Manager of its rights and obligations under the Collateral Management Agreement, except for any assignments or transfers by the Collateral Manager of its rights and obligations to Affiliates of the Collateral Manager, subject to any applicable requirements under the Investment Advisers Act. PAA Issued Note Paying Agent means Wells Fargo Bank, National Association, and any successors or assigns in its capacity as PAA Issued Note Paying Agent under the Paying Agency Agreement. PAA Issued Note Paying Agent Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by, or otherwise owing to, the PAA Issued Note Paying Agent during the preceding Due Period in accordance with the Paying Agency Agreement. PAA Issued Note Paying Agent Fee means, with respect to any Payment Date, for so long as any Class G Notes or Income Notes remain Outstanding, the fee payable to the PAA Issued Note Paying Agent in an aggregate amount equal to U.S.$10,000 per annum. PAA Issued Note Register means, with respect to the Income Notes and the Class G Notes, the note register maintained by the PAA Issued Note Registrar. PAA Issued Note Registrar means Wells Fargo Bank, National Association, and any successors or assigns in its capacity as PAA Issued Note Registrar under the Paying Agency Agreement. PAA Issued Notes means, together, the Class G Notes and the Income Notes. Participation Interests pari passu participation interests in commercial mortgage loans. Paying Agency Agreement means that certain Paying Agency Agreement, dated as of June 14, 2005, as the same may be amended or supplemented from time to time, between the Issuer and the PAA Issued Note Paying Agent. Paying Agents means, together, the Note Paying Agent and the PAA Issued Note Paying Agent. Payment Account means the Securities Account designated the “Payment Account” and established in the name of the Trustee pursuant to Section 10.9. Payment Date means the 27th day of each calendar month, or if such day is not a Business Day, the next succeeding Business Day, commencing in July, 2005 and ending in July, 2040 or such earlier date upon which all of the Notes are redeemed as provided herein. 30

Processed and formatted by SEC Watch - Visit SECWatch.com

Periodic Interest means the amount of interest payable (i) in respect of each Class of Floating Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of business on the day immediately preceding the relevant Payment Date, multiplying the resulting figure by the actual number of days in such Interest Period, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards), and (ii) in respect of each Class of Fixed Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of the Business Day immediately preceding the relevant Payment Date, multiplying the resulting figure by (a) for the first Interest Period, 43 days, and (b) for every other Interest Period, 30 days, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards). Permitted NS Purchaser means (i) NS CDO Holdings IV, LLC or (ii) NS Advisors, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act. Person means any individual, corporation, partnership, limited liability partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof or any similar entity. PIK Bond means any security that, pursuant to the terms of the related Underlying Instruments, permits the payment of interest thereon to be deferred or capitalized as additional principal thereof or not pay interest when scheduled (but without being an Impaired Interest) or that issues identical securities in lieu of payments of interest in Cash. Plan Asset Regulation means the U.S. Department of Labor regulation at 29 C.F.R. Section 2510.3-101. Pledged Collateral Interest means as of any date of determination, any Collateral Interest that has been Granted to the Trustee and has not been released from the lien of this Indenture pursuant to Section 10.12. Pledged Securities means on any date of determination, (a) the Collateral Interests, Equity Interests and the Eligible Investments that have been Granted to the Trustee and (b) all non-Cash proceeds thereof, in each case, to the extent not released from the lien of this Indenture pursuant hereto. Principal Balance means, with respect to any Collateral Interest or Eligible Investment, as of any date of determination, the outstanding principal amount of such Collateral Interest or Eligible Investment; provided that the Principal Balance of (i) any Collateral Interest which permits the deferral or capitalization of interest will not include any outstanding balance of the deferred and/or capitalized interest, (ii) any Equity Interest will be zero, (iii) any putable Collateral Interest which matures after the Stated Maturity Date will be the lower of the put price and the outstanding principal amount, (iv) any Collateral Interest or Eligible Investment in which the Trustee does not have a first priority perfected security interest shall be deemed to be zero and (v) the Principal Balance of an Earn-Out Asset will be the outstanding principal balance of such Earn-Out Asset, plus any undrawn commitments that have not been irrevocably reduced with respect to such Earn-Out Asset; provided, further, that for purposes of calculating the Principal Coverage Amount, an appraisal reduction of a Collateral Interest will be assumed to result in an implied reduction of Principal Balance for such Collateral Interest only if such appraisal reduction is intended to reduce the interest payable on such Collateral Interest and only in proportion to such interest reduction. 31

Processed and formatted by SEC Watch - Visit SECWatch.com

Principal Coverage Amount means, on any Measurement Date, an amount equal to (i) the aggregate Principal Balance of all Collateral Interests (other than Impaired Interests, Written Down Interests and Deferred Interest PIK Bonds) included in the Collateral on such date, plus (ii) the aggregate Principal Balance of the Eligible Investments in the Collateral Account on such date that represent Collateral Principal Collections, plus (iii) the Impaired Interests Amount, plus (iv) with respect to Written Down Interests, the Reduced Principal Balance, plus (v) the Deferred Interest PIK Bond Amount. For purposes of calculating the Principal Coverage Amount, any Collateral Interest that has sustained an implied reduction of Principal Balance due to an appraisal reduction will not be considered an Impaired Interest solely due to such implied reduction. Principal Coverage Ratio means, on any Measurement Date for any Class of Notes, the ratio (expressed as a percentage) based on the ratio of (x) to (y), where (x) is the Principal Coverage Amount as of such Measurement Date and (y) is the sum of the aggregate principal amount of such as class and each Senior Class of Notes as of such Measurement Date. Principal Coverage Test means, for any Class of Notes Outstanding, a test satisfied on any Measurement Date if the applicable Principal Coverage Ratio as of such Measurement Date is equal to or greater than the applicable Required Coverage Rates. Principal Prepayments means, following any failure of any Coverage Test as of any Calculation Date, amounts that would otherwise be used (i) for payments of Income Note Excess Funds, (ii) for the purchase of additional Collateral Interests, (iii) for the payment of certain fees and expenses, (iv) in the case of a failure to satisfy any Coverage Test for any Class of Notes, for interest payments on each Subordinate Class of Notes, in each case to the extent necessary to satisfy such Coverage Test as of the related Calculation Date, to principal payments on each Class of Notes, starting with the most senior Class of Notes then Outstanding, until such Coverage Test is satisfied as of the related Calculation Date or the Notes are paid in full. Priority of Payments means, collectively, the priority of payments specified in Section 11.1(a), (b) and (c) or upon an Event of Default, the priority of payments in connection therewith. Proceeding means any suit in equity, action at law or other judicial or administrative proceeding. Proposed Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Interests and the proceeds of disposition thereof held as Cash, (b) Uninvested Proceeds held as Cash and (c) Eligible Investments purchased with Uninvested Proceeds or the proceeds of disposition of Pledged Collateral Interests resulting from the sale, maturity or other disposition of a Pledged Collateral Interest or a proposed purchase of a Collateral Interest, as the case may be. Purchased Accrued Interest means all payments of interest received, or amounts collected that are attributable to interest received on Collateral Interests and Eligible Investments, to the extent such payments or amounts constitute accrued interest purchased with Collateral Principal Collections except for interest accrued on Collateral Interests prior to the Closing Date. Qualified Bidder List means a list of not less than three Persons that are Independent from one another and the Issuer prepared by the Collateral Manager and delivered to the Trustee prior to an Auction, as may be amended and supplemented by the Collateral Manager from time to time upon written notice to the Trustee; provided that (i) the Qualified Bidder List may include the Collateral Manager as a Qualified Bidder if it is Independent from the other Persons on such list and (ii) any such notice referred to above shall only be effective on any Auction Date if it was received by the Trustee at least two Business Days prior to such Auction Date. 32

Processed and formatted by SEC Watch - Visit SECWatch.com

Qualified Bidders means the Persons whose names appear from time to time on the Qualified Bidder List. Qualified Institutional Buyer has the meaning given in Rule 144A under the Securities Act. Qualified Institutional Lender means a qualified institutional lender of the type typically permitted to acquire subordinate interests in commercial mortgage loans (all or a portion of which will be included in a CMBS transaction) pursuant to the documents creating such interests. Qualified Purchaser means (i) a “qualified purchaser” as defined in Section 2(a)(51) of the Investment Company Act and the rules thereunder, (ii) a “knowledgeable employee” with respect to the Issuer as defined in rule 3c-5 under the Investment Company Act or (iii) a company beneficially owned exclusively by one or more “qualified purchasers” and/or “knowledgeable employees” with respect to the Issuer. Qualified REIT Subsidiary means a “Qualified REIT Subsidiary” within the meaning of Section 856(i)(2) of the Code. Qualifying Foreign Obligor means a corporation, partnership or other entity organized or incorporated under the law of any of Australia, Canada, France, Germany, Ireland, Italy, New Zealand, Sweden, Switzerland or the United Kingdom, so long as the unguaranteed, unsecured and otherwise unsupported long-term Dollar sovereign debt obligations of such country are rated “Aa2” or better by Moody’s and “AA” or better by S&P. Quarterly Pay Security means a security that provides for periodic payments of interest in cash quarterly. Quarterly Pay Security Interest Reserve Amount means, with respect to each Collateral Interest that is a Quarterly Pay Security, as of any Calculation Date, the amount equal to (i) the amount of interest paid by the obligor on the most recent payment date (or, if no payment date has occurred, the estimated interest payment due on the first payment date) with respect to such Quarterly Pay Security multiplied by (ii) (A) the number of months until the next payment date with respect to such Quarterly Pay Security minus one (rounded up to the nearest whole number) divided by (B) three; provided that for any Quarterly Pay Security with respect to which no scheduled interest payments remain, the Quarterly Pay Security Interest Reserve Amount shall be zero. Rake Bond means a CMBS backed solely by a single promissory note secured by a mortgaged property, which promissory note is subordinate in right of payment to one or more separate promissory notes secured by the same mortgaged property. Ramp-Up Period means the period commencing on the Closing Date and ending on the Effective Date. Rated Note Calculation Agent has the meaning specified in Section 7.15. Rated Notes means, collectively, the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes. Rated Noteholder means, with respect to any Rated Note, the Person in whose name such Note is registered; provided that Beneficial Owners or Agent Members will have no rights under the Indenture with respect to Global Notes, and the Rated Noteholder may be treated by the Issuer and the Trustee (and any agent of any of the foregoing) as the owner of such Global Notes for all purposes whatsoever. Rating means, as the context requires, an S&P Rating or a Moody’s Rating. 33

Processed and formatted by SEC Watch - Visit SECWatch.com

Rating Agency means each of (i) Moody’s, for so long as any of the Outstanding Rated Notes are rated by Moody’s (including any private or confidential rating) and (ii) S&P, for so long as any of the Outstanding Rated Notes are rated by Moody’s (including any private or confidential rating) or, with respect to Pledged Securities generally, if at any time Moody’s or S&P ceases to provide rating services, any other nationally recognized investment rating agency selected by the Issuer (upon consultation with the Collateral Manager) and reasonably satisfactory to a Majority of each Class of Rated Notes. In the event that at any time Moody’s ceases to be a Rating Agency, references to rating categories of Moody’s in this Indenture shall be deemed instead to be references to the equivalent categories of such other rating agency as of the most recent date on which such other rating agency and Moody’s published ratings for the type of security in respect of which such alternative rating agency is used. In the event that at any time S&P ceases to be a Rating Agency, references to rating categories of S&P in this Indenture shall be deemed instead to be references to the equivalent categories of such other rating agency as of the most recent date on which such other rating agency and S&P published ratings for the type of security in respect of which such alternative rating agency is used. Rating Agency Confirmation means, with respect to any specified action or determination, for so long as any of the Rated Notes are Outstanding and rated by Moody’s or S&P, the receipt of written confirmation by each Rating Agency rating any Rated Notes, that such specified action or determination will not result in the reduction or withdrawal or other adverse action with respect to their then-current ratings on the Rated Notes (including any private or confidential rating) unless Rating Agency Confirmation is specified herein to be required by only Moody’s or S&P, in which case such Rating Agency Confirmation will be sufficient. Rating Confirmation has the meaning specified in Section 7.18(e). Rating Confirmation Failure has the meaning specified in Section 7.18(e). Real Estate CDO Securities means securities that entitle the holders thereof to receive payments that depend on the cash flow from or the credit exposure to a portfolio consisting primarily of (i) REIT Debt Securities, (ii) commercial mortgage backed securities or (iii) a combination of the foregoing; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the Real Estate CDO Securities such as a financial guaranty insurance policy. Record Date means the date on which the Holders of Rated Notes entitled to (i) vote with respect to any matters under the Indenture are determined, such date being the 15th day (whether or not a Business Day) prior to the date the Trustee delivers notice with respect to such vote and (ii) receive a payment in respect of principal or interest on the succeeding Payment Date or Redemption Date are determined, such date as to any Payment Date or Redemption Date with respect to any Global Note being the first day (whether or not a Business Day) prior to such Payment Date or Redemption Date and with respect to any Certificated Note being the fifteenth day (whether or not a Business Day) prior to such Payment Date or Redemption Date. Redemption means an Optional Redemption, an Auction Call Redemption or a Tax Redemption. Redemption Date means the Payment Date upon which the Rated Notes are redeemed pursuant to an Optional Redemption, an Auction Call Redemption or a Tax Redemption. Redemption Date Statement has the meaning specified in Section 10.11(b). 34

Processed and formatted by SEC Watch - Visit SECWatch.com

Redemption Premium The premium payable to Holders of each Class of Fixed Rate Notes in connection with an Optional Redemption of such Class of Fixed Rate Notes in an amount equal to the excess, if any, of (i) the present value (discounted to the applicable Redemption Date using the Reinvestment Yield on a monthly basis using a 360-day year of twelve 30-day months as the discount rate) of the remaining payments of interest and principal due on such Class of Fixed Rate Notes, assuming that the entire outstanding principal amount of such Class of Fixed Rate Notes will be paid on the Payment Date occurring in July 2017 and that each intervening payment of interest on such Class of Fixed Rate Notes will be made on the related Payment Date in its entirety (and therefore there is no Defaulted Interest on such Class of Fixed Rate Notes) over (ii) the outstanding principal amount of such Class of Fixed Rate Notes on the applicable Redemption Date. Redemption Price means, (i) with respect to each Class of Rated Notes, (a) their then Aggregate Outstanding Amount plus (b) accrued interest thereon to the date of redemption to the extent not already paid (including, without limitation, any Cumulative Applicable Periodic Interest Shortfall Amount together with interest thereon) plus (c) unreimbursed Interest Advances plus (d) in the case of an Optional Redemption only and with respect to any Fixed Rate Notes, the applicable Redemption Premium and (ii) if the Income Notes are redeemed, the “Redemption Price” for the Income Notes, means an amount equal to the aggregate of any residual amounts distributable on the Income Notes in respect of such redemption pursuant to Section 11.1(a) and (b). Redemption Spread means, with respect to the Class F Notes, 5.75% and with respect to the Class G Notes, 6.50%. Reduced Principal Balance means, with respect to each Written Down Interest, the original Principal Balance of such Written Down Interest minus the Written Down Amount as notified by or on behalf of the related issuer or trustee to the holders of such Written Down Interest (including appraisal reductions on CMBS). Reference Banks has the meaning specified in Schedule B. Registered means in registered form for U.S. federal income tax purposes and issued after July 18, 1984; provided that a certificate of interest in a trust that is treated as a grantor trust for U.S. federal income tax purposes will not be treated as Registered unless each of the obligations or securities held by the trust was issued after that date. Registered Form has the meaning specified in Section 8-102(a)(13) of the UCC. Regulation S means Regulation S under the Securities Act. Regulation S Certificated Note has the meaning specified in Section 2.4(b)(1)(vi). Regulation S Global Note has the meaning specified in Section 2.1(a). Regulation S Note has the meaning specified in Section 2.1(a). Regulation S Transfer Certificate has the meaning specified in Section 2.4(b)(1)(iii). Regulation U means Regulation U of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 221, or any successor regulation. 35

Reimbursement Rate means a per annum rate equal to the “prime rate” as published in the “Money Rates” section of the Wall Street Journal, as such “prime rate” may change from time to time. Reinvestment Criteria means, with respect to any reinvestment of Collateral Principal Payments, the following criteria: (i) the Collateral Quality Tests are satisfied, or, if any Collateral Quality Test was not satisfied immediately prior to such investments, such Collateral Quality Test will be maintained or improved following such reinvestment; (ii) the Coverage Tests are satisfied, or, if any Coverage Test was not satisfied immediately prior to such investments, such Coverage Test will be maintained or improved following such reinvestment; (iii) if immediately prior to such reinvestment the Moody’s Maximum Weighted Average Rating Factor Test was not satisfied, the weighted average of the Moody’s Rating Factors of the Substitute Collateral Interests purchased with Sale Proceeds from the Collateral Interests being replaced will be no higher than the weighted average of the Moody’s Rating Factors of such Collateral Interests at the time they were released for sale by the Trustee; (iv) if immediately prior to such reinvestment the Weighted Average Spread Test was not satisfied, the Weighted Average Spread of the Substitute Collateral Interests purchased with Sale Proceeds from the Collateral Interests being replaced will be no lower than the Weighted Average Spread of such Collateral Interests at the time they were released for sale by the Trustee; and (v)

no Event of Default has occurred and is continuing.

Processed and formatted by SEC Watch - Visit SECWatch.com

Reinvestment Period means the period beginning on the Closing Date and ending on and including the Payment Date in July, 2010. Reinvestment Yield means with respect to either class of the Fixed Rate Notes, the rate equal to the sum of the Redemption Spread with respect to such Fixed Rate Note and the applicable yield to maturity implied by (i) the yields reported as of 10:00 a.m. (New York City time) on the tenth Business Day preceding the related Optional Redemption Date on the display page designated as “Page 678” on the Telerate Service (or such other display as may replace Page 678 on the Telerate Service) for actively traded U.S. Treasury securities having a maturity as nearly as practicable equal to the Payment Date occurring in July 2017 or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the tenth Business Day preceding the Optional Redemption Date, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity as nearly as practicable equal to the Payment Date occurring in July 2017. REIT Debt Securities means securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities) of a portfolio of real property interests. Relevant Jurisdiction means, as to any obligor on any Collateral Interest, any jurisdiction (a) in which the obligor is incorporated, organized, managed and controlled or considered to have its seat, (b) where an office through which the obligor is acting for purposes of the relevant Collateral Interest is located, (c) in 36

Processed and formatted by SEC Watch - Visit SECWatch.com

which the obligor executes Underlying Instruments or (d) in relation to any payment, from or through which such payment is made. 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 and maintained by the Bond Market Association. Required Coverage Ratio means, with respect to a specified Class of Notes and the related Interest Coverage Test or Principal Coverage Test, as the case may be, as of any Calculation Date, the applicable percentage indicated below opposite such specified Class or Classes: C lass

Prin cipal C ove rage Te st

Class C Class D Class E Class F Class G

Inte re st C ove rage Te st

137.00% 132.10% 119.40% 114.90% 110.00%

135.00% 125.00% 118.00% 115.00% 110.00%

Requisite Noteholders means the Holders of 662/3% or more of the then Aggregate Outstanding Amount of (i) the Class A Notes, so long as any Class A Notes remain Outstanding, (ii) thereafter the Class B Notes so long as any Class B Notes remain Outstanding, (iii) thereafter the Class C Notes so long as any Class C Notes remain Outstanding, (iv) thereafter the Class D Notes so long as any Class D Notes remain Outstanding, (v) thereafter the Class E Notes so long as any Class E Notes remain Outstanding, (vi) thereafter the Class F Notes so long as any Class F Notes remain Outstanding and (vii) thereafter the Class G Notes so long as any Class G Notes remain Outstanding. Reserved Matters has the meaning specified in Section 8.2(j). Rule 144A means Rule 144A under the Securities Act. Rule 144A Certificated Note has the meaning specified in Section 2.4(b)(1)(vi). Rule 144A Global Note has the meaning specified in Section 2.1(b). Rule 144A Information means such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto). Rule 144A Note has the meaning specified in Section 2.1(b). Rule 144A Transfer Certificate has the meaning specified in Section 2.4(b)(1)(ii). S&P means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor or successors thereto. S&P CDO Monitor means the dynamic, analytical computer model provided by S&P to the Collateral Manager and the Trustee (together with such instructions and assumptions as are necessary to run such model) on or prior to the Effective Date used to determine the credit risk of a portfolio of Collateral Interests, as may be modified by S&P from time to time. S&P CDO Monitor Test means the test which is satisfied, as of any Calculation Date, if each of the Class A Note Default Differential, the Class B Note Default Differential, the Class C Note Default 37

Processed and formatted by SEC Watch - Visit SECWatch.com

Differential, the Class D Note Default Differential, the Class E Note Default Differential, the Class F Note Default Differential and the Class G Note Default Differential of the Current Portfolio or the Proposed Portfolio, as applicable, is positive. The S&P CDO Monitor Test will be considered to be improved if the Class A Note Default Differential of the Proposed Portfolio is greater than the Class A Note Default Differential of the Current Portfolio, the Class B Note Default Differential of the Proposed Portfolio is greater than the Class B Note Default Differential of the Current Portfolio, the Class C Note Default Differential of the Proposed Portfolio is greater than the Class C Note Default Differential of the Current Portfolio, the Class D Note Default Differential of the Proposed Portfolio is greater than the Class D Note Default Differential of the Current Portfolio, the Class E Note Default Differential of the Proposed Portfolio is greater than the Class E Note Default Differential of the Current Portfolio, the Class F Note Default Differential of the Proposed Portfolio is greater than the Class F Note Default Differential of the Current Portfolio, and the Class G Note Default Differential of the Proposed Portfolio is greater than the Class G Note Default Differential of the Current Portfolio. S&P Industry Classification Group means any of the S&P industrial classification groups as set forth on Schedule H and any additional classification groups established by S&P with respect to the Collateral Interests and provided, in each case, by the Collateral Manager or S&P to the Trustee. S&P Letter means that certain letter dated December 10, 2004, from S&P to Northstar Capital (as predecessor in interest to Northstar Realty Finance Corp.). S&P Minimum Average Recovery Rate means, as of any date or determination, a rate expressed as a percentage equal to the number obtained by (i) summing the products obtained by multiplying the Principal Balance of each Collateral Interest by its S&P Recovery Rate set forth in a schedule of the Indenture and (ii) dividing such sum by the Collateral Interest Principal Balance less cash and Eligible Investments representing Collateral Principal Collections and (iii) rounding up to the first decimal place. S&P Minimum Average Recovery Rate Test means a test that will be satisfied as of any Measurement Date if the S&P Minimum Average Recovery Rate is greater than or equal to (i) 27.30% with respect to the Class A Notes, (ii) 27.60% with respect to the Class B Notes, (iii) 27.70% with respect to the Class C Notes, (iv) 29.90% with respect to the Class D Notes, (v) 29.90% with respect to the Class E Notes, (vi) 31.20% with respect to the Class F Notes and (vii) 32.50% with respect to the Class G Notes. S&P’s Preferred Format means an electronic spreadsheet file to be provided to S&P, which file shall include the following information, if available (to the extent such information is not confidential) with respect to each Collateral Interest: (a) the name and country of domicile of the issuer thereof and the particular issue held by the Issuer, (b) the CUSIP or other applicable identification number associated with such Collateral Interest, (c) the par value of such Collateral Interest, (d) the type of issue (including, by way of example, whether such Collateral Interest is a bond, loan or asset-backed security), using such abbreviations as may be selected by the Trustee, (e) a description of the index or other applicable benchmark upon which the interest payable on such Collateral Interest is based (including, by way of example, fixed rate, stepup rate, zero coupon and LIBOR), (f) the coupon (in the case of a Collateral Interest which bears interest at a fixed rate) or the spread over the applicable index (in the case of a Collateral Interest which bears interest at a floating rate), (g) the S&P Industry Classification Group for such Collateral Interest, (h) the Stated Maturity Date of such Collateral Interest, (i) the S&P Rating of such Collateral Interest or the issuer thereof, as applicable, (j) the priority category assigned by S&P to such Collateral Interest, if available and (k) such other information as the Trustee may determine to include in such file. 38

Processed and formatted by SEC Watch - Visit SECWatch.com

S&P Rating means a rating of any Collateral Interest determined as follows: (a)

if S&P has assigned a rating to such Collateral Interest either publicly or privately (in the case of a private rating, with the written consent of the issuer of such Collateral Interest for use of such private rating and delivery of a copy of such consent to S&P), the S&P Rating shall be the rating assigned thereto by S&P; provided that, solely for purposes of determining compliance with the S&P CDO Monitor Test, if such Collateral Interest is placed on a watch list for possible upgrade or downgrade by S&P, the S&P Rating applicable to such Collateral Interest shall be one rating subcategory above or below, respectively, the S&P Rating applicable to such Collateral Interest immediately prior to such Collateral Interest being placed on such watch list;

(b)

if such Collateral Interest is not rated by S&P but the Issuer or the Collateral Manager on behalf of the Issuer has requested that S&P assign a rating to such Collateral Interest, the S&P Rating shall be the rating so assigned by S&P; provided that pending receipt from S&P of such rating, if such Collateral Interest is not eligible for notching in accordance with a Schedule G hereto, such Collateral Interest shall have a S&P Rating of “CCC-,” otherwise such S&P Rating shall be the rating assigned according to Schedule F hereto until such time as S&P shall have assigned a rating thereto; or

(c)

if any Collateral Interest is a Collateral Interest that has not been assigned a rating by S&P and is not a Collateral Interest listed in Schedule G hereto, as identified by the Collateral Manager, refer to Schedule F hereto to determine the S&P Rating; provided that (i) if any Collateral Interest shall, at the time of its purchase by the Issuer, be listed for a possible upgrade or downgrade on either Moody’s or S&P’s then current credit rating watch list, then the S&P Rating of such Collateral Interest shall be one subcategory above or below, respectively, the rating then assigned to such item in accordance with Schedule F hereto; (ii) for purposes of determining compliance with S&P CDO Monitor Test, if the rating assigned to such Collateral Interest pursuant to this subparagraph (c) is placed on a watch list for possible upgrade or downgrade by any Rating Agency, the S&P Rating applicable to such Collateral Interest shall be one rating subcategory above or below, respectively, the S&P Rating applicable to such Collateral Interest immediately prior to such Collateral Interest being placed on such watch list and (iii) the aggregate Principal Balance that may be given a rating based on this subparagraph (iii) may not exceed 20% of the aggregate Principal Balance of all Collateral Interests; provided that if any Collateral Interest has not been assigned a rating by S&P and is a type of Collateral Interest not listed on Schedule G hereto, subsequent to the Closing Date, (A) the acquisition of any such Collateral Interest will require an estimate or shadow rating from S&P, the assignment of an S&P Recovery Rate to such Collateral Interest and receipt of Rating Agency Confirmation from S&P prior to the acquisition by the Issuer of such Collateral Interest or (B) the Collateral Administrator may use the tranched ratings determined in accordance with Schedule I for Collateral Interests represented by Commercial Mortgage Loans, Subordinate Mortgage Loan Interests and Mezzanine Loans representing up to 20% of the Collateral Interests Principal Balance;

notwithstanding the foregoing, if any Collateral Interest shall, at the time of its purchase by the Issuer, be listed for a possible upgrade or downgrade on the then current S&P credit rating watch list, then the S&P Rating of such Collateral Interest shall be one subcategory above or below, respectively, the rating then assigned to such item by S&P, as applicable; provided that if such Collateral Interest is removed from such list at any time, it shall be deemed to have its then-current actual rating by S&P. 39

Processed and formatted by SEC Watch - Visit SECWatch.com

S&P Recovery Rate means, with respect to a Collateral Interest on any Calculation Date, an amount equal to the percentage for such Collateral Interest set forth in the S&P Recovery Rate Matrix attached as a Schedule D (determined in accordance with procedures prescribed by S&P for such Collateral Interest on such Calculation Date or, in the case of Impaired Interests, the S&P Rating immediately prior to default). Sale has the meaning specified in Section 5.17(a). Sale Proceeds means all proceeds (including accrued interest) received with respect to Collateral Interests and Equity Interests as a result of sales of such Collateral Interests and Equity Interests pursuant to the Indenture, net of any reasonable amounts expended by the Collateral Manager or the Trustee in their good faith determination in connection with such sale or disposition. Schedule of Collateral Interests means the list of Collateral Interests securing the Indenture Issued Notes that is attached as Schedule A. Scheduled Distribution means, with respect to any Pledged Security, for each Due Date, the scheduled payment in Cash of principal and/or interest and/or fees due on such Due Date with respect to such Pledged Security, determined in accordance with the assumptions specified in Section 1.2. Second Currency has the meaning specified in Section 14.13. Secured Parties means the Trustee, for the benefit of the Rated Noteholders (other than the Class G Noteholders) and the Collateral Manager. Securities Account has the meaning specified in Section 8-501(a) of the UCC. Securities Act means the U.S. Securities Act of 1933, as amended. Securities Intermediary has the meaning specified in Section 8-102(a)(14) of the UCC. Security has the meaning specified in Section 8-102(a)(15) of the UCC. Seller means NRFC DB Holdings, LLC and its successors or assigns, in its capacity as seller under the Asset Transfer Agreement or any other seller of Collateral Interests acquired by the Issuer or the Underlying Trustee after the Closing Date. Semi-Annual Pay Security means a security that provides for periodic payments of interest in Cash semi-annually. Semi-Annual Pay Security Interest Reserve Amount means, with respect to each Collateral Interest that is a Semi-Annual Pay Security, as of any Calculation Date, the amount equal to (i) the amount of interest paid by the obligor on the most recent payment date (or if no payment date has occurred, the estimated interest payment due on the first payment date) with respect to such Semi-Annual Pay Security multiplied by (ii) (A) the number of months until the next payment date with respect to such Semi-Annual Pay Security minus one (rounded up to the nearest whole number) divided by (B) six; provided that for any Semi-Annual Pay Security with respect to which no scheduled interest payments remain, the Semi-Annual Pay Security Interest Reserve Amount shall be zero. Senior Collateral Management Fee means with respect to each Payment Date, a senior fee equal to the sum of (a) the Monitoring Fee and (b) the Senior Structuring Fee payable to the Collateral Manager pursuant to the Collateral Management Agreement; provided that the Senior Collateral Management Fee 40

Processed and formatted by SEC Watch - Visit SECWatch.com

will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Senior Collateral Management Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Senior Collateral Management Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Senior Collateral Management Fee accrued but not paid prior to the resignation or removal of the Collateral Manager shall continue to be payable to the Collateral Manager on the Payment Date immediately following the effectiveness of such resignation or removal. Senior Interests means the interests in a Commercial Mortgage Loan which rank senior in priority to the Subordinate Mortgage Loan Interests in the same Commercial Mortgage Loan. Senior Notes means, with respect any Class of Notes (other than the Class A Notes) the Class or Classes of Notes with a prior alphabetical designation. Senior Structuring Fee means, with respect to each Payment Date, an amount equal to 0.04875% per annum of the Fee Basis Amount payable to the Collateral Manager pursuant to the Collateral Management Agreement. Servicing Agreement means that certain Servicing Agreement, dated as of June 14, 2005, as the same may be amended or supplemented from time to time, between Wachovia Bank, National Association as servicer and Wells Fargo Bank, National Association as underlying trustee. Special Amortization Pro Rata Condition means a condition that will be satisfied with respect to any Payment Date on which either: (A) (I) the aggregate Collateral Interest Principal Balance as of the related Calculation Date is at least equal to 50% of the aggregate Collateral Interest Principal Balance on the Closing Date, (II) the Collateral Quality Tests are satisfied, (III) no Principal Coverage Test is failing as of such Payment Date and (IV) no Principal Coverage Test has previously failed for two or more Calculation Dates unless, as of the related Payment Date, the Principal Coverage Ratio related to such Principal Coverage Test equals or exceeds the related Principal Coverage Ratio in existence on the Closing Date; or (B) if clause (A) above is not satisfied, Rating Agency Confirmation has been provided by Moody’s and S&P with respect to the pro rata payment of principal of the Rated Notes. Specified Currency has the meaning specified in Section 14.13. Specified Person has the meaning specified in Section 2.5(a). Specified Place has the meaning specified in Section 14.13. Specified Types means any Trust Certificate, CMBS, Real Estate CDO Security and REIT Debt Security. Stated Maturity Date means the Payment Date occurring in July 2040. Subordinate Collateral Management Fee means the fee payable to the Collateral Manager at a per annum rate in arrears on each Payment Date pursuant to the Collateral Management Agreement, in an amount (as certified by the Collateral Manager to the Trustee) equal to 0.20% of the Fee Basis Amount for such Payment Date; provided that the Subordinate Collateral Management Fee will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Subordinate Collateral Management Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Subordinate Collateral Management Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Subordinate Collateral Management Fee accrued but not paid prior to the resignation 41

Processed and formatted by SEC Watch - Visit SECWatch.com

or removal of the Collateral Manager shall continue to be payable to the Collateral Manager on the Payment Date immediately following the effectiveness of such resignation or removal. Subordinate Mortgage Loan Interests means subordinate interests in commercial mortgage loans (including subordinate participation interests in commercial mortgage loans) and subordinate commercial mortgage loans. Subpool means each of the groups of the Collateral Interests designated by the Collateral Manager in accordance with the Auction Procedures on which the Listed Bidders may provide a separate bid in an Auction. Substitute Collateral Interest means a debt obligation meeting the Eligibility Criteria acquired by or on behalf of the Issuer with Collateral Principal Proceeds or Sale Proceeds that are reinvested in accordance with the provisions of the Indenture. Synthetic Security means any swap transaction, debt security, security issued by a trust or similar vehicle or other investment, the returns on which (as determined by the Collateral Manager) are linked to the credit performance of a reference obligation, but which may provide for a different maturity, payment date, interest rate, credit exposure or other credit or non-credit related characteristics from such reference obligation. Taxed Collateral Interest has the meaning specified in Section 7.7(e). Taxes means any present or future taxes, duties, assessments or governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by any governmental authority having power to tax. Tax Event means an event that will occur if (i) any obligor or withholding agent is, or on the next scheduled payment date under any Collateral Interest, will be, required to deduct or withhold from any payment under any Collateral Interest to the Issuer (other than any commitment fee with respect to the unfunded portion of any Earn-Out Assets) for or on account of any tax for whatever reason and such obligor or withholding agent is not required to pay to the Issuer such additional amount as is necessary to 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, (ii) any jurisdiction imposes net income, profits, or similar tax on the Issuer, (iii) the Issuer being required to deduct or withhold from any payment under a Hedge Agreement for or on account of any tax and the Issuer being obligated to make a gross up payment (or otherwise pay additional amounts) to the Hedge Counterparty or (iv) a Hedge Counterparty being required to deduct or withhold from any payment under a Hedge Agreement for or on account of any tax for whatever reason if such Hedge Counterparty is not required to pay to the Issuer such additional amount as is necessary to 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 the sum of the amount of (i) such a tax or taxes imposed on the Issuer or withheld from payments to the Issuer to the extent the Issuer receives less than the full amount that the Issuer would have received had no such deduction occurred and (ii) such gross up payments required to be made by the Issuer to the extent they exceed the amounts that the Issuer would have been required to pay had no deduction or withholding been required, in the aggregate, equals ten percent (10%) or more of the amount of aggregate interest payments on all of the related Collateral Interests during the related Due Period. Tax Redemption has the meaning specified in Section 9.1(b). 42

Processed and formatted by SEC Watch - Visit SECWatch.com

Tax Subsidiary has the meaning specified in Section 7.7(e). Tenant Lease Loan Interests means commercial mortgage-backed securities that entitle the holders thereof to receive payments that depend on the cash flow from a pool of commercial mortgage loans made to finance the acquisition, construction and improvement of properties primarily leased to tenants engaged in a business (or on the cash flow from such leases), the underwriting of which is dependent primarily on the creditworthiness of the related tenants; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the commercial mortgage-backed securities such as a financial guaranty insurance policy. Transaction Documents means the Indenture, the Collateral Management Agreement, the Account Control Agreement, the Corporate Services Agreement, the Collateral Administration Agreement, any Hedge Agreement and the Paying Agency Agreement. Trust Certificate means one or more trust certificates each of which represents an ownership interest in the Underlying Trust created pursuant to the Master Trust Agreement, which are secured by Subordinate Mortgage Loan Interests, Mezzanine Loans, Participation Interests, Commercial Mortgage Loans, Credit Lease Loans and/or Tenant Lease Loan Interests. Trust Officer means, when used with respect to the Trustee, any Officer within the Corporate Trust Office working on the transaction described in this Indenture and (or any successor group of the Trustee) authorized to act for and on behalf of the Trustee, including any vice president, assistant vice president or other Officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such Officers, respectively, or to whom any corporate trust matter is referred at the Corporate Trust Office because of such person’s knowledge of and familiarity with the particular subject. Trustee means Wells Fargo Bank, National Association, and any successors or assigns, in its capacity as trustee under this Indenture. Trustee Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by or otherwise owing to the Trustee during the preceding Due Period in accordance with the Indenture, other than the Trustee Fee, including, without limitation, any expenses or indemnities incurred by the Trustee (and the Bank) in any of its capacities (including in its capacity as Collateral Administrator, Calculation Agent, Note Paying Agent, PAA Issued Note Paying Agent and Registrar). Trustee Fee means, with respect to any Payment Date, the fee payable to the Trustee in an aggregate amount equal to 0.02% per annum of the Collateral Interest Principal Balance as of the first day of the related Due Period; provided that in no event shall, so long as any Class of Rated Notes remains Outstanding, such fee be an annual amount less than U.S.$40,000. Trustee Interest Advance Fee means, a per annum fee payable to the Trustee in accordance with the Priority of Payments on each Payment Date equal to 0.00125% of the outstanding principal amount of the Class A Notes and the Class B Notes immediately prior to such Payment Date. UCC means the Uniform Commercial Code as in effect in the State of New York. 43

Processed and formatted by SEC Watch - Visit SECWatch.com

Underlying Instrument means the agreement pursuant to which a Pledged Security has been issued or created and each other agreement that governs the terms of or secures the obligations represented by such Pledged Security or of which the holders of such Pledged Security are the beneficiaries. Underlying Trust means the newly formed trust established pursuant to the Master Trust Agreement. Underlying Trust Expenses means, all reasonable expenses, disbursements and advances incurred or made by the Underlying Trustee in accordance with any provision of the Master Trust Agreement or in the administration or the enforcement of any provision thereof (including the reasonable compensation, expenses and disbursements of its agents and counsel) including, without limitation, any amounts in respect of indemnification owed to the Underlying Trustee pursuant to Section 6.04 of the Master Trust Agreement, but excluding any overhead or employee expenses of the Underlying Trustee. Underlying Trustee means Wells Fargo Bank, National Association, in its capacity as underlying trustee pursuant to the Master Trust Agreement, and any successor or successors thereto. Uninvested Proceeds means, at any time, the net proceeds received by the Issuer on the Closing Date from the initial issuance of the Rated Notes and Income Notes, to the extent such proceeds have not theretofore been invested in Collateral Interests. Uninvested Proceeds Account has the meaning specified in Section 10.4. United States or U.S. means the United States of America, including the States thereof and the District of Columbia. Unregistered Securities has the meaning specified in Section 5.17(c). U.S. Person has the meaning given in Regulation S under the Securities Act. USA PATRIOT Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56 (2001). Weighted Average Fixed Rate Coupon means, as of any Measurement Date, the sum (rounded up to the next 0.001%) obtained by (i) multiplying the Principal Balance of each Fixed Rate Collateral Interest (except Collateral Interests that are currently deferring interest) held in the portfolio as of such date by the then-current interest rate, (ii) summing the amounts determined pursuant to clause (i) for all Fixed Rate Collateral Interests held in the portfolio as of such date and (iii) dividing such sum by the aggregate Principal Balance of all Fixed Rate Collateral Interests held in the portfolio as of such date; provided that for purposes of calculating the Weighted Average Fixed Rate Coupon of Collateral Interests that are Impaired Interests, the Written Down Amount with respect to Written Down Interests and Equity Interests will be excluded, except for those Impaired Interests that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument. Weighted Average Life means, on any Calculation Date with respect to all Collateral Interests (excluding any Impaired Interests), the number obtained by the Collateral Manager by (i) summing the products obtained by multiplying (a) the Average Life at such time of each Collateral Interest by (b) the outstanding Principal Balance of such Collateral Interest and (ii) dividing such sum by the aggregate Principal Balance at such time of all Collateral Interests. 44

Processed and formatted by SEC Watch - Visit SECWatch.com

Weighted Average Life Test means a test that shall be satisfied as of any Measurement Date during any period set forth below if the Weighted Average Life of all Collateral Interests as of such Measurement Date is less than or equal to 6.5 years. Weighted Average Spread means, as of any Measurement Date, the sum (rounded up to the next 0.001%) of the number obtained by (i) summing the products obtained by multiplying (A) for each Floating Rate Collateral Interest (other than any Impaired Interest, Written Down Interest or Deferred Interest PIK Bond), the stated spread above LIBOR at which interest accrues on such Collateral Interest as of such date and, for each Deemed Floating Rate Collateral Interest (other than any Impaired Interest, Written Down Interest or Deferred Interest PIK Bond), the Deemed Floating Spread by (B) the Principal Balance of such Collateral Interest as of such date and (ii) dividing such sum by the aggregate Principal Balance of all Floating Rate Collateral Interests and all Deemed Floating Rate Collateral Interests (excluding, in each case, all Impaired Interests, Written Down Interests and Deferred Interest PIK Bonds, except for those Impaired Interests that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument); provided, that for purposes of calculating the Weighted Average Spread, each Earn-Out Asset will be deemed to be two separate Floating Rate Collateral Interests: (I) one with an outstanding principal balance equal to the funded portion thereof and a stated interest rate spread equal to the funded spread on such Earn-Out Asset and (II) the other with an outstanding principal balance equal to the unfunded portion thereof and an assumed stated interest rate spread equal to the commitment fee of such EarnOut Asset, less any withholding tax on such commitment fee. Withholding Tax Interest means a Collateral Interest if: (i)

any payments thereon to the Issuer (other than any commitment fee with respect to the unfunded portion of any Earn-Out Assets) are subject to withholding tax imposed by any jurisdiction (other than U.S. backup withholding tax or other similar withholding tax); and

(ii)

under the underlying documentation with respect to such Collateral Interest, the issuer of or counterparty with respect to such Collateral Interest is not required to make “gross-up” payments to the Issuer that cover the full amount of such withholding tax on an after-tax basis.

Written Down Amount means, with respect to each Written Down Interest, the amount by which the original Principal Balance of such Written Down Interest is reduced as notified by or on behalf of the related issuer or trustee to the holders of such Written Down Interest (including appraisal reductions on CMBS). Written Down Interest means any Collateral Interest as to which the aggregate par amount of such Collateral Interest and all other securities secured by the same pool of collateral that rank pari passu with or senior in priority of payment to such Collateral Interest exceeds the aggregate par amount (including reserved interest or other amounts available for overcollateralization) of all collateral securing such securities (excluding defaulted collateral); provided that the Issuer shall immediately send notice to S&P by facsimile and e-mail upon any Collateral Interest becoming a Written Down Interest. 45

Processed and formatted by SEC Watch - Visit SECWatch.com

1.2. ASSUMPTIONS AS TO COLLATERAL INTERESTS, FEES, ETC. The provisions set forth in this Section 1.2 shall be applied in connection with all calculations required to be made pursuant to this Indenture with respect to Scheduled Distributions on any Pledged Security, or any payments on any other assets included in the Collateral, and with respect to the income that can be earned on Scheduled Distributions on such Pledged Securities and on any other amounts that may be received for deposit in the Collection Account. (a)

All calculations with respect to Scheduled Distributions on the Pledged Securities securing the Indenture Issued Notes shall be made by the Issuer or the Collateral Administrator on behalf of the Issuer using (in the case of the Collateral Interests) the assumptions that (i) no Pledged Security defaults or is sold, (ii) prepayment of any Pledged Security during any month occurs at a rate equal to the average rate of prepayment during the period of six consecutive months immediately preceding the current month (or, with respect to any Pledged Security that has not been outstanding for at least six consecutive calendar months, at the rate of prepayment assumed at the time of issuance of such Pledged Security), (iii) any clean-up call with respect to a Pledged Security will be exercised when economic to the Person or Persons entitled to exercise such call and (iv) no other optional redemption of any Pledged Security will occur except for those that have actually occurred or as to which irrevocable notice thereof shall have been given.

(b)

For purposes of determining compliance with the Interest Coverage Tests, except as otherwise specified in the Interest Coverage Tests, there shall be excluded all payments in respect of Impaired Interests and Deferred Interest PIK Bonds unless the Trustee or Collateral Manager has actual knowledge such payments will be made in Cash and will be received on or before the Due Date therefor and all other scheduled payments (whether of principal, interest, fees or other amounts) including payments to the Issuer under any Hedge Agreement, as to which the Trustee or Collateral Manager has actual knowledge will not be made in Cash or will not be received when due. For purposes of calculating the applicable Interest Coverage Ratio:

(c)

(1)

the expected interest income on Collateral Interests and Eligible Investments and the expected interest payable on the Rated Notes and amounts, if any, payable under a Hedge Agreement will be calculated using the interest rates applicable thereto on the applicable date of determination;

(2)

accrued original issue discount on Eligible Investments will be deemed to be a scheduled interest payment thereon due on the date such original issue discount is scheduled to be paid; and

(3)

it will be assumed that no principal payments are made on the Rated Notes during the applicable periods.

For each Due Period, the Scheduled Distribution on any Pledged Security (other than (i) an Impaired Interest, (ii) a Deferred Interest PIK Bond or (iii) an Equity Interest, which, in each case except as otherwise provided herein, shall be assumed to have a Scheduled Distribution of zero and with respect to any Written Down Interest, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount) shall be the sum of (x) the total amount of payments and collections in respect of such Pledged Security (including the proceeds of the sale of such Pledged Security received during the 46

Processed and formatted by SEC Watch - Visit SECWatch.com

Due Period) that, if paid as scheduled, will be available in the Collection Account at the end of the Due Period for payment on the Rated Notes or other amounts payable pursuant to this Indenture and of certain expenses of the Issuer and the CoIssuer plus (y) any such amounts received in prior Due Periods that were not disbursed on a previous Payment Date (provided that such sum shall be computed without regard to any amounts excluded from the determination of compliance with the Coverage Tests pursuant to Section 1.2(b)). (d)

Subject to Section 1.2(b), each Scheduled Distribution receivable with respect to a Pledged Security shall be assumed to be received on the applicable Due Date, and each such Scheduled Distribution shall be assumed to be immediately deposited in the Collection Account and, except as otherwise specified, to earn interest at the Assumed Reinvestment Rate. All such funds shall be assumed to continue to earn interest until the date on which they are required to be available in the Collection Account for transfer to the Payment Account and application, in accordance with the terms hereof, to payments of principal of or interest on the Rated Notes or other amounts payable pursuant to this Indenture.

(e)

With respect to any Collateral Interest as to which any interest or other payment thereon is subject to withholding tax of any Relevant Jurisdiction, each Distribution thereon shall, for purposes of the Coverage Tests and each Collateral Quality Test, be deemed to be payable net of such withholding tax unless the issuer thereof or obligor thereon is required to make additional payments sufficient on an after tax basis to cover any withholding tax imposed on payments to the Issuer with respect thereto (including in respect of any such additional payment). On any date of determination, the amount of any Scheduled Distribution due on any future date shall be assumed to be made net of any such uncompensated withholding tax based upon withholding tax rates in effect on such date of determination.

(f)

For purpose of determining compliance with the Interest Coverage Tests, it will be assumed that any amount required to be paid for taxes, filing and registration fees on the Payment Date immediately following the relevant Due Period shall be equal to the aggregate amount for which the Trustee has received an invoice or demand for payment on or prior to the relevant Measurement Date.

(g)

Any reference in the definition of “Trustee Fee,” “Senior Collateral Management Fee” or “Subordinate Collateral Management Fee” in Section 1.1(a) to an amount calculated with respect to a period at a per annum rate shall be computed on the basis of a 360 day year of twelve 30-day months.

(h)

Unless otherwise specified, test calculations that evaluate to a percentage will be rounded to the nearest one-hundredth, and test calculations that evaluate to a number or decimal will be rounded to the nearest one hundredth.

(i)

Unless otherwise specified, all calculations required to be made and all reports which are to be prepared pursuant to this Indenture with respect to the Collateral Interests, shall be made on the basis of the date on which the Issuer makes a commitment to acquire or to sell an asset, as applicable (the trade date), not the settlement date for such sale. 47

(j)

For the purpose of determining fees constituting Administrative Expenses payable under the Priority of Payments hereunder, periods longer or shorter than a one-month period shall be prorated based on the number of days in such period.

1.3. RULES OF CONSTRUCTION Unless the context otherwise clearly requires: (a)

the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined;

(b)

whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms;

(c)

the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”;

(d)

the word “will” shall be construed to have the same meaning and effect as the word “shall”;

(e)

any definition of or reference to any agreement, statute, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein);

(f)

any reference herein to any Person, or to any Person in a specified capacity, shall be construed to include such Person’s successors and assigns or such Person’s successors in such capacity, as the case may be; and

(g)

all references in this instrument to designated “Sections”, “clauses” and other subdivisions are to the designated Sections, clauses and other subdivisions of this instrument as originally executed, and the words “herein”, “hereof”, “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Section, clause or other subdivision.

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE II THE INDENTURE ISSUED NOTES 2.1. FORMS GENERALLY (a)

The Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes offered and sold in reliance on Regulation S (each, a Regulation S Note) shall be issued in fully Registered form without interest coupons substantially in the form of the note attached as Exhibit A-1 (each, a Regulation S Global Note) with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office in Minneapolis, Minnesota, as custodian for DTC and registered in the name of DTC or a nominee of DTC, duly executed by the Co-Issuers and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Regulation S 48

Processed and formatted by SEC Watch - Visit SECWatch.com

Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be. (b)

The Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and sold in the United States pursuant to an exemption from the registration requirements of the Securities Act (Rule 144A Notes) shall be issued in fully Registered form without interest coupons substantially in the form of the note attached as Exhibit A-2 (each, a Rule 144A Global Note), with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for DTC and registered in the name of DTC or a nominee of DTC, duly executed by the Co-Issuers and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be.

(c)

Regulation S Global Notes and Rule 144A Global Notes may also be exchanged under the limited circumstances set forth in Section 2.4 for notes in definitive fully Registered form without interest coupons (each, a Certificates Class A-E Note), which may be either a Regulation S Certificated Class A-E Note or a Rule 144A Certificated Class A-E Note, with such legends as may be applicable thereto, which shall be duly executed by the Issuer and the Co-Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided.

(d)

The Class F Notes offered or sold in the United States or to U.S. Persons pursuant to Rule 144A or another applicable exemption from registration under the Securities Act shall be issued in the form of physical certificates in definitive fully Registered form without interest coupons substantially in the form of the certificated note attached as Exhibit B (each, a Certificated Class F Note) with such legends as may be applicable thereto, which shall be duly executed by the Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided.

(e)

The Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) and the Issuer (in the case of the Class F Notes) in issuing the Indenture Issued Notes may use “CUSIP” or “private placement” numbers (if then generally in use), and, if so, the Trustee will indicate the “CUSIP” or “private placement” numbers of the Indenture Issued Notes in notices of redemption and related materials as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Indenture Issued Notes or as contained in any notice of redemption and related materials.

2.2. AUTHORIZED AMOUNT; APPLICABLE PERIODIC INTEREST RATE; STATED MATURITY DATE; DENOMINATIONS (a)

The aggregate principal amount of Indenture Issued Notes which may be issued under this Indenture may not exceed U.S.$320,000,000, excluding Indenture Issued Notes issued upon registration of, transfer of, or in exchange for, or in lieu of, other Indenture Issued Notes pursuant to Section 2.4, 2.5 or 8.5. 49

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

The Rated Notes shall be divided into seven Classes having designations, original principal amounts, original Applicable Periodic Interest Rates and Stated Maturities as follows:

De signation

Class A Notes Class B Notes Class C Notes Class D Notes Class E Notes Class F Notes Class G Notes

O rigin al Prin cipal Am ou n t

Applicable Pe riodic In te re st Rate

Inde n ture Issu e d Note S tate d Maturity Date

U.S.$185,000,000 U.S.$32,600,000 U.S.$31,800,000 U.S.$38,600,000 U.S.$12,000,000 U.S.$20,000,000 U.S.$20,000,000

LIBOR + 0.35% LIBOR + 0.45% LIBOR + 0.75% LIBOR + 1.60% LIBOR + 1.75% 7.00% 7.00%

2040 2040 2040 2040 2040 2040 2040

The Indenture Issued Notes will be issuable in minimum denominations of U.S.$500,000 and, in each case, only in integral multiples of U.S.$1,000 in excess of such minimum denominations. After issuance, (x) an Indenture Issued Note may fail to be in compliance with the minimum denomination requirement as a result of the repayment of principal thereon in accordance with the Priority of Payments and (y) the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes or the Class F Notes may fail to be in an amount which is an integral multiple of U.S.$1,000 due to the addition to the principal amount thereof of deferred interest. (c)

Interest shall accrue on the Aggregate Outstanding Amount of each Class of Indenture Issued Notes (determined as of the first day of each Interest Period and after giving effect to any payment of principal occurring on such day) from the Closing Date and will be payable in arrears on each Payment Date. Interest on each Class of Indenture Issued Notes and interest on Defaulted Interest will be calculated in accordance with the definition of Periodic Interest.

(d)

The Indenture Issued Notes shall be redeemable as provided in Section 9.

(e)

The Depositary for the Global Notes shall initially be DTC.

(f)

The Indenture Issued Notes shall be numbered, lettered or otherwise distinguished in such manner as may be consistent herewith, determined by the Authorized Officers of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) and the Issuer (in the case of the Class F Notes) executing such Indenture Issued Notes as evidenced by their execution of such Indenture Issued Notes.

2.3. EXECUTION, AUTHENTICATION, DELIVERY AND DATING (a)

The Indenture Issued Notes (other than the Class F Notes) shall be executed on behalf of the Co-Issuers by an Authorized Officer of each of the Co-Issuers. The Class F Notes shall be executed on behalf of the Issuer by an Authorized Officer of the Issuer. The 50

Processed and formatted by SEC Watch - Visit SECWatch.com

signatures of such Authorized Officers on the Indenture Issued Notes may be manual or facsimile (including in counterparts). (b)

Indenture Issued Notes bearing the manual or facsimile signatures of individuals who were at any time the Authorized Officers of either of the Co-Issuers shall bind such Person, notwithstanding the fact that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Indenture Issued Notes or did not hold such offices at the date of issuance of such Indenture Issued Notes.

(c)

At any time and from time to time after the execution and delivery of this Indenture, the Co-Issuers may deliver Indenture Issued Notes (other than the Class F Notes) executed by the Co-Issuers and the Issuer may deliver the Class F Notes executed by the Issuer, to the Trustee or the Authenticating Agent for authentication, and the Trustee or the Authenticating Agent, upon Issuer Order, shall authenticate and deliver such Indenture Issued Notes as provided in this Indenture and not otherwise.

(d)

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

(e)

Indenture Issued Notes issued upon transfer, exchange or replacement of other Indenture Issued Notes shall be issued in authorized denominations reflecting the original aggregate principal amount of the Indenture Issued Notes so transferred, exchanged or replaced, but shall represent only the current Aggregate Outstanding Amount of the Indenture Issued Notes so transferred, exchanged or replaced. In the event that any Indenture Issued Note is divided into more than one Indenture Issued Note in accordance with this Section 2, the original principal amount of such Indenture Issued Note shall be proportionately divided among the Indenture Issued Notes delivered in exchange therefor and shall be deemed to be the original aggregate principal amount of such subsequently issued Indenture Issued Notes.

(f)

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

2.4. REGISTRATION, TRANSFER AND EXCHANGE OF INDENTURE ISSUED NOTES (a)

Registration of Indenture Issued Notes. The Trustee is hereby appointed as the registrar hereunder (the Note Registrar). The Trustee is hereby appointed as a transfer agent with respect to the Indenture Issued Notes (the Note Transfer Agent). The Note Registrar shall (acting solely for this purpose as agent for the Issuer) keep a register (the Note Register) at the Corporate Trust Office in which, subject to such reasonable regulations as it may prescribe, the Note Registrar shall provide for the registration of Indenture Issued Notes and the registration of transfers of Indenture Issued Notes. Upon any resignation or removal of the Note Registrar, the Issuer (after consultation with the 51

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Manager) shall propose a replacement for approval by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class. The Co-Issuers may not terminate the appointment of the Note Registrar or any Note Transfer Agent without the consent of each Holder of Indenture Issued Notes. Subject to this Section 2.4, upon surrender for registration of transfer of any Indenture Issued Notes (other than the Class F Notes) at the office or agency of the Co-Issuers (or in the case of the Class F Notes, the Issuer) to be maintained as provided in Section 7.2, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes) shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Indenture Issued Notes of any authorized denomination and of a like aggregate principal amount. At the option of the Holder, Indenture Issued Notes may be exchanged for Indenture Issued Notes of like terms, in any authorized denominations and of like aggregate principal amount, upon surrender of the Indenture Issued Notes to be exchanged at such office or agency. Whenever any Indenture Issued Note is surrendered for exchange, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes) shall execute and the Trustee shall authenticate and deliver the Indenture Issued Notes that the Indenture Issued Noteholder making the exchange is entitled to receive. All Indenture Issued Notes issued and authenticated upon any registration of transfer or exchange of Indenture Issued Notes shall be the valid obligations of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes), evidencing the same debt, and entitled to the same benefits under this Indenture, as the Indenture Issued Notes surrendered upon such registration of transfer or exchange. Every Indenture Issued Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes) and the Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to a Holder for any registration of transfer or exchange of Indenture Issued Notes, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith and delivery charges, if any, not made by regular mail. (b)

Transfers of Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes (1)

Subject to Section 2.4(b)(4), exchanges or transfers of beneficial interests in a Global Note may be made only in accordance with the rules and regulations of the Depositary and the transfer restrictions contained in the legend on such Global Note and exchanges or transfers of interests in a Global Note may be made only in accordance with the following: 52

Processed and formatted by SEC Watch - Visit SECWatch.com

(2)

(i)

Subject to Section 2.4(b)(1)(ii) through (vi), transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor’s nominee.

(ii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Regulation S Global Note for a beneficial interest in a Rule 144A Global Note upon provision to the Trustee and the Co-Issuers of a written certification in the form of Exhibit C-1 (a Rule 144A Transfer Certificate).

(iii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Rule 144A Global Note for a beneficial interest in a Regulation S Global Note upon provision to the Trustee and the Co-Issuers of a written certification substantially in the form of Exhibit C-2 (a Regulation S Transfer Certificate).

(iv)

An owner of a beneficial interest in a Regulation S Global Note may transfer such interest in the form of a beneficial interest in such Regulation S Global Note without the provision of written certification; provided that (1) such transfer is made to a Person who is not a U.S. Person in an offshore transaction in reliance on an exemption from the registration requirements of the Securities Act under Regulation S and (2) the transferee, by purchase of such interest in such Regulation S Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Regulation S Transfer Certificate.

(v)

An owner of a beneficial interest in a Rule 144A Global Note may transfer such interest in the form of a beneficial interest in such Rule 144A Global Note without the provision of written certification; provided that the transferee, by purchase of such interest in such Rule 144A Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Rule 144A Transfer Certificate.

(vi)

In the event Certificated Class A-E Notes are issued pursuant to Section 2.4(b)(5), the Trustee shall cause the transfer of (i) any beneficial interest in a Global Note for a Certificated A-E Note that is a Regulation S Note (a Regulation S Certificated Note), upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any beneficial interest in a Global Note for a Certificated A-E Note that is a Rule 144A Note (a Rule 144A Certificated Note), upon provision to the Trustee, the Co-Issuers and the Note Registrar of a Rule 144A Transfer Certificate.

Subject to Section 2.4(b)(4), in the event Certificated Class A-E Notes are issued pursuant to Section 2.4(b)(5), the Trustee shall cause the transfer of (i) any Certificated A-E Note for a beneficial interest in a Regulation S Global Note, upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any Certificated A-E Note for a beneficial interest in a Rule 144A Global Note, upon provision to the Trustee and the Co-Issuers of a Rule 144A Transfer Certificate. 53

Processed and formatted by SEC Watch - Visit SECWatch.com

(3)

Upon acceptance for exchange or transfer of a beneficial interest in a Global Note for a Certificated A-E Note, or upon acceptance for exchange or transfer of a Certificated A-E Note for a beneficial interest in a Global Note, each as provided herein, the Trustee shall approve the instruction at the Depositary to adjust the principal amount of such Global Note on its records to evidence the date of such exchange or transfer and the change in the principal amount of such Global Note.

(4)

Subject to the restrictions on transfer and exchange set forth in this Section 2.4 and to any additional restrictions on transfer or exchange specified in the Certificated Class A-E Notes, the Holder of any Certificated A-E Note may transfer or exchange the same in whole or in part (in a principal amount equal to the minimum authorized denomination or any larger authorized amount) by surrendering such Certificated A-E Note at the Corporate Trust Office or at the office of any Note Transfer Agent, together with (x) in the case of any transfer, an executed instrument of assignment and (y) in the case of any exchange, a written request for exchange. Following a proper request for transfer or exchange, the Trustee shall (provided it has available in its possession an inventory of Certificated Class A-E Notes), within five Business Days of such request if made at such Corporate Trust Office, or within ten Business Days if made at the office of a Note Transfer Agent (other than the Trustee), authenticate and make available at such Corporate Trust Office or at the office of such Note Transfer Agent, as the case may be, to the transferee (in the case of transfer) or Indenture Issued Noteholder (in the case of exchange) or send by first class mail (at the risk of the transferee in the case of transfer or Indenture Issued Noteholder in the case of exchange) to such address as the transferee or Indenture Issued Noteholder, as applicable, may request, a Certificated A-E Note or Notes, as the case may require, for a like aggregate principal amount and in such authorized denomination or denominations as may be requested. The presentation for transfer or exchange of any Certificated Note shall not be valid unless made at the Corporate Trust Office or at the office of a Note Transfer Agent or by a duly authorized attorney-in-fact. Beneficial interests in Global Notes shall be exchangeable for Certificated Class A-E Notes only under the limited circumstances described in Section 2.4(b)(5).

(5)

Interests in a Global Note deposited with or on behalf of the Depositary pursuant to Section 2.1 hereunder shall be transferred (A) to the Beneficial Owners thereof in the form of Certificated Class A-E Notes only if such transfer otherwise complies with this Section 2.4 (including Section 2.4(b)(1) and (2) and (1) the Depositary notifies the Issuer that it is unwilling or unable to continue as Depositary for the Indenture Issued Notes, (2) the Depositary ceases to be a “clearing agency” registered under the Exchange Act and a successor Depositary is not appointed by the Issuer within 90 days of such notice or (3) as a result of any amendment to or change in the laws or regulations of the Cayman Islands, or of any authority therein or thereof having power to tax, or in the interpretation or administration of such laws or regulations which become effective on or after the Closing Date, the Issuer, the Trustee or any Note Paying Agent becomes aware that it is or will be required to make any deduction or withholding from any payment in respect of the Global Notes which would not be required if the Global Notes were not represented by a global certificate or (B) to the purchaser thereof 54

Processed and formatted by SEC Watch - Visit SECWatch.com

in the form of one or more Certificated Notes in accordance with the provisions of Section 2.4(b)(1). (6)

If interests in any Global Note are to be transferred to the Beneficial Owners thereof in the form of Certificated Class A-E Notes pursuant to Section 2.4(b)(5), such Global Note shall be surrendered by the Depositary, or its custodian on its behalf, to the Corporate Trust Office or to the Note Transfer Agent located in Minneapolis, Minnesota and the Trustee shall authenticate and deliver without charge, upon such transfer of interests in such Global Note, an equal aggregate principal amount of Certificated Notes of authorized denominations. The Certificated Class A-E Notes transferred pursuant to this Section 2.4 shall be executed, authenticated and delivered only in the denominations specified in Section 2.2(b) and registered in such names as the Depositary shall direct in writing.

(7)

For so long as one or more Global Notes are Outstanding:

(8)

(i)

the Trustee and its directors, officers, employees and agents may deal with the Depositary for all purposes (including the making of distributions on, and the giving of notices with respect to, the Global Notes);

(ii)

unless otherwise provided herein and subject to Section 2.4(b)(7)(i) above, the rights of Beneficial Owners shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such Beneficial Owners and the Depositary;

(iii)

for purposes of determining the identity of and principal amount of Indenture Issued Notes beneficially owned by a Beneficial Owner, the records of the Depositary shall be conclusive evidence of such identity and principal amount and the Trustee may conclusively rely on such records when acting hereunder;

(iv)

the Depositary will make book-entry transfers among the Depositary Participants of the Depositary and will receive and transmit distributions of principal of and interest on the Global Notes to such Depositary Participants; and

(v)

the Depositary Participants of the Depositary shall have no rights under this Indenture under or with respect to any of the Global Notes held on their behalf by the Depositary, and the Depositary may be treated by the Trustee and its agents, employees, officers and directors as the absolute owner of the Global Notes for all purposes whatsoever.

Each holder of a Class A Note, Class B Note, Class C Note, Class D Note and Class E Note (in each case, or an interest therein) shall represent or shall be deemed to represent that either (A) it is not, and it is not acquiring such Note or interest therein on behalf of or with “plan assets” (within the meaning of Plan Asset Regulation) of, any employee benefit plan (within the meaning of Section 3(3) of the ERISA) or plan (within the meaning of Section 4975 of the Code) 55

Processed and formatted by SEC Watch - Visit SECWatch.com

subject to ERISA or Section 4975 of the Code (or any materially similar applicable law (“Similar Law”)), including certain insurance company general accounts (each, a “Plan”), or (B)(I) such Note is rated investment grade or better as of the date of acquisition, (II) the holder believes that the Note is properly treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulation and agrees to so treat such Note and (III) the holder’s acquisition, holding and disposition of such Note will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code (or Similar Law). (c)

Transfers of Class F Notes. (1)

If a holder of a beneficial interest in a Certificated Class F Note wishes at any time to transfer its interest in such Certificated Class F Note such holder may transfer or cause the transfer of such interest for an equivalent beneficial interest in one or more such Certificated Class F Notes, as provided below. Upon receipt by the Issuer and the Note Registrar of (A) such holder’s Certificated Class F Note properly endorsed for assignment to the transferee and (B) a certificate in the form of Exhibit C-3 (a Certificated Class F Note Transfer Certificate) given by the transferee of such beneficial interest, the Note Registrar shall cancel such Certificated Class F Note record the transfer in the Note Register and authenticate and deliver one or more Certificated Class F Notes bearing the same designation as the related Certificated Class F Notes endorsed for transfer, registered in the names specified in the assignment described in clause (A) above, in principal amounts designated by the transferee (the aggregate of such amounts being the same as the beneficial interest in the related Certificated Class F Notes surrendered by the transferor) and in the minimum denominations and integral multiples in excess thereof. In addition, the Note Registrar shall not register any transfer of any Certificated Class F Notes to a proposed transferee that has represented that it is a Benefit Plan Investor or a Controlling Person if the transfer would result in Benefit Plan Investors owning 25% or more of the value of the Certificated Class F Notes outstanding (as determined without regard to interests held by Controlling Persons, and otherwise contemplated by the applicable regulations under ERISA) immediately after such transfer, based on assurances received from investors. Without limiting the generality of the forgoing, the Note Registrar shall not register any transfer of Certificated Class F Notes represented by Regulation S Notes to a proposed transferee of such Certificated Class F Notes that has represented that it is or may become a Benefit Plan Investor or a Controlling Person. Without limiting the generality of the foregoing, a transfer of beneficial interests in a Certificated Class F Note will not be permitted unless an ERISA Restriction Certificate substantially in the form set forth in Exhibit C-4 is obtained from each transferee of a Certificated Class F Note, for the benefit of the Issuer, the Trustee and the Initial Purchasers, (i) in the case of a Certificated Class F Note not represented by a Regulation S Note, regarding whether it is, or is not and will not be, a Benefit Plan Investor or Controlling Person, or (ii) in the case of a Certificated Class F Note or represented by a Regulation S Note, to the effect that it is not and will not be a Benefit Plan Investor or Controlling Person. Any purported transfer in violation of the foregoing requirements shall be null and void ab initio, and the Note Registrar shall not register any such purported transfer and shall not authenticate and deliver such Certificated Class F Notes. 56

(2)

(d)

If a holder of a beneficial interest in one or more Certificated Class F Notes wishes at any time to exchange its interest in such related Certificated Class F Notes for an interest in one or more such Certificated Class F Notes of different principal amounts, such holder may exchange or cause the exchange of such interest for an equivalent beneficial interest in the Certificated Class F Notes bearing the same designation as the related Certificated Class F Notes endorsed for exchange as provided below. Upon receipt by the Note Registrar of (A) such holder’s Certificated Class F Notes properly endorsed for such exchange and (B) written instructions from such holder designating the number and principal amounts of the applicable Certificated Class F Notes to be issued (the aggregate principal amounts of such Certificated Class F Notes being the same as the Certificated Class F Notes surrendered for exchange), then the Note Registrar shall cancel such Certificated Class F Notes, record the exchange in the Note Register and authenticate and deliver one or more Certificated Class F Notes bearing the same designation endorsed for exchange, registered in the same names as the related Certificated Class F Notes surrendered by such holder or such different names as are specified in the endorsement described in clause (A) above, in different principal amounts designated by such holder (the Class and the aggregate principal amounts being the same as the beneficial interest in the Certificated Class F Notes surrendered by such holder), and the minimum denominations and integral multiples in excess.

Denominations; Qualified Purchaser Status. No Person may hold a beneficial interest in any Indenture Issued Note except in a denomination authorized for the Indenture Issued Notes of such Class under Section 2.2(b). In addition, no transfer of an Indenture Issued Note (or any interest therein) may be made to any Person that is a U.S. Person unless such Person is (A) a Qualified Institutional Buyer and (B) a Qualified Purchaser. In addition, no transfer of an Indenture Issued Note (or any interest therein) may be made to any Person that is a U.S. Person unless such Person (A) was not formed for the purpose of investing in either of the Co-Issuers (except when each beneficial owner of the purchaser is a Qualified Purchaser, (B) has received the necessary consent from its beneficial owners if it is a private investment company formed before April 30, 1996, (C) 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, (D) is not a pension, profit, sharing or other retirement trust fund or plan in which the

Processed and formatted by SEC Watch - Visit SECWatch.com

partners, beneficiaries or participants, as applicable, may designate the particular investments to be made, and in a transaction that may be effected without loss of any applicable Investment Company Act exemption, (E) will provide notice to any subsequent transferee of the transfer restrictions provided in the legend, (F) will hold and transfer in a principal amount of not less than U.S.$500,000, for it or for each account for which it is acting and (G) will provide the Issuer from time to time such information as it may reasonably request in order to ascertain compliance with the foregoing. Any purported transfer that is not in compliance with this Section 2.4 or the legends on the Indenture Issued Notes will be void ab initio, and will not operate to transfer any rights to the transferee, notwithstanding any instructions to the contrary to the CoIssuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes), the Trustee or any intermediary. If any purported transfer of Indenture 57

Processed and formatted by SEC Watch - Visit SECWatch.com

Issued Notes or any beneficial interest therein to a purported transferee does not comply with the requirements set forth in this Section 2.4 or the legends on the Indenture Issued Notes, then the purported transferor of such Indenture Issued Notes or beneficial interest therein shall be required to cause the purported transferee to surrender the Indenture Issued Notes or any beneficial interest therein in return for a refund of the consideration paid therefor by such transferee (together with interest thereon) or to cause the purported transferee to dispose of such Indenture Issued Notes or beneficial interest promptly in one or more open market sales to one or more persons each of whom satisfies the requirements of this Section 2.4 and the legends on the Indenture Issued Notes and such purported transferor shall take, and shall cause such transferee to take, all further action necessary or desirable, in the judgment of the Trustee, to ensure that such Indenture Issued Notes or any beneficial interest therein are held by persons in compliance therewith. (e)

Requirement to Sell. (1)

If, notwithstanding the restrictions set forth in this Section 2.4, either of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes) determines that any beneficial owner of a Rule 144A Note (A) is a U.S. Person and (B) is not a Qualified Institutional Buyer and also a Qualified Purchaser, either of the Co-Issuers or the Issuer, as applicable, may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Indenture Issued Note (or interest therein) to a Person that is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser, with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (x) upon written direction from the Issuer, the Trustee shall, and is hereby irrevocably authorized by such beneficial owner to cause its interest in such Indenture Issued Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9611 of the UCC as applied to securities that are customarily sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser and (y) pending such transfer, no further payments will be made in respect of such Indenture Issued Note (or beneficial interest therein) held by such beneficial owner.

(2)

If, notwithstanding the restrictions set forth in this Section 2.4, either of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes) determines that any beneficial owner of a Regulation S Note is (A) a U.S. Person or (B) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), either of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes) may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Indenture Issued Note (or interest therein) to a Person that is not (1) a U.S. Person or (2) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (x) upon written direction from the Issuer, the Trustee shall, and is hereby irrevocably authorized by such beneficial owner to cause its interest in such Indenture Issued Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9-611 of the UCC as applied to securities that are customarily 58

Processed and formatted by SEC Watch - Visit SECWatch.com

sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is neither (1) a U.S. Person nor (2) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA) and (y) pending such transfer, no further payments will be made in respect of such Indenture Issued Note (or beneficial interest therein) held by such beneficial owner. (f)

Legends. Any Indenture Issued Note issued upon the transfer, exchange or replacement of Indenture Issued Notes shall bear such applicable legend set forth in the relevant Exhibit hereto unless there is delivered to the Trustee, the Note Registrar and the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes) such satisfactory evidence, which may include an Opinion of Counsel, as may be reasonably required by any of the Trustee, the Note Registrar and the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes) to the effect that neither such applicable legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A and to ensure that neither of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes) nor the pool of Collateral becomes an investment company required to be registered under the Investment Company Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes), shall authenticate and deliver Indenture Issued Notes that do not bear such applicable legend.

(g)

Expenses; Acknowledgment of Transfer. Transfer, registration and exchange shall be permitted as provided in this Section 2.4 without any charge to the Indenture Issued Noteholder except for a sum sufficient to cover any tax or other governmental charge payable in connection therewith or the expenses of delivery (if any) not made by regular mail and payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith pursuant to Section 2.4(a). Registration of the transfer of a Indenture Issued Note by the Trustee shall be deemed to be the acknowledgment of such transfer on behalf of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) and the Issuer (in the case of the Class F Notes).

(h)

Surrender upon Final Payment. Upon final payment due on the date on which all outstanding unpaid principal of a Indenture Issued Note becomes due and payable as therein or herein provided, whether at the Stated Maturity Date or by declaration of acceleration, call for redemption or otherwise, the Holder thereof shall present and surrender such Indenture Issued Note at the Corporate Trust Office of the Trustee in Minneapolis, Minnesota.

(i)

Repurchase and Cancellation of Indenture Issued Notes. The Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) and the Issuer (in the case of the Class F Notes) will not purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the Outstanding Indenture Issued Notes except upon the redemption of the Indenture Issued Notes in accordance with the terms of this Indenture and the Indenture Issued Notes. The Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) and the Issuer (in the case of the Class F Notes) will promptly cancel all Indenture Issued Notes acquired by them pursuant to any payment, purchase, redemption, prepayment or other acquisition of Indenture Issued Notes pursuant to any 59

Processed and formatted by SEC Watch - Visit SECWatch.com

provision of this Indenture and no Indenture Issued Notes may be issued in substitution or exchange for any such Indenture Issued Notes. (j)

Compliance with Transfer Restrictions. Notwithstanding anything contained herein to the contrary, neither the Trustee nor the Note Registrar shall be responsible for ascertaining whether any transfer complies with the registration provisions of or exemptions from the Securities Act, applicable state securities laws, the rules of any Depositary, ERISA, the Code or the Investment Company Act; provided that if a certificate is specifically required by the express terms of this Section 2.4 to be delivered to the Trustee or the Note Registrar by a purchaser or transferee of a Indenture Issued Note, the Trustee or the Note Registrar, as the case may be, shall be under a duty to receive and examine the same to determine whether the transfer contemplated thereby substantially complies with the express terms of this Indenture and shall promptly notify the party delivering the same if such transfer does not comply with such terms. To the extent applicable to the Issuer, the Issuer shall impose additional restrictions to comply with the USA PATRIOT Act, and any such transfer restrictions shall be binding on each Holder or Beneficial Owner of a Indenture Issued Note. The Issuer shall notify the Trustee and the Note Registrar of the imposition of any such transfer restrictions.

(k)

Physical Indenture Issued Notes. The Issuer will promptly make available to the Trustee without charge a reasonable supply of Certificated Notes in definitive, fully Registered Form, without interest coupons.

2.5. MUTILATED, DEFACED, DESTROYED, LOST OR STOLEN INDENTURE ISSUED NOTES If (a) any mutilated or defaced Indenture Issued Note is surrendered to a Note Transfer Agent, or if there shall be delivered to either of the Co-Issuers (in the case of Indenture Issued Notes other than Class F Notes) or the Issuer (in the case of Class F Notes), the Trustee and the Note Transfer Agent (each, a Specified Person) evidence to their reasonable satisfaction of the destruction, loss or theft of any Indenture Issued Note, and (b) there is delivered to the Specified Persons such security or indemnity as may reasonably be required by them to save each of them harmless then, in the absence of notice to the Specified Persons that such Indenture Issued Note has been acquired by a bona fide purchaser, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) and the Issuer (in the case of the Class F Notes) shall execute and shall direct the Trustee to authenticate, and upon Issuer Request the Trustee shall authenticate and deliver, in lieu of any such mutilated, defaced, destroyed, lost or stolen Indenture Issued Note, a new Indenture Issued Note of the same Class as such mutilated, defaced, destroyed, lost or stolen Indenture Issued Note, of like tenor (including the same date of issuance) and equal principal amount, registered in the same manner, dated the date of its authentication, bearing interest from the date to which interest has been paid on the mutilated, defaced, destroyed, lost or stolen Indenture Issued Note and bearing a number not contemporaneously outstanding. If, after delivery of such new Indenture Issued Note, a bona fide purchaser of the predecessor Indenture Issued Note presents for payment, transfer or exchange such predecessor Indenture Issued Note, the Specified Persons shall be entitled to recover such new Indenture Issued Note from the Person to whom it was delivered or any Person taking therefrom, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Specified Persons in connection therewith. In case any such mutilated, defaced, destroyed, lost or stolen Indenture Issued Note has become due and payable, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) and the Issuer (in the case of the Class F Notes) in their or its (as applicable) discretion may, instead of 60

Processed and formatted by SEC Watch - Visit SECWatch.com

issuing a new Indenture Issued Note, pay such Indenture Issued Note without requiring surrender thereof except that any mutilated Indenture Issued Note shall be surrendered. Upon the issuance of any new Indenture Issued Note under this Section 2.5, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) and the Issuer (in the case of the Class F Notes), the Trustee or any Note Transfer Agent may require the payment by the registered Holder thereof of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Indenture Issued Note issued pursuant to this Section 2.5 in lieu of any mutilated, defaced, destroyed, lost or stolen Indenture Issued Note, shall constitute an original additional contractual obligation of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) and the Issuer (in the case of the Class F Notes) and such new Indenture Issued Note shall be entitled, subject to the second paragraph of this Section 2.5, to all the benefits of this Indenture equally and proportionately with any and all other Indenture Issued Notes duly issued hereunder. The provisions of this Section 2.5 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, defaced, destroyed, lost or stolen Indenture Issued Notes. 2.6. PAYMENT OF PRINCIPAL AND INTEREST; RIGHTS PRESERVED (a)

Each Class of Rated Notes shall accrue interest during each Interest Period applicable to such Class in the manner and at the Applicable Periodic Interest Rate specified in Section 2.2. Interest on each Class of Rated Notes shall be due and payable on each Payment Date; provided that (i) interest on the Class B Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), (ii) interest on the Class C Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon) and on the Class B Notes (together with any Defaulted Interest thereon), (iii) interest on the Class D Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon) and on the Class C Notes (together with any Defaulted Interest thereon), (iv) interest on the Class E Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon) and on the Class D Notes (together with any Defaulted Interest thereon), (v) interest on the Class F Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon) and on the Class E Notes (together with any Defaulted Interest thereon), (vi) interest on the Class G Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the 61

Processed and formatted by SEC Watch - Visit SECWatch.com

Class E Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon) and on the Class F Notes (together with any Defaulted Interest thereon), and (vii) interest on all Rated Notes is subordinated in right of payment to the prior payment in full on each Payment Date of other amounts in accordance with Section 11.1. Except as provided in Section 5.5, no payment shall be made by the Co-Issuers hereunder other than on a Payment Date. So long as any Class A Notes or Class B Notes are Outstanding, any Class C Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class C Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class C Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, any Class D Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class D Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class D Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding, any Class E Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class E Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class E Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding, any Class F Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class F Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class F Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes are Outstanding, any Class G Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class G Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class G Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. (b)

The principal of each Rated Note shall be payable no later than the Stated Maturity Date thereof unless the unpaid principal of such Rated Note becomes due and payable at an earlier date by declaration of acceleration, call for redemption or otherwise; provided that: (1)

so long as any Class A Notes are Outstanding, except as provided in Section 9 and Section 11.1(b)(17) and (18), the payment of principal of the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes to the PAA Issued Note Paying Agent for payment on the Class G Notes in accordance with the Paying Agency Agreement (x) may only 62

Processed and formatted by SEC Watch - Visit SECWatch.com

occur after principal of the Class A Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and other amounts payable in accordance with Section 11.1;

(c)

(2)

so long as any Class B Notes are Outstanding, except as provided in Section 9 and Section 11.1(b)(17) and (18), the payment of principal of the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes (x) may only occur after principal of the Class A Notes and Class B Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class B Notes and other amounts payable in accordance with Section 11.1;

(3)

so long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, except as provided in Section 11.1(b)(17) and (18), the payment of principal of the Class D Notes (x) may only occur after principal of the Class A Notes, Class B Notes and Class C Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes and Class C Notes and other amounts payable in accordance with Section 11.1;

(4)

so long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding, except as provided in Section 11.1(b)(17) and (18), the payment of principal of the Class E Notes (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes and Class D Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes and Class D Notes and other amounts payable in accordance with Section 11.1;

(5)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding, except as provided in Section 11.1(b)(17) and (18), the payment of principal of the Class F Notes (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes and other amounts payable in accordance with Section 11.1;

(6)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes are Outstanding, except as provided in Section 11.1(b)(17) and (18), the payment of principal of the Class G Notes (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes and other amounts payable in accordance with Section 11.1.

So long as the Coverage Tests are satisfied, principal will not be payable on any Class of Rated Notes except (i) upon the occurrence of a Redemption, (ii) in the case of any Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes or Class G Notes, 63

Processed and formatted by SEC Watch - Visit SECWatch.com

to pay amounts in respect of the Class C Cumulative Applicable Periodic Interest Shortfall Amount, the Class D Cumulative Applicable Periodic Interest Shortfall Amount, the Class E Cumulative Applicable Periodic Interest Shortfall Amount, the Class F Cumulative Applicable Periodic Interest Shortfall Amount or the Class G Cumulative Applicable Periodic Interest Shortfall Amount, as the case may be, in accordance with Section 11.1 and (iii) on each Payment Date, in accordance with Section 11.1. (d)

As a condition to the payment of any principal of or interest on any Rated Note without the imposition of withholding tax, any Note Paying Agent shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor 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 Internal Revenue Service Form W-8 (or applicable successor 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) or other certification acceptable to it to enable the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes), the Trustee and any Note Paying Agent to determine their duties and liabilities with respect to any taxes or other charges that they may be required to pay, deduct or withhold in respect of such Rated Note or the Holder of such Rated Note under any present or future law or regulation of the Cayman Islands or the United States or any present or future law or regulation of any political subdivision thereof or taxing authority therein or to comply with any reporting or other requirements under any such law or regulation.

(e)

All payments made by the Issuer under the Rated Notes will be made without any deduction or withholding for or on the account of any tax unless such deduction or withholding is required by applicable law, as modified by the practice of any relevant governmental authority, then in effect. If the Issuer is so required to deduct or withhold, then neither the Issuer nor the Co-Issuer will be obligated to pay any additional amounts in respect of such withholding or deduction.

(f)

Payments in respect of principal of and interest on the Rated Notes shall be payable by wire transfer in immediately Available Funds to a Dollar account maintained by the Rated Noteholders in accordance with wire transfer instructions received by any Note Paying Agent on or before the Record Date or, if no wire transfer instructions are received by a Note Paying Agent, by a Dollar check drawn on a bank in the United States mailed to the address of such Rated Noteholder as it appears on the Note Register at the close of business on the Record Date for such payment.

(g)

The principal of and interest on any Rated Note which is payable on a Redemption Date or in accordance with Section 11.1 on a Payment Date and is punctually paid or duly provided for on such Redemption Date or Payment Date shall be paid to the Person in whose name that Rated Note (or one or more predecessor Rated Notes) is registered at the close of business on the Record Date for such payment. All such payments that are mailed or wired and returned to the Note Paying Agent shall be held for payment as herein provided at the office or agency of the Co-Issuers (in the case of the Rated Notes other than the Class F Notes and the Class G Notes) or the Issuer (in the case of the Class F Notes and the Class G Notes) to be maintained as provided in Section 7.2. 64

Processed and formatted by SEC Watch - Visit SECWatch.com

Payments to Holders of the Rated Notes of each Class shall be made in the proportion that the Aggregate Outstanding Amount of the Rated Notes of such Class registered in the name of each such Holder on the Record Date for such payment bears to the Aggregate Outstanding Amount of all Rated Notes of such Class on such Record Date. (h)

Payment of any Defaulted Interest may be made in any other lawful manner in accordance with Section 11.1 if notice of such payment is given by the Trustee to the Co-Issuers and the Rated Noteholders, and such manner of payment shall be deemed practicable by the Trustee.

(i)

All reductions in the principal amount of a Rated Note (or one or more predecessor Rated Notes) effected by payments of installments of principal made on any Payment Date or Redemption Date shall be binding upon all future Holders of such Rated Note and of any Rated Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Rated Note.

(j)

Notwithstanding anything to the contrary herein, the obligations of the Co-Issuers under the Rated Notes (other than the Class F Notes and the Class G Notes), the Issuer under the Class F Notes and the Class G Notes or the Co-Issuers under this Indenture or arising in connection herewith are limited recourse obligations of the Co-Issuers or the Issuer, as the case may be, payable solely from the Collateral and following realization of the Collateral, all obligations of and all claims against the Co-Issuers or the Issuer, as the case may be, hereunder or arising in connection herewith shall be extinguished and shall not thereafter revive. No recourse shall be had against any Officer, member, director, employee, security holder or incorporator of the Co-Issuers (in the case of the Rated Notes other than the Class F Notes and the Class G Notes) or the Issuer (in the case of the Class F Notes and the Class G Notes) or their respective successors or assigns for the payment of any amounts payable under the Rated Notes or this Indenture. It is understood that the foregoing provisions of this Section 2.6(j) shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or agreement which is part of the Collateral or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Rated Notes or secured by this Indenture until such Collateral has been realized, whereupon any outstanding indebtedness or obligation shall be extinguished. It is further understood that the foregoing provisions of this Section 2.6(j) shall not limit the right of any Person to name either of the Co-Issuers (in the case of the Rated Notes other than the class F Notes and the Class G Notes) or the Issuer (in the case of the Class F Notes and the Class G Notes) as a party defendant in any action or suit or in the exercise of any other remedy under the Rated Notes or this Indenture, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity.

(k)

Subject to the foregoing provisions of this Section 2.6 and the provisions of Sections 2.4 and 2.5, each Rated Note delivered under this Indenture and upon registration of transfer of or in exchange for or in lieu of any other Rated Note shall carry the rights of unpaid interest and principal that were carried by such other Rated Note. 65

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE III CONDITIONS PRECEDENT 3.1. GENERAL PROVISIONS The Indenture Issued Notes may be executed by the Co-Issuers (in the case of the Indenture Issued Notes other than the Class F Notes) or the Issuer (in the case of the Class F Notes) and delivered to the Trustee for authentication and thereupon the same shall be authenticated and delivered by the Trustee (or an Authenticating Agent on its behalf) upon Issuer Request, upon receipt by the Trustee of the following: (a)

(b)

(1)

an Officer’s certificate of the Issuer, (A) evidencing the authorization by Board Resolution of the execution and delivery of, and the performance of the Issuer’s obligations under, each Transaction Document, in each case as may be amended on or prior to, and as in effect on, the Closing Date, and the execution, authentication and delivery of the Indenture Issued Notes and specifying the Stated Maturity Date, the principal amount and the Applicable Periodic Interest Rate with respect to each Class of Indenture Issued Notes to be authenticated and delivered, and (B) certifying that (1) the attached copy of such Board Resolution is a true and complete copy thereof, (2) such resolutions have not been rescinded and are in full force and effect on and as of the Closing Date and (3) the Officers authorized to execute and deliver such documents hold the offices and have the signatures indicated thereon; and

(2)

an Officer’s certificate of the Co-Issuer (A) evidencing the authorization by Board Resolution of the execution and delivery of, and the performance of the Co-Issuer’s obligations under, this Indenture, as may be amended on or prior to, and as in effect on, the Closing Date, and the execution, authentication and delivery of the Indenture Issued Notes (other than the Class F Notes) and specifying the Stated Maturity Date, the principal amount and the Applicable Periodic Interest Rate of each Class of Indenture Issued Notes (other than the Class F Notes) to be authenticated and delivered, and (B) certifying that (1) the attached copy of such Board Resolution is a true and complete copy thereof, (2) such resolutions have not been rescinded and are in full force and effect on and as of the Closing Date and (3) the Officers authorized to execute and deliver such documents hold the offices and have the signatures indicated thereon;

(1)

either (A) a certificate of the Issuer, or other official document evidencing the due authorization, approval or consent of any governmental body or bodies, at the time having jurisdiction in the premises, together with an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee on which the Trustee is entitled to rely to the effect that no other authorization, approval or consent of any governmental body is required for the valid issuance of the Indenture Issued Notes, or (B) an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee to the effect that no such authorization, approval or consent of any governmental body is required for the valid issuance of the Indenture Issued Notes except as may have been given; and

(2)

either (A) a certificate of the Co-Issuer or other official document evidencing the due authorization, approval or consent of any governmental body or bodies, at 66

Processed and formatted by SEC Watch - Visit SECWatch.com

the time having jurisdiction in the premises, together with an Opinion of Counsel to the Co-Issuer satisfactory in form and substance to the Trustee on which the Trustee is entitled to rely to the effect that no other authorization, approval or consent of any governmental body is required for the valid issuance of the Indenture Issued Notes (other than the Class F Notes), or (B) an Opinion of Counsel to the Co-Issuer satisfactory in form and substance to the Trustee that no such authorization, approval or consent of any governmental body is required for the valid issuance of the Indenture Issued Notes (other than the Class F Notes) except as may have been given; (c)

(1)

an opinion of Thacher Proffitt & Wood LLP, special New York counsel to the Co-Issuers, dated the Closing Date, substantially in the form of Exhibit E-1;

(2)

an opinion of Walkers, special Cayman Islands counsel to the Issuer, dated the Closing Date, substantially in the form of Exhibit E-2;

(3)

an opinion of Kennedy Covington Lobdell & Hickman, L.L.P., counsel to the Trustee, dated the Closing Date, substantially in the form of Exhibit F; and

(4)

an opinion of Thacher Proffitt & Wood LLP, counsel to the Collateral Manager, dated the Closing Date, substantially in the form of Exhibit G;

(d)

an Officer’s certificate of the Issuer, stating that the Issuer is not in Default under this Indenture and that the issuance of the Indenture Issued Notes will not result in a breach of any of the terms, conditions or provisions of, or constitute a Default under, the Articles, any indenture or other agreement or instrument to which the Issuer is a party or by which it is bound, or any order of any court or administrative agency entered in any Proceeding to which the Issuer is a party or by which it may be bound or to which it may be subject; that no Event of Default shall have occurred and be continuing; that all of the representations and warranties contained herein are true and correct as of the Closing Date; that all conditions precedent provided in this Indenture relating to the authentication and delivery of the Indenture Issued Notes applied for (including in Section 3.2) have been complied with; and that all expenses due or accrued with respect to the Offering or relating to actions taken on or in connection with the Closing Date have been paid;

(e)

an Officer’s certificate of the Co-Issuer stating that the Co-Issuer is not in Default under this Indenture and that the issuance of the Indenture Issued Notes will not result in a breach of any of the terms, conditions or provisions of, or constitute a Default under, the Certificate of Incorporation or By-Laws of the Co-Issuer, any indenture or other agreement or instrument to which the Co-Issuer is a party or by which it is bound, or any order of any court or administrative agency entered in any Proceeding to which the Co-Issuer is a party or by which it may be bound or to which it may be subject; that no Event of Default shall have occurred and be continuing; that all of the representations and warranties contained herein are true and correct as of the Closing Date; that all conditions precedent provided in this Indenture relating to the authentication and delivery of the Indenture Issued Notes applied for have been complied with; and that all expenses due or accrued with respect to the Offering or relating to actions taken on or in connection with the Closing Date have been paid; 67

(f)

an Accountants’ Report (A) confirming the information with respect to each Collateral Interest (other than its price) set forth on a schedule setting forth each Collateral Interest and the information provided by the Issuer with respect to every other asset forming part of the Collateral, by reference to such sources as shall be specified therein, (B) confirming that, on the Closing Date, the Collateral Interests set forth on Schedule A meet the Collateral Quality Tests (with the exception of the S&P CDO Monitor Test), (C) calculating each of the Coverage Tests as of the Closing Date and (D) specifying the procedures undertaken by them to review data and computations relating to the foregoing statement;

(g)

executed counterparts of this Indenture, the Account Control Agreement, the Collateral Administration Agreement, the Collateral Management Agreement and the other Transaction Documents;

(h)

execution and delivery of the Financing Statement for filing against the Issuer with the Recorder of Deeds in the District of Columbia; and

(i)

evidence of an entry having been made in the Issuer’s Register of Mortgages and Charges in respect of the charge.

3.2. SECURITY FOR THE INDENTURE ISSUED NOTES Prior to the issuance of the Indenture Issued Notes on the Closing Date, the Issuer shall cause the following conditions to be satisfied: (a)

Grant of Security Interest; Delivery of Collateral Interests. The Grant pursuant to the Granting clauses of this Indenture of all of the Issuer’s right, title and interest in and to the Collateral and the transfer of all Collateral Interests purchased by the Issuer on the Closing Date (as set forth in Schedule A) to the Trustee in the manner provided in Section 3.3(b).

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

Certificate of the Issuer. The delivery to the Trustee of a certificate of an Authorized Officer of the Issuer or the Collateral Manager, for and on behalf of the Issuer, dated as of the Closing Date, to the effect that (x) the Issuer has no assets other than the Collateral, (y) the Issuer has no investments that do not qualify as Collateral Interests or Eligible Investments and (z) in the case of each Collateral Interest identified on Schedule A and pledged to the Trustee for inclusion in the Collateral on the Closing Date: (1)

the Issuer is the owner of such Collateral Interest free and clear of any liens, claims or encumbrances of any nature whatsoever except for those which are being released on the Closing Date and except for those Granted pursuant to this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on such Collateral Interest prior to the first Payment Date and owed by the Issuer to the seller of such Collateral Interest;

(2)

the Issuer has acquired its ownership in such Collateral Interest in good faith without notice of any adverse claim (within the meaning given to such term by Section 8-102(a)(1) of the UCC), except as described in clause (1) above;

(3)

the Issuer has not assigned, pledged or otherwise encumbered any interest in such Collateral Interest (or, if any such interest has been assigned, pledged or 68

Processed and formatted by SEC Watch - Visit SECWatch.com

otherwise encumbered, it has been released) other than interests Granted pursuant to this Indenture; (4)

the Issuer has full right to Grant a security interest in and assign and pledge all of its right, title and interest in such Collateral Interest to the Trustee;

(5)

the information set forth with respect to such Collateral Interest on Schedule A is correct and each such Collateral Interest is transferred to the Trustee as required by Section 3.2(a) (or, if any such Collateral Interest is not so transferred to the Trustee on the Closing Date, the Issuer has entered into a binding agreement to purchase such Collateral Interest for settlement within 10 days after the Closing Date);

(6)

each such Collateral Interest satisfies the requirements of the definition of “Collateral Interest” and is not an Impaired Interest; and

(7)

upon Grant by the Issuer, the Trustee has a first priority perfected security interest in the Collateral (assuming that any Clearing Corporation, Securities Intermediary or other entity not within the control of the Issuer involved in the Grant of Collateral takes the actions required of it under Section 3.3(b) for perfection of that interest) and a “securities entitlement” (as defined in the UCC) with respect to Financial Assets.

(c)

Rating Letters. The delivery to the Trustee of an Officer’s certificate of the Issuer, to the effect that (i) attached thereto are true and correct copies of (A) a letter signed by S&P confirming that the Class A Notes have been rated “AAA”, the Class B Notes have been rated at least “AA”, the Class C Notes have been rated at least “A”, the Class D Notes have been rated at least “BBB”, the Class E Notes have been rated at least “BBB-”, the Class F Notes have been rated at least “BB” and the Class G Notes have been rated at least “B” by S&P and (B) a letter signed by Moody’s confirming that the Class A Notes have been rated “Aaa”, the Class B Notes have been rated at least “Aa2”, the Class C Notes have been rated at least “A2”, the Class D Notes have been rated at least “Baa2”, the Class E Notes have been rated at least “Baa3”, the Class F Notes have been rated at least “Ba2” and the Class G Notes have been rated at least “B2” by Moody’s and (ii) each such rating is in full force and effect on the Closing Date.

(d)

Accounts. The delivery by the Trustee of evidence of the establishment of the Payment Account, the Collection Account (including each Collateral Sub-Account established therein), the Expense Reserve Account, the Interest Reserve Account, the Collateral Account and the Uninvested Proceeds Account and, to be established on the Closing Date.

(e)

Funding Certificate. The delivery to the Trustee of a funding certificate (the Funding Certificate), duly executed by an Authorized Officer of the Issuer, relating to, among other things, the disposition of the proceeds of the issuance of the Indenture Issued Notes, dated the Closing Date, in substantially the form of Exhibit D hereto.

(f)

Purchases. The delivery to the Trustee of a certification of the Issuer that it shall have entered into one or more agreements to purchase, for settlement on or following the Closing Date in accordance with customary settlement procedures in the relevant 69

Processed and formatted by SEC Watch - Visit SECWatch.com

markets, Collateral Interests having an aggregate Principal Balance of not less than U.S.$328,916,892.43. 3.3. CUSTODIANSHIP; TRANSFER OF COLLATERAL INTERESTS AND ELIGIBLE INVESTMENTS (a)

The Trustee shall hold all Certificated Securities and Instruments in physical form at the office of a custodian appointed by it in Minnesota (together with any successor, the Custodian). Initially, such Custodian shall be Wells Fargo Bank, National Association with its address at Wells Fargo Center, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: CDO Trust Services—N-Star REL CDO IV. Any successor custodian shall be a state or national bank or trust company that is not an Affiliate of the Issuer or the Co-Issuer, has a long-term debt rating of at least “BBB+” by S&P and has a combined capital and surplus of at least U.S.$250,000,000.

(b)

Each Collateral Interest, Equity Interest and Eligible Investment shall be credited to the appropriate Account. Each time that the Issuer shall direct or cause the acquisition of any Collateral Interest, Equity Interest or Eligible Investment, the Trustee (on behalf of the Issuer) shall, if such Collateral Interest, Equity Interest or Eligible Investment has not already been transferred to the Collateral Account and credited thereto, cause the transfer of such Collateral Interest, Equity Interest or Eligible Investment to the Custodian to be held in and credited to the Collateral Account for the benefit of the Trustee in accordance with the terms of this Indenture. The security interest of the Trustee in the funds or other property utilized in connection with such acquisition shall, immediately and without further action on the part of the Trustee, be released. The security interest of the Trustee shall nevertheless come into existence and continue in the Collateral Interest, Equity Interest or Eligible Investment so acquired, including all rights of the Issuer in and to any contracts related to and proceeds of such Collateral Interest, Equity Interest or Eligible Investment.

(c)

On the Closing Date, on each day thereafter, if any, that any Collateral is acquired or otherwise becomes subject to the lien of this Indenture and on the Effective Date, the Issuer represents and warrants to the Trustee as follows: (1)

This Indenture creates a valid and continuing security interest (as defined in the applicable Uniform Commercial Code) in the Collateral in favor of the Trustee on behalf and for the benefit of the Secured Parties, which security interest is prior to all other liens and security interests, and is enforceable as such as against creditors of and purchasers from the Issuer and, upon delivery of the Collateral Interests and filing of the appropriate financing statements in the appropriate filing offices, the lien and security interest created by this Indenture shall be a perfected first priority security interest in favor of the Trustee for the benefit of the Secured Parties.

(2)

The Issuer owns and has good and marketable title to the Collateral free and clear of any liens, claims, encumbrances or defects of any nature whatsoever except for those which are being released on the Closing Date or on the date of purchase by the Issuer or those created pursuant to or contemplated under this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on any Collateral Interest prior to the first payment date and owed by the Issuer to the seller of such Collateral Interest. 70

Processed and formatted by SEC Watch - Visit SECWatch.com

(3)

The Issuer has acquired its ownership in each such Collateral Interest, or will acquire in the case of any Collateral Interests which the Issuer has on or before the Closing Date committed to purchase but which will not have settled on or before the Closing Date or any additional Collateral Interests or Substitute Collateral Interests acquired by the Issuer after the Closing Date, in good faith without notice of any adverse claim, except as described in clause (2) above.

(4)

The Issuer (a) has delivered each such Collateral Interest, or will deliver any Collateral Interests which the Issuer has on or before the Closing Date committed to purchase but which will not have settled on or before the Closing Date or any additional Collateral Interests or Substitute Collateral Interests acquired by the Issuer after the Closing Date, to the Trustee and (b) has not assigned, pledged, sold, granted a security interest in or otherwise encumbered any interest in such Collateral Interest other than interests granted pursuant to this Indenture.

(5)

The Issuer has full right to grant all security interests granted herein.

(6)

All Collateral is comprised of either “securities”, “instruments”, “tangible chattel paper”, “accounts”, “security entitlements” or “general intangibles”, in each case as defined in the applicable Uniform Commercial Code.

(7)

Each of the Accounts, and all subaccounts thereof, constitute securities accounts as defined in the applicable Uniform Commercial Code.

(8)

All items of the Collateral that constitute security entitlements have been and will have been credited to one of the securities accounts. The securities intermediary for each of the Accounts has agreed to treat all assets credited to the securities accounts as financial assets under the applicable Uniform Commercial Code.

(9)

Other than the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Collateral. The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer that include a description of collateral covering the Collateral other than any financing statement relating to the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder or that has been terminated. The Issuer is not aware of any judgment, Pension Benefit Guarantee Corporation lien or tax lien filings against it.

(10)

The Issuer has caused or will have caused, within ten (10) days of the Closing Date, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Collateral granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder that constitutes chattel paper, instruments, accounts, securities entitlements or general intangibles under the applicable Uniform Commercial Code, if any.

(11)

The Trustee or the Accountholder has in its possession all original copies of the instruments that constitute or evidence the Collateral, if any. The instruments, loan agreements and leases that constitute or evidence the Collateral do not have any marks or notations indicating that they have been pledged, assigned or 71

Processed and formatted by SEC Watch - Visit SECWatch.com

otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties. All financing statements filed or to be filed against the Issuer in favor of the Trustee on behalf and for the benefit of the Secured Parties in connection herewith describing the Collateral contain a statement to the following effect: “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Trustee on behalf and for the benefit of (A) itself and for the benefit of the Noteholders, (B) the Collateral Manager and (C) each Hedge Counterparty.” (12)

The authoritative copy of any chattel paper that constitutes or evidences the Collateral, if any, has been communicated to the Trustee and has no marks or notations indicating that it has been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties.

(13)

The Issuer has received or will receive all consents and approvals required by the terms of the underlying loan agreement, indenture or other underlying documentation, if any, relating to the Collateral to the transfer to the Trustee on behalf and for the benefit of the Secured Parties of its interest and rights in the Collateral hereunder.

(14)

The Issuer, the Accountholder and the Trustee have entered into the Account Control Agreement pursuant to which the Accountholder has agreed to comply with all instructions originated by the Trustee relating to the Accounts without further consent by the Issuer.

(15)

None of the Accounts is in the name of any person other than the Trustee, held on behalf and for the benefit of the Secured Parties. The Issuer has not consented to the Trustee or the Accountholder maintaining any of the Accounts to comply with entitlement orders or instructions of any Person other than the Trustee.

(16)

Notwithstanding any other provision of this Indenture or any other related Transaction Document, the representations in this Section 3.3(c) shall be continuing and deemed to be updated on any day a new item of Collateral is acquired, and remain in full force and effect until such time as all obligations under this Indenture and the Notes have been finally and fully paid and performed and shall survive the termination of this Indenture for any other reason.

(17)

The parties to this Indenture (i) shall not, without obtaining a Rating Agency Confirmation, waive any of the representations in this Section 3.3(c); (ii) shall provide each of the Rating Agencies with prompt written notice of any breach of the representations contained in this Section 3.3(c) upon becoming aware thereof; and (iii) shall not, without obtaining a Rating Agency Confirmation (as determined after any adjustment or withdrawal of the ratings following notice of such breach), waive a breach of any of the representations in this Section 3.3(c). 72

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE IV SATISFACTION AND DISCHARGE 4.1. SATISFACTION AND DISCHARGE OF INDENTURE This Indenture shall be discharged and shall cease to be of further effect with respect to the Collateral securing the Indenture Issued Notes and the Indenture Issued Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Indenture Issued Notes, (iii) rights of Rated Noteholders to receive payments of principal thereof and interest thereon, (iv) the rights, obligations and immunities of the Trustee hereunder, (v) the rights, obligations and immunities of the Collateral Manager hereunder and under the Collateral Management Agreement and (vi) the rights of the Secured Parties as beneficiaries hereof with respect to the property deposited with the Trustee and payable to all or any of them; and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when: (a)

either: (1)

all Indenture Issued Notes theretofore authenticated and delivered (other than (A) Indenture Issued Notes which have been mutilated, defaced, destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.5 and (B) Indenture Issued Notes for whose payment funds have theretofore irrevocably been deposited in trust and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 7.3) have been delivered to the Trustee for cancellation; or

(2)

all Rated Notes not theretofore delivered to the Trustee or the PAA Issued Note Paying Agent, as applicable, for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity Date within one year, or (C) are to be called for redemption pursuant to Section 9.1 under an arrangement satisfactory to the Trustee for the giving of notice of redemption by the Co-Issuers pursuant to Section 9.3 and the Issuer has irrevocably deposited or caused to be deposited with the Trustee, in trust for such purpose, Cash or non-callable direct obligations of the United States in an amount sufficient, according to the Priority of Payments as verified by a firm of nationally recognized Independent certified public accountants, to pay and discharge the entire indebtedness on all Rated Notes not theretofore delivered to the Trustee or the PAA Issued Note Paying Agent, as applicable, for cancellation, including all principal and interest (including Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Periodic Interest Shortfall Amount, Class F Cumulative Applicable Periodic Interest Shortfall Amount and Class G Cumulative Applicable Periodic Interest Shortfall Amount accrued to the date of such deposit (in the case of Rated Notes which have become due and payable) or to the Stated Maturity Date or the Redemption Date, as the case may be; provided that (x) such obligations are entitled to the full faith and credit of the United States and (y) this subclause (2) shall not apply if an election to act in accordance with the provisions of Section 5.5(a) shall have been made and not rescinded; 73

(b)

the Issuer has paid or caused to be paid all other sums payable hereunder (including amounts payable pursuant to the Paying Agency Agreement, the Corporate Services Agreement, the Collateral Management Agreement, any Hedge Agreement and the Collateral Administration Agreement) and no other amounts will become due and payable by the Issuer; and

(c)

the Co-Issuers have delivered to the Trustee Officer’s certificates and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the rights and obligations of the Co-Issuers, the Trustee and any Hedge Counterparty and, if applicable, the Rated Noteholders, as the case may be, under Sections 2.6, 4.1, 4.2, 5.9, 5.18, 6.7, 6.8, 7.1 and 7.3 shall survive. 4.2. APPLICATION OF TRUST MONEY All funds deposited with the Trustee pursuant to Section 4.1 for the payment of principal of and interest on the Rated Notes and amounts payable pursuant to any Hedge Agreement, the Collateral Management Agreement, the Paying Agency Agreement, the Corporate Services Agreement and the Collateral Administration Agreement shall be held in trust and applied by it in accordance with the provisions of the Rated Notes and this Indenture, including the Priority of Payments, for the payment either directly or through any Note Paying Agent, as the Trustee may determine, to the Person entitled thereto of the respective amounts in respect of which such funds has been deposited with the Trustee; but such funds need not be segregated from other funds except to the extent required herein or required by law. 4.3. REPAYMENT OF FUNDS HELD BY NOTE PAYING AGENT

Processed and formatted by SEC Watch - Visit SECWatch.com

In connection with the satisfaction and discharge of this Indenture with respect to the Rated Notes, all funds then held by any Note Paying Agent other than the Trustee under the provisions of this Indenture shall, upon demand of the Co-Issuers, be paid to the Trustee to be held and applied pursuant to Section 7.3 and in accordance with the Priority of Payments and thereupon such Note Paying Agent shall be released from all further liability with respect to such funds. ARTICLE V EVENTS OF DEFAULT; REMEDIES 5.1. EVENTS OF DEFAULT Event of Default, is defined as any one of the following wherever used herein, means any one of the following events as set forth in Section 5.1(a) through (h) (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a)

a default for five (5) Business Days in the payment, when due and payable, of any interest on any Class A Note, or if there are no Class A Notes Outstanding, on any Class B Note, or, if there are no Class A Notes or Class B Notes Outstanding, on any Class C Note, or, if there are no Class A Notes, Class B Notes or Class C Notes Outstanding, on any Class D Note, or if there are no Class A Notes, Class B Notes, Class 74

Processed and formatted by SEC Watch - Visit SECWatch.com

C Notes or Class D Notes Outstanding, on any Class E Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes Outstanding, on any Class F Note; (b)

a default in the payment of any principal, when due and payable of any Rated Note other than a Class G Note (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent, the Note Registrar or the PAA Issued Note Registrar, such default continues for a period of five (5) Business Days);

(c)

the failure on any Payment Date to disburse amounts available in accordance with Section 11.1 (except as provided in Section 5.1(a) and (b) above) and a continuation of such failure for three (3) Business Days (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent, the Note Registrar or the PAA Issued Note Registrar, such default continues for a period of five (5) Business Days);

(d)

on any date of determination, the failure to maintain an aggregate principal amount of Collateral Interests and Eligible Investments at least equal to 100% of the aggregate principal amount of the Class A Notes Outstanding;

(e)

the event that either of the Co-Issuers or the pool of Collateral becomes an investment company required to be registered under the Investment Company Act;

(f)

a default in the performance, or breach, of any other covenant (it being understood that non-compliance with any of the Coverage Tests or the Collateral Quality Tests will not constitute a default or breach) or warranty of either of the Co-Issuers under the Indenture of any representation or if any certificate or writing delivered pursuant thereto proves to be incorrect when made, which default or breach has a material adverse effect on the Rated Noteholders and continues for a period of thirty (30) days (or, in the case of a default, breach or failure of a representation or warranty regarding the Collateral, fifteen (15) days) of the earlier of knowledge by the Co-Issuers or the Collateral Manager or notice to the Co-Issuers and the Collateral Manager by the Trustee or to the Co-Issuers and the Collateral Manager by the Holders of at least 25%, of the then Aggregate Outstanding Amount of the Rated Notes of any Class, specifying such default, breach or failure and requiring it to be remedied and stating that such notice is a “Notice of Default” under this Indenture;

(g)

the entry of a decree or order by a court having competent jurisdiction adjudging the Issuer or the Co-Issuer as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer or the Co-Issuer under the Bankruptcy Code or any other applicable law, or appointing a receiver, liquidator, assignee, or sequestrator (or other similar official) of the Issuer or the Co-Issuer or of any substantial part of its property; 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 ninety (90) consecutive days; or

(h)

the institution by the Issuer or the Co-Issuer of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, 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, or 75

Processed and formatted by SEC Watch - Visit SECWatch.com

the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of the Issuer or the Co-Issuer or of any substantial part of its property, respectively, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of any action by the Issuer or the Co-Issuer in furtherance of any such action. If either of the Co-Issuers shall obtain actual knowledge that an Event of Default shall have occurred and be continuing, such CoIssuer shall (unless the Trustee shall have provided notice of such Event of Default pursuant to Section 6.2) promptly notify the Trustee, the Rated Noteholders, any Hedge Counterparty, the Collateral Manager and each Rating Agency in writing of such Event of Default. 5.2. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT (a)

If an Event of Default occurs and is continuing, the Trustee may or, if so directed by the Holders of a Majority in aggregate principal amount of the Outstanding Rated Notes, will declare the principal of and accrued interest on all Notes to be immediately due and payable (except that in the case of an Event of Default described in Section 5.1(g) or 5.1(h) above, such an acceleration will occur automatically).

(b)

Any Hedge Agreement existing on or after such acceleration may not be terminated by the Issuer unless and until liquidation of the Collateral has commenced and annulment of such acceleration may no longer be affected.

(c)

At any time after such acceleration of maturity has been made and before a judgment or decree for payment of the amount due has been obtained by the Trustee as hereinafter provided in this Section 5, the Trustee may reverse such acceleration and its consequences if the Trustee determines that: (1)

the Issuer has paid or deposited with the Trustee funds sufficient to pay: (i)

all overdue installments of principal of and interest on the Notes (including interest upon the Class C Cumulative Applicable Periodic Interest Shortfall Amount, the Class D Cumulative Applicable Periodic Interest Shortfall Amount, the Class E Cumulative Applicable Periodic Interest Shortfall Amount, the Class F Cumulative Applicable Periodic Interest Shortfall Amount and the Class G Cumulative Applicable Periodic Interest Shortfall Amount, respectively, at the Applicable Periodic Interest Rate and, to the extent that payment of such interest is lawful, upon Defaulted Interest at the Applicable Periodic Interest Rate);

(ii)

any accrued and unpaid amounts (including termination payments, if any) payable by the Issuer pursuant to any Hedge Agreement;

(iii)

all unpaid taxes and Administrative Expenses, any accrued and unpaid Senior Collateral Management Fee, and other sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; 76

Processed and formatted by SEC Watch - Visit SECWatch.com

(2)

the Trustee has determined that all Events of Default of which it has actual knowledge, other than the nonpayment of the principal of or interest on the Rated Notes that have become due solely by such acceleration, have been cured; and

(3)

any Hedge Agreement in effect immediately prior to such acceleration shall remain in effect.

provided that the Trustee shall have obtained (and shall be entitled to rely upon) a certification of an Independent accounting firm of national reputation as to the sufficiency of the amounts in Section 5.2(c)(1) above, which certification shall be conclusive evidence as to such sufficiency. In addition, the Trustee may, but is not required to, obtain, at the Issuer’s expense (and may rely upon), an Opinion of Counsel as to the matters in Sections 5.2(c)(2) and (3) above. At any such time as the Trustee shall reverse such acceleration and its consequences, the Trustee shall preserve the Collateral in accordance with the provisions of Section 5.5; provided that, if the conditions for liquidation of the Collateral are satisfied pursuant to Section 5.5, the Rated Notes may be accelerated pursuant to Section 5.2(a). No such reversal of acceleration shall affect any subsequent Default or impair any right consequent thereon. 5.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE The Co-Issuers (or, with respect to the Class F Notes and the Class G Notes, the Issuer only) covenant that if a Default shall occur in respect of the payment of any principal of or interest on any Class A Note, the payment of principal of or interest on any Class B Note (but with respect to interest, only after the Class A Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class C Note (but with respect to interest, only after the Class A Notes and Class B Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class D Note (but with respect to interest, only after the Class A Notes, the Class B Notes and the Class C Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class E Note (but with respect to interest, only after the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class F Note (but with respect to interest, only after the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and all interest accrued thereon have been paid in full) or the payment of principal of or interest on any Class G Note (but with respect to interest, only after the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes and all interest accrued thereon have been paid in full), the Co-Issuers (or, with respect to the Class F Notes and the Class G Notes, the Issuer only) will, upon demand of the Trustee or any affected Rated Noteholder, pay to the Trustee, for the benefit of the Holder of such Rated Note, the whole amount, if any, then due and payable on such Rated Note for principal and interest, with interest upon the overdue principal and, to the extent that payments of such interest shall be legally enforceable, upon overdue installments of interest, at the Applicable Periodic Interest Rate and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee and such Rated Noteholder and their respective agents and counsel. If either of the Co-Issuers (or, in the case of the Class G Notes and the Class F Notes, the Issuer only), fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may, and shall, upon the direction by a the Holders of Majority of the then Aggregate Outstanding Amount of 77

Processed and formatted by SEC Watch - Visit SECWatch.com

the Notes of the Controlling Class (and, if the action of the Issuer or the Co-Issuer pursuant to such direction would have a material adverse effect on the Initial Hedge Counterparty, the Initial Hedge Counterparty), prosecute such Proceeding to judgment or final decree, and may enforce the same against the Issuer or the Co-Issuers, as applicable, or any other obligor upon the Rated Notes and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the Collateral; provided that a Holder of a Rated Note may institute any proceeding if (i) such Holder previously has given to the Trustee written notice of an Event of Default, (ii) except in the case of a default in the payment of principal or interest, the Holders of at least 25% of the then Aggregate Outstanding Amount of the Notes of the Controlling Class have made a written request upon the Trustee to institute such proceedings in its own name as Trustee and such Holders have offered the Trustee reasonable indemnity, (iii) the Trustee has, for thirty (30) days after receipt of notice, request and offer of such indemnity, failed to institute any such proceeding and (iv) no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Secured Parties by such appropriate Proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law. The Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class may, in certain cases, waive any default with respect to such Notes, except (i) a default for more than five (5) Business Days in the payment, when due and payable, of any interest on any Note, (ii) a default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date, (iii) the failure on any Payment Date to disburse amounts available in the Collection Account in accordance with Section 11.1 and continuation of such failure for a period of three (3) Business Days, (iv) certain events of bankruptcy or insolvency with respect to the Co-Issuers (or, in the case of the Class G Notes and the Class F Notes, the Issuer only) or (v) a default in respect of any provision of the Indenture that cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby. In case there shall be pending Proceedings relative to the Issuer or the Co-Issuer or any other obligor upon the Rated Notes or any Hedge Agreement under the Bankruptcy Code or any other applicable bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer, the Co-Issuer or their respective property or such other obligor or its property, or in case of any other comparable Proceedings relative to the Issuer, the Co-Issuer or other obligor upon the Rated Notes or Hedge Agreement, or the creditors or property of the Issuer, the Co-Issuer or such other obligor, the Trustee, regardless of whether the principal of any Rated Notes or Hedge Agreement shall then be due and payable as therein expressed or by declaration or otherwise and regardless of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.3, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (a)

to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Rated Notes or any Hedge Agreement upon direction by a Majority of the Controlling Class, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and 78

Processed and formatted by SEC Watch - Visit SECWatch.com

liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee) and of the Rated Noteholders allowed in any Proceedings relative to the Issuer, the Co-Issuer or other obligor upon the Rated Notes or to the creditors or property of the Issuer, the Co-Issuer or such other obligor; (b)

unless prohibited by applicable law and regulations, to vote on behalf of the Holders of the Rated Notes, upon the direction of such Holders, in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency Proceedings or person performing similar functions in comparable Proceedings; and

(c)

to collect and receive any amounts or other property payable to or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Rated Noteholders and of the Trustee on behalf of the Rated Noteholders and the Trustee; and any trustee, receiver or liquidator, custodian or other similar official is hereby authorized by each of the Rated Noteholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Rated Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other reasonable expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Rated Noteholder or the Initial Hedge Counterparty, any plan of reorganization, arrangement, adjustment or composition affecting the Rated Notes or the rights of any Holder thereof or the Initial Hedge Counterparty, or to authorize the Trustee to vote in respect of the claim of any Rated Noteholder or the Initial Hedge Counterparty in any such Proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. In any Proceedings brought by the Trustee on behalf of the Holders, the Trustee shall be held to represent, subject to Section 6.17, all the Secured Parties if applicable, pursuant to Section 6.17. Notwithstanding anything in this Section 5.3 to the contrary, the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to this Section 5.3 except in accordance with Section 5.5(a). 5.4. REMEDIES (a)

If an Event of Default shall have occurred and be continuing, and the Notes have been declared due and payable and such declaration and its consequences have not been rescinded and annulled, the Co-Issuers agree that, in addition to the requirements of Section 5.5(a), the Trustee may, after giving notice to the Noteholders, the Collateral Manager, each Hedge Counterparty and each Rating Agency, and with the consent of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class, and shall, upon written direction by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class, to the extent permitted by applicable law, exercise one or more of the following rights, privileges and remedies: (1)

institute Proceedings for the collection of all amounts then payable on the Notes or otherwise payable under this Indenture, whether by declaration or otherwise, 79

Processed and formatted by SEC Watch - Visit SECWatch.com

enforce any judgment obtained, and collect from the Collateral any amounts adjudged due; (2)

institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Collateral;

(3)

exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Secured Parties hereunder; and

(4)

subject to Section 5.4(d) below, exercise any other rights and remedies that may be available at law or in equity;

provided that the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to this Section 5.4 except in accordance with Section 5.5(a). The Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking firm of national reputation as to the feasibility of any action proposed to be taken in accordance with this Section 5.4 and as to the sufficiency of the proceeds and other amounts receivable with respect to the Collateral to make the required payments of principal of and interest on the Notes, which opinion shall be conclusive evidence as to such feasibility or sufficiency. (b)

If an Event of Default as described in Section 5.1(f) shall have occurred and be continuing, the Trustee may, and at the request of at least 25% of the Holders of the then Aggregate Outstanding Amount of the Notes of the Controlling Class shall, institute a Proceeding solely to compel performance of the covenant or agreement or to cure the representation or warranty, the breach of which gave rise to the Event of Default under such Section, and enforce any equitable decree or order arising from such proceeding; provided that (i) such request does not conflict with any provision in this Indenture, (ii) the Trustee determines that such action will not involve the Trustee incurring any liability (unless the Trustee is indemnified to its satisfaction against any such liability) and (iii) the Trustee may take other action deemed proper by the Trustee, that is not inconsistent with such direction.

(c)

Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the Initial Purchasers, any Hedge Counterparty, any Noteholder or Noteholders may bid for and purchase the Collateral or any part thereof and, upon compliance with the terms of sale, may hold, retain, possess or dispose of such property in its or their own absolute right without accountability. Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the receipt of the Trustee, or of the Officer making a sale under judicial proceedings, shall be a sufficient discharge to the purchaser or purchasers at any sale for its or their purchase price, and such purchaser or purchasers shall not be obliged to see to the application thereof. Any such sale, whether under any power of sale hereby given or by virtue of judicial proceedings, shall bind the Co-Issuers, the Trustee and the Noteholders, shall operate to divest all right, title and interest whatsoever, either at law or in equity, of each of them in 80

Processed and formatted by SEC Watch - Visit SECWatch.com

and to the property sold, and shall be a perpetual bar, both at law and in equity, against each of them and their successors and assigns, and against any and all Persons claiming through or under them. (d)

Notwithstanding any other provision of this Indenture, the Trustee may not, prior to the date which is one year and one day, or if longer the applicable preference period then in effect, after the payment in full of all Notes, institute against, or join any other Person in instituting against, the Issuer or the Co-Issuer any bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceedings, or other proceedings under federal or state bankruptcy or similar laws (of any jurisdiction). Nothing in this Section 5.4 shall preclude, or be deemed to stop, the Trustee (i) from taking any action prior to the expiration of the aforementioned one year and one day period, or if longer the applicable preference period then in effect, in (A) any case or proceeding voluntarily filed or commenced by the Issuer or the Co-Issuer or (B) any involuntary insolvency proceeding filed or commenced by a Person other than the Trustee, or (ii) from commencing against the Issuer or the Co-Issuer or any of its properties any legal action which is not a bankruptcy, reorganization, arrangement, insolvency, moratorium, liquidation or similar proceeding.

5.5. PRESERVATION OF COLLATERAL (a)

If an Event of Default shall have occurred and be continuing when any Class of Rated Notes is Outstanding, the Trustee shall retain the Collateral securing the Indenture Issued Notes and any Hedge Agreement intact, collect and cause the collection of the proceeds thereof and make all payments and deposits and maintain all accounts in respect of the Collateral, the Rated Notes and any Hedge Agreement in accordance with Section 11.1 and the provisions of Sections 10, 12 and 13 unless: (1)

the Trustee, pursuant to Section 5.5(c), determines (such determinations may be based upon a certificate from the Collateral Manager) that the anticipated proceeds of a sale or liquidation of the Collateral (after deducting reasonable expenses relating to such sale or liquidation) would be sufficient to discharge in full the Redemption Prices then due on the Rated Notes, any amounts required to be paid under any Hedge Agreement, all unreimbursed Interest Advances together with interest thereon, all unpaid Administrative Expenses and any accrued and unpaid Senior Collateral Management Fee (to the extent not waived by the Collateral Manager) and the Holders of a Majority of the then Aggregate Outstanding Amount of Rated Notes agrees with such determination; or

(2)

the Holders of at least 662/3% of the Aggregate Outstanding Amount of the Rated Notes of the Controlling Class (and, unless it will be paid in full all amounts owing to it by the Issuer, the Initial Hedge Counterparty), subject to the provisions hereof, and subject to the Trustee determining that such action will not involve the Trustee incurring any liability, (unless the Trustee is indemnified to its satisfaction against any such liability) direct the sale and liquidation of the Collateral.

For purposes of Section 5.5(a)(2), if the Initial Hedge Counterparty shall fail to vote to direct the sale and liquidation of the Collateral within three Business Days after written notice from the Issuer or the Trustee requesting a vote pursuant to such Section 5.5(a)(2), the Initial Hedge Counterparty shall not be entitled to participate in the vote requested by 81

Processed and formatted by SEC Watch - Visit SECWatch.com

such notice. The Trustee shall give written notice of the retention of the Collateral to the Issuer with a copy to the CoIssuer, each Holder of the Rated Notes and the Initial Hedge Counterparty. So long as such Event of Default is continuing, any such retention pursuant to this Section 5.5(a) may be rescinded at any time when the conditions specified in clause Section 5.5(a)(1) or (2) exist. (b)

Nothing contained in Section 5.5(a) shall be construed to require the Trustee to preserve the Collateral securing the Indenture Issued Notes if prohibited by applicable law.

(c)

In determining whether the condition specified in Section 5.5(a)(1) exists, the Trustee shall obtain bid prices with respect to each security contained in the Collateral from two nationally recognized dealers (or if it is unable in good faith to obtain such bid prices from two nationally recognized dealers, one nationally recognized dealer), as specified by the Collateral Manager in writing, which are Independent from each other and the Collateral Manager, at the time making a market in such securities and shall compute the anticipated proceeds of sale or liquidation on the basis of the lower of such bid prices for each such security. In addition, for the purposes of determining issues relating to the execution of a sale or liquidation of the Pledged Securities and the execution of a sale or other liquidation thereof in connection with a determination whether the condition specified in Section 5.5(a)(1) exists, the Trustee may retain and rely on an opinion of an Independent investment banking firm of national reputation. The Trustee shall deliver to the Noteholders, the Initial Hedge Counterparty, the Rating Agencies and the Co-Issuers a report stating the results of any determination required pursuant to Section 5.5(a)(1) no later than ten (10) days after making such determination but in any event prior to the sale or liquidation of the Collateral. The Trustee shall make the determinations required by Section 5.5(a)(1) within thirty (30) days after an Event of Default and at the request of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class at any time during which the Trustee retains the Collateral pursuant to Section 5.5(a)(1). In the case of each calculation made by the Trustee pursuant to Section 5.5(a)(1), the Trustee shall obtain a letter of an Independent certified public accountant confirming the accuracy of the computations of the Trustee and certifying their conformity to the requirements of this Indenture. In determining whether the Holders of the requisite percentage of any Class of Rated Notes or the requisite percentage of Income Noteholders have given any direction or notice or have agreed pursuant to Section 5.5(a), any Holder of a Rated Note of a Class or Income Notes who is also a Holder of Rated Notes of another Class or of Income Notes or any Affiliate of any such Holder shall be counted as a Holder of each such Rated Note and/or Income Note for all purposes.

(d)

If an Event of Default shall have occurred and be continuing at a time when no Rated Note is Outstanding, the Trustee shall retain the Collateral securing the Indenture Issued Notes and any Hedge Agreement intact, collect and cause the collection of the proceeds thereof and make and apply all payments and deposits and maintain all accounts in respect of the Collateral and the Rated Notes in accordance with Section 11.1 and the provisions of Section 10 and Section 12 unless a Majority of the Income Noteholders direct the sale and liquidation of the Collateral. 82

Processed and formatted by SEC Watch - Visit SECWatch.com

5.6. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION All rights of action and of asserting claims under this Indenture, or under any of the Rated Notes, may be enforced by the Trustee without the possession of any of the Hedge Agreements or the Rated Notes or the production thereof in any trial or other Proceedings relative thereto, and any action or Proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the reasonable expenses, disbursements and compensation of the Trustee, each predecessor trustee and their respective agents and attorneys and counsel, shall be for the benefit of the Secured Parties and shall be applied as set forth in Section 5.7. 5.7. APPLICATION OF FUNDS COLLECTED Any funds collected by the Trustee with respect to any Hedge Agreement or the Rated Notes pursuant to this Section 5 and any funds that may then be held or thereafter received by the Trustee with respect to any Hedge Agreements or the Rated Notes hereunder shall be applied subject to Section 13.1 and in accordance with the provisions of Section 11.1(c), at the date or dates fixed by the Trustee. 5.8. LIMITATION ON SUITS Only the Trustee may pursue remedies available hereunder and no Holder of any Note shall have any right to institute any Proceedings, judicial or otherwise, with respect to this Indenture, or its Note or otherwise, for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a)

such Holder has previously given to the Trustee written notice of a continuing Event of Default;

(b)

except in the case of a default in the payment of principal or interest, the Holders or Holders of at least 25% of the then Aggregate Outstanding Amount of the Rated Notes of the Controlling Class shall have made a written request to the Trustee to institute Proceedings in respect of such Event of Default in its own name as Trustee hereunder and such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

(c)

the Trustee for thirty (30) days after its receipt of such notice, request and offer of indemnity has failed to institute any such Proceeding; and

(d)

no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of a Majority of the then Aggregate Outstanding Amount of the Rated Notes;

it being understood and intended that no one or more Holders of Rated Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders of the Notes of the same Class or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders of Notes of the same Class. In addition, any action taken by any one or more of the Holders of Notes shall be subject to and in accordance with Sections 13.1 and 11.1(d). Notwithstanding any other provisions of this Indenture but subject to Section 5.8(d), if the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of the Rated Notes, each representing less than a Majority of the then Aggregate Outstanding 83

Processed and formatted by SEC Watch - Visit SECWatch.com

Amount of Rated Notes, the Trustee shall follow the instructions of the group representing the higher percentage of aggregate principal amount of Outstanding Rated Notes. 5.9. UNCONDITIONAL RIGHTS OF RATED NOTEHOLDERS (OTHER THAN THE CLASS G NOTEHOLDERS) TO RECEIVE PRINCIPAL AND INTEREST Notwithstanding any other provision in this Indenture (other than Section 2.6(i)), the Holder of any Indenture Issued Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest (if any) on such Indenture Issued Note as such principal and/or interest become due and payable in accordance with Sections 13.1 and 11.1(c) and, subject to the provisions of Section 5.8, to institute proceedings for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. Holders of the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes shall have no right to institute proceedings for the enforcement of any payment until such time as no Class of Rated Note that is senior to such Class of them remains Outstanding, which right shall be subject to the provisions of Section 5.8, and shall not be impaired without the consent of any such Holder. 5.10.

RESTORATION OF RIGHTS AND REMEDIES

If the Trustee or any Rated Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Rated Noteholder, then and in every such case the Co-Issuers, the Trustee and the Rated Noteholder shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Secured Parties shall continue as though no such Proceeding had been instituted. 5.11.

RIGHTS AND REMEDIES CUMULATIVE

No right or remedy herein conferred upon or reserved to the Trustee or to the Rated Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing by law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 5.12.

DELAY OR OMISSION NOT WAIVER

No delay or omission of the Trustee, any Rated Noteholder or the Initial Hedge Counterparty to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Section 5 or by law to the Trustee, the Rated Noteholders or the Initial Hedge Counterparty may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Rated Noteholders the Initial Hedge Counterparty, as the case may be. 5.13.

CONTROL BY CONTROLLING CLASS

Notwithstanding any other provision of this Indenture (but subject to the proviso in the definition of “Outstanding” in Section 1.1(a)), the Holders of a Majority of the then Aggregate Outstanding Amount of the Rated Notes shall have the right to cause the institution of and direct the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or of any sale of the Collateral, in whole or in part, provided that: 84

5.14.

(a)

such direction shall not conflict with any rule of law or with this Indenture;

(b)

the Trustee may take any other action deemed proper by it that is not inconsistent with such direction; provided that, subject to Section 6.1, the Trustee need not take any action that it determines might involve it in liability (unless the Trustee has received an indemnity reasonably satisfactory to it against such liability as set forth below);

(c)

the Trustee shall have been provided with an indemnity reasonably satisfactory to it; and

(d)

any direction to the Trustee to undertake a Sale of the Collateral shall be made only pursuant to, and in accordance with, Sections 5.4 and 5.5.

WAIVER OF PAST DEFAULTS

The Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class may, in certain cases waive any past Default and its consequences, except: (a)

a Default for more than five (5) Business Days in the payment, when due and payable, of any interest on any Rated Note; or

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

a Default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date; or

(c)

the failure on any Payment Date to disburse amounts available in the Collection Account in accordance with Section 11.1 and the continuation of such failure for a period of three (3) Business Days; or

(d)

a Default arising under Section 5.1(g) or 5.1(h); or

(e)

a Default in respect of any provision of this Indenture that under Section 8.2 cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby.

In the case of any such waiver, (i) the Co-Issuers, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto, and (ii) the Trustee shall promptly give written notice of any such waiver to the Collateral Manager and each Holder of Rated Notes. The Rating Agencies shall be notified by the Issuer of any such waiver. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. 5.15.

UNDERTAKING FOR COSTS

All parties to this Indenture agree, and each Holder of any Rated Note by its acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the 85

Processed and formatted by SEC Watch - Visit SECWatch.com

claims or defenses made by such party litigant; but the provisions of this Section 5.15 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Rated Noteholder, or group of Rated Noteholders, holding in the aggregate more than 10% in Aggregate Outstanding Amount of the Controlling Class, or to any suit instituted by any Rated Noteholder for the enforcement of the payment of the principal of or interest on any Rated Note on or after the Stated Maturity Date expressed in such Rated Note (or, in the case of redemption, on or after the applicable Redemption Date). 5.16.

WAIVER OF STAY OR EXTENSION LAWS

The Co-Issuers covenant (to the extent that they may lawfully do so) that they will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force (including but not limited to filing a voluntary petition under Chapter 11 of the Bankruptcy Code and by the voluntary commencement of a proceeding or the filing of a petition seeking winding up, liquidation, reorganization or other relief under any bankruptcy, insolvency, receivership or similar law now or hereafter in effect), which may affect the covenants, the performance of or any remedies under this Indenture; and the Co-Issuers (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 5.17.

SALE OF COLLATERAL (a)

The power to effect any sale (a Sale) of any portion of the Collateral pursuant to Sections 5.4 and 5.5 shall not be exhausted by any one or more Sales as to any portion of such Collateral remaining unsold, but shall continue unimpaired until the entire Collateral shall have been sold or all amounts secured by the Collateral shall have been paid. The Trustee hereby expressly waives its rights to any amount fixed by law as compensation for any Sale; provided that the Trustee shall be authorized to deduct the reasonable costs, charges and expenses incurred by it in connection with such Sale from the proceeds thereof notwithstanding the provisions of Section 6.7.

(b)

The Trustee may bid for and acquire any portion of the Collateral in connection with a public Sale thereof, by crediting all or part of the net proceeds of such Sale after deducting the reasonable costs, charges and expenses incurred by the Trustee in connection with such Sale notwithstanding the provisions of Section 6.7. The Rated Notes and the Hedge Agreement, if any, need not be produced in order to complete any such Sale, or in order for the net proceeds of such Sale to be credited against amounts owing on the Rated Notes. The Trustee may hold, lease, operate, manage or otherwise deal with any property so acquired in any manner permitted by law in accordance with this Indenture.

(c)

If any portion of the Collateral consists of securities not registered under the Securities Act (Unregistered Securities), the Trustee may, but shall not be required to, seek an Opinion of Counsel, or, if no such Opinion of Counsel can be obtained, with the consent of a Majority of the Controlling Class seek, a no-action position from the Commission or any other relevant federal or state regulatory authorities, regarding the legality of a public or private sale of such Unregistered Securities. In no event will the Trustee be required to register Unregistered Securities under the Securities Act.

(d)

The Trustee shall execute and deliver an appropriate instrument of conveyance transferring its interest in any portion of the Collateral in connection with a sale thereof. 86

Processed and formatted by SEC Watch - Visit SECWatch.com

In addition, the Trustee is hereby irrevocably appointed the agent and attorney-in-fact of the Issuer to transfer and convey its interest in any portion of the Collateral in connection with a sale thereof, and to take all action necessary to effect such sale. No purchaser or transferee at such a sale shall be bound to ascertain the Trustee’s authority, to inquire into the satisfaction of any conditions precedent or see to the application of any funds. 5.18.

ACTION ON THE RATED NOTES

The Trustee’s right to seek and recover judgment on the Rated Notes or under this Indenture shall not be affected by the seeking or obtaining of or application for any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Secured Parties shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer or the Co-Issuer. ARTICLE VI THE TRUSTEE 6.1. CERTAIN DUTIES AND RESPONSIBILITIES (a)

Except during the continuance of an Event of Default: (1)

the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2)

in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided that, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they substantially conform to the requirements of this Indenture and shall promptly, but in any event within three Business Days in the case of an Officer’s certificate furnished by the Issuer, notify the party delivering the same if such certificate or opinion does not conform. If a corrected form shall not have been delivered to the Trustee within 15 days after such notice from the Trustee, the Trustee shall promptly notify the Rated Noteholders and the Initial Hedge Counterparty.

(b)

In case an Event of Default actually known to the Trustee has occurred and is continuing, the Trustee shall, prior to the receipt of directions, if any, from a Majority of the Controlling Class, exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(c)

No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: 87

Processed and formatted by SEC Watch - Visit SECWatch.com

(1)

This Section 6.1(c) shall not be construed to limit the effect of Section 6.1(a);

(2)

the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it shall be proven that the Trustee was negligent in ascertaining the pertinent facts;

(3)

the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Issuer or the Co-Issuer in accordance with this Indenture and/or a Majority (or such other percentage as may be required by the terms hereof) of the Aggregate Outstanding Amount of the Controlling Class (or other Class if required or permitted by the terms hereof) relating to the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;

(4)

no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers contemplated hereunder, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it (if the amount of such funds or risk or liability does not exceed the amount payable to the Trustee pursuant to Section 11.1(a)(1) net of the amounts specified in Section 6.8(a)(1), the Trustee shall be deemed to be reasonably assured of such repayment) unless such risk or liability relates to performance of its ordinary services, including under Section 5, under this Indenture; and

(5)

the Trustee shall not be liable to the Rated Noteholders for any action taken or omitted by it at the direction of the Co-Issuers (in the case of the Rated Notes other than the Class G Notes and the Class F Notes), the Issuer (in the case of the Class G Notes and the Class F Notes), the Collateral Manager and/or the Holders of the Rated Notes under the circumstances in which such direction is required or permitted by the terms of this Indenture.

(d)

For all purposes under this Indenture, the Trustee shall not be deemed to have notice or knowledge of any Event of Default described in Section 5.1(e), 5.1(f), 5.1(g) or 5.1(h) unless a Trust Officer assigned to and working in the Corporate Trust Office has actual knowledge thereof or unless written notice of any event which is in fact such an Event of Default or such a Default, as the case may be, is received by the Trustee at the Corporate Trust Office. For purposes of determining the Trustee’s responsibility and liability hereunder, whenever reference is made in this Indenture to such an Event of Default or such a Default, as the case may be, such reference shall be construed to refer only to such an Event of Default or such a Default, as the case may be, of which the Trustee is deemed to have notice as described in this Section 6.1(d).

(e)

Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.

(f)

The Trustee shall, upon receipt of reasonable (but no less than three Business Days’) prior written notice, permit any representative of a Holder of a Rated Note or the Initial Hedge Counterparty, during the Trustee’s normal business hours, to examine all books of 88

Processed and formatted by SEC Watch - Visit SECWatch.com

account, records, reports and other papers of the Trustee relating to the Rated Notes, to make copies and extracts therefrom (the reasonable out-of-pocket expenses incurred in making any such copies or extracts to be reimbursed to the Trustee by such Holder) and to discuss the Trustee’s actions, as such actions relate to the Trustee’s duties with respect to the Rated Notes, with the Trustee’s officers and employees responsible for carrying out the Trustee’s duties with respect to the Rated Notes; provided that under no circumstances shall the Initial Hedge Counterparty be permitted to review any documentation containing the names or other indicia of identity of any of the Noteholders unless any such information (including the number of shares held by such Noteholder) has been redacted from such documentation. (g)

With respect to the security interests created hereunder, the Trustee acts as a fiduciary for the Rated Noteholders only, and serves as a collateral agent for the other Secured Parties.

6.2. NOTICE OF DEFAULT Promptly (and in no event later than three Business Days) after the occurrence of any Default actually known to a Trust Officer of the Trustee or after acceleration has been made pursuant to Section 5.2, the Trustee shall send to the Issuer, the PAA Issued Note Paying Agent, each Rating Agency, (for so long as any Class of Rated Notes is Outstanding), the Collateral Manager, the Initial Hedge Counterparty and to all Holders of Rated Notes, as their names and addresses appear on the Note Register, notice of all Defaults hereunder known to the Trustee, unless such Default shall have been cured or waived. 6.3. CERTAIN RIGHTS OF TRUSTEE Except as otherwise provided in Sections 6.1 and 8: (a)

the Trustee may rely and shall be protected in acting or refraining from acting in good faith and in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b)

any request or direction of the Issuer or the Co-Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or Issuer Order, as the case may be;

(c)

whenever in the administration of this Indenture the Trustee shall (i) deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer’s certificate or (ii) be required to determine the value of any Collateral or funds hereunder or the cashflows projected to be received therefrom, the Trustee may, in the absence of bad faith on its part, rely on reports of nationally recognized accountants, investment bankers or other Persons qualified to provide the information required to make such determination, including nationally recognized dealers in securities of the type being valued and securities quotation services;

(d)

as a condition to the taking or omitting of any action by it hereunder, the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be 89

Processed and formatted by SEC Watch - Visit SECWatch.com

full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in reliance thereon; (e)

the Trustee shall be under no obligation to exercise or to honor any of the rights or powers vested in it by this Indenture at the request or direction of any of the Rated Noteholders pursuant to this Indenture, unless such Rated Noteholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might reasonably be incurred by it in compliance with such request or direction;

(f)

the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper documents, but the Trustee, in its discretion, may and, upon the written direction of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of any Class, the Initial Hedge Counterparty or any Rating Agency shall make such further inquiry or investigation into such facts or matters as it may see fit or as it shall be directed, and, the Trustee shall be entitled, on reasonable prior notice to the Co-Issuers, to examine the books and records of the Co-Issuers or the Collateral Manager relating to the Rated Notes and the Collateral, personally or by agent or attorney at a time acceptable to the CoIssuers or the Collateral Manager in their reasonable judgment during normal business hours; provided that the Trustee shall, and shall cause its agents, to hold in confidence all such information, except (i) to the extent disclosure may be required by law by any regulatory authority and (ii) to the extent that the Trustee, in its sole judgment, may determine that such disclosure is consistent with its obligations hereunder;

(g)

the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys; provided that the Trustee shall not be responsible for any misconduct or negligence on the part of any agent (other than any Affiliate of the Trustee) appointed and supervised, or attorney appointed, with due care by it hereunder;

(h)

the Trustee shall not be liable for any action it takes or omits to take in good faith that it reasonably and, after the occurrence and during the continuance of an Event of Default, prudently believes to be authorized or within its rights or powers hereunder;

(i)

nothing herein shall be construed to impose an obligation on the part of the Trustee to recalculate, evaluate or verify any report, certificate or information received from the Issuer or Collateral Manager (unless and except to the extent otherwise expressly set forth herein or upon the request of the Initial Hedge Counterparty, a Rating Agency or a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class);

(j)

the Trustee shall not be responsible or liable for the actions or omissions of, or any inaccuracies in the records of, any nonAffiliated custodian, clearing agency, common depository, Euroclear or Clearstream or for the acts or omissions of the Collateral Manager or either Co-Issuer;

(k)

to the extent any defined term hereunder, or any calculation required to be made or determined by the Trustee hereunder, is dependent upon or defined by reference to generally accepted accounting principles in the United States (GAAP), the Trustee shall be entitled to request and receive (and rely upon) instruction from the Issuer or the 90

Processed and formatted by SEC Watch - Visit SECWatch.com

accountants appointed pursuant to 10.14 as to the application of GAAP in such connection, in any instance; (l)

to the extent permitted by law, the Trustee shall not be required to give any bond or surety in respect of the execution of this Indenture or otherwise; and

(m)

the permissive right of the Trustee to take or refrain from taking any actions enumerated in this Indenture shall not be construed as a duty.

(n)

The Trustee shall be entitled to conclusively rely upon the Collateral Manager’s determination that the representations and warranties provided in connection with the acquisition of a Mezzanine Loan, a Subordinate Mortgage Loan Interest, a Credit Lease Loan, a Tenant Lease Loan Interest, a Participation Interest or a Commercial Mortgage Loan comply with the requirements of clause (u) of the definition of “Eligibility Criteria.”

6.4. AUTHENTICATING AGENTS If the Trustee so chooses the Trustee may appoint one or more Authenticating Agents with power to act on its behalf and subject to its direction in the authentication of Indenture Issued Notes in connection with issuance, transfers and exchanges under Sections 2.4, 2.5 and 8.5, as fully to all intents and purposes as though each such Authenticating Agent had been expressly authorized by those Sections to authenticate such Indenture Issued Notes. For all purposes of this Indenture, the authentication of Indenture Issued Notes by an Authenticating Agent pursuant to this Section 6.4 shall be deemed to be the authentication of Indenture Issued Notes “by the Trustee”. Any entity into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any entity succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, without the execution or filing of any further act on the part of the parties hereto or such Authenticating Agent or such successor entity. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and the Issuer. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Co-Issuers. Upon receiving such notice of resignation or upon such a termination, the Trustee shall promptly appoint a successor Authenticating Agent and shall give written notice of such appointment to the Co-Issuers. The Issuer agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services (provided, however, that, so long as an Authenticating Agent is the Trustee, or an Affiliate thereof, such compensation shall be payable by the Trustee, rather than by the Issuer), and reimbursement for its reasonable expenses relating thereto and the Trustee shall be entitled to be reimbursed for such payments, subject to Section 6.8. The provisions of Sections 2.8, 6.5 and 6.6 shall be applicable to any Authenticating Agent. 6.5. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF RATED NOTES The recitals contained herein and in the Rated Notes, other than the Certificate of Authentication thereon, shall be taken as the statements of the Co-Issuers (with respect to the Rated Notes other than the Class F Notes and the Class G Notes) and the Issuer (with respect to the Class F Notes and the Class G 91

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes), and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or sufficiency of this Indenture (except as may be made with respect to the validity of the Trustee’s obligations hereunder), of the Collateral or of the Rated Notes. The Trustee shall not be accountable for the use or application by the Co-Issuers of the Rated Notes (other than the Class F Notes or the Class G Notes), by the Issuer of the Class F Notes or the Class G Notes or the proceeds thereof or any amounts paid to either of the CoIssuers pursuant to the provisions hereof. 6.6. MAY HOLD RATED NOTES The Trustee, any Note Paying Agent, the Note Registrar or any other agent of the Co-Issuers, in its individual or any other capacity, may become the owner or pledgee of Rated Notes and, may otherwise deal with the Co-Issuers or any of their Affiliates, with the same rights it would have if it were not Trustee, Note Paying Agent, Note Registrar or such other agent. 6.7. FUNDS HELD IN TRUST Funds held by the Trustee hereunder shall be held in trust to the extent required herein. The Trustee shall be under no liability for interest on any funds received by it hereunder except as otherwise agreed upon with the Issuer and except to the extent of income or other gain on investments which are deposits in or certificates of deposit of the Trustee in its commercial capacity and income or other gain actually received by the Trustee on Eligible Investments. 6.8. COMPENSATION AND REIMBURSEMENT (a)

The Issuer agrees: (1)

to pay the Trustee on each Payment Date the Trustee Fee, the PAA Issued Note Paying Agent Fee and reasonable compensation for all other services, including custodial services, rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

(2)

except as otherwise expressly provided herein, to reimburse the Trustee (subject to any written agreement between the Issuer and the Trustee) in a timely manner upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture or in the enforcement of any provision hereof and expenses related to the maintenance and administration of the Collateral (including securities transaction charges and the reasonable compensation and expenses and disbursements of its agents and legal counsel and of any accounting firm or investment banking firm employed by the Trustee pursuant to Section 5.2, 5.4, 5.5, 6.3(c), 6.3(k), 10.12 or 10.14, except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith but only to the extent any such securities transaction charges have not been waived during a Due Period due to the Trustee’s receipt of a payment from a financial institution with respect to certain Eligible Investments);

(3)

to indemnify the Trustee and its Officers, directors, employees and agents for, and to hold them harmless against, any loss, liability or expense incurred by it without negligence, willful misconduct or bad faith on their part, arising out of or in connection with the acceptance or administration of this trust, including the 92

Processed and formatted by SEC Watch - Visit SECWatch.com

reasonable costs and expenses (including reasonable counsel fees) of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties hereunder; and (4)

to pay the Trustee reasonable additional compensation together with its expenses (including reasonable counsel fees) for any collection action taken pursuant to Section 6.14.

(b)

The Issuer may remit payment for such fees and expenses to the Trustee or, in the absence thereof, the Trustee may from time to time deduct payment of its fees and expenses hereunder from funds on deposit in the Expense Account pursuant to Section 11.1.

(c)

The Trustee hereby agrees not to cause the filing of a petition in bankruptcy against the Issuer for the non-payment to the Trustee of any amounts provided by this Section 6.8 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 Rated Notes.

(d)

The amounts payable to the Trustee pursuant to Sections 6.8(a)(2) through (4) (other than amounts received by the Trustee from financial institutions under Section 6.8(a)(2) above) shall not, except as provided by Section 11.1(a)(24) or Section 11.1(b)(20), exceed on any Payment Date the limitation described in Section 11.1(a)(1) for such Payment Date; provided that (A) the Trustee shall not institute any proceeding for enforcement of such lien except in connection with an action pursuant to Section 5.3 or 5.4 for the enforcement of the lien of this Indenture for the benefit of the Secured Parties and (B) the Trustee may only enforce such a lien in conjunction with the enforcement of the rights of the Secured Parties in the manner set forth in Section 5.4.

The Trustee shall, subject to the Priority of Payments, receive amounts pursuant to this Section 6.8 and Section 11.1 only to the extent that the payment thereof will not result in an Event of Default and the failure to pay such amounts to the Trustee will not, by itself, constitute an Event of Default. Subject to Section 6.10, the Trustee shall continue to serve as Trustee under this Indenture notwithstanding the fact that the Trustee shall not have received amounts due it hereunder and hereby agrees not to cause the filing of a petition in bankruptcy against the Co-Issuers for the nonpayment to the Trustee of any amounts provided by this Section 6.8 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 Rated Notes. No direction by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class shall affect the right of the Trustee t o collect amounts owed to it under this Indenture. The indemnifications in favor of the Trustee in this Section 6.8 shall (i) survive any resignation or removal of any Person acting as Trustee (to the extent of any indemnified liabilities, costs, expenses and other amounts arising or incurred prior to, or arising out of actions or omissions occurring prior to, such resignation or removal) and (ii) apply to the Trustee in its capacities as Custodian, Note Paying Agent, Rated Note Calculation Agent and Authenticating Agent. 6.9. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY There shall at all times be a Trustee hereunder which shall be a bank, corporation or trust company 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.$100,000,000, subject to supervision or examination by federal or state banking authorities, 93

Processed and formatted by SEC Watch - Visit SECWatch.com

and insured by the Federal Deposit Insurance Corporation, whose long-term senior unsecured debt is rated “AA-” by S&P (or “A+” by S&P, if the Trustee’s short-term unsecured debt rating is at least “A-1” by S&P), or an entity with respect to which Rating Agency Confirmation has been received. If such entity publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.9, the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.9, it shall resign immediately in the manner and with the effect hereinafter specified in this Section 6. 6.10.

RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR (a)

No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Section 6 shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11.

(b)

The Trustee may resign at any time by giving 90 days prior written notice thereof to the Co-Issuers, the Rated Noteholders, the Collateral Manager, the Initial Hedge Counterparty and each Rating Agency. Upon receiving such notice of resignation, or if the Trustee is removed or becomes incapable of acting, or if a vacancy shall occur in the office of the Trustee for any reason, the Issuer shall (after consultation with the Collateral Manager) promptly propose a successor trustee for approval by the Holders of 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes. A proposed successor trustee approved in accordance with the preceding sentence shall be appointed by the Co-Issuers as successor trustee by written instrument, in duplicate, executed by an Authorized Officer of the Issuer and an Authorized Officer of the Co-Issuer, one copy of which shall be delivered to the Trustee so resigning and one copy to the successor trustee or trustees, together with a copy to each Rated Noteholder. If no successor trustee shall have been appointed and an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee or any Holder of a Rated Note or the Initial Hedge Counterparty on behalf of itself and all others similarly situated, subject to Section 5.15, may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c)

The Trustee may be removed at any time by an Act of the Holders of at least 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes delivered to the Trustee and to the Co-Issuers.

(d)

If at any time: (1)

the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by any Holder; or

(2)

the Trustee shall become incapable of acting or shall be adjudged as bankrupt or insolvent or a receiver or liquidator of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case (subject to Section 6.10(a)), (A) the Co-Issuers, by Issuer Order shall remove the Trustee, or (B) subject to Section 5.15, any Holder or the Initial Hedge Counterparty 94

Processed and formatted by SEC Watch - Visit SECWatch.com

may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e)

6.11.

The Co-Issuers shall give prompt notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first class mail, postage prepaid, to each Rating Agency, the Initial Hedge Counterparty, the Collateral Manager and the Holders as their names and addresses appear in the Note Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. If the Co-Issuers fail to mail such notice within ten days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Co-Issuers.

ACCEPTANCE OF APPOINTMENT BY SUCCESSOR

Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Co-Issuers and the retiring Trustee (with copies to the Collateral Manager) an instrument accepting such appointment. Upon delivery of the required instruments, the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any other act, deed or conveyance, shall become vested with all the rights, powers, trusts, duties and obligations of the retiring Trustee; but, on request of the Co-Issuers or a Majority of the then Aggregate Outstanding Amount of the Notes of any Class of Notes or the successor Trustee, such retiring Trustee shall, upon payment of its charges, fees, indemnities and expenses then unpaid, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and funds held by such retiring Trustee hereunder, subject nevertheless to its lien, if any, provided for in Section 6.8(d). Upon request of any such successor Trustee, the Co-Issuers shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless (a) at the time of such acceptance such successor shall be qualified and eligible under Section 6.9 and the other provisions of this Section 6 and (b) a Rating Agency Confirmation shall have been obtained with respect to the appointment of such successor Trustee shall have been satisfied. No appointment of a successor Trustee shall become effective if the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class objects to such appointment; and no appointment of a successor Trustee shall become effective until the date ten days after notice of such appointment has been given to each Rated Noteholder and each Rating Agency. 6.12.

MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF TRUSTEE

Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided such Person shall be otherwise qualified and eligible under this Section 6, without the execution or filing of any paper or any further act on the part of any of the parties hereto. The successor Trustee will notify each Rating Agency of any such merger, conversion or consolidation. In case any of the Indenture Issued Notes have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Indenture Issued Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Indenture Issued Notes. 95

6.13.

CO-TRUSTEES

At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any part of the Collateral may at the time be located, the Trustee shall have power to appoint one or more Persons to act as Co-trustee, jointly with the Trustee of all or any part of the Collateral, with the power to file such proofs of claim and take such other actions pursuant to Section 5.6 and to make such claims and enforce such rights of action on behalf of the Holders of the Rated Notes subject to the other provisions of this Section 6.13. The Co-Issuers shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint a Co-trustee. If the Co-Issuers do not join in such appointment within 15 days after the receipt by them of a request to do so, the Trustee shall have power to make such appointment. Should any written instrument from the Co-Issuers be required by any Co-trustee so appointed for more fully confirming to such Cotrustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the CoIssuers. The Co-Issuers agree to pay (subject to the Priority of Payments) for any reasonable fees and expenses in connection with such appointment. Every Co-trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms: (a)

the Indenture Issued Notes shall be authenticated and delivered and all rights, powers, duties and obligations hereunder in respect of the custody of securities, funds and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely by the Trustee;

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by the appointment of a Co-trustee shall be conferred or imposed upon and exercised or performed by the Trustee or by the Trustee and such Co-trustee jointly, as shall be provided in the instrument appointing such Co-trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by a Co-trustee;

(c)

the Trustee at any time, by an instrument in writing executed by it, may accept the resignation of or remove any Co-trustee appointed under this Section 6.13. A successor to any Co-trustee so resigned or removed may be appointed in the manner provided in this Section 6.13;

(d)

no Co-trustee hereunder shall be personally liable by reason of any act or omission of the Trustee or any other Co-trustee hereunder;

(e)

the Trustee shall not be liable by reason of any act or omission of a Co-trustee;

(f)

any Act of Rated Noteholders delivered to the Trustee shall be deemed to have been delivered to each Co-trustee; and 96

Processed and formatted by SEC Watch - Visit SECWatch.com

(g)

6.14.

each Co-trustee hereunder shall at the time of such acceptance satisfy the qualification required of a Trustee under Section 6.9 and the other provisions of this Section 6.

CERTAIN DUTIES RELATED TO DELAYED PAYMENT OF PROCEEDS; OTHER NOTICES

In the event that the Trustee shall not have received a payment with respect to any Pledged Security within two Business Days after its Due Date, the Trustee shall (i) notify the Issuer and Collateral Manager in writing and (ii) promptly request the issuer of such Pledged Security, the trustee under the related Underlying Instrument or paying agent designated by either of them, as the case may be, to make such payment as soon as practicable after such request but in no event later than three Business Days after the date of such request. In the event that such payment is not made within such time period, the Trustee, subject to the provisions of Section 6.1(c)(4), shall, subject to the restrictions on the sale of Collateral Interests set forth in Section 12.1, take such action as the Collateral Manager shall direct in writing. Any such action shall be without prejudice to any right to claim a Default under this Indenture. The Trustee will promptly notify the Issuer if the Collateral Manager has determined that (i) any Collateral Interest has become an Impaired Interest, a Deferred Interest PIK Bond, a Credit Risk Interest or a Written Down Interest or (ii) the Trustee has received an Equity Interest in connection with any Collateral Interest. 6.15.

REPRESENTATIONS AND WARRANTIES OF THE BANK (a)

Organization. The Bank has been duly organized and is validly existing as a national banking association under the laws of the United States and has the power to conduct its business and affairs as a trustee.

(b)

Authorization; Binding Obligations. The Bank has the power and authority to perform the duties and obligations of Trustee, Note Registrar and Note Transfer Agent or any other capacity to which it is appointed under this Indenture. The Bank has taken all necessary action to authorize the execution, delivery and performance of this Indenture, and all of the documents required to be executed by the Bank pursuant hereto. This Indenture has been duly executed and delivered by the Bank. Upon execution and delivery by the Co-Issuers, this Indenture will constitute the legal, valid and binding obligation of the Bank enforceable in accordance with its terms.

(c)

Eligibility. The Bank is eligible under Section 6.9 to serve as Trustee hereunder.

(d)

No Conflict. Neither the execution, delivery and performance of this Indenture, nor the consummation of the transactions contemplated by this Indenture, (i) is prohibited by, or requires the Bank to obtain any consent, authorization, approval or registration under, any law, statute, rule, regulation, judgment, order, writ, injunction or decree that is binding upon the Bank or any of its properties or assets, or (ii) will violate any provision of, result in any default or acceleration of any obligations under, result in the creation or imposition of any lien pursuant to, or require any consent under, any agreement to which the Bank is a party or by which it or any of its property is bound.

(e)

No Proceedings. There are no proceedings pending, or to the best knowledge of the Bank, threatened against the Bank before any federal, state or other governmental agency, authority, administrator or regulatory body, arbitrator, court or other tribunal, foreign or domestic, that could have a material adverse effect on the Collateral or any action taken or to be taken by the Bank under this Indenture. 97

Processed and formatted by SEC Watch - Visit SECWatch.com

6.16.

EXCHANGE OFFERS, PROPOSED AMENDMENTS ETC.

The Collateral Manager may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, take any of the following actions with respect to a Collateral Interest or Equity Interest as to which an Offer has been made or as to which any consent, waiver, vote or exercise has been requested: (i) exchange such instrument for other securities or a mixture of securities and other consideration pursuant to such Offer (and in making a determination whether or not to exchange any security, none of the restrictions set forth in Section 12 shall be applicable); and (ii) give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Interest or Equity Interest. In the event that the Trustee does not receive instruction from the Collateral Manager, the Trustee shall have no obligation to take action with respect to such exchange or such request for consent, waiver, vote or exercise. In the event that the Trustee receives written notice of any proposed amendment, consent or waiver under the Underlying Instruments of any Collateral Interests (before or after any default), the Trustee shall promptly deliver copies of such notice to the Issuer and the Collateral Manager. The Collateral Manager may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, with respect to a Collateral Interest as to which a consent or waiver under the Underlying Instruments of such Collateral Interest (before or after any default) has been proposed, give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Interest only in accordance with such Issuer Order. In the absence of any instruction from the Collateral Manager, the Trustee shall not engage in any vote with respect to such Collateral Interest. 6.17.

FIDUCIARY FOR RATED NOTEHOLDERS ONLY; AGENT FOR OTHER SECURED PARTIES

With respect to the security interests created hereunder, the pledge of any portion of the Collateral to the Trustee is to the Trustee as representative of the Rated Noteholders and agent for other Secured Parties. In furtherance of the foregoing, the possession by the Trustee of any portion of the Collateral and the endorsement to or registration in the name of the Trustee of any portion of the Collateral (including without limitation as entitlement holder of the Collateral Account) are all undertaken by the Trustee in its capacity as representative of the Rated Noteholders and as agent for the other Secured Parties. The Trustee shall not by reason of this Indenture be deemed to be acting as fiduciary for the Initial Hedge Counterparty or the Collateral Manager, provided that the foregoing shall not limit any of the express obligations of the Trustee under this Indenture. 6.18.

WITHHOLDING

If any withholding tax is imposed on the Issuer’s payment (or allocations of income) under the Rated Notes to any Rated Noteholder, such tax shall reduce the amount otherwise distributable to such Rated Noteholder. The Trustee is hereby authorized and directed to retain from amounts otherwise distributable to any Rated Noteholder sufficient funds for the payment of any tax that is required to be withheld or deducted by the Issuer (but such authorization shall not prevent the Trustee from contesting any such tax in appropriate proceedings and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding tax imposed with respect to any Rated Noteholder shall be treated as Cash distributed to such Rated Noteholder at the time it is withheld by the Trustee and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution, the Trustee may in its sole discretion withhold such amounts in accordance with this Section 6.18. If any Rated Noteholder wishes to apply for a refund of any such withholding tax, the Trustee shall reasonably cooperate with such Rated Noteholder in making such claim so long as such Rated Noteholder agrees to reimburse the Trustee for any out-of-pocket expenses incurred. Nothing herein shall impose an obligation on the part of the Trustee to determine the amount of any tax or withholding obligation on the part of the Issuer or in respect of the Income Notes. 98

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE VII COVENANTS 7.1. PAYMENT OF PRINCIPAL AND INTEREST The Co-Issuers will duly and punctually pay all principal (including the Class C Cumulative Periodic Interest Shortfall Amount, the Class D Cumulative Periodic Interest Shortfall Amount and the Class E Cumulative Periodic Interest Shortfall Amount), interest (including Defaulted Interest and interest thereon, if any) in accordance with the terms of the Rated Notes (other than the Class F Notes and the Class G Notes) and this Indenture and amounts due under any Hedge Agreement in accordance with this Indenture. The Issuer will duly and punctually pay all principal (including the Class F Cumulative Periodic Interest Shortfall Amount and the Class G Cumulative Periodic Interest Shortfall Amount), interest (including Defaulted Interest and interest thereon, if any) in accordance with the terms of the Class F Notes and the Class G Notes and this Indenture and amounts due under any Hedge Agreement in accordance with this Indenture. Amounts properly withheld under the Code or other applicable law by any Person from a payment to any Rated Noteholder of principal and/or interest shall be considered as having been paid by the Co-Issuers (in the case of Rated Notes other than the Class F Notes and the Class G Notes) or the Issuer (in the case of the Class F Notes or the Class G Notes) to such Rated Noteholder for all purposes of this Indenture. The Trustee shall, unless prevented from doing so for reasons beyond its reasonable control, give notice to each Rated Noteholder and each Rating Agency of any such withholding requirement no later than ten days prior to the date of the payment from which amounts are required to be withheld; provided that despite the failure of the Trustee to give such notice, amounts withheld pursuant to applicable tax laws shall be considered as having been paid by the Co-Issuers or the Issuer as provided above. 7.2. MAINTENANCE OF OFFICE OR AGENCY The Co-Issuers hereby appoint the Trustee as Note Paying Agent for the payment of principal of and interest on the Rated Notes. The Co-Issuers hereby appoint Wells Fargo Bank, National Association with an address at 9062 Old Annapolis Road, Columbia, Maryland 21045, Attn: CDO Trust Services—N-Star REL CDO IV, as the Co-Issuers’ agent where notices and demands to or upon the Co-Issuers in respect of the Rated Notes or this Indenture (except service of any and all process in any action or proceeding) may be served and where the Rated Notes may be surrendered for registration of transfer or exchange. The Issuer hereby appoints NCB Stockbroker Limited, 3 George’s Dock, Dublin 1, Ireland, as offshore Note Paying Agent and as the Issuer’s agent where notices and demands to or upon the Issuer in respect of any Rated Notes or Income Notes listed on the Irish Stock Exchange may be served and where such Rated Notes or Income Notes may be surrendered for registration of transfer or exchange. The Co-Issuers may at any time and from time to time, terminate the appointment of any such agent or appoint any additional agents for any or all of such purposes; provided that (A) the Co-Issuers will maintain in the Borough of Manhattan, The City of New York, an office or agency where notices and demands to or upon the Co-Issuers in respect of the Rated Notes and this Indenture may be served, (B) no Note Paying Agent shall be appointed in a jurisdiction which subjects payments on the Rated Notes to withholding tax and (C) the Co-Issuers may not terminate the appointment of any Note Paying Agent without the consent of each Income Noteholder. The Co-Issuers shall give prompt written notice to the Trustee and each Rating Agency and the Rated Noteholders of the appointment or termination of any such agent and of the location and any change in the location of any such office or agency. 99

Processed and formatted by SEC Watch - Visit SECWatch.com

If at any time the Co-Issuers shall fail to maintain any such required office or agency in the Borough of Manhattan, The City of New York or shall fail to furnish the Trustee with the address thereof, presentations and surrenders may be made at and notices and demands may be served on the Co-Issuers and Rated Notes may be presented and surrendered for payment to the Note Paying Agent at its office in Minnesota (and the Co-Issuers hereby appoint the same as their agent to receive such respective presentations, surrenders, notices and demands). For so long as any Class of Rated Notes or Income Notes is listed on the Irish Stock Exchange and such exchange shall so require, the Co-Issuers shall maintain a listing agent, a paying agent and an agent where notices and demands to or upon the Co-Issuers in respect of any Rated Notes or Income Notes listed on the Irish Stock Exchange may be served and where such Rated Notes or Income Notes may be surrendered for registration of transfer or exchange. 7.3. FUNDS FOR RATED NOTE PAYMENTS TO BE HELD IN TRUST All payments of amounts due and payable with respect to any Rated Notes that are to be made from amounts withdrawn from the Payment Account shall be made on behalf of the Co-Issuers or the Issuer, as applicable, by the Trustee or a Note Paying Agent with respect to payments on the Rated Notes. When the Co-Issuers shall have a Note Paying Agent that is not also the Note Registrar, they shall direct the Note Registrar to furnish, no later than the fifth calendar day after each Record Date a list, if necessary, in such form as such Note Paying Agent may reasonably request, of the names and addresses of the Holders and of the certificate numbers of individual Rated Notes held by each such Holder. The initial Note Paying Agent shall be as set forth in Section 7.2. Any additional or successor Paying Agents shall be appointed by Issuer Order with written notice thereof to the Trustee and the Rating Agencies; provided that so long as any Class of Rated Notes is rated by the Rating Agencies and with respect to any additional or successor Note Paying Agent for the Rated Notes, (a) the Note Paying Agent for the Rated Notes has a rating of not less than “AA-” and not less than “A-1+” by S&P or (b) a Rating Agency Confirmation from S&P shall have been obtained with respect to the appointment of such Note Paying Agent. In the event that (i) the Co-Issuers have actual knowledge that such successor Note Paying Agent ceases to have a rating of at least “AA-” and of “A-1+” by S&P or (ii) a Rating Agency Confirmation from S&P shall not have been obtained with respect to the appointment of such Note Paying Agent, the Co-Issuers shall promptly remove such Note Paying Agent and appoint a successor Note Paying Agent. The Co-Issuers shall not appoint any Note Paying Agent (other than an initial Note Paying Agent) that is not, at the time of such appointment, a depository institution or trust company subject to supervision and examination by federal and/or state and/or national banking authorities. The Co-Issuers shall cause each Note Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Note Paying Agent shall agree with the Trustee (and if the Trustee acts as Note Paying Agent, it hereby so agrees), subject to the provisions of this Section 7.3, that such Note Paying Agent will: (a)

allocate all sums received for payment to the Holders of Rated Notes for which it acts as Note Paying Agent on each Payment Date and Redemption Date among such Holders in the proportion specified in the instructions set forth in the applicable Note Valuation Report or Redemption Date Statement or as otherwise provided herein, in each case to the extent permitted by applicable law;

(b)

hold all amounts held by it for the payment of amounts due with respect to the Rated Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid 100

Processed and formatted by SEC Watch - Visit SECWatch.com

to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided; (c)

if such Note Paying Agent is not the Trustee, immediately resign as a Note Paying Agent and forthwith pay to the Trustee all amounts held by it in trust for the payment of Rated Notes if at any time it ceases to meet the standards set forth above required to be met by a Note Paying Agent at the time of its appointment;

(d)

if such Note Paying Agent is not the Trustee, immediately give the Trustee notice of any Default by the Issuer or the CoIssuer (or any other obligor upon the Rated Notes) in the making of any payment required to be made; and

(e)

if such Note Paying Agent is not the Trustee at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all amounts so held in trust by such Note Paying Agent.

If the Co-Issuers shall have appointed a Note Paying Agent other than the Trustee, the Trustee shall deposit on or prior to the Business Day next preceding each Payment Date or Redemption Date, as the case may be, with such Note Paying Agent, if necessary, an aggregate amount sufficient to pay the amounts then becoming due (to the extent funds are then available for such purpose in the Collection Account, as the case may be), such amount to be held in trust for the benefit of the Persons entitled thereto. Any funds deposited with a Note Paying Agent (other than the Trustee) in excess of an amount sufficient to pay the amounts then becoming due on the Rated Notes with respect to which such deposit was made shall be paid over by such Note Paying Agent to the Trustee for application in accordance with Section 11. The Co-Issuers may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, direct any Note Paying Agent to pay, to the Trustee all amounts held in trust by such Note Paying Agent, such amounts to be held by the Trustee upon the same trusts as those upon which such amounts were held by such Note Paying Agent; and, upon such payment by any Note Paying Agent to the Trustee, such Note Paying Agent shall be released from all further liability with respect to such amounts. Except as otherwise required by applicable law, any funds deposited with the Trustee or any Note Paying Agent in trust for the payment of the principal of or interest on any Rated Note and remaining unclaimed for two years after the same has become due and payable shall be paid to the Co-Issuers on Issuer Request; and the Holder of such Rated Note shall thereafter, as an unsecured general creditor, look only to the Co-Issuers (in the case of the Rated Notes other than the Class F Notes and the Class G Notes) or the Issuer (in the case of the Class F Notes or the Class G Notes) for payment of such amounts and all liability of the Trustee or such Note Paying Agent with respect to such trust funds (but only to the extent of the amounts so paid to the Co-Issuers) shall thereupon cease. The Trustee or such Note Paying Agent, before being required to make any such release of payment, may, but shall not be required to, adopt and employ, at the expense of the Co-Issuers, any reasonable means of notification of such release of payment, including mailing notice of such release to Holders whose Rated Notes have been called but have not been surrendered for redemption or whose right to or interest in amounts due and payable but not claimed is determinable from the records of any Note Paying Agent, at the last address of record of each such Holder. 101

Processed and formatted by SEC Watch - Visit SECWatch.com

7.4. EXISTENCE OF CO-ISSUERS The Issuer and the Co-Issuer shall maintain in full force and effect their existence and rights as an exempted company incorporated and registered under the laws of the Cayman Islands and as a corporation incorporated under the laws of the State of Delaware, respectively, and shall obtain and preserve their qualification to do business in each jurisdiction in which such qualifications are or shall be necessary to protect the validity and enforceability of this Indenture, the Rated Notes (in the case of the Issuer), the Rated Notes other than the Class F Notes and the Class G Notes (in the case of the Co-Issuer) or any of the Collateral. The Issuer and the Co-Issuer shall ensure that all corporate or other formalities regarding their respective existences (including holding regular board of directors’ and shareholders’, or other similar, meetings) or registrations are followed. Neither the Issuer nor the CoIssuer shall take any action, or conduct its affairs in a manner, that is likely to result in its separate existence being ignored or in its assets and liabilities being substantively consolidated with any other Person in a bankruptcy, reorganization or other insolvency proceeding. At least one director of the Issuer and of the Co-Issuer shall be Independent of other parties to the Transaction Documents. Without limiting the foregoing, (a) the Issuer shall not have any subsidiaries (other than the Co-Issuer and any Tax Subsidiary), (b) the Co-Issuer shall not have any subsidiaries and (c) the Issuer and the Co-Issuer shall not (i) have any employees, (ii) engage in any transaction with any shareholder that would constitute a conflict of interest or (iii) pay dividends, provided that the foregoing shall not prohibit the Issuer from entering into the transactions contemplated by the Corporate Services Agreement with the Administrator. 7.5. PROTECTION OF COLLATERAL (a)

The Issuer shall from time to time, execute and deliver all such supplements and amendments hereto and all such Financing Statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action as may be necessary or advisable or desirable to secure the rights and remedies of the Secured Parties hereunder and to: (1)

Grant more effectively all or any portion of the Collateral;

(2)

maintain, preserve and perfect the lien (and the first priority nature thereof) of this Indenture or to carry out more effectively the purposes hereof;

(3)

perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations);

(4)

enforce any of the Pledged Securities or other instruments or property included in the Collateral;

(5)

preserve and defend title to the Collateral and the rights therein of the Trustee and the Holders of the Rated Notes against the claims of all Persons and parties; or

(6)

pay or cause to be paid any and all taxes levied or assessed upon all or any part of the Collateral. 102

Processed and formatted by SEC Watch - Visit SECWatch.com

The Issuer hereby designates the Trustee its agent and attorney-in-fact to execute any Financing Statement, continuation statement or other instrument delivered to it pursuant to this Section 7.5, and the Trustee, as agent of the Issuer, agrees to file such continuation statements as are necessary to maintain perfection of the Collateral perfected by the filing of Financing Statements, provided that the Issuer retains ultimate responsibility to maintain the perfection of the Collateral perfected by the filing of Financing Statements and any failure of the Trustee to file continuation statements pursuant to this undertaking shall not result in any liability of the Trustee and the Trustee shall be entitled to indemnification pursuant to Section 6.8(a) with respect to any claim, loss, liability or expense incurred by the Trustee with respect to the filing of such continuation statements. The Trustee agrees that it will from time to time, at the direction of any Secured Party, execute and cause to be filed Financing Statements and continuation statements. The Issuer shall otherwise cause the perfection and priority of the security interest in the Collateral and the maintenance of such security interest at all times. Notwithstanding anything to the contrary herein, the right of a Secured Party to provide direction to the Trustee shall not impose upon the Trustee, as Secured Party, any obligation to provide any such direction. The Issuer agrees that a carbon, photographic, photostatic or other reproduction of this Indenture or of a Financing Statement is sufficient as an Indenture or a Financing Statement as the case may be. (b)

The Trustee shall not (i) except in accordance with Section 10.12(a) or (b), as applicable, remove any portion of the Collateral that consists of Cash or is evidenced by an Instrument, certificate or other writing (A) from the jurisdiction in which it was held at the date the most recent Opinion of Counsel was delivered pursuant to Section 7.6 (or from the jurisdiction in which it was held as described in the Opinion of Counsel delivered at the Closing Date pursuant to Section 3.1(c), if no Opinion of Counsel has yet been delivered pursuant to Section 7.6) or (B) from the possession of the Person who held it on such date or (ii) cause or permit ownership or the pledge of any portion of the Collateral that consists of book-entry securities to be recorded on the books of a Person (A) located in a different jurisdiction from the jurisdiction in which such ownership or pledge was recorded at such date or (B) other than the Person on whose books such ownership or pledge was recorded at such date, unless the Trustee shall have first received an Opinion of Counsel to the effect that the lien and security interest created by this Indenture with respect to such property will continue to be maintained after giving effect to such action or actions.

(c)

The Issuer shall pay or cause to be paid taxes, if any, levied on account of the beneficial ownership by the Issuer of any Pledged Securities that secure the Rated Notes; provided that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which disputed amounts or adequate reserves have been made or the failure of which to pay or discharge could not reasonably be expected to have a material adverse effect upon the ability of the Issuer to timely and fully perform any of its payment or other material obligations under this Indenture or upon the interests of the Rated Noteholders in the Collateral.

(d)

The Issuer shall enforce all of its material rights and remedies under the Transaction Documents to which it is a party. 103

Processed and formatted by SEC Watch - Visit SECWatch.com

(e)

Without at least thirty (30) days’ prior written notice to the Trustee, the Issuer shall not change its name, or the name under which it does business, from the name shown on the signature pages hereto.

7.6. OPINIONS AS TO COLLATERAL On or before May 31 in each calendar year, commencing in 2006, the Issuer shall furnish to the Trustee and each Rating Agency an Opinion of Counsel (which shall include assumptions and qualifications substantially similar to those set forth in Exhibit E-1) stating that, in the opinion of such counsel, as of the date of such opinion, the lien and security interest created by this Indenture with respect to the Collateral remains a valid and perfected first priority lien and describing the manner in which such security interest shall remain perfected. 7.7. PERFORMANCE OF OBLIGATIONS (a)

The Trustee shall notify the Issuer, the Initial Hedge Counterparty and each Rated Noteholder of any request for an amendment, waiver or supplement to any Underlying Instrument included in the Collateral or of any other notice of a vote in respect of any Collateral Interest included in the Collateral. The Issuer shall not enter into any such amendment, waiver or supplement; provided that, notwithstanding anything in this Section 7.7(a) to the contrary, the Issuer may enter into any amendment or waiver of or supplement to any such Underlying Instrument if such amendment, supplement or waiver: (1)

is required by the provisions of any Underlying Instrument or by applicable law (other than pursuant to an Underlying Instrument);

(2)

is necessary to cure any ambiguity, inconsistency or formal defect or omission in such Underlying Instrument; or

(3)

(x) is deemed necessary by the Issuer or the Collateral Manager and does not materially and adversely affect the Secured Parties or (y) is effected pursuant to Section 6.16.

The Issuer shall be entitled to rely on an Opinion of Counsel as to material adverse effect and as to whether the entry into an amendment, supplement or waiver is permitted pursuant to this Indenture. (b)

The Issuer or the Co-Issuer may, with the prior written consent of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes and the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes and the Initial Hedge Counterparty, contract with other Persons, including the Collateral Administrator, the Collateral Manager and the Bank, for the performance of actions and obligations to be performed by the Issuer or the Co-Issuer hereunder by such Persons. Notwithstanding any such arrangement, the Issuer or the Co-Issuer, as the case may be, shall remain liable for all such actions and obligations. In the event of such contract, the performance of such actions and obligations by such Persons shall be deemed to be performance of such actions and obligations by the Issuer or the Co-Issuer, as the case may be; and the Issuer or Co-Issuer, as the case may be, will punctually perform, and use its best efforts to cause such other Person to perform, all of their obligations and agreements contained in related agreement. 104

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

The Co-Issuers shall treat all acquisitions of Collateral Interests as a “purchase” for tax, accounting and reporting purposes.

(d)

Each of the Co-Issuers shall file, or cause to be filed, any tax returns, including information tax returns, required by any governmental authority.

(e)

In the event that (i) the ownership of a Collateral Interest or property acquired in respect of a Collateral Interest would result in the Issuer being or becoming subject to U.S. tax on a net income basis or being or becoming subject to the U.S. branch profits tax (in either case, such Collateral Interest becoming a “Taxed Collateral Interest” and such property becoming a “Taxed Property”), and (ii) the Issuer does not sell or otherwise dispose of all or a portion of such Taxed Collateral Interest or Taxed Property in accordance with the provisions of Section 12.1(a)(3), the Collateral Manager on behalf of the Issuer shall, prior to such Collateral Interest becoming a Taxed Collateral Interest or such property becoming a Taxed Property, (a) set up a special purpose subsidiary meeting S&P’s then current published criteria for bankruptcy-remote special purpose entities (a “Tax Subsidiary”) to receive and hold any such Taxed Collateral Interest or Taxed Property or transfer such Taxed Collateral Interest or Taxed Property to the Tax Subsidiary or (b) contribute such taxed Collateral Interest or Taxed Property to a REMIC or other pass-through entity, unless the Issuer has received an opinion of nationally recognized counsel that the Issuer can hold such Taxed Collateral Interest directly without causing the Issuer to be treated as engaged in a trade or business in the United States for United States federal income tax purposes. The Issuer shall cause the purposes and permitted activities of any such Tax Subsidiary to be restricted solely to the acquisition, holding and disposition of such Taxed Collateral Interest and shall require such subsidiary to distribute 100% of any payments or distributions received with respect to such taxed Collateral Interest, together with the proceeds of any sale of such Taxed Collateral Interest, net of any tax liabilities, to the Issuer.

7.8. NEGATIVE COVENANTS (a)

The Issuer will not and, with respect to Section 7.8(a)(3), (4), (5) and (9), the Co-Issuer will not: (1)

intentionally operate so as to be subject to U.S. federal income taxes on its net income;

(2)

sell, assign, participate, transfer, exchange or otherwise dispose of, or pledge, mortgage, hypothecate or otherwise encumber (or permit such to occur or suffer such to exist), any part of the Collateral, except as expressly permitted by this Indenture;

(3)

claim any credit on, make any deduction from, or dispute the enforceability of, the payment of the principal or interest (or any other amount) payable in respect of the Rated Notes (other than amounts required to be paid, deducted or withheld in accordance with any applicable law or regulation of any governmental authority) or assert any claim against any present or future Rated Noteholder by reason of the payment of any taxes levied or assessed upon any part of the Collateral; 105

(4)

(A) incur or assume or guarantee any indebtedness, other than the Rated Notes and this Indenture and the transactions contemplated hereby; (B) issue any additional class of securities other than the Income Notes; or (C) issue any additional shares of stock;

(5)

(A) take any action that would impair the validity or effectiveness of this Indenture or any Grant hereunder or the lien of this Indenture, amend hypothecate, subordinate, terminate, discharge or release any Person from any covenants or obligations with respect to this Indenture or the Rated Notes, except as may be permitted hereby, (B) create or extend any lien, charge, adverse claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) on or to the Collateral or any part thereof, any interest therein or the proceeds thereof, or (C) take any action that would cause the lien of this Indenture not to constitute a valid first priority security interest in the Collateral;

(6)

use any of the proceeds of the Rated Notes issued hereunder (A) to extend “purpose credit” within the meaning given to such term in Regulation U or (B) to purchase or otherwise acquire any Margin Stock;

(7)

permit the aggregate book value of all Margin Stock held by the Issuer on any date to exceed the net worth of the Issuer on such date (excluding any unrealized gains and losses) on such date;

(8)

dissolve or liquidate in whole or in part, except as permitted hereunder; or

(9)

except for any agreements involving the purchase and sale of Collateral Interests having customary purchase or sale terms and documents with customary loan trading documentation (but not excepting any Hedge Agreement), enter into any agreements unless such agreements contain “non-petition” and “limited recourse” provisions with respect to the Issuer.

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

Except as permitted by this Indenture, the Issuer will not do business under any other name other than the name set forth in the Articles and neither the Issuer nor the Trustee shall acquire any Collateral after the Closing Date, sell, transfer, exchange or otherwise dispose of Collateral, or enter into or engage in any business with respect to any part of the Collateral.

(c)

The Co-Issuer will not invest any of its assets in “securities” (as such term is defined in the Investment Company Act), and will keep all of its assets in Cash.

7.9. STATEMENT AS TO COMPLIANCE On or before May 31 in each calendar year commencing in 2006, or immediately if there has been a Default in the fulfillment of an obligation under this Indenture, the Issuer shall deliver to the Trustee, the PAA Issued Note Paying Agent, each Rated Noteholder making a written request therefor, the Irish Paying Agent, the Initial Hedge Counterparty, the Collateral Manager and each Rating Agency a certificate of the Issuer stating, as to each signer thereof, that: (a)

the Officer executing such certificate has conducted a review of the activities of the Issuer and of the Issuer’s performance under this Indenture during the 12-month period ending on December 31 of such year (or from the Closing Date until December 31, 2005, 106

Processed and formatted by SEC Watch - Visit SECWatch.com

in the case of the first such certificate) based on reports and other information delivered to such Officer by the Trustee, the Collateral Manager and the Collateral Administrator and a review of the Accountant’s Reports prepared pursuant to Section 10.11 and such other materials as such Officer deems appropriate; and (b)

7.10.

to the best of knowledge of the Issuer, based on such review, the Issuer has fulfilled all of its material obligations under this Indenture throughout the period, or, if there has been a Default in the fulfillment of any such obligation, specifying each such Default known to such Officer and the nature and status thereof, including actions undertaken to remedy the same.

CO-ISSUERS MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS (a)

The Issuer shall not consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any Person, unless permitted by Cayman Islands law and unless: (1)

the Issuer shall be the surviving entity, or the Person (if other than the Issuer) formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall be an exempted limited liability company organized and existing under the laws of the Cayman Islands or such other jurisdiction outside the United States as may be approved by a Majority of each Class and the Initial Hedge Counterparty, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, the Initial Hedge Counterparty and each Rated Noteholder, the due and punctual payment of the principal of and interest on all Rated Notes and the performance of every covenant of this Indenture and any Hedge Agreement on the part of the Issuer to be performed or observed, all as provided herein;

(2)

each Rating Agency and the Initial Hedge Counterparty shall have received written notification from the Issuer of such consolidation, merger, transfer or conveyance and the identity of the surviving entity and a Rating Agency Confirmation shall have been obtained with respect to the consummation of such transaction;

(3)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have agreed with the Trustee (A) to observe the same legal requirements for the recognition of such formed or surviving entity as a legal entity separate and apart from any of its Affiliates as are applicable to the Issuer with respect to its Affiliates and (B) not to consolidate or merge with or into any other Person or transfer or convey the Collateral or all or substantially all of its assets to any other Person except in accordance with the provisions of this Section 7.10;

(4)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have delivered to the Trustee, the Initial Hedge Counterparty and each Rating Agency an Officer’s certificate and an Opinion of Counsel each stating that such Person shall be duly organized, 107

Processed and formatted by SEC Watch - Visit SECWatch.com

validly existing and (if applicable) in good standing in the jurisdiction in which such Person is organized; that such Person has sufficient power and authority to assume the obligations set forth in Section 7.10(a)(1) above and to execute and deliver an indenture supplemental hereto for the purpose of assuming such obligations; that such Person has duly authorized the execution, delivery and performance of an indenture supplemental hereto for the purpose of assuming such obligations and that such supplemental indenture is a valid, legal and binding obligation of such Person, enforceable in accordance with its terms, subject only to bankruptcy, reorganization, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); that, immediately following the event which causes such Person to become the successor to the Issuer, (A) such Person has good and marketable title, free and clear of any lien, security interest or charge, other than the lien and security interest of this Indenture, to the Collateral; (B) the Trustee continues to have a valid perfected first priority security interest in the Collateral securing all of the Rated Notes; (C) such Person has received an Opinion of Counsel to the effect that (i) (x) such Person has been organized in conformity with the requirements for qualification as a real estate investment trust under the Code, and such Person’s actual method of operation has (for the time period specified in such Opinion of Counsel) enabled, and its proposed method of operation will enable, such Person to satisfy the requirements for qualification and taxation as a real estate investment trust under the Code or (y) such Person will not be subject to net income tax or be treated as engaged in a trade or business within the United States for U.S. federal income tax purposes and (ii) such other matters as the Trustee, the Initial Hedge Counterparty or any Rated Noteholder may reasonably require;

(b)

(5)

immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(6)

the Issuer shall have delivered to the Trustee, the Initial Hedge Counterparty and each Rated Noteholder an Officer’s certificate and an Opinion of Counsel each stating that such consolidation, merger, transfer or conveyance and such supplemental indenture comply with this Section 7, that all conditions precedent in this Section 7 provided for relating to such transaction have been complied with and that no adverse tax consequences will result therefrom to any Rated Noteholder or the Initial Hedge Counterparty; and

(7)

the Issuer shall have delivered to the Trustee an Opinion of Counsel stating that after giving effect to such transaction, neither of the Co-Issuers will be required to register as an investment company under the Investment Company Act.

The Co-Issuer shall not consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any Person, unless: (1)

the Co-Issuer shall be the surviving corporation, or the Person (if other than the Co-Issuer) formed by such consolidation or into which the Co-Issuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, the due and punctual payment of the principal of 108

Processed and formatted by SEC Watch - Visit SECWatch.com

and interest on all Rated Notes and the performance of every covenant of this Indenture on the part of the CoIssuer to be performed or observed, all as provided herein; (2)

each Rating Agency shall have received written notification from the Co-Issuer of such consolidation, merger, transfer or conveyance and the identity of the surviving entity and a Rating Agency Confirmation shall have been obtained with respect to the consummation of such transaction;

(3)

if the Co-Issuer is not the surviving corporation, the Person formed by such consolidation or into which the CoIssuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall have agreed with the Trustee (A) to observe the same legal requirements for the recognition of such formed or surviving corporation as a legal entity separate and apart from any of its Affiliates as are applicable to the CoIssuer with respect to its Affiliates and (B) not to consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any other Person except in accordance with the provisions of this Section 7.10;

(4)

if the Co-Issuer is not the surviving corporation, the Person formed by such consolidation or into which the CoIssuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall have delivered to the Trustee and each Rating Agency an Officer’s certificate and an Opinion of Counsel each stating that such Person shall be duly organized, validly existing and (if applicable) in good standing in the jurisdiction in which such Person is organized; that such Person has sufficient power and authority to assume the obligations set forth in Section 7.10(b)(1) above and to execute and deliver an indenture supplemental hereto for the purpose of assuming such obligations; that such Person has duly authorized the execution, delivery and performance of an indenture supplemental hereto for the purpose of assuming such obligations and that such supplemental indenture is a valid, legal and binding obligation of such Person, enforceable in accordance with its terms, subject only to bankruptcy, reorganization, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and such other matters as the Trustee or any Rated Noteholder may reasonably require;

(5)

immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(6)

the Co-Issuer shall have delivered to the Trustee and each Rated Noteholder an Officer’s certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance or transfer and such supplemental indenture comply with this Section 7 and that all conditions precedent in this Section 7 provided for relating to such transaction have been complied with and that no adverse tax consequences will result therefrom to any Rated Noteholder;

(7)

after giving effect to such transaction, neither of the Co-Issuers will be required to register as an investment company under the Investment Company Act; and 109

Processed and formatted by SEC Watch - Visit SECWatch.com

(8)

7.11.

after giving effect to such transaction, the outstanding stock of the Co-Issuer will not be beneficially owned by any Person other than the Issuer.

SUCCESSOR SUBSTITUTED

Upon any consolidation or merger, or transfer or conveyance of all or substantially all of the assets of the Issuer or the Co-Issuer, in accordance with Section 7.10, the Person formed by or surviving such consolidation or merger (if other than the Issuer or the Co-Issuer), or, the Person to which such transfer or conveyance is made, shall succeed to, and be substituted for, and may exercise every right and power of, and shall be bound by each obligation or covenant of, the Issuer or the Co-Issuer, as the case may be, under this Indenture with the same effect as if such Person had been named as the Issuer or the Co-Issuer, as the case may be, herein. In the event of any such consolidation, merger, transfer or conveyance, the Person named as the “Issuer” or the “Co-Issuer” in the first paragraph of this Indenture or any successor which shall theretofore have become such in the manner prescribed in this Section 7 may be dissolved, wound-up and liquidated at any time thereafter, and such Person thereafter shall be released from its liabilities as obligor and maker on all the Rated Notes and from its obligations under this Indenture. 7.12.

NO OTHER BUSINESS

The Issuer shall not engage in any business or activity other than (i) issuing and selling the Indenture Issued Notes pursuant to this Indenture, (ii) issuing and selling the PAA Issued Notes in accordance with the Paying Agency Agreement (iii) issuing the Ordinary Shares pursuant to the Issuer Charter, (iv) acquiring, pledging, holding and disposing of, solely for its own account, Collateral Interests, Eligible Investments and other Collateral described in clauses (a) to (e) of the granting clauses hereof, (v) holding the capital stock of the Co-Issuer and (vi) such other activities that are incidental thereto and connected therewith. The Co-Issuer shall not engage in any business or activity other than issuing and selling the Indenture Issued Notes (other than the Class F Notes) pursuant to this Indenture and such other activities incidental thereto or connected therewith. The Issuer shall not hold itself out as a derivatives dealer willing to enter into either side of, or to offer to enter into, assume, offset, assign or otherwise terminate positions in (i) interest rate, currency, equity or commodity swaps or caps or (ii) derivative financial instruments (including options, forward contracts, short positions and similar instruments) in any commodity, currency, share of stock, partnership or trust, note, bond, debenture or other evidence of indebtedness, swap or cap. The foregoing shall not limit the ability of the Issuer to enter into any Hedge Agreements. Furthermore, the Issuer shall not hold itself out, whether through advertising or otherwise, as a bank, insurance company or finance company, or as originating loans, lending funds, making a market in loans or other assets or selling loans or other assets to customers. The Issuer will not amend the Issuer Charter and the Co-Issuer will not amend its Certificate of Incorporation or By-Laws, if such amendment would result in the rating (including any private or confidential rating) of any Class of Rated Notes being reduced or withdrawn. At any time at which the Issuer is not a Qualified REIT Subsidiary, the Issuer shall not engage in any business or activity or hold any asset that would cause the Issuer to be engaged in a U.S. trade or business for U.S. federal income tax purposes, except as the result of ownership of Equity Interests or securities received in an Offer in accordance with the provisions of this Indenture. 7.13.

CHANGE OR WITHDRAWAL OF RATING

The Issuer shall promptly notify the Trustee in writing and upon receipt of such notice the Trustee shall promptly notify the Rated Noteholders and the Initial Hedge Counterparty if at any time the rating of any Class of Rated Notes has been, or is known will be, changed or withdrawn.

110

Processed and formatted by SEC Watch - Visit SECWatch.com

7.14.

REPORTING

At any time when the Co-Issuers are not subject to Section 13 or 15(d) of the Exchange Act and are not exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, upon the request of a Holder or Beneficial Owner of a Rated Note or Income Note, the CoIssuers shall promptly furnish or cause to be furnished Rule 144A Information to such Holder or Beneficial Owner, to a prospective purchaser of such Rated Note or Income Note designated by such Holder or Beneficial Owner or to the Trustee for delivery to such Holder or Beneficial Owner or a prospective purchaser designated by such Holder or Beneficial Owner, as the case may be, in order to permit compliance by such Holder or Beneficial Owner with Rule 144A under the Securities Act in connection with the resale of such Rated Note or Income Note by such Holder or Beneficial Owner. 7.15.

RATED NOTE CALCULATION AGENT (a)

The Issuer hereby agrees that for so long as any of the Rated Notes remain Outstanding the Issuer will at all times cause there to be an agent appointed to calculate LIBOR in respect of each Interest Period in accordance with the terms of Schedule B (the Rated Note Calculation Agent), which agent shall be a financial institution, subject to supervision or examination by federal or state authority, having a rating of at least “BBB+” by S&P and having an office within the United States. Whenever the Rated Note Calculation Agent is required to act or exercise judgment, it will do so in good faith and in a commercially reasonable manner. The Issuer has initially appointed the Trustee as Rated Note Calculation Agent for purposes of determining LIBOR for each Interest Period. If the Rated Note Calculation Agent is unable or unwilling to act as such or is removed by the Issuer, the Issuer (after consultation with the Collateral Manager) will propose a leading bank which is engaged in transactions in Dollar deposits in the international Eurodollar market and which does not control or is not controlled by or under common control with the Co-Issuers or any of their Affiliates as a replacement Rated Note Calculation Agent for approval by Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes. The Rated Note Calculation Agent may not resign its duties without a successor having been duly appointed.

(b)

As soon as possible after 11:00 a.m. (London time) on each LIBOR Calculation Date, but in no event later than 11:00 a.m. (New York time) on the London Banking Day immediately following each LIBOR Calculation Date, the Rated Note Calculation Agent will calculate LIBOR for the next Interest Period and the Periodic Interest payable for such Interest Period in respect of the Outstanding Rated Notes, rounded to the nearest cent, with half a cent being rounded upward, on the related Payment Date to be given to the Co-Issuers, the Trustee, the Collateral Manager, the Depositary, Euroclear, Clearstream, the Note Paying Agent and the Irish Paying Agent. The Rated Note Calculation Agent will also specify to the Co-Issuers and the Collateral Manager the quotations upon which the Applicable Periodic Interest Rate for each Class of Rated Notes is based, and in any event the Rated Note Calculation Agent must notify the Co-Issuers and the Collateral Manager before 5:00 p.m. (New York time) on each applicable LIBOR Calculation Date if it has not determined and is not in the process of determining LIBOR with respect to the Rated Notes and the Periodic Interest with respect to each Class of Rated Notes, together with its reasons for the delay. The Irish Paying Agent also will cause the Applicable Periodic Interest Rate for each Interest Period for each Class of Rated Notes listed on the Irish Stock Exchange, the amount of interest payable in respect of each Class of Rated Notes listed on the Irish Stock Exchange and 111

Processed and formatted by SEC Watch - Visit SECWatch.com

each Payment Date to be delivered to the Company Announcements Office of the Irish Stock Exchange as soon as possible after the Irish Paying Agent has received notice from the Rated Note Calculation Agent of such Applicable Periodic Interest Rates and amounts. 7.16.

LISTING

The Issuer will use its commercially reasonable efforts to obtain and maintain the listing of each Class of Rated Notes and Income Notes on the Irish Stock Exchange. 7.17.

AMENDMENT OF CERTAIN DOCUMENTS

The Issuer will not agree to any amendment to or modification, substitution or replacement of the Corporate Services Agreement, the Collateral Management Agreement, the Account Control Agreement or any Hedge Agreement at any time without obtaining Rating Agency Confirmation with respect to any such amendment, modification, substitution or replacement and will not amend, modify or waive any “nonpetition” or “limited recourse” provisions of any Transaction Document to which it is a party without obtaining a Rating Agency Confirmation with respect to such modification. The Trustee shall provide each of the Holders of Rated Notes of the Controlling Class, the Collateral Manager, the Initial Hedge Counterparty and the Rating Agencies with a copy of any such amendment or modification within 10 Business Days before effecting such amendment or modification. Prior to entering into any waiver in respect of the any of the foregoing agreements, the Issuer will provide to each Rating Agency and the Trustee with written notice of such waiver. 7.18.

PURCHASE OF COLLATERAL; INFORMATION REGARDING COLLATERAL; RATING CONFIRMATION (a)

The Issuer will use reasonable efforts to purchase or enter into agreements to purchase, on or before the Effective Date (first using Collateral Principal Proceeds and then Uninvested Proceeds), Collateral Interests having an aggregate Principal Balance, together with the aggregate Principal Balance of all Eligible Investments purchased with Collateral Principal Collections, of not less than U.S.$400,000,000 (assuming, for these purposes, settlement (in accordance with customary settlement procedures in the relevant markets) of all agreements entered into by the Issuer to acquire Collateral Interests scheduled to settle on or following the Effective Date).

(b)

The Issuer (or the Collateral Manager on behalf of the Issuer) shall cause to be delivered to the Trustee on the Effective Date an amended Schedule A listing all Collateral Interests purchased on or before the Effective Date, which schedule will supersede any prior Schedule A delivered to the Trustee.

(c)

On or before the Effective Date, the Issuer (or the Collateral Manager on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Rated Notes of the Controlling Class, the Initial Hedge Counterparty and each Rating Agency (in addition to any such Officer’s Certificate, the information set forth in such Officer’s Certificate shall also be provided to S&P in a form that complies with S&P’s Preferred Format) demonstrating compliance by the Issuer with its obligations under Section 7.18(a) and satisfaction of each applicable Collateral Quality Test (with the exception of S&P’s CDO Monitor Test), and Coverage Test or, if on the Effective Date, the Issuer shall be in default in the performance of its obligations under this Section 7.18 or any of the Collateral Quality Tests (with the exception of S&P’s CDO Monitor Test) or the specified 112

Processed and formatted by SEC Watch - Visit SECWatch.com

Coverage Tests shall fail to be satisfied, the Issuer (or the Collateral Manager on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Rated Notes of the Controlling Class, the Initial Hedge Counterparty and each Rating Agency specifying the details of such default or failure; provided that the failure to satisfy any of the Collateral Quality Tests or Coverage Tests does not constitute an Event of Default but such failure may result in a Rating Confirmation Failure. (d)

No later than fifteen (15) Business Days after the Effective Date, the Issuer (or the Collateral Manager on its behalf) shall deliver or cause to be delivered to the Trustee an accountant’s certificate (the Accountant’s Certificate) (i) confirming the information with respect to each Collateral Interest set forth on the amended schedule delivered pursuant to Section 7.18(b) as of the Effective Date, and the information provided by the Issuer with respect to every other asset included in the Collateral, (ii) certifying as of the Effective Date the procedures applied and their associated findings with respect to the Coverage Tests and the Collateral Quality Tests and (iii) specifying the procedures undertaken to review data and computations relating to the foregoing clause (ii) held by the Issuer on the Effective Date.

(e)

The Issuer (or the Collateral Manager on its behalf) shall request in writing that each of the Rating Agencies confirm in writing (a Rating Confirmation), within thirty (30) Business Days after the Effective Date, the ratings (including any private or confidential ratings) assigned by it on the Closing Date to the Rated Notes. In the event that the Issuer fails to obtain a Rating Confirmation within 30 days after the Effective Date (a Rating Confirmation Failure), Collateral Interest Collections and, to the extent Collateral Interest Collections are insufficient therefor, Collateral Principal Collections shall be applied on the first Payment Date and any succeeding Payment Dates, as applicable as provided in Section 11.1 to the extent necessary for each of the Rating Agencies to provide a Rating Confirmation.

(f)

No later than fifteen (15) Business Days following the Effective Date, the Trustee shall (i) run the S&P CDO Monitor and report to S&P whether or not the S&P CDO Monitor Test has been satisfied and (ii) report the S&P scenario default and break-even default rate for each Class of Notes.

(g)

Not later than fifteen (15) Business Days following the end of each calendar quarter, the Collateral Manager on behalf of the Issuer shall provide to S&P a report containing the representations and warranties made with respect to any Commercial Mortgage Loans, Mezzanine Loans, Subordinate Mortgage Loan Interests, Credit Lease Loans and Tenant Lease Loan Interests purchased by the Issuer during the preceding calendar quarter, including any exceptions and qualifications thereto. ARTICLE VIII SUPPLEMENTAL INDENTURES

8.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF RATED NOTEHOLDERS Without the consent of the Holders of any Rated Notes, the Initial Hedge Counterparty (except as specified below) or the Income Noteholders, the Co-Issuers, when authorized by Board Resolutions, and 113

Processed and formatted by SEC Watch - Visit SECWatch.com

the Trustee, at any time and from time to time subject to the requirement provided below in this Section 8.1 with respect to the ratings of the Rated Notes and subject to Section 8.3, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for certain limited purposes including, inter alia, to: (a)

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 herein and in the Rated Notes and the assumption by any such successor Person of the covenants of the Co-Issuer herein and in the Rated Notes (other than the Class F Notes and the Class G Notes) pursuant to Section 7.10 or 7.11;

(b)

add to the covenants of the Co-Issuers (in the case of the Rated Notes other than the Class F Notes or the Class G Notes) or the Issuer (in the case of the Class F Notes or the Class G Notes) or the Trustee for the benefit of the Holders of all of the Rated Notes;

(c)

pledge any additional property to the Trustee;

(d)

add to the conditions, limitations or restrictions on the authorized amount, terms and purposes of the issue, authentication and delivery of the Rated Notes;

(e)

effect the appointment of a successor;

(f)

reduce the permitted minimum denomination of the Rated Notes;

(g)

take any action necessary or advisable to prevent the Issuer, any Note Paying Agent or the Trustee from being subject to withholding or other taxes, fees or assessments, to prevent the Issuer from failing to qualify as a Qualified REIT Subsidiary or, at any time at which the Issuer is not a Qualified REIT Subsidiary, to prevent the Issuer from being treated as engaged in a U.S. trade or business or otherwise being subjected to U.S. federal, state or local income tax on a net income tax basis; provided that such action will not cause the Noteholders to experience any material change to the timing, character or source of income from the Notes and will not be considered a significant modification resulting in an exchange for purposes of section 1.1001-3 of the U.S. Treasury regulations;

(h)

modify the restrictions on and procedures for resale and other transfer of the Rated 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 (in addition to that provided under Section 3(c)(7) thereunder) or to remove restrictions on resale and transfer to the extent not required thereunder;

(i)

grant, convey, transfer, assign, mortgage or pledge any property to or with the Trustee for the benefit of the Secured Parties;

(j)

correct or amplify the description of any property at any time subject to the lien of this Indenture, or to better assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations) or to subject to the lien of this Indenture any additional property; 114

(k)

make any change required by the stock exchange on which any Class of Rated Note is listed, if any, in order to permit or maintain such listing;

(l)

correct, amend, cure any manifest error, inconsistency, defect or ambiguity or correct any typographical error in this Indenture;

(m)

modify this Indenture to conform the terms herein to the terms set forth in the then current Offering Circular;

(n)

modify any provision (other than in respect of a Reserved Matter), with respect to restrictions upon the Issuer’s rights to acquire and dispose of Collateral Interests and other assets, that the Issuer or the Collateral Manager determines to be necessary or desirable in order for the Issuer to maintain any desired exemption from registration of the Issuer under the Investment Company Act or of the Notes under the Securities Act;

(o)

with the consent of the Collateral Manager, modify the calculation of the Collateral Quality Tests and the definitions applicable thereto to correspond with published or written changes in the guidelines, methodology or standards established by the Rating Agencies;

(p)

agree to any modification of the Indenture or any other Transaction Document (other than in respect of a Reserved Matter), which is, in the opinion of the Trustee, proper to make if, in the opinion of the Trustee (based upon an opinion of counsel), such modification will not have a material adverse effect on the interests of Holders of any Class or Classes of Notes or the Initial Hedge Counterparty and which is of a formal, minor or technical nature or is to correct a manifest error.

Processed and formatted by SEC Watch - Visit SECWatch.com

In addition, the Trustee may, but is not obligated to, without the consent of the Rated Noteholders or of the Holders of any relevant Class or Classes of Rated Notes, agree to any modification of any other Transaction Document which is of a formal, minor or technical nature or is to correct a manifest error and which is, in the opinion of the Trustee, proper to make, in the opinion of the Trustee (based upon an opinion of counsel); provided such modification will not have a material adverse effect on the interests of the Initial Hedge Counterparty or the Holders of any Class or Classes of Notes. For so long as any Rated Notes are Outstanding, no such supplemental indenture shall be effective unless and until Rating Agency Confirmation has been received. The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. Without obtaining the requisite consents of the applicable parties pursuant to this Section 8.1, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of the Initial Hedge Counterparty any Holder of Rated Notes or of the Income Noteholders would be materially and adversely affected thereby. Unless notified by (i) a Majority of the then Aggregate Outstanding Amount of any Class of Rated Notes that such Class will be materially and adversely affected, (ii) a Majority of the aggregate principal amount of Income Notes Outstanding that the Income Noteholders will be materially and adversely affected or (iii) the Initial Hedge Counterparty (with respect to the Initial Hedge Counterparty, only to the extent that its right to payments in accordance with the Priority of Payments is adversely affected), the Trustee shall be entitled to rely upon an Opinion of 115

Processed and formatted by SEC Watch - Visit SECWatch.com

Counsel as to whether the interests of any Holder of Rated Notes or of Income Notes would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the PAA Issued Note Paying Agent). The Collateral Manager will not be bound by any supplemental indenture that affects the obligations of the Collateral Manager unless the Collateral Manager has consented thereto (which consent will not be unreasonably withheld). The Co-Issuers shall not consent to any supplemental indenture that would have a material adverse effect on the Initial Hedge Counterparty without the consent of the Initial Hedge Counterparty. At the cost of the Co-Issuers, the Trustee shall provide to the Rated Noteholders, the PAA Issued Note Paying Agent, the Initial Hedge Counterparty and each Rating Agency a copy of any proposed supplemental indenture at least 10 days prior to the execution thereof by the Trustee and, for so long as any Rated Notes are Outstanding, request a Rating Agency Confirmation from each Rating Agency with respect to such supplemental indenture. As soon as practicable after the execution by the Trustee and the Issuer of any such supplemental indenture, the Trustee shall provide to the Rated Noteholders, the PAA Issued Note Paying Agent, the Initial Hedge Counterparty and each Rating Agency a copy of the executed supplemental indenture. For so long as any Rated Notes are Outstanding, no supplemental indenture shall be effective unless and until a Rating Agency Confirmation from each Rating Agency has been received. 8.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF RATED NOTEHOLDERS With the written consent of the Holders of not less than 75% of the then Aggregate Outstanding Amount of each adversely affected Class of Rated Notes and the written consent of 75% of the Holders of the aggregate principal amount of the Outstanding Income Notes if materially and adversely affected thereby (which consent shall be evidenced by an Officer’s certificate of the Issuer certifying that such consent has been obtained), Rating Agency Confirmation and the written consent of the Initial Hedge Counterparty (which shall be required only if the right of the Initial Hedge Counterparty to payments in accordance with the Priority of Payments is adversely affected), the Trustee and Co-Issuers may, subject to Section 8.3, enter into one or more indentures supplemental hereto in order to: (a)

change the applicable Stated Maturity Date of the Rated Notes or scheduled redemption of the principal of or the due date of any installment of interest on the Rated Notes, reduce the principal amount thereof or the rate of interest thereon, or the Redemption Price with respect thereto, or change the earliest date on which Rated Notes 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 the Rated Notes or change any place where, or the coin or currency in which, Rated Notes or the principal thereof or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity Date thereof (or, in the case of redemption, on or after the Redemption Date);

(b)

reduce the percentage, in principal amount, of Holders of Rated Notes of each Class, or the percentage of Income Noteholders, whose consent is required for the authorization of any supplemental indenture or for any waiver of compliance with certain provisions of the Indenture or certain defaults thereunder or their consequences;

(c)

impair or adversely affect the Collateral other than as permitted by the Indenture;

(d)

permit the creation of any security interest ranking prior to or on a parity with the security interest of the Indenture with respect to any part of the Collateral or terminate such security interest on any property at any time subject thereto (other than in accordance 116

Processed and formatted by SEC Watch - Visit SECWatch.com

with the Indenture) or deprive the Holder of any Rated Note or the Initial Hedge Counterparty of the security afforded by the security interest of the Indenture; (e)

reduce the percentage of the aggregate principal amount of Holders of Rated Notes of each Class whose consent is required to request the Trustee to preserve the Collateral or rescind the Trustee’s election to preserve the Collateral pursuant to Section 5.5 or to sell or liquidate the Collateral pursuant to Section 5.4 or 5.5;

(f)

modify any of the provisions of this Section 8.2, except to increase the percentage of the aggregate principal amount of Outstanding Rated Notes of each Class whose Holders’ consent is required for any such action or to provide that other provisions of the Indenture cannot be modified or waived without the written consent of the Holders of 75% of the then Aggregate Outstanding Amount of each affected Class of Rated Notes Outstanding and the Initial Hedge Counterparty;

(g)

modify the definition of the term “Outstanding” or Section 11.1;

(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 or principal of any Rated Note on any Payment Date or to affect the right of the Holders of Rated Notes or the Initial Hedge Counterparty to the benefit of any provisions for the redemption of such Rated Notes contained therein;

(i)

modify provisions related to the bankruptcy or insolvency of the Co-Issuers; or

(j)

modify provisions stating that the obligations of the Co-Issuers are joint and several limited recourse obligations of the CoIssuers payable solely from the Collateral in accordance with the terms of the Indenture (Section 8.2(a) through (j) collectively, the Reserved Matters).

The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. Not later than 15 Business Days prior to the execution of any proposed supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Co-Issuers, shall mail to the Rated Noteholders, PAA Issued Note Paying Agent, the Initial Hedge Counterparty, the Collateral Manager and each Rating Agency a copy of such proposed supplemental indenture (or a description of the substance thereof) and shall request Rating Agency Confirmation with respect to such supplemental indenture. If any Class of Rated Notes is then rated by any Rating Agency, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, Rating Agency Confirmation would not be received with respect to such supplemental indenture, unless each Holder of Rated Notes of each Class whose rating will be reduced or withdrawn has, after notice that the proposed supplemental indenture would result in such reduction or withdrawal of the rating of the Class of Rated Notes held by such Holder, consented to such supplemental indenture. Without having obtained the consent of the applicable parties pursuant to this Section 8.2, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of any Holder of Rated Notes, the Initial Hedge Counterparty or of the Income Noteholders would be materially and adversely affected thereby. Unless notified by (i) the Holders of a Majority of the then Aggregate Outstanding Amount of any Class of Rated Notes that such Class will be materially and adversely affected or (ii) the Holders of a 117

Processed and formatted by SEC Watch - Visit SECWatch.com

Majority of aggregate principal balance of the Income Notes that the Income Noteholders will be materially and adversely affected, the Trustee shall be entitled to rely upon an Opinion of Counsel as to whether the interests of any Holder of Rated Notes or of the Income Noteholders would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the PAA Issued Note Paying Agent). It shall not be necessary for any Act of Rated Noteholders or any consent of Income Noteholders under this Section 8.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act or consent shall approve the substance thereof. Promptly after the execution by the Co-Issuers and the Trustee of any supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Co-Issuers, shall mail or make available to the Rated Noteholders, the Initial Hedge Counterparty, the PAA Issued Note Paying Agent (for forwarding to the Income Noteholders), the Collateral Manager and each Rating Agency a copy thereof. Any failure of the Trustee to publish or mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. In addition, the Issuer shall cause to be delivered a copy of the executed supplemental indenture to the Repository for posting on the Repository in the manner described in Section 14.3. 8.3. EXECUTION OF SUPPLEMENTAL INDENTURES In executing or accepting the additional trusts created by any supplemental indenture permitted by this Section 8 or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Sections 6.1 and 6.3) shall be fully protected in relying in good faith upon an Opinion of Counsel, stating that the execution of such supplemental indenture is authorized, or permitted by this Indenture and that all conditions precedent thereto have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or indemnities under this Indenture or otherwise. Such supplemental indenture will not be binding on the Collateral Manager to the extent that it reduces the rights or increases the obligations of the Collateral Manager, unless such supplemental indenture is consented to in writing by the Collateral Manager. 8.4. EFFECT OF SUPPLEMENTAL INDENTURES Upon the execution of any supplemental indenture under this Section 8, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Rated Notes theretofore and thereafter authenticated and delivered hereunder or under the Paying Agency Agreement shall be bound thereby. Notwithstanding anything to the contrary herein, no amendment or modification of or supplement to this Indenture will be effective until the Collateral Manager has received written notice of such amendment, modification or supplement and, if such amendment, modification or supplement affects the rights, obligations or compensation of the Collateral Manager, the Collateral Manager has consented in writing to the terms of the proposed amendment. In addition, the consent of any predecessor Collateral Manager will be required to implement any such amendment, modification or supplemental that would change any provision of this Indenture entitling such predecessor Collateral Manager to any fee or other amount payable to it under this Indenture or to reduce or delay the right of such predecessor to such payment. 118

Processed and formatted by SEC Watch - Visit SECWatch.com

8.5. REFERENCE IN INDENTURE ISSUED NOTES TO SUPPLEMENTAL INDENTURES Indenture Issued Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Section 8 may, and if required by the Trustee shall, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Co-Issuers shall so determine, new Indenture Issued Notes, so modified as to conform in the opinion of the Trustee and the Co-Issuers to any such supplemental indenture, may be prepared and executed by the Co-Issuers and authenticated and delivered by the Trustee in exchange for Outstanding Indenture Issued Notes. ARTICLE IX REDEMPTION OF RATED NOTES 9.1. REDEMPTION OF RATED NOTES The Rated Notes will be subject to redemption in whole but not in part at their respective Redemption Prices, in each case, in accordance with the procedures, and subject to the satisfaction of the conditions, in Section 9.2 below, in the following circumstances: (a)

on or after the Payment Date occurring in July 2007 and continuing until the Stated Maturity Date (the Call Period), at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Income Notes Outstanding (an Optional Redemption);

(b)

on any Payment Date following the occurrence and during the continuation of a Tax Event, at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Income Notes Outstanding (such a redemption, a Tax Redemption); and

(c)

automatically and without any direction by any Person, (i) if the Notes have not been redeemed in full on or after the Payment Date occurring in July 2017, and (ii) if any of the conditions set forth in Sections 9.2(a) through (d) below have not been met or if the highest bidder fails to pay the purchase price within six (6) Business Days following such Payment Date, the Payment Date thereafter, unless the Notes are redeemed in full prior to the next Auction Date (such a redemption, an Auction Call Redemption).

9.2. REDEMPTION PROCEDURES; AUCTION In connection with any Redemption, the Trustee and the Collateral Manager will, in accordance with the procedures set forth in Schedule E (the Auction Procedures) and at the expense of the Issuer, conduct an auction (an Auction) of the Collateral Interests included in the Collateral on a date (each such date, an Auction Date) occurring no later than ten (10) Business Days prior to any scheduled Redemption Date. Any of the Initial Purchasers, the Collateral Manager, the Income Noteholders, the Trustee or their respective Affiliates may, but will not be required to, bid at the Auction. (a)

Any Redemption will be subject to the satisfaction of each of the following conditions: (1)

the related Auction has been conducted in accordance with the Auction Procedures;

(2)

the Trustee has received bids for the Collateral Interests (or for each of the related Subpools) from at least two Qualified Bidders (including the winning 119

Processed and formatted by SEC Watch - Visit SECWatch.com

Qualified Bidder) identified on a list of qualified bidders provided by the Collateral Manager to the Trustee;

(b)

(3)

the Collateral Manager certifies that the Highest Auction Price would result in the Sale Proceeds from the Collateral Interests (or the related Subpools) for a purchase price (paid in cash) plus the Balance of all Eligible Investments and cash held by the Issuer, plus any termination payments payable by a Hedge Counterparty to the Issuer (in excess of any amounts payable by the Issuer to a Hedge Counterparty) resulting from the termination of the related Hedge Agreement pursuant to the Redemption being at least equal to the sum of (i) the aggregate Redemption Prices of the Notes plus (ii) any accrued but unpaid fees and expenses of the Issuer pursuant to Section 11.1(b)(1) and (19) through (22) (including any termination payments payable by the Issuer resulting from the termination of any Hedge Agreement pursuant to the Redemption) plus (iii) any Outstanding Interest Advances, together with interest thereon plus (iv) (a) in connection with a Tax Redemption at the direction of the Controlling Class and (b) an Auction Call Redemption, any additional amounts necessary to satisfy the Income Note Redemption Approval Condition; and

(4)

the bidder(s) who offered the Highest Auction Price for the Collateral Interests (or the related Subpools) enter(s) into a written agreement with the Issuer (which the Issuer will execute if the conditions set forth above and in this Indenture are satisfied, which execution will constitute certification by the Issuer that such conditions have been satisfied) that obligates the highest bidder(s) (or the highest bidder for each Subpool) to purchase all of the Collateral Interests (or the relevant Subpool) and provides for payment in full (in Cash) of the purchase price to the Trustee on or prior to the sixth Business Day following the relevant Auction Date.

In addition, any Optional Redemption requires the occurrence of the following: (1)

at least four (4) Business Days before the scheduled Redemption Date, the Collateral Manager has furnished to the Trustee evidence, in form satisfactory to the Trustee, that the Collateral Manager on behalf of the Issuer has entered into a binding agreement or agreements with an institution or institutions (or guarantor or guarantors of the obligations): (A) with regard to which Rating Agency Confirmation has been received; or (B) whose long-term unsecured debt obligations (other than such obligations whose rating is based on the credit of a person other than such institution) have a credit rating from Moody’s, if rated by Moody’s, of “P-1” and of at least “A-1” from S&P; and in each case, to sell, not later than the Business Day immediately preceding the scheduled Redemption Date, in immediately available funds, all or part of the Collateral Interests at a purchase price (paid in Cash) which together with the Balance of all Eligible Investments and Cash held by the Issuer will be at least equal to the sum of (i) the aggregate Redemption Prices of the Notes plus (ii) any accrued but unpaid fees and expenses of the Issuer pursuant to Section 11.1(b)(1) and (19) through (22) (including any termination payments payable by the Issuer resulting from the termination of any Hedge Agreement pursuant to the Redemption); or

(2)

prior to selling any Collateral Interests or any other collateral, the Collateral Manager certifies that the expected proceeds from such sale will, in the 120

Processed and formatted by SEC Watch - Visit SECWatch.com

aggregate, equal or exceed, in each case, the sum of (A) any amounts payable in connection with an Optional Redemption pursuant to Section 9.2 of the Notes plus (B) all expenses of such redemption and all other administrative fees and expenses payable on the related Redemption Date. Provided that all of the conditions set forth in Section 9.2(a) through (d) have been met, the Trustee will sell and transfer the Collateral Interests (or each related Subpool), without representation, warranty or recourse, to the bidder(s) who offered the Highest Auction Price for the Collateral Interests (or the related Subpools) in accordance with and upon completion of the Auction Procedures. If any of the conditions set forth in Section 9.2(a) through (d) are not met, (i) the Redemption will not occur on the Payment Date following the relevant Auction Date, (ii) the Trustee will give notice of the withdrawal of the Redemption, (iii) subject to clause (iv) below, the Trustee will decline to consummate such sale and may not solicit any further bids or otherwise negotiate any further sale of Collateral Interests in relation to such Auction and (iv) unless the Rated Notes are redeemed in full prior to the next succeeding Auction Date, the Trustee will conduct another Auction on the next succeeding Auction Date. The Trustee will deposit the purchase price for the Collateral Interests in the Collection Account, and the Rated Notes and, to the extent funds are available therefor, the Income Notes, will be redeemed on the Payment Date immediately following the relevant Auction Date in the order of priorities set forth in Section 11.1. Any Redemption will only be effected on a Payment Date. Installments of principal and interest due on or prior to a Redemption Date shall continue to be payable to the Holders of such Rated Notes as of the relevant Record Dates according to their terms. 9.3. RECORD DATE; NOTICE TO TRUSTEE OF REDEMPTION (a)

The Issuer shall set the Redemption Date and the applicable Record Date and give notice thereof to the Trustee pursuant to Section 9.3(b) below and shall issue an Issuer Request to the Trustee for the provision of the information necessary for the Issuer to compile the Redemption Date Statement in accordance with Section 10.11(b).

(b)

In the event of any Redemption, the Issuer shall, at least 45 days (but not more than 90 days) prior to the Redemption Date, notify the Trustee and the Initial Hedge Counterparty of such Redemption Date, the applicable Record Date, the principal amount of each Class of Notes to be redeemed on such Redemption Date and the Redemption Price of such Notes.

9.4. NOTICE OF REDEMPTION Notice of Redemption will be given by first-class mail, postage prepaid, mailed not less than eight (8) Business Days prior to the applicable Redemption Date, to the Initial Hedge Counterparty, each Rating Agency and each Holder of Rated Notes at such Holder’s address in the Note Register maintained by the Note Registrar in accordance with the provisions of this Indenture and to the Collateral Manager. Rated Notes called for Redemption must be surrendered at the office of any Note Paying Agent appointed pursuant to this Indenture in order to receive the Redemption Price. The Issuer will also deliver notice of Redemption to the Irish Paying Agent if and so long as any Class of Rated Notes or the Income Notes to be redeemed is listed on the Irish Stock Exchange. All notices of redemption shall state: (a)

the applicable Redemption Date; 121

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

the applicable Record Date;

(c)

the Redemption Price;

(d)

that all the Notes of the relevant Class are being redeemed in full and that interest on the applicable principal amount of Notes shall cease to accrue on the date specified in the notice; and

(e)

the place or places where such Rated Notes are to be surrendered for payment of the Redemption Price, which shall be the office or agency of the Note Paying Agent to be maintained as provided in Section 7.2.

Notice of redemption shall be given by the Co-Issuers or, at the Co-Issuers’ request, by the Trustee in the name and at the expense of the Co-Issuers. Failure to give notice of redemption, or any defect therein, to any Holder of any Note selected for redemption shall not impair or affect the validity of the redemption of any other Notes. 9.5. NOTICE OF WITHDRAWAL With regard to an Optional Redemption or a Tax Redemption, any notice of redemption may be withdrawn by the Issuer up to the fourth Business Day prior to the Redemption Date by written notice to the Trustee and the Collateral Manager only if the Collateral Manager is unable to deliver such sale agreement or agreements or certifications, as the case may be, in form satisfactory to the Trustee. With regard to any Redemption, notice of any withdrawal pursuant to Section 9.2 shall be given by the Trustee to each Holder of Rated Notes at such Holder’s address in the Note Register maintained by the Note Registrar by overnight courier guaranteeing next day delivery (or second day delivery outside the United States) sent not later than the third Business Day prior to such Redemption Date. In addition, the Trustee will, if any Class of Rated Notes to have been redeemed is listed on the Irish Stock Exchange, deliver a notice of such withdrawal to the Irish Stock Exchange not less than three (3) Business Days prior to such Redemption Date. 9.6. RATED NOTES PAYABLE ON REDEMPTION DATE Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after the Redemption Date (unless the Issuer shall default in the payment of the Redemption Price) such Rated Notes shall cease to bear interest. Upon final payment on a Note to be redeemed, the Holder shall present and surrender such Note at the place specified in the notice of redemption on or prior to such Redemption Date; provided that if there is delivered to the Co-Issuers (i) such security or indemnity as may be required by them to save each of them harmless and (ii) an undertaking thereafter to surrender such Note, then, in the absence of notice to the Co-Issuers that the applicable Note has been acquired by a bona fide purchaser, such final payment shall be made without presentation or surrender. Installments of interest on Rated Notes of a Class so to be redeemed whose Stated Maturity Date is on or prior to the Redemption Date shall be payable to the Holders of such Rated Notes, or one or more predecessor Rated Notes, registered as such at the close of business on the relevant Record Date according to the terms and provisions of Section 2.6(e). If any Rated Note called for redemption shall not be paid upon surrender thereof for redemption, the principal thereof shall, until paid, bear interest from the Redemption Date at the Applicable Periodic Interest Rate for each successive Interest Period the Rated Note remains Outstanding. 122

Processed and formatted by SEC Watch - Visit SECWatch.com

9.7. SPECIAL AMORTIZATION If the Collateral Manager notifies the Trustee in writing that it has determined, in its sole discretion, that investments in additional Collateral Interests would either be impractical or not beneficial, the amount of such Collateral Principal Collections available pursuant to Section 11.1(b)(17), as determined by the Collateral Manager (the “Special Amortization Amount”) shall be applied to the payment of principal on the Notes on the next succeeding Payment Date (a “Special Amortization”) in accordance with Section 11.1(b)(17)(ii) hereof. Payments of principal on the Notes pursuant to Section 11.1(b)(17)(ii) shall be made: (i) if the Special Amortization Pro Rata Condition is satisfied, pro rata to the respective Classes of the Rated Notes pursuant to Section 11.1(b)(17)(i) of the Priority of Principal Payments provided that a Special Amortization Notice is delivered by the Collateral Manager to the Issuer and the Trustee; or (ii) if the criteria for a Special Amortization Pro Rata Condition are not satisfied, sequentially to the respective Classes of the Rated Notes pursuant to Section 11.1(b)(17)(ii)(2) of the Priority of Principal Payments. If the Collateral Manager elects to initiate a Special Amortization, the Collateral Manager shall deliver on or prior to the related Calculation Date, to each of the Trustee and each Rating Agency, advance written notice (which may be included in the related Note Report) (each, a “Special Amortization Notice”) specifying the identity and principal amount of each Class of Rated Notes to be paid pursuant to such Special Amortization and that the Collateral Manager has been unable to identify for purchase by the Issuer Substitute Collateral Interests that comply with the Reinvestment Criteria and the other applicable requirements of the Indenture, and that the other applicable requirements of the Indenture, and that all other Indenture requirements for such Special Amortization are complied with. On each Payment Date on which a Special Amortization occurs, each related Hedge Agreement will be terminated in part in accordance with the terms and conditions thereof, including compliance with any applicable requirement that the Issuer receive Rating Agency Confirmation from S&P, and any amounts due and payable pursuant to such Hedge Agreement in connection with such termination thereof will be paid on such Payment Date in accordance with the terms thereof subject to this Indenture. ARTICLE X ACCOUNTS, ACCOUNTINGS AND RELEASES 10.1.

COLLECTION OF FUNDS (a)

Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all funds and other property payable to or receivable by the Trustee pursuant to this Indenture, including all payments due on the Pledged Securities, in accordance with the terms and conditions of such Pledged Securities. The Trustee shall segregate and hold all such funds and property received by it in trust for the Secured Parties and shall apply such funds as provided in this Indenture.

(b)

Each of the parties hereto hereby agrees to cause the Custodian or any other Securities Intermediary that holds any funds or other property for the Issuer or the Co-Issuer in an Account to agree with the parties hereto that (1) each Account is a Securities Account in 123

Processed and formatted by SEC Watch - Visit SECWatch.com

respect of which the Trustee is the Entitlement Holder, (2) each Account is held by a financial institution that has a combined capital and surplus of at least U.S.$250,000,000 and being subject to supervision or examination by federal or state banking authority, (3) the Cash, Securities and other property credited to any Account is to be treated as a Financial Asset under Article 8 of the UCC and (4) the securities intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC) for that purpose will be the State of New York. In no event may any Financial Asset held in any Account be registered in the name of, payable to the order of, or specially Indorsed to, the Issuer unless such Financial Asset has also been Indorsed in blank or to the Custodian or other Securities Intermediary that holds such Financial Asset in such Account. Each Account shall be held and maintained at an office located in Minneapolis, Minnesota or Columbia, Maryland. 10.2.

GENERAL PROVISIONS APPLICABLE TO ACCOUNTS

The Payment Account, Collateral Account, Uninvested Proceeds Account, Collection Account (including each Collateral SubAccount therein), Expense Reserve Account, each Hedge Counterparty Collateral Account (if any) and Interest Reserve Account shall remain at all times with a financial institution having a long-term debt rating of at least “BBB+” by S&P. (a)

The Trustee agrees to give the Issuer prompt notice (with a copy to each Hedge Counterparty, the Collateral Manager, each Rating Agency and the PAA Issued Note Paying Agent) if any Account or any funds on deposit therein, or otherwise standing to the credit of any Account, shall become subject to any writ, order, judgment, warrant of attachment, execution or similar process.

(b)

The Collateral Manager shall direct the Trustee to invest and reinvest any funds on deposit in any of the Accounts (other than the Payment Account) in Eligible Investments. In the event that the Collateral Manager has not delivered investment instructions to the Trustee or after the occurrence of an Event of Default, the Trustee shall invest and reinvest any funds on deposit in any Account (other than the Payment Account) as fully as practicable in investments described in clause (vii) of the definition of Eligible Investments maturing not later than the earlier of (i) 30 days after the date of such investment or (ii) the Business Day immediately preceding the next Payment Date. With respect to each Account, all interest and other income from Eligible Investments purchased with funds on deposit in such Account shall be deposited in such Account, any gain realized from such investments shall be credited to such Account, and any loss resulting from such investments shall be charged to such Account. Any gain or loss with respect to an Eligible Investment shall be allocated in such a manner as to increase or decrease, respectively, Collateral Principal Collections and/or Collateral Interest Collections in the proportion that the amount of Collateral Principal Collections and/or Collateral Interest Collections used to acquire such Eligible Investment bears to the purchase price thereof. The Trustee shall not in any way be held liable by reason of any insufficiency of any such Account resulting from any loss relating to any such investment. Nothing herein shall be deemed to relieve the Bank or its Affiliates from any duties or liabilities with respect to investments in obligations of the Bank or any Affiliate thereof.

(c)

All funds deposited from time to time in the Collection Account, the Expense Reserve Account or the Interest Reserve Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided. 124

Processed and formatted by SEC Watch - Visit SECWatch.com

10.3.

COLLATERAL ACCOUNT

The Trustee shall, prior to the Closing Date, cause the Custodian to establish a Securities Account which shall be designated as the “Collateral Account”, which shall be in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties and into which the Trustee shall from time to time deposit Collateral. All Collateral from time to time deposited in, or otherwise standing to the credit of, the Collateral Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided. The Co-Issuers shall not have any legal, equitable or beneficial interest in the Collateral Account other than in accordance with the Priority of Payments. 10.4.

UNINVESTED PROCEEDS ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Uninvested Proceeds Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties, into which the Trustee shall deposit all Uninvested Proceeds (other than the organizational and structuring fees and expenses of the Co-Issuers (including, without limitation, the legal fees and expenses of counsel to the Co-Issuers, Deutsche Bank and the Collateral Manager), the expenses of offering the Rated Notes and the Income Notes (including placement fees and structuring fees) and amounts deposited in the Expense Reserve Account on such date). On or prior to the Effective Date, the Collateral Manager on behalf of the Issuer may direct the Trustee to, and upon such direction the Trustee shall, apply funds in the Uninvested Proceeds Account to purchase additional Collateral Interests and, pending such investment in additional Collateral Interests, such funds will be invested in Eligible Investments, as directed by the Collateral Manager, with stated maturities no later than the Business Day immediately preceding the next Payment Date; provided, however that during the Ramp-Up Period, Substitute Collateral Interests shall be purchased with Collateral Principal Collections, if sufficient Collateral Principal Collections are available, and only if sufficient Collateral Principal Collections are not available, with amounts in the Uninvested Proceeds Account. The Trustee shall transfer any Uninvested Proceeds remaining on deposit in the Uninvested Proceeds Account on the Effective Date to the Collection Account to be treated as either (i) Collateral Interest Collections, if Rating Agency Confirmation to treat such Uninvested Proceeds as such has been obtained or (ii) Collateral Principal Collections, if such Rating Agency Confirmation has not been obtained, on the first Payment Date and distributed in accordance with the Priority of Payments. 10.5.

COLLECTION ACCOUNT (a)

Collection Account (1)

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Collection Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. The Trustee shall cause to be established two sub-accounts of the Collection Account. The Trustee shall deposit Collateral Principal Collections into one sub-account (the Collateral Principal Collections Sub-Account) and Collateral Interest Collections into the other sub-account. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Collection Account (including the Collateral Principal Collection Sub-Account) in Eligible Investments or Substitute Collateral Interests in accordance with the requirements and limitations contained in Section 12.1(c). 125

10.6.

(2)

The Trustee, within one Business Day after receipt of any Distribution or other proceeds that are not Cash shall so notify the Issuer and the Issuer shall sell such Distribution or other proceeds for Cash in accordance with Section 12.1.

(3)

The Trustee shall transfer to the Payment Account for application pursuant to Section 11.1(a) and in accordance with the calculations and the instructions contained in the Note Valuation Report prepared by the Issuer pursuant to Section 10.11(a), on or prior to the Business Day prior to each Payment Date, funds on deposit in the Collection Account (including reinvestment income) other than Collections received after the end of the Due Period with respect to such Payment Date. An Authorized Officer of the Issuer or the Collateral Manager’s approval of the Note Valuation Report shall constitute direction to the Trustee to, and upon such approval, the Trustee shall, transfer to the Payment Account, for application pursuant to Section 11.1(a) no later than the Business Day prior to each Payment Date, all Interest Advances made to or by the Trustee pursuant to Section 10.17 and any amounts then held in the Collection Account other than proceeds received after the end of the Due Period with respect to such Payment Date.

(4)

The Trustee shall withdraw and apply amounts on deposit in the Collection Account in accordance with any Redemption Date Statement delivered to the Trustee in connection with the redemption of Rated Notes pursuant to Section 9.1.

EXPENSE RESERVE ACCOUNT The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Expense

Processed and formatted by SEC Watch - Visit SECWatch.com

Reserve Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. On the Closing Date, the Trustee shall deposit into the Expense Reserve Account an amount equal to U.S.$ 25,000 together with an amount sufficient to pay any outstanding fees and expenses of the Issuer in relation to the offering of the Rated Notes and the Income Notes which are not paid on the Closing Date. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Expense Reserve Account in Eligible Investments. Any amounts held in the Expense Reserve Account in excess of U.S.$ 25,000 on the day which is 60 days following the Closing Date (or, if such day is not a Business Day, the next following Business Day) shall be transferred by the Trustee into the Uninvested Proceeds Account. Thereafter, the Trustee shall transfer to the Expense Reserve Account from the Payment Account amounts required to be deposited therein pursuant to Section 11.1(a) and in accordance with the calculations and the instruction contained in the Note Valuation Report prepared by the Issuer pursuant to Section 10.11(a). Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be to pay (on any day other than a Payment Date) accrued and unpaid Administrative Expenses of the Co-Issuers; provided that the Trustee shall deposit all amounts remaining on deposit in the Expense Reserve Account at the time when substantially all of the Issuer’s assets have been sold or otherwise disposed of into the Collections Account for application as Collateral Interest Collections on the immediately succeeding Payment Date. 126

Processed and formatted by SEC Watch - Visit SECWatch.com

10.7.

INTEREST RESERVE ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Interest Reserve Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Interest Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Interest Reserve Account in Eligible Investments. On each Payment Date, in accordance with the Priority of Payments, the Trustee will deposit the Interest Reserve Amount, if any, into the Interest Reserve Account. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Interest Reserve Account shall be to deposit into the Payment Account, on the Business Day prior to each Payment Date, the Balance of the Interest Reserve Account (including reinvestment income) for distribution as Collateral Interest Collections in accordance with the Priority of Payments on the related Payment Date. 10.8.

EARN-OUT ASSET ACCOUNT

With respect to any Earn-Out Asset, the Trustee, at the direction of the Collateral Manager, at the time of purchase thereof shall withdraw from the principal collection subaccount of the Collection Account and deposit into the Earn-Out Asset Account the amount of funds equal to or greater than the combined aggregate principal amounts of the funding obligations under the any Earn-Out Asset included in the Collateral Interests less the amount of any previous funding, as specified in such direction. Upon initial purchase of an Earn-Out Asset, such funding obligations shall be treated as part of the purchase price for such Collateral Interest. As directed by the Collateral Manager in writing and in accordance with the Indenture, amounts on deposit in the Earn-Out Asset Account shall be invested in overnight funds that are Eligible Investments. On the Business Day immediately preceding each Payment Date, the income received on amounts contained in the Earn-Out Asset Account during the related Due Period shall be withdrawn from such account and deposited in the Collection Account as Collateral Interest Collections. Any funds in the Earn-Out Asset Account will be available solely to cover any drawdowns on the related Earn-Out Assets; provided, however, that the excess of (a) the amounts on deposit in the Earn-Out Asset Account over (b) the combined aggregate principal amounts of the undrawn commitments under any Earn-Out Assets included in the Collateral shall be transferred to Collection Account by the Trustee (upon the direction of the Collateral Manager) from time to time as Collateral Principal Collections. Upon (i) the sale or maturity of an Earn-Out Asset or (ii) the occurrence of an event of default with respect to an Earn-Out Asset or any other event or circumstance which results in the irrevocable reduction of the undrawn commitments under such Earn-Out Asset, any funds in the Earn-Out Asset Account in excess of the amount needed to cover any draw-downs on all remaining Earn-Out Assets shall be transferred, at the direction of the Collateral Manager, to the Collection Account for distribution as Collateral Principal Collections in accordance with Section 11.1 on the immediately succeeding Payment Date. 10.9.

PAYMENT ACCOUNT

The Trustee shall, prior to the Closing Date, establish a Securities Account which shall be designated as the “Payment Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Payment Account shall be held in trust by the Trustee for the 127

Processed and formatted by SEC Watch - Visit SECWatch.com

benefit of the Secured Parties. Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Payment Account shall be to pay the interest on and the principal of the Rated Notes in accordance with their terms and the provisions of this Indenture and, upon Issuer Order, to pay Administrative Expenses, amounts due to the Advancing Agent or the Trustee in connection with the reimbursement of Interest Advances and interest thereon and other amounts specified therein, each in accordance with the Priority of Payments. The Co-Issuers shall not have any legal, equitable or beneficial interest in the Payment Account other than in accordance with the Priority of Payments. 10.10.

REPORTS BY TRUSTEE

The Trustee shall supply, in a timely fashion to each Rating Agency (so long as any Rated Notes are rated by such Rating Agency), the Initial Hedge Counterparty, the Holders of Rated Notes of the Controlling Class, the Collateral Manager, the PAA Issued Note Paying Agent, the Initial Purchasers, the Issuer and the Advancing Agent any information regularly maintained by the Trustee that each such Person may from time to time request with respect to the Pledged Securities or the Accounts reasonably needed to complete the Note Valuation Report or to provide any other information reasonably available to the Trustee by reason of its acting as Trustee hereunder and required to be provided by Section 10.11. The Trustee shall forward to the Collateral Manager, the Holders of Rated Notes of the Controlling Class, the Advancing Agent, or upon request therefor, any Holder of a Rated Note shown on the Note Register, the Initial Purchasers, the Initial Hedge Counterparty or the PAA Issued Note Paying Agent, copies of notices and other writings received by it from the issuer of any Collateral Interest or from any Clearing Agency with respect to any Collateral Interest advising the holders of such security of any rights that the holders might have with respect thereto (including notices of calls and redemptions of securities) as well as all periodic financial reports received from such issuer and Clearing Agencies with respect to such issuer; provided that the Trustee shall not disclose any unpublished S&P Rating assigned by S&P with respect to any Collateral Interest without the prior consent of S&P. So long as any Class of Rated Notes is listed on the Irish Stock Exchange, the Irish Paying Agent shall notify the Irish Stock Exchange not later than the Business Day preceding each Payment Date of the amount of principal payments to be made on the Rated Notes of each Class on such Payment Date, any Class C Cumulative Periodic Interest Shortfall Amount, any Class D Cumulative Periodic Interest Shortfall Amount, any Class E Cumulative Periodic Interest Shortfall Amount, any Class F Cumulative Periodic Interest Shortfall Amount, any Class G Cumulative Periodic Interest Shortfall Amount and the Aggregate Outstanding Amount of the Rated Notes of each Class and as a percentage of the original Aggregate Outstanding Amount of the Rated Notes of such Class after giving effect to the principal payments, if any, on such Payment Date. As promptly as possible following the delivery of each Note Valuation Report to the Trustee pursuant to Section 10.11(a) or (b), as applicable, the Issuer shall cause a copy of such report to be delivered the Repository for posting on the Repository in the manner described in Section 14.3. In connection therewith, each of the Co-Issuers acknowledges and agrees that each Note Valuation Report shall be posted to the Repository for use in the manner described in the section headed “Terms of Use” on the Repository. In the event that a Distribution on any Collateral Interest is not paid to the Trustee on the Due Date therefor, the Trustee shall provide the Advancing Agent with notice of such default on the Business Day immediately following such default. In addition, (i) the Trustee shall provide the Advancing Agent (either electronically or in hard-copy format) with copies of all reports received from any trustee, trust administrator, master servicer or similar administrative entity with respect to the Collateral Interests and 128

Processed and formatted by SEC Watch - Visit SECWatch.com

(ii) upon request, the Trustee shall promptly make available to the Advancing Agent any other information reasonably available to the Trustee by reason of its acting as Trustee hereunder to permit the Advancing Agent to make a determination of recoverability with respect to any Interest Advance and to otherwise perform its advancing obligations hereunder. 10.11.

ACCOUNTINGS (a)

Payment Date Accounting. The Issuer shall, not later than the related Payment Date and after the reconciliation process described in this Section 10.11, render an accounting (a Note Valuation Report), determined as of each Calculation Date, and deliver the Note Valuation Report to each Rating Agency, the Trustee, the Collateral Manager and the Advancing Agent and make available via the Trustee’s internet website, initially located at www.cdolink.com to the Trustee, the Irish Paying Agent, the Initial Hedge Counterparty, the PAA Issued Note Paying Agent, each Note Transfer Agent, Deutsche Bank, the Advancing Agent and, upon written request therefor, any Holder of a Rated Note shown on the Note Register. The Note Valuation Report shall contain the following information (which shall, in the case of any Note Valuation Report delivered to S&P, be presented in a form that complies with S&P’s Preferred Format) determined, unless otherwise specified below, as of the related Calculation Date: (1)

the calculation showing compliance with each of the Coverage Tests, accompanied by a list setting forth the applicable maximum or minimum value, percentage or ratio which must be maintained pursuant to this Agreement with respect to each of the Coverage Tests and a list setting forth the results of the calculation of each of the Coverage Tests with respect to the Collateral Interests, the calculation showing whether the S&P CDO Monitor Test is satisfied (including the weighted average rating, the default measure, variability measure and correlation measure, the scenario default rate and/or such other information required to be computed with respect to the S&P CDO Monitor Test), and the calculation showing the Moody’s Maximum Weighted Average Rating Factor Test, the Weighted Average Fixed Rate Coupon, the Weighted Average Spread, the Weighted Average Life and the S&P Minimum Average Recovery Rate;

(2)

the estimated remaining Average Life of each of the Collateral Interests;

(3)

the Applicable Periodic Interest Rate in respect of each Class of Notes and the amount of Periodic Interest payable to the Holders of the Notes for such Payment Date (in the aggregate and by Class);

(4)

the amount (if any) payable to each Hedge Counterparty pursuant to the related Hedge Agreement;

(5)

the amount (if any) payable by each Hedge Counterparty pursuant to the related Hedge Agreement:

(6)

the Aggregate Fees and Expenses payable on the next Payment Date on an itemized basis;

(7)

the Aggregate Fees and Expenses paid during a period of twelve (12) months ending on the next Payment Date on an itemized basis; 129

Processed and formatted by SEC Watch - Visit SECWatch.com

(8)

(9)

(10)

for the Collection Account: (i)

the Balance on deposit in the Collection Account, the Collateral Principal Collections Sub-Account at the end of the related Due Period;

(ii)

the nature and source of any Collections in the Collection Account, the Collateral Principal Collections Sub-Account, including Collections received since the date of the last Note Valuation Report;

(iii)

the amounts payable from the Collection Account in accordance with the priority set forth in Section 11.1 on the next Payment Date; and

(iv)

the Balance remaining in the Collection Account immediately after all payments and deposits to be made on such Payment Date;

(v)

the Balance on deposit in the Collateral Principal Collections Sub-Account.

for the Interest Reserve Account: (i)

the balance on deposit in the Interest Reserve Account at the end of the related Due Period;

(ii)

the amount payable from the Interest Reserve Account pursuant to the Priority of Payments on the next Payment Date;

(iii)

the Interest Reserve Amount to be paid into the Interest Reserve Account on the next Payment Date; and

(iv)

the Balance remaining in the Interest Reserve Account immediately after all payments and deposits to be made on such Payment Date;

for the Expense Reserve Account: (i)

the amount to be paid into the Expense Reserve Account on the next Payment Date; and

(ii)

the Balance remaining in the Expense Reserve Account immediately after all payments and deposits to be made on such Payment Date;

(11)

any Hedge Receipt Amount or Hedge Payment Amount for the related Payment Date, and for each Hedge Agreement (if any), the outstanding notional amount of such Hedge Agreement and the amounts, if any, scheduled to be received or paid, as the case may be, by the Issuer pursuant to such Hedge Agreement for the related Payment Date, separately stating the portion payable in accordance with Section 11.1;

(12)

the aggregate amount of outstanding Interest Advances;

(13)

the amount of Income Note Excess Funds on the related Payment Date; 130

Processed and formatted by SEC Watch - Visit SECWatch.com

(14)

the amount of the Senior Collateral Management Fee and the amount of the Subordinate Collateral Management Fee;

(15)

such other information as the Collateral Manager, the Initial Purchasers, the Trustee, any Rating Agency or any Hedge Counterparty may reasonably request;

(16)

with respect to each Collateral Interest, the Principal Balance, the annual coupon rate or spread to the relevant floating rate index, the frequency of coupon payments, the amount of principal payments received, the maturity date, the issuer, the country in which the issuer is incorporated or organized, the S&P Industry Classification Group, the Moody’s Recovery Rate, the S&P Recovery Rate, the S&P Rating and the Moody’s Rating (provided that if any Moody’s Rating for any Collateral Interest is an “estimated” or “shadow” rating, such rating shall be identified as “estimated” or “shadow rated”, shall be disclosed with an asterisk in the place of the applicable estimated or shadow rating and shall include the date as of which such rating was first provided by Moody’s to the Issuer); and any S&P Rating which is determined from an implied rating, a credit estimate, a confidential rating or another non-public rating, shall not be distinguished and shall either (i) be reported in a single column with the public ratings of S&P (without distinguishing the source) or (ii) be reported in a separate column labeled “Nonpublic and Implied S&P Rating.”

(17)

the Principal Balance, the maturity date, the S&P Rating, the Moody’s Rating and the issuer of each Eligible Investment included in the Collateral;

(18)

(A) the identity and Principal Balance of each Collateral Interest that became a Credit Risk Interest, an Impaired Interest, an Equity Interest, a Written Down Interest, a Withholding Tax Interest, a Deferred Interest PIK Bond, (B) the date, as provided by the Collateral Manager, on which any Collateral Interest became a Credit Risk Interest, an Impaired Interest, an Equity Interest, a Written Down Interest or a Withholding Tax Interest, (C) the date by which the Issuer or the Collateral Manager is required to declare its intention to sell or to hold such Collateral Interest, (D) whether the Collateral Manager has directed the Issuer to sell or not to sell such Collateral Interest, and (E) the date by which any such sale must occur;

(19)

the identity of each Collateral Interest that was upgraded or downgraded or placed on watch for upgrade or downgrade by any Rating Agency since the date of the last Note Valuation Report;

(20)

the Principal Balance and identity of each Collateral Interest that was released for sale indicating the reason for such sale and the amount and identity of each Collateral Interest that was granted since the date of the last Note Valuation Report;

(21)

the identity and Principal Balance of each Collateral Interest that was a Credit Risk Interest, an Impaired Interest, an Equity Interest, a Written Down Interest, a Buy/Sell Interest, a Withholding Tax Interest, a Taxed Collateral Interest, a Taxed Property or a Deferred Interest PIK Bond; 131

Processed and formatted by SEC Watch - Visit SECWatch.com

(22)

the purchase price of each Pledged Security granted and the sale price of each Pledged Security subject to a sale since the date of the last Note Valuation Report; and whether such Pledged Security is a Collateral Interest, an Eligible Investment or proceeds in the Collection Account;

(23)

the amount of Purchased Accrued Interest;

(24)

a description of any transactions with the Collateral Manager, the Issuer, the Collateral Administrator and the Trustee and any Affiliates thereof;

(25)

the Weighted Average Recovery Rate for each Class of Notes; and

(26)

the components of the S&P CDO Monitor Test.

Upon receipt of each Note Valuation Report, the Trustee and the Collateral Manager shall compare the information contained therein to the information contained in their respective records with respect to the Collateral and shall, within two (2) Business Days after receipt of such Note Valuation Report, notify each of the Issuer, the Collateral Manager, the Trustee, the Initial Hedge Counterparty, Moody’s and S&P if the information contained in the Note Valuation Report does not conform to the information maintained by the Trustee or the Collateral Manager as applicable, with respect to the Collateral, and detail any discrepancies. In the event that any discrepancy exists, the Trustee and the Issuer, or the Collateral Manager shall attempt to promptly resolve the discrepancy. If such discrepancy cannot be promptly resolved, the Trustee shall within five (5) Business Days after discovery of such discrepancy cause the Independent Accountants of recognized international reputation to review such Note Valuation Report and the Trustee’s and the Collateral Manager’s records to determine the cause of such discrepancy. If such review reveals an error in the Note Valuation Report or the records of the Trustee or the Collateral Manager, as the case may be, such item shall be revised accordingly and, as so revised, shall be utilized in making further calculations. Subject to the terms of this Agreement, the Trustee shall be entitled to rely on the information supplied by the Collateral Manager in relation to the preparation of the Note Valuation Report and shall not be liable for the accuracy or completeness of such information or the lack thereof. In addition to the foregoing information, each Note Valuation Report shall include a statement to the following effect: “The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act), or under any state securities laws, and the Co-Issuers have not been and will not be registered under the United States Investment Company Act of 1940, as amended (the 1940 Act). Each Holder of the Notes, other than those Holders that are not “U.S. persons” (U.S. Person) within the meaning of Regulation S (Regulation S) under the Securities Act and have acquired their Notes outside the United States pursuant to Regulation S, is required to be both [(i)] (A) with respect to any Rated Note, a “qualified institutional buyer” as defined in Rule 144A under the Securities Act (Qualified Institutional Buyer) or (B) solely with respect to the Income Notes, any of NS CDO Holdings IV, LLC, NS Advisors, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(A) under the Securities Act (each of the foregoing, a Permitted NS Purchaser) and (ii) a “qualified purchaser” (Qualified Purchaser) within the meaning of Section 3(c)(7) of the 1940 Act, purchasing for its own account or for the account of another Qualified Purchaser, that can make all of the representations in this Indenture applicable to a holder that is a U.S. Person. The beneficial interest in the Notes may be transferred only to a transferee that meets both of the criteria in clauses (i) and (ii) above and can make all 132

Processed and formatted by SEC Watch - Visit SECWatch.com

of the representations in this Indenture applicable to a Holder that is a U.S. Person, except that any such transfer in reliance on Regulation S can be made only to a transferee that is not a U.S. Person. The Issuer has the right to compel any Holder that does not meet the qualifications and the transfer restrictions set forth in this Indenture to sell its interest in the Notes, or may sell such interest on behalf of such owner, pursuant to the Indenture.” (b)

(c)

Redemption Date Instructions. Not less than five Business Days after receiving an Issuer Request requesting information regarding a redemption pursuant to Section 9.1 of the Rated Notes of a Class as of a proposed Redemption Date set forth in such Issuer Request, the Trustee shall provide the necessary information (to the extent it is available to the Trustee) to the Issuer, and the Issuer shall compute the following information and provide such information in a statement (the Redemption Date Statement) delivered to the Trustee: (1)

the Aggregate Outstanding Amount of the Rated Notes of the Class or Classes to be redeemed as of such Redemption Date;

(2)

the amount of accrued interest due on such Rated Notes as of the last day of the Interest Period immediately preceding such Redemption Date; and

(3)

the amount in the Collection Account available for application to the redemption of such Rated Notes.

If the Trustee shall not have received any accounting provided for in this Section 10.11 on the first Business Day after the date on which such accounting is due to the Trustee, the Trustee shall use reasonable efforts to cause such accounting to be made by the applicable Payment Date or Redemption Date. To the extent the Trustee is required to provide any information or reports pursuant to this Section 10.11 as a result of the failure of the Issuer to provide such information or reports, the Trustee shall be entitled to retain an Independent certified public accountant in connection therewith and the reasonable costs incurred by the Trustee for such Independent certified public accountant shall be reimbursed pursuant to Section 6.8. The Trustee will make the Note Valuation Report available via its internet website initially located at www.cdolink.com. All information made available on the Trustee’s website will be restricted and the Trustee will only provide access to such reports to those parties entitled thereto pursuant to the Indenture. In connection with providing access to its website, the Trustee may require registration and the acceptance of a disclaimer. Questions regarding the Trustee’s website can be directed to the Trustee’s customer service desk at phone number 301-815-6600.

10.12.

RELEASE OF SECURITIES (a)

If no Event of Default has occurred and is continuing and subject to Section 12, the Issuer shall, in connection with any sale required pursuant to Section 12.1, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the settlement date for any sale of a security certifying that the conditions set forth in Section 12.1 are satisfied, direct the Trustee to release such security from the lien of this Indenture against receipt of payment therefor. 133

Processed and formatted by SEC Watch - Visit SECWatch.com

10.13.

(b)

The Issuer shall, if notified that the issuer of the Pledged Security requires delivery of such Pledged Security as a condition to redemption or payment in full, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the date set for redemption or payment in full of a Pledged Security, certifying that such security is being redeemed or paid in full, direct the Trustee or, at the Trustee’s instructions, the Custodian, to deliver such security, if in physical form, duly endorsed, or, if such security is a Clearing Corporation Security, to cause it to be presented, to the appropriate paying agent therefor on or before the date set for redemption or payment, in each case against receipt of the redemption price or payment in full thereof.

(c)

The Trustee shall, upon receipt of an Issuer Order at such time as there are no Rated Notes Outstanding and all obligations of the Co-Issuers hereunder have been satisfied, release the Collateral from the lien of this Indenture.

(d)

The Issuer may retain agents (including the Collateral Manager) to assist the Issuer in preparing any notice or other report required under Section 10.12 and this Section 10.13.

REPORTS BY INDEPENDENT ACCOUNTANTS (a)

At the Closing Date the Issuer (or the Collateral Manager on its behalf) shall appoint a firm of Independent certified public accountants of recognized national reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Indenture. Upon any resignation by such firm, the Issuer shall (after consultation with the Collateral Manager) propose a replacement firm meeting the criteria set forth in the preceding sentence for approval by a Majority of the Controlling Class. Upon approval by a Majority of the Controlling Class, the Issuer shall promptly appoint such firm by Issuer Order delivered to the Trustee, the Initial Hedge Counterparty, the Collateral Manager and each Rating Agency. If the Issuer shall fail to appoint a successor to a firm of Independent certified public accountants which has resigned within 30 days after such resignation, the Issuer shall promptly notify the Trustee of such failure in writing. The fees of such Independent certified public accountants and its successor shall be payable by the Issuer as provided in Section 11.1.

(b)

On or before May 31 of each year (commencing with May 31, 2006), the Issuer shall cause to be delivered to the Trustee, the PAA Issued Note Paying Agent and each Rating Agency an Accountants’ Report specifying the procedures applied and their associated findings with respect to the Note Valuation Reports and any Redemption Date Statements prepared in the preceding year. At least 60 days prior to the Payment Date in May 2006 (and, if at any time a successor firm of Independent certified public accountants is appointed, prior to the Payment Date in August following the date of such appointment), the Issuer shall deliver to the Trustee an Accountant’s Report specifying in advance the procedures that such firm will apply in making the aforementioned findings throughout the term of its service as accountants to the Issuer. The Trustee shall promptly forward a copy of such Accountant’s Report to the Initial Hedge Counterparty, the Rating Agencies, the PAA Issued Note Paying Agent and each Holder of Class A Notes (or, if no Class A Notes are Outstanding, each Holder of Class B Notes or, if no Class B Notes are Outstanding, each Holder of Class C Notes or, if no Class C Notes are Outstanding, each Holder of Class D Notes or, if no Class D Notes are Outstanding, each Holder of Class E Notes or, if no Class E Notes are Outstanding, each Holder of Class F Notes), at the address shown on the Note Register. The Issuer shall not approve the institution of such 134

Processed and formatted by SEC Watch - Visit SECWatch.com

procedures if a Majority of the Controlling Class or the Collateral Manager, by notice to the Issuer and the Trustee within 30 days after the date of the related notice to the Trustee, object thereto. (c)

10.14.

Any statement delivered to the Trustee pursuant to Section 10.13(b) above shall be made available by the Trustee to any Holder of a Rated Note shown on the Note Register upon written request therefor.

REPORTS TO RATING AGENCIES

In addition to the information and reports specifically required to be provided to the Rating Agencies, the PAA Issued Note Paying Agent, the Holders of Rated Notes of the Controlling Class and the Initial Hedge Counterparty pursuant to the terms of this Indenture or the Paying Agency Agreement (as the case may be), the Issuer shall provide or procure to provide the Rating Agencies and the Initial Hedge Counterparty with (a) all information or reports delivered to the Trustee hereunder and (b) such additional information as the Rating Agencies, the Initial Hedge Counterparty or the PAA Issued Note Paying Agent may from time to time reasonably request, provided that such information may be obtained and provided without unreasonable burden or expense. The Issuer shall promptly notify the Trustee, the PAA Issued Note Paying Agent if the rating of any Class of Rated Notes has been, or it is known by the Issuer that such rating will be, changed or withdrawn. The Issuer shall notify each Rating Agency and the Initial Hedge Counterparty in the case of (i) termination or amendment of any Transaction Document or organizational document of the Issuer or Co-Issuer, (ii) termination or change of party to any of the Transaction Documents or (iii) material breach of any of the Transaction Documents by any party thereto. 10.15.

TAX MATTERS

The Issuer and the Co-Issuer agree to treat, and hereby notify the Trustee to treat, and, by accepting a Certificated Class A-E Note, each Holder of a Certificated Class A-E Note agrees to treat, for U.S. federal income, state and local income and franchise tax and any other income tax purposes, the Certificated Class A-E Notes, for so long as NRFC Sub-REIT Corp. or another REIT (in either case, the “Owner REIT”) qualifies for U.S. federal income tax purposes as a real estate investment trust (within the meaning of Section 856 of the Code) and 100% of the Class F Notes, Class G Notes, Income Notes, and Ordinary Shares are owned by the Owner REIT, directly or indirectly through one or more Qualified REIT Subsidiaries thereof or one or more entities disregarded as entities separate from the Owner REIT or its Qualified REIT Subsidiaries, as indebtedness solely of the Owner REIT, and not as indebtedness of the Issuer or the Co-Issuer, and at any other time, as indebtedness solely of the Issuer and not the Co-Issuer. The Issuer also agrees to treat the Class F Notes as indebtedness for legal purposes and for certain tax purposes. The Issuer (and, with respect to the Certificated Class A-E Notes, the Co-Issuer) agree, and, by accepting a Certificated Class A-E Note or Class F Note, each Holder of a Certificated Class A-E Note or Class F Note agrees, to report all income (or loss) in accordance with such treatment, and not to take any action inconsistent with such treatment except as otherwise required by any taxing authority under applicable law. The Issuer agrees that, for purposes of U.S. federal income taxes, for so long as the Owner REIT qualifies for U.S. federal income tax purposes as a real estate investment trust (within the meaning of Section 856 of the Code) and 100% of the Class F Notes, Class G Notes, Income Notes, and Ordinary Shares are owned by the Owner REIT, directly or indirectly through one or more Qualified REIT Subsidiaries thereof or one or more entities disregarded as entities separate from the Owner REIT or its Qualified REIT Subsidiaries, the Issuer will be treated as a Qualified REIT Subsidiary of the Owner REIT, and at any other time, the Issuer agrees not to elect to be treated as other than a corporation for U.S. federal income tax purposes. 135

10.16.

TAX INFORMATION

The Issuer will furnish to any Holder of Rule 144A Certificated Notes (or its designee), Rule 144A Global Notes (or its designees), Certificated Class F Notes (or its designee) and Certificated Class G Notes (or its designee), upon the request of any such Holder, the necessary information, and will permit such Holder reasonable access to its books of account, in order to allow such Holder to make a “qualifying electing fund” election pursuant to Section 1295 of the Code. The Issuer shall provide on a timely basis to any holder of a beneficial interest in Rule 144A Certificated Notes (or its designee), Rule 144A Global Notes (or its designees), Certificated Class F Notes (or its designee) and Certificated Class G Notes (or its designee), upon written request therefor certifying that it is such a holder, (i) all information that a U.S. shareholder making a “qualified electing fund” election (as defined in the Code) is required to obtain for U.S. federal income tax purposes and (ii) a “PFIC Annual Information Statement” as described in Treasury Regulation 1.1295-1 (or any successor Internal Revenue Service release or Treasury Regulation), including all representations and statements required by such statement, and will take any other steps necessary to facilitate such election by a holder of a beneficial interest in any Rule 144A Certificated Notes, Rule 144A Global Notes, Certificated Class F Notes (or its designee) and Certificated Class G Notes. The Issuer shall also provide, upon request of a Holder of, or a holder of a beneficial interest in, any Rule 144A Certificated Notes, Rule 144A Global Notes, Certificated Class F Notes (or its designee) and Certificated Class G Notes, any information that such Holder or holder of a beneficial interest reasonably requests to assist such Holder or holder of a beneficial interest with regard to any filing requirements the Holder or holder of a beneficial interest may have as a result of the controlled foreign corporation rules under the Code. The cost and expense of the preparation and delivery of the PFIC Annual Information Statement shall be at the expense of the Issuer. 10.17.

INTEREST ADVANCES (a)

With respect to each Payment Date for which the sum of (i) Collateral Interest Collections collected during the related Due Period and (ii) funds on deposit in the Collection Account, are insufficient to remit the interest due and payable with respect

Processed and formatted by SEC Watch - Visit SECWatch.com

to the Class A Notes and Class B Notes on the following Payment Date (the amount of such insufficiency, an “Interest Shortfall”), provided that no Event of Default is occurring (except an Event of Default with respect to the non-payment of interest on the Class A Notes or the Class B Notes), the Trustee shall provide the Advancing Agent with written notice of such Interest Shortfall no later than 12:00 noon (New York time) on the Business Day immediately preceding such Payment Date. The Trustee shall provide the Advancing Agent with notice, prior to any funding of an Interest Advance (as defined below) by the Advancing Agent, of any additional interest remittances received by the Trustee after deliver of such initial notice that reduce such Interest Shortfall. No later than 5:00 p.m. (New York time) on the Business Day immediately preceding the related Payment Date, the Advancing Agent shall advance the difference between such amounts (each such advance, an “Interest Advance”) by deposit of an amount equal to such Interest Shortfall in the Payment Account, subject to a determination of recoverability by the Advancing Agent as described in Section 10.17(b). Any Interest Advance made by the Advancing Agent with respect to a Payment Date that is in excess of the actual Interest Shortfall for such Payment Date shall be refunded to the Advancing Agent by the Trustee on the same Business Day that such Interest Advance was made (or, if such Interest Advance is made prior to final determination by the Trustee of such Interest Shortfall, on the Business Day of such final determination). The Advancing Agent shall provide the Trustee written notice of a determination by the Advancing Agent that a proposed Interest Advance would constitute a Nonrecoverable Advance no later than the 136

Processed and formatted by SEC Watch - Visit SECWatch.com

close of business on the Business Day immediately preceding the related Payment Date. If the Advancing Agent does not make any required Interest Advance at or prior to the time at which distributions are to be made pursuant to Section 11.1, the Trustee shall be required to make such Interest Advance, subject to a determination of recoverability by the Trustee as described in Section 10.17(b). The Trustee shall be entitled to conclusively rely on any determination by the Advancing Agent that an Interest Advance, if made, would constitute a Nonrecoverable Advance. Notwithstanding the foregoing, to the extent the Advancing Agent fails to make an Interest Advance it was required to make, the Advancing Agent shall not be entitled to make a recoverability determination affecting the Trustee’s obligation to provide an Interest Advance and any such determination shall not be binding on the Trustee. Notwithstanding anything herein to the contrary, neither the Advancing Agent nor the Trustee shall be required to make any Interest Advance unless such Person determines, in its sole discretion, exercised in good faith and, with respect to the Advancing Agent, in accordance with the Advancing Standards (as defined below), that such Interest Advance, plus interest expected to accrue thereon at the Reimbursement Rate, will be recoverable from subsequent payments or collections with respect to all Collateral Interests. Such interest on any Interest Advance will be payable to the Advancing Agent or the Trustee, as the case may be, out of default charges collected in respect of the Collateral Interests for the related period or, in connection with the reimbursement of such Interest Advance, out of Collateral Interest Collections, and to the extent not reimbursed in full by Collateral Interest Collections, out of Collateral Principal Collections then on deposit in the Collection Account or any collection account established in favor of the Underlying Trust (provided that interest on Nonrecoverable Advances will be payable first from Collateral Principal Collections, and to the extent not reimbursed in full from Collateral Principal Collections, from Collateral Interest Collections then on deposit in the Collection Account or any collection account established in favor of the Underlying Trust). To the extent interest on any outstanding Interest Advance cannot be offset by such default charges, such interest accrued on outstanding Interest Advances made in respect thereof will result in a reduction in amounts payable on the Collateral Interests. In determining whether any proposed Interest Advance will be, or whether any Interest Advance previously made is, a Nonrecoverable Advance, the Advancing Agent or the Trustee, as applicable, will take into account: (1)

amounts that may be realized on each Mortgaged Property in its “as is” or then current condition and occupancy;

(2)

that such Interest Advances, together with interest accruing thereon, may only be recovered from subsequent payments or collections on the Collateral Interests, as allocable thereto from recoveries on the related Mortgage Properties pursuant to the related participation agreement, intercreditor agreement or other similar agreement;

(3)

that the related Senior Interests may be required to be fully paid and any advances (and interest thereon) made in respect of such Senior Interests may be required to be fully reimbursed, prior to any amounts recovered in respect of the Mortgaged Properties being allocated or otherwise made available to the Collateral Interests;

(4)

the possibility and effects of future adverse change with respect to the Mortgaged Properties, the potential length of time before such Interest Advance may be reimbursed and the resulting degree of uncertainty with respect to such 137

Processed and formatted by SEC Watch - Visit SECWatch.com

reimbursement; and (5)

the fact that Interest Advances are intended to provide liquidity only and not credit support to the Noteholders.

For purposes of any such determination of whether an Interest Advance constitutes or would constitute a Nonrecoverable Advance, an Interest Advance will be deemed to be nonrecoverable if the Advancing Agent or the Trustee, as applicable, determines that future payments or collections on the Collateral Interests may be insufficient to fully reimburse such Interest Advance, plus interest thereon at the Reimbursement Rate within a reasonable period of time. Absent bad faith, the determination by the Advancing Agent or the Trustee, as applicable, as to the nonrecoverability of any Interest Advance shall be conclusive and binding on the Noteholders. The Trustee shall be entitled to conclusively rely on any determination by the Advancing Agent that an Interest Advance, if made, would constitute a Nonrecoverable Advance. The Collateral Manager and the Advancing Agent shall provide any information regarding the Collateral reasonably requested by the Trustee in connection with the Trustee’s determination of whether any Interest Advance would be recoverable. (b)

The Advancing Agent and the Trustee will each be entitled to recover any previously unreimbursed Interest Advance made by it (including any Nonrecoverable Advance), together with interest thereon, in accordance with the Section 11.1(k).

(c)

The Advancing Agent and the Trustee will each be entitled with respect to any Interest Advance made by it (including Nonrecoverable Advances) to interest accrued on the amount of such Interest Advance for so long as it is outstanding at the Reimbursement Rate.

(d)

The Advancing Agent’s obligations to make Interest Advances in respect of the Class A Notes and the Class B Notes will continue through the date on which the outstanding principal amount of such Notes is paid in full or redeemed.

(e)

In no event will the Advancing Agent or the Trustee be required to advance any payments in respect of interest on any Notes other than the Class A Notes and the Class B Notes or any payments in respect of principal.

(f)

In consideration of the performance of its obligations hereunder, the Trustee shall be entitled to receive, in its capacity as backup advancing agent, at the times set forth herein and subject to the conditions and the priority of distribution provisions hereof, to the extent funds are available therefor, the Trustee Interest Advance Fee. In addition, to the extent that the Trustee makes an Interest Advance on any Payment Date that the Advancing Agent was required, but failed, to make, the Trustee shall be entitled to receive the Advancing Agent Fee (in addition to the Trustee Interest Advance Fee) for such Payment Date and any future Payment Dates upon which such Interest Advance remains outstanding.

(g)

In consideration of the performance of its obligations hereunder, the Advancing Agent, at the times set forth herein and subject to the conditions and the priority of distribution provisions hereof, to the extent funds are available therefor, the Advancing Agent Fee (except to the extent the Advancing Agent Fee is being paid to the Trustee as described in clause (g), above). 138

Processed and formatted by SEC Watch - Visit SECWatch.com

(h)

The determination by the Advancing Agent or the Trustee, as applicable, (i) that it has made a Nonrecoverable Advance or (ii) that any proposed Interest Advance, if made, would constitute a Nonrecoverable Servicing Advance, shall be evidenced by an Officer’s Certificate delivered promptly to the Trustee (or, if applicable, retained thereby) and the Issuer, setting forth the basis for such determination; provided, that failure to give such notice, or any defect therein, shall not impair or affect the validity of, or the Advancing Agent’s or the Trustee’s entitlement to reimbursement with respect to, any Interest Advance.

(i)

The Advancing Agent, in such capacity, shall act in the best interests of the Class A Noteholders and the Class B Noteholders (taking into account the interests of the Class A Noteholders and the Class B Noteholders collectively), as determined by the Advancing Agent, in its good faith judgment and in accordance with this Indenture and applicable law, and in all cases without regard to: (i) any relationship that the Advancing Agent may have with any obligor under a Collateral Interest or any Affiliate of such obligor, any seller or any other parties to this Indenture; (ii) the ownership of any Note by the Advancing Agent or any of its Affiliates; (iii) the adequacy of the Advancing Agent’s right to receive compensation for its services and reimbursement for its costs hereunder; (iv) the ownership or management of any interests in any mortgage loans, mortgaged properties, mezzanine loans or Collateral Interests by the Advancing Agent; (v) any obligation of the Advancing Agent or any of its Affiliates to cure a breach of a representation or warranty or document defect with respect to, or repurchase or substitute for any Collateral Interest; and (vi) any other debt the Advancing Agent or any of its Affiliates has extended to any obligor under any Collateral Interest or any of its Affiliates (the criteria specified in this Section 10.17(i), collectively referred to as the “Advancing Standards”). ARTICLE XI APPLICATION OF MONIES

11.1.

DISBURSEMENTS OF FUNDS FROM PAYMENT ACCOUNT; PRIORITY OF PAYMENTS (a)

Collateral Interest Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Rated Notes in connection with an Event of Default, in accordance with a Note Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Interest Collections, to the extent of Available Funds in the Payment Account, together with any Interest Advances applied for such Payment Date, less any amounts applied to reimburse any outstanding Interest Advances, together with interest thereon, as described in Section 10.17, will be applied by the Trustee in the following order of priority: (1)

to pay, in the following order: (i)

taxes and filing fees and registration fees (including, without limitation, annual return fees) payable by the Co-Issuers, if any; and then,

(ii)

pro rata the amount of any due and unpaid Trustee Fee, Trustee Interest Advance Fee, Underlying Trust Expenses and PAA Issued Note Paying Agent Fee; and then, 139

Processed and formatted by SEC Watch - Visit SECWatch.com

(iii)

the amount of any due and unpaid fees to the Administrator; and then,

(iv)

the amount of any due and unpaid Trustee Expenses; and then,

(v)

the amount of any due and unpaid fees of any Collateral Interest servicer owed directly by the Issuer; and then

(vi)

the amount of any due and unpaid fees and expenses of the Rating Agencies; and then,

(vii)

pro rata the amount of any due and unpaid Advancing Agent Fee, expenses of the Administrator and Administrative Expenses not included in (iii), (iv), (v) and (vi) above, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee; and then,

(viii)

to deposit to the Expense Reserve Account the amount needed to bring the amount on deposit therein to U.S.$25,000 (unless the Collateral Manager directs that a lesser amount be deposited to the Expense Reserve Account);

provided that the cumulative amount paid under (iii) through (viii) above (excluding any Administrative Expenses due or accrued with respect to the actions taken on or prior to the Closing Date and accounting fees that the Trustee is required to pay (other than certain accountants’ fees related to annual reviews) and fees the Trustee pays in connection with any Event of Default and any default of the Collateral Interests) may not exceed U.S.$300,000 in the aggregate in any consecutive 12-month period; (2)

to pay the Senior Collateral Management Fee with respect to such Payment Date and any Senior Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date;

(3)

to pay any Hedge Counterparty any amounts due to such Hedge Counterparty under any Hedge Agreement, pro rata, including any termination payments other than any termination payments payable under Section 11.1(a)(23), below;

(4)

to pay Periodic Interest on the Class A Notes and any Defaulted Interest on the Class A Notes (and interest thereon);

(5)

to pay Periodic Interest on the Class B Notes and any Defaulted Interest on the Class B Notes (and interest thereon);

(6)

to pay an amount equal to the Interest Reserve Amount for deposit into the Interest Reserve Account;

(7)

if a Rating Confirmation Failure occurs, on each Payment Date commencing with the Payment Date immediately following the Effective Date, to pay principal on the Notes in accordance with the Note Payment Sequence, in the amounts necessary for each Rating Agency to confirm its respective ratings of the Notes assigned on the Closing Date or until each Class of Notes is paid in full; 140

Processed and formatted by SEC Watch - Visit SECWatch.com

(8)

to pay Periodic Interest on the Class C Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class C Notes (and interest thereon);

(9)

if either of the Class C Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most Senior Class of Notes then Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such most Senior Class of Notes is paid in full, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class C Coverage Test is satisfied or until the Class C Notes are paid in full;

(10)

to pay the Class C Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(11)

to pay Periodic Interest on the Class D Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class D Notes (and interest thereon);

(12)

if either of the Class D Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount or Class D Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most Senior Class of Notes then Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such most Senior Class of Notes is paid in full, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class D Coverage Test is satisfied or until the Class D Notes are paid in full;

(13)

to pay the Class D Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(14)

to pay Periodic Interest on the Class E Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class E Notes (and interest thereon);

(15)

if either of the Class E Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount or Class E Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most Senior Class of Notes then Outstanding until such Class E Coverage Test is satisfied as of such Calculation Date or until such most Senior Class of Notes is paid in full, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class E Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class E Coverage Test is satisfied or until the Class E Notes are paid in full;

(16)

to pay the Class E Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any; 141

Processed and formatted by SEC Watch - Visit SECWatch.com

(17)

to pay Periodic Interest on the Class F Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class F Notes (and interest thereon);

(18)

if either of the Class F Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Periodic Interest Shortfall Amount or Class F Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most Senior Class of Notes then Outstanding until such Class F Coverage Test is satisfied as of such Calculation Date or until such most Senior Class of Notes is paid in full, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class F Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class F Coverage Test is satisfied or until the Class F Notes are paid in full;

(19)

to pay the Class F Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(20)

to pay Periodic Interest on the Class G Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class G Notes (and interest thereon) to the PAA Issued Note Paying Agent for payment on the Class G Notes in accordance with the Paying Agency Agreement;

(21)

if either of the Class G Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Periodic Interest Shortfall Amount, Class F Cumulative Applicable Periodic Interest Shortfall Amount or Class G Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most Senior Class of Notes then Outstanding (in the case of the Class G Notes, to the PAA Issued Note Paying Agent for payment on the Class G Notes in accordance with the Paying Agency Agreement) until such Class G Coverage Test is satisfied as of such Calculation Date or until such most Senior Class of Notes is paid in full, and then to pay principal of the next most Senior Class of Notes Outstanding (in the case of the Class G Notes, to the PAA Issued Note Paying Agent for payment on the Class G Notes in accordance with the Paying Agency Agreement) until such Class G Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class G Coverage Test is satisfied or until the Class G Notes are paid in full;

(22)

to pay the Class G Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any, to the PAA Issued Note Paying Agent for payment on the Class G Notes in accordance with the Paying Agency Agreement;

(23)

to pay termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, pro rata, if such termination occurred solely as the result of an event of default or a termination event with respect to the Hedge Counterparty as Defaulting Party or sole Affected Party, as the case may be; 142

Processed and formatted by SEC Watch - Visit SECWatch.com

(24)

to pay, in the following order: (i)

any due and unpaid Trustee Fee, Trustee Interest Advance Fee, Underlying Trust Expenses, PAA Issued Note Paying Agent Fee, Trustee Expenses, Advancing Agent Fee and other Administrative Expenses, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee, in each case, in the same order of priority as provided in Section 11.1(a)(1) above and to the extent not paid in full under Section 11.1(a)(1) above without regard to any limitation on any maximum amounts payable on such date contained therein; and

(ii)

on a pro rata basis, any due and unpaid expenses and other liabilities of the Co-Issuers to the extent not paid under Section 11.1(a)(1) above, whether as a result of an amount limitation imposed thereunder or otherwise;

(25)

to pay the Subordinate Collateral Management Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date;

(26)

to repay, pro rata, the amount of any outstanding Cure Advances, if any;

(27)

all Income Note Excess Funds to the PAA Issued Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Paying Agency Agreement;

Provided, however, with respect to this Section 11.1(a):

(b)

(i)

For purposes of determining if any Principal Coverage Test is satisfied after giving effect to payments of principal, the denominator of such Principal Coverage Test shall be determined after giving effect to any principal on the Notes paid pursuant to any clauses prior to such clause and such clause on the related Payment Date; and

(ii)

with respect to the Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes, payment of principal not constituting the related Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the related Cumulative Applicable Periodic Interest Shortfall Amount, if any.

Collateral Principal Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Rated Notes in connection with an Event of Default, in accordance with a Note Valuation Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Principal Collections, to the extent of Available Funds in the Payment Account, less any amounts applied to reimburse Interest Advances together with interest thereon, as described in Section 10.17, will be applied by the Trustee in the following order of priority: 143

Processed and formatted by SEC Watch - Visit SECWatch.com

(1)

to the payment of the amounts referred to in Section 11.1(a)(1) through (5), in the same order of priority specified therein, but only to the extent not paid in full thereunder;

(2)

If the Class A Notes and the Class B Notes are no longer Outstanding, to pay Periodic Interest on the Class C Notes and any Defaulted Interest on the Class C Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(8) are insufficient to pay such amounts in full;

(3)

if either of the Class C Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(9) are insufficient to cause the Class C Coverage Tests to be satisfied, to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most Senior Class of Notes then Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such most Senior Class of Notes is paid in full, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class C Coverage Test is satisfied or until the Class C Notes are paid in full;

(4)

If the Class A Notes and the Class B Notes are no longer Outstanding, to pay the Class C Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(10) are insufficient to pay such amounts in full thereunder;

(5)

If the Class A Notes, the Class B Notes and the Class C Notes are no longer Outstanding, to pay Periodic Interest on the Class D Notes and any Defaulted Interest on the Class D Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(11) are insufficient to pay such amounts in full thereunder;

(6)

If either of the Class D Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that amounts paid pursuant to Section 11.1(a)(12) are insufficient to cause the Class D Coverage Tests to be satisfied, to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount or Class D Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most Senior Class of Notes then Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class D Coverage Test is satisfied or until the Class D Notes are paid in full;

(7)

if the Class A Notes, the Class B Notes, and the Class C Notes are no longer Outstanding, to pay the Class D Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that amounts paid pursuant to Section 11.1(a)(13) are insufficient to pay such amounts in full thereunder;

(8)

if the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes are no longer Outstanding, to pay Periodic Interest on the Class E Notes and any Defaulted Interest on the Class E Notes (and interest thereon), to the extent that 144

Processed and formatted by SEC Watch - Visit SECWatch.com

the amounts paid pursuant to Section 11.1(a)(14) are insufficient to pay such amounts in full thereunder; (9)

if either of the Class E Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(15) are insufficient to cause the Class E Coverage Tests to be satisfied, to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount or Class E Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most Senior Class of Notes then Outstanding until such Class E Coverage Test is satisfied as of such Calculation Date or until such most Senior Class of Notes is paid in full, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class E Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class E Coverage Test is satisfied or until the Class E Notes are paid in full;

(10)

if the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes are no longer Outstanding, to pay the Class E Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(16) are insufficient to pay such amounts in full thereunder;

(11)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes are no longer Outstanding, to pay Periodic Interest on the Class F Notes and any Defaulted Interest on the Class F Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(17) are insufficient to pay such amounts in full thereunder;

(12)

if either of the Class F Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(18) are insufficient to cause the Class F Coverage Tests to be satisfied, to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Periodic Interest Shortfall Amount or Class F Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most Senior Class of Notes then Outstanding until such Class F Coverage Test is satisfied as of such Calculation Date or until such most Senior Class of Notes is paid in full, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class F Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class F Coverage Test is satisfied or until the Class F Notes are paid in full;

(13)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes are no longer Outstanding, to pay the Class F Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(19) are insufficient to pay such amounts in full thereunder; 145

(14)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes are no longer Outstanding, to pay Periodic Interest on the Class G Notes and any Defaulted Interest on the Class G Notes (and interest thereon) to the PAA Issued Note Paying Agent for payment on the Class G Notes in accordance with the Paying Agency Agreement, to the extent that the amounts paid pursuant to Section 11.1(a)(20) are insufficient to pay such amounts in full thereunder;

(15)

if either of the Class G Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(21) are insufficient to cause the Class G Coverage Tests to be satisfied, to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Periodic Interest Shortfall Amount, Class F Cumulative Applicable Periodic Interest Shortfall Amount or Class G Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most Senior Class of Notes then Outstanding (in the case of the Class G Notes, to the PAA Issued Note Paying Agent for payment on the Class G Notes in accordance with the Paying Agency Agreement) until such Class G Coverage Test is satisfied as of such Calculation Date or until such most Senior Class of Notes is paid in full, and then to pay principal of the next most Senior Class of Notes Outstanding (in the case of the Class G Notes, to the PAA Issued Note Paying Agent for payment on the Class G Notes in accordance with the Paying Agency Agreement) until such Class G Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class G Coverage Test is satisfied or until the Class G Notes are paid in full;

(16)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes are no longer Outstanding, to pay the Class G Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon) to the PAA Issued Note Paying Agent for payment on the Class G Notes in accordance with the Paying Agency Agreement, to the extent that the amounts paid pursuant to Section 11.1(a)(22) are insufficient to pay such amounts in full thereunder;

Processed and formatted by SEC Watch - Visit SECWatch.com

(17)

on or prior to the last day of the Reinvestment Period to pay, in the following order: (i)

to be retained in the Collection Account (i) to invest in Eligible Investments pending reinvestment in Substitute Collateral Interests at a later date, (ii) to reinvest in Substitute Collateral Interests subject to the Reinvestment Criteria and (iii) for payment of a Special Amortization in accordance with clause (ii) below (to the extent of available Collateral Principal Collections determined by the Collateral Manager);

(ii)

on each Payment Date through and including the last Payment Date during the Reinvestment Period, if the Collateral Manager notifies the Trustee in writing that it has decided to declare a Special Amortization, the amount of available Collateral Principal Collections determined by the Collateral Manager, (1) if the Special Amortization Pro Rata 146

Processed and formatted by SEC Watch - Visit SECWatch.com

Condition is satisfied, to pay each Class of Rated Notes in full, pro rata based on their respective aggregate outstanding principal amounts and (2) if the Special Amortization Pro Rata Condition is not satisfied, to pay principal on each class of Rated Notes in accordance with the Note Payment Sequence until each such Class of Rated Notes have been paid in full; (18)

after the end of the Reinvestment Period, to pay principal on each Class of Rated Notes in accordance with the Note Payment Sequence until each such Class of Rated Notes have been paid in full;

(19)

to pay termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, pro rata, if such termination occurred solely as the result of an event of default or a termination event with respect to the Hedge Counterparty as Defaulting Party or sole Affected Party, as the case may be, to the extent that the amounts paid pursuant to Section 11.1(a)(23) are insufficient to pay such amounts in full thereunder;

(20)

to pay, in the following order: (i)

any due and unpaid Trustee Fee, Trustee Interest Advance Fee, Underlying Trust Expenses, PAA Issued Note Paying Agent Fee, Trustee Expenses, Advancing Agent Fee and other Administrative Expenses, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee, in each case, in the same order of priority as provided in Section 11.1(b)(1) above and to the extent not paid in full under Section 11.1(b)(1) above and to the extent that the amounts paid pursuant to Section 11.1(a)(1) and (24) are insufficient to pay such amounts in full thereunder; and

(ii)

on a pro rata basis, any due and unpaid expenses and other liabilities of the Co-Issuers to the extent not paid under Section 11.1(b)(1) above and to the extent that the amounts paid pursuant to Section 11.1(a)(1) and (24) are insufficient to pay such amounts in full thereunder, whether as a result of an amount limitation imposed thereunder or otherwise;

(21)

to pay the Subordinate Collateral Management Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date, to the extent that the amounts paid pursuant to Section 11.1(a)(25) are insufficient to pay such amounts in full thereunder;

(22)

to repay, pro rata, the amount of any outstanding Cure Advances, if any; and

(23)

all Income Note Excess Funds to the PAA Issued Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Paying Agency Agreement.

Provided, however, with respect to with respect to this Section 11.1(b); 147

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

(i)

For purposes of determining if any Principal Coverage Test is satisfied after giving effect to payments of principal, the denominator of such Principal Coverage Test shall be determined after giving effect to any principal on the Notes paid pursuant to any clauses prior to such clause and such clause on the related Payment Date; and

(ii)

with respect to the Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes, payment of principal not constituting the related Cumulative Applicable Periodic interest Shortfall Amount shall be paid before principal constituting the related Cumulative Applicable Periodic Interest Shortfall Amount, if any.

If an Event of Default has occurred and is continuing, on the date or dates determined by the Trustee, the Trustee will pay, from all collections from, and proceeds of the sale or liquidation of, the Collateral (excluding any amounts necessary to reimburse any unpaid Interest Advances, together with interest thereon), in the following order: (1)

amounts corresponding to the amounts set forth in clauses Section 11.1(a)(1) through (3), and (to the extent not covered by Section 11.1(a)(1) through (3)) Section 11.1(b)(1);

(2)

the Periodic Interest on the Class A Notes (including Defaulted Interest on such Class A Notes, if any);

(3)

outstanding principal on the Class A Notes until paid in full;

(4)

the Periodic Interest on the Class B Notes (including Defaulted Interest on such Class B Notes, if any);

(5)

outstanding principal on the Class B Notes until paid in full;

(6)

the Periodic Interest on the Class C Notes (including Defaulted Interest on the Class C Notes, if any) and then outstanding principal on the Class C Notes (including the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(7)

the Periodic Interest on the Class D Notes (including Defaulted Interest on the Class D Notes, if any) and then outstanding principal on the Class D Notes (including Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(8)

the Periodic Interest on the Class E Notes (including Defaulted Interest on the Class E Notes, if any) and then outstanding principal on the Class E Notes (including Class E Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(9)

the Periodic Interest on the Class F Notes (including Defaulted Interest on the Class F Notes, if any) and then outstanding principal on the Class F Notes (including Class F Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full; 148

Processed and formatted by SEC Watch - Visit SECWatch.com

(10)

to the PAA Issued Note Paying Agent, the Periodic Interest on the Class G Notes (including Defaulted Interest on the Class G Notes, if any) and then outstanding principal on the Class G Notes (including Class G Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(11)

amounts corresponding to the amounts set forth in Section 11.1(a)(23) through (26) and Section 11.1(b)(19) through (22); and

(12)

to the PAA Issued Note Paying Agent, any remaining amounts for distributions on the Income Notes.

(d)

Not later than 12:00 p.m., New York time, on or before the Business Day preceding each Payment Date, the Issuer shall, pursuant to Section 10, remit or cause to be remitted to the Trustee for deposit in the Payment Account an amount of Cash sufficient to pay the amounts described in Section 11.1(a) and 11.1(b) required to be paid on such Payment Date.

(e)

If, on any Payment Date, the amount available in the Payment Account from amounts received in the related Due Period is insufficient to make the full amount of the disbursements required by the statements furnished by the Issuer pursuant to Section 10.12(b), the Trustee shall make the disbursements called for in the order and according to the priority set forth under Section 11.1(a) and 11.1(b), subject to Section 13.1, to the extent funds are available therefor.

(f)

Except as otherwise expressly provided in this Section 11.1, if on any Payment Date the amount of funds is insufficient to make the full amount of the disbursements required by any clause or subclause of Section 11.1(a) or 11.1(b) to different Persons, the Trustee shall make the disbursements called for by such clause or subclause ratably in accordance with the respective amounts of such disbursements then due and payable to the extent funds are available therefor.

(g)

With respect to principal payments of the Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes in connection with a mandatory redemption pursuant to Section 11.1(a)(9), (12), (15), (18) or (21) and pursuant to Section 11.1(b)(3), (6), (9), (12) or (15), payment of principal not constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any, payment of principal not constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any, payment of principal not constituting the Class E Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class E Cumulative Applicable Periodic Interest Shortfall Amount, if any, payment of principal not constituting the Class F Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class F Cumulative Applicable Periodic Interest Shortfall Amount, if any, and payment of principal not constituting the Class G Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class G Cumulative Applicable Periodic Interest Shortfall Amount, if any. 149

Processed and formatted by SEC Watch - Visit SECWatch.com

(h)

Any amounts to be paid to the PAA Issued Note Paying Agent pursuant to Section 11(a)(20), (21), (22) and (27) or Section 11.1(b)(14), (15), (16) and (23) will be released from the lien of this Indenture.

(i)

No Collateral Principal Collections will be paid to a Class of Rated Notes in accordance with the Priority of Payments on a Payment Date if, after giving effect to such payment, any Principal Coverage Test for a more Senior Class of Rated Notes would have failed.

(j)

If directed by the Holder of not less than 100% of the Income Notes, the Trustee shall withhold distributions to the PAA Issued Note Paying Agent that would otherwise be paid pursuant to Section 11.1(a)(27) and Section 11.1(b)(23) in respect of distributions on the Income Notes. Further, any Holder of Income Notes may elect at any time to make additional capital contributions to the Issuer, which contributions will be pledged to the Trustee as Collateral pursuant to this Indenture. Any such retained distribution or additional capital contribution will be deemed to be Collateral Principal Collections received in the Due Period following the Due Period relating to the Payment Date on which the option is exercised. Any Holder who makes an additional capital contribution will not be entitled to interest or additional return thereon.

(k)

The Advancing Agent and the Trustee shall be entitled to receive the Advancing Agent Fee and the Trustee Interest Advance Fee, respectively, in each case payable in accordance with the Priority of Payments. In addition, the Advancing Agent and the Trustee shall each be entitled on each Payment Date to reimbursement of any previously unreimbursed Interest Advance made by it, together with interest thereon, from Collateral Interest Collections, and to the extent not reimbursed in full by Collateral Interest Collections, from Collateral Principal Collections, prior to application of Collections in accordance with Section 11.1(a), (b) and (c); provided that (i) reimbursement of Interest Advances (other than Nonrecoverable Advances) shall not cause an additional Interest Shortfall, (ii) reimbursement of Nonrecoverable Advances, together with interest thereon, will be made first from Collateral Principal Collections, and to the extent not reimbursed in full from Collateral Principal Collections, from Collateral Interest Collections and (iii) reimbursement of Nonrecoverable Advances shall be made regardless of whether such reimbursement causes an additional Interest Shortfall. Prior to an Interest Advance becoming a Nonrecoverable Advance, such reimbursement shall not be payable to the extent it would trigger an additional Interest Shortfall and shall be junior in priority to the payment of interest due on the Class A Notes and the Class B Notes on such Payment Date, but shall be senior in priority to payment of interest on any other Class of Notes. For purposes of the foregoing, an Interest Advance shall be deemed to be a Nonrecoverable Advance if the Advancing Agent or the Trustee, as applicable, determines that future payments or collections on the Collateral Interests could reasonably be expected to be insufficient to fully reimburse such Interest Advance, plus interest thereon. Amounts used for the reimbursement of Interest Advances and interest thereon shall not be included in the Available Funds for any Payment Date. Notwithstanding the foregoing, the Advancing Agent or the Trustee, as applicable, may opt, in their sole discretion, to defer the reimbursement for Nonrecoverable Advances to a subsequent Payment Date or Payment Dates if such reimbursement would trigger an additional Interest Shortfall. In addition, based upon information available at such time, the Advancing Agent or the Trustee, as applicable, shall provide 15 days prior notice to the Collateral Manager, the Trustee and each Rating Agency if an Interest Advance is determined to be a Nonrecoverable Advance and whether or not reimbursement thereof shall be deferred; provided, that the failure to provide such notice shall in no way limit 150

Processed and formatted by SEC Watch - Visit SECWatch.com

the rights of either of the Trustee or the Advancing Agent to reimburse itself for Nonrecoverable Advances on any Payment Date. ARTICLE XII PURCHASE AND SALE OF COLLATERAL INTERESTS 12.1.

SALE OF COLLATERAL INTERESTS (a)

Sale of Collateral Interests. (1)

Subject to the satisfaction of the conditions specified in Section 10.12 as applicable, if the Collateral Manager, on behalf of the Issuer, pursuant to this Article 12, shall direct the Trustee to sell any Impaired Interest, Credit Risk Interest, Written Down Interest, Buy/Sell Interest, Taxed Collateral Interest, Taxed Property or Withholding Tax Interest, the Trustee shall sell in the manner directed by the Collateral Manager, such Impaired Interest, Equity Interest, Credit Risk Interest, Written Down Interest, Buy/Sell Interest, Taxed Collateral Interest, Taxed Property or Withholding Tax Interest.

(2)

Reserved.

(3)

The Collateral Manager may, in its reasonable discretion, direct the Issuer to sell or otherwise dispose of any Impaired Interest, Credit Risk Interest, Written Down Interest, Buy/Sell Interest, Taxed Collateral Interest, Taxed Property or Withholding Tax Interest. The Collateral Manager shall direct the Issuer to sell or otherwise dispose of any Collateral Interest that is an Equity Interest as soon as practicable after such Collateral Interest becomes an Equity Interest.

(4)

The Collateral Manager may direct the Issuer to (i) sell any Buy/Sell Interest at any time if the Sales Proceeds thereof are at least equal to its Principal Balance (adjusted for any Collateral Principal Payments received thereon) or (ii) purchase the corresponding pari passu participation from the related participant at any time, regardless of whether such purchase would occur during the Reinvestment Period or whether Reinvestment Criteria would be satisfied thereafter, so long as the Issuer entered into a binding agreement with the Collateral Manager, any of its Affiliates or any other person qualified in accordance with the Indenture to purchase such corresponding pari passu participation from the Issuer at a purchase price equal to that paid by the Issuer to such participant and such purchaser thereof either (A) has a long term rating by S&P of “A-” or a short term rating by S&P of “A-1”, (B) is a Qualified Institutional Lender or (C) Rating Agency Confirmation from S&P has been received; provided that Rating Agency Confirmation shall be deemed to have been received with respect to NRFC DB Holdings, LLC and any NorthStar Subsidiary as described in the S&P Letter or with respect to any entities described in any amendments to or renewals of the S&P Letter.

(5)

In the event of a Redemption, the Collateral Manager shall direct the Trustee to sell Collateral Interests without regard to the foregoing limitations; provided that the Sale Proceeds therefrom and other amounts available therefor will be at least sufficient to pay certain expenses, including all amounts due under any Hedge 151

Processed and formatted by SEC Watch - Visit SECWatch.com

Agreements, and redeem, in whole but not in part, the Notes at the applicable Redemption Prices; and provided, further, that such Sale Proceeds are used to make such a Redemption. (6)

(b)

12.2.

The Collateral Manager shall sell any Collateral Interest pursuant to this Section 12 only at a price that, in its judgment, is not substantially less than the market value of such Collateral Interest at the time of such sale.

Reinvestment of Sale Proceeds and Replacement of Collateral Interests. Subject to Section 9.7 above, following the Closing Date and during the Reinvestment Period, subject to the satisfaction of the Eligibility Criteria and the Reinvestment Criteria, the Collateral Manager, acting on behalf of the Issuer, shall use reasonable efforts to cause the Trustee to reinvest Sale Proceeds received at any time from the sale of Collateral Interests that are Impaired Interests, Equity Interests, Credit Risk Interests, Written Down Interests, Buy/Sell Interests, Taxed Collateral Interests, Taxed Properties or Withholding Tax Interests in Substitute Collateral Interests with an aggregate purchase price up to the amount of the Sale Proceeds; provided, however, that prior to any such acquisition of Substitute Collateral Interests by or on behalf of the Issuer in the manner described above, the following conditions are satisfied on the date of such acquisition: (1)

the rating by any Rating Agency on (A) the Class A Notes or Class B Notes is one or more notches below the rating assigned to the Class A Notes or Class B Notes, as applicable, by such Rating Agency on the Closing Date; or (B) any other Class of Rated Notes is two or more notches below the rating assigned to such Class of Rated Notes by such Rating Agency on the Closing Date; and

(2)

the Reinvestment Criteria are satisfied.

PORTFOLIO CHARACTERISTICS

Except as provided in Section 12.3(c), a security will be eligible for inclusion in the Collateral as a Pledged Collateral Interest only if, as evidenced by an Officer’s certificate from the Collateral Manager to the Trustee, each of the following eligibility criteria is satisfied immediately after the Issuer Grants such Collateral Interest to the Trustee (collectively, the Eligibility Criteria): (a)

it is issued by an issuer incorporated or organized under the laws of the United States, the Bahamas, Bermuda, the Cayman Islands, the British Virgin Islands, the Netherlands Antilles, Jersey, Guernsey or Luxembourg;

(b)

it is U.S. Dollar-denominated and all cash flows thereunder are to be paid in U.S. Dollars, and it is not convertible into, or payable in, any other currency; provided, however, the requirements of this Section (b) will not be applicable if Rating Agency Confirmation is obtained;

(c)

it is one of the Specified Types of Collateral Interests;

(d)

it has an S&P Rating (which rating does not include a “p”, “pi”, “q”, “t” or “r” subscript) and a Moody’s Rating;

(e)

either (A) the Issuer is a Qualified REIT Subsidiary or (B) the acquisition, ownership, enforcement and disposition of such security will not cause the Issuer to be treated as 152

Processed and formatted by SEC Watch - Visit SECWatch.com

engaged in a U.S. trade or business for U.S. federal income tax purposes or otherwise to be subject to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation (other than as attributable to property received in connection with a workout or foreclosure, as permitted under the Transaction Documents); (f)

the payments on such security are not subject to withholding tax unless the issuer thereof or the obligor thereon is required to make additional payments sufficient to cover any withholding tax imposed at any time on payments made to the Issuer with respect thereto (for the avoidance of doubt, this clause will not apply to any commitment fees with respect to the unfunded portion of any Earn-Out Assets;

(g)

its acquisition would not cause the Issuer or the pool of Collateral to be required to register as an investment company under the Investment Company Act;

(h)

it is not an obligation that is ineligible under its Underlying Instruments to be purchased by the Issuer and pledged to the Trustee, and in the case of a Subordinate Mortgage Loan Interest or Mezzanine Loan, it is not ineligible under its Underlying Instruments to be purchased by the Underlying Trust;

(i)

it is not an insurance-linked debt instrument containing a provision pursuant to which the issuer’s obligation to pay interest or principal is deferred or forgiven in the event of loss due to certain natural catastrophes specified in the Underlying Instruments;

(j)

it provides for the payment of principal at not less than par upon maturity;

(k)

(A) its Underlying Instruments do not obligate the Issuer to make any future advances or any other payment except the purchase price thereof (except for Earn-Out Assets) and (B) in the case of an Earn-Out Asset, the Issuer has deposited funds in the Earn-Out Asset Account in an amount sufficient to meet such future advances or future payment obligations in full;

(l)

it is not an obligation with respect to which, in the reasonable judgment of the Collateral Manager, the timely repayment of principal and interest is subject to substantial non-credit related risks;

(m)

it is not an Interest Only Security;

(n)

it is not an obligation issued by an Emerging Market Issuer;

(o)

it is not an obligation that has, at the time of purchase, any deferred or capitalized interest;

(p)

it is not an obligation that, at the time it is purchased, is a Credit Risk Interest, an Impaired Interest, a Written Down Interest or a Deferred Interest PIK Bond;

(q)

it is not a Synthetic Security;

(r)

If it is a participation interest in a commercial mortgage loan, the entity that created such participation interest is either (A) a special purpose entity meeting S&P’s then current published criteria for bankruptcy-remote special purpose entities, (B) a Qualified Institutional Lender or (C) an entity with respect to which Rating Agency Confirmation 153

Processed and formatted by SEC Watch - Visit SECWatch.com

has been received; provided that Rating Agency Confirmation shall be deemed to have been received with respect to NRFC DB Holdings, LLC and any NorthStar Subsidiary as described in the S&P Letter or with respect to any entities described in any amendments to or renewals of the S&P Letter; (s)

at the time the obligation is purchased by the Issuer: (1)

it is not an obligation issued by an issuer located in a country that imposes foreign exchange controls that effectively limit the availability or use of U.S. Dollars to make when due the scheduled payments of principal and interest on such security;

(2)

it is not, and does not provide for conversion or exchange into, Margin Stock at any time over its life;

(3)

it is not an obligation which (1) was incurred in connection with a merger, acquisition, consolidation or sale of all or substantially all of the assets of a person or entity or similar transaction and (2) by its terms is required to be repaid within one year of the incurrence thereof with proceeds from additional borrowings or other refinancing;

(4)

it is not the subject of (1) any offer by the issuer of such obligation or by any other person made to all of the holders of such obligation to purchase or otherwise acquire such obligation (other than pursuant to any redemption in accordance with the terms of the related underlying instruments) or to convert or exchange such obligation into or for cash, securities or any other type of consideration or (2) any solicitation by an issuer of such obligation or any other person to amend, modify or waive any provision of such obligation or any related underlying instrument, and has not been called for redemption;

(5)

it is not an Equity Interest;

(6)

it is not an obligation that by the terms of its underlying instruments provides for conversion or exchange (whether mandatory or at the option of the issuer or the holder thereof) into equity capital at any time prior to its maturity;

(7)

it is not a financing by a debtor-in-possession in any insolvency proceeding;

(8)

it is not a first loss tranche of any securitization that does not have an S&P Rating (as defined in clause (i) of the definition of S&P Rating) that addresses the obligation of the obligor (or guarantor, if applicable) to pay principal of and interest on the relevant Collateral Interest in full, which ratings are monitored on an ongoing basis by the relevant Rating Agency;

(9)

it is not an obligation that provides for the payment of interest in cash less frequently than semi-annually;

(10)

(A) if it is a Commercial Mortgage Loan, a Mezzanine Loan, a Subordinate Mortgage Loan Interest, a Credit Lease Loan or a Tenant Lease Loan Interest, no commercial mortgage loan underlying, securing or constituting such Collateral Interest has a maturity date (including any extension option) that is later than ten 154

Processed and formatted by SEC Watch - Visit SECWatch.com

(10) years prior to the Stated Maturity Date; and (B) if it is a CMBS, such CMBS (without regard to the maturities of any collateral underlying such CMBS) does not have a rated final maturity date later than the Stated Maturity Date; and (C) if it is a Real Estate CDO Security, it does not have a stated maturity later than the Stated Maturity Date; and (11)

if it is a Deemed Floating Rate Collateral Interest, the Deemed Floating Asset Hedge entered into with respect to such Deemed Floating Rate Collateral Interest conforms to all requirements set forth in the definition of “Deemed Floating Asset Hedge”;

(t) if it is a (1) Mezzanine Loan or a Participation Interest therein, it is serviced (or in the case of a Mezzanine Loan acquired by the Issuer on the Closing Date or within thirty days thereafter, will be serviced within thirty days of the Closing Date) in accordance with a servicing agreement which complies in all material respects with S&P’s criteria for Mezzanine Loan servicing agreements, (2) Subordinate Mortgage Loan Interest and the related senior mortgage loan is not otherwise serviced in connection with a commercial mortgage backed securitization transaction, it is serviced in accordance with the related participation agreement or intercreditor agreement and (3) Credit Lease Loan, a Tenant Lease Loan Interest or a Commercial Mortgage Loan, or a Participation Interest therein, it is serviced in accordance with a servicing agreement the terms of which are substantially similar to the terms of servicing agreements entered into in connection with CMBS transactions rated by S&P or a servicing agreement with respect to which Rating Agency Confirmation from S&P has been received; (u) if it is a Mezzanine Loan, a Subordinate Mortgage Loan Interest, a Commercial Mortgage Loan (other than a Credit Lease Loan or a Tenant Lease Loan Interest), or a Participation Interest therein, such Collateral Interest shall have the benefit of (i) either (A) representations and warranties made by the Seller of such Collateral Interest (with such exceptions, qualifications and omissions as the Collateral Manager shall reasonably determine) substantially similar to either (x) the representations and warranties set forth on Schedule J-1 hereto or (y) in the case of a Mezzanine Loan or a Subordinate Mortgage Loan Interest, the representations and warranties made by the Seller of such Collateral Interest in connection with the CMBS transaction including the related senior interest in such Collateral Interest (provided that such CMBS transaction is rated by S&P) or (B) representations and warranties with respect to which Rating Agency Confirmation from S&P has been received and (ii) remedies for the breach of such representations and warranties or the existence of document defects that are either (A) substantially similar to the remedies provided in the Asset Transfer Agreement or (B) with respect to which Rating Agency Confirmation from S&P has been received; (v) if it is a Credit Lease Loan or a Tenant Lease Loan Interest or a Participation Interest therein, such Collateral Interest shall have the benefit of (i) either (A) representations and warranties made by the Seller of such Collateral Interest (with such exceptions, qualifications and omissions as the Collateral Manager shall reasonably determine) substantially similar to the representations and warranties set forth on Schedule J-1 (to the extent such representations and warranties are applicable to Credit Lease Loans and Tenant Lease Loan Interests) and Schedule J-2 hereto or (B) representations and warranties with respect to which Rating Agency Confirmation from S&P has been received and (ii) remedies for the breach of representations and warranties or the existence of document defects that are either (A) substantially similar to the remedies provided in the Asset Transfer Agreement or (B) with respect to which Rating Agency Confirmation from S&P has been received; and 155

(w) if it is a Collateral Interest acquired after the Closing Date, it will be transferred (i) from a Seller to the Depositor pursuant to an agreement substantially similar to the Asset Transfer Agreement and (ii) from the Depositor (in the case of a CMBS or Real Estate CDO Security) or the Underlying Trustee (in the case of a Trust Certificate) to the Issuer pursuant to an agreement substantially similar to the Bill of Sale; provided that notwithstanding anything to the contrary herein, the Issuer may, while attempting to dispose of property acquired in foreclosure or similar circumstances, make an election under Section 882(d) of the Code to treat the income related to real property located in the United States as income that is effectively connected with a U.S. trade or business. 12.3.

CONDITIONS APPLICABLE TO ALL TRANSACTIONS INVOLVING SALE OR GRANT (a)

Any transaction effected under Section 5, Section 9, Section 10.2 or Section 12.1 shall be conducted on an arm’s length basis and if effected with the Issuer, the Trustee, the Collateral Manager or any Affiliate of any of the foregoing, shall be effected in a secondary market transaction on terms at least as favorable to the Rated Noteholders as would be the case if such Person were not so Affiliated; provided that any disposition of a Collateral Interest in accordance with Section 12.1 shall be deemed to comply with this Section 12.3(a). The Trustee shall have no responsibility to oversee compliance with this clause by the other parties.

(b)

Upon any purchase or substitution pursuant to this Section 12, all of the Issuer’s right, title and interest to the Pledged Security or Securities shall be, and hereby is, Granted to the Trustee pursuant to this Indenture, such Pledged Security or Securities shall be registered in the name of the Trustee, and, if applicable, the Trustee shall receive such Pledged Security or Securities. The Trustee shall receive, not later than the date of delivery of any Pledged Security pursuant to a purchase under this Section 12, (a) an Officer’s Certificate of the Collateral Manager certifying (1) compliance with the Reinvestment Criteria in accordance with Section 12.1(b), (2) that the Collateral Debt Security to be sold constitutes an Impaired Interest,

Processed and formatted by SEC Watch - Visit SECWatch.com

Credit Risk Interest, Written Down Interest, Buy/Sell Interest, Taxed Collateral Interest, Taxed Property or Withholding Tax Interest and (3) that any security to be purchased satisfies the definition of Collateral Interest and (b) an Officer’s Certificate of the Collateral Manager on behalf of the Issuer containing the statements set forth in Section 3.2(b)(2) through (4), (6) and (7). (c)

Notwithstanding anything contained in this Section 12 to the contrary, the Issuer shall, subject to Section 12.3(d), have the right to effect any transaction to which the Initial Hedge Counterparty, Holders of Rated Notes evidencing 100% of the Aggregate Outstanding Amount of each Class of Rated Notes, and each Income Noteholder has consented, and of which each Rating Agency has been notified in advance.

(d)

Except as specifically provided in this Indenture, at any time at which the Issuer is not a Qualified REIT Subsidiary, the Issuer may not (i) engage in any business or activity that would cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or (ii) acquire or hold any asset that is an equity interest in an entity that is treated as a partnership engaged in a U.S. trade or business for U.S. federal income tax purposes or the acquisition or ownership of which otherwise would subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation. 156

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE XIII SECURED PARTIES’ RELATIONS 13.1.

SUBORDINATION (a)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes agree for the benefit of the Holders of the Class A Notes that the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(b)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes agree for the benefit of the Holders of the Class A Notes and the Class B Notes that the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes and the Class B Notes the Subordinate Interests) shall be subordinate and junior to the Class A Notes and the Class B Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A Notes and the Class B Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes and the Class B Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes and the Class B Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes and the Class B Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(c)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class D Notes, the Class E Notes, the Class F Notes and the Class 157

Processed and formatted by SEC Watch - Visit SECWatch.com

G Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes and the Class C Notes that the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes and the Class C Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes and the Class C Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes and the Class C Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes, the Class B Notes and the Class C Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes and the Class C Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes and the Class C Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (d)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class E Notes, the Class F Notes and the Class G Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes that the Class E Notes, the Class F Notes and the Class G Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(e)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class F Notes and the Class G Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes that the Class F Notes and the Class G Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, the Subordinate Interests) shall be 158

Processed and formatted by SEC Watch - Visit SECWatch.com

subordinate and junior to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes shall be paid in full in Cash or, to the extent a Majority of each of Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (f)

13.2.

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class G Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes that the Class G Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes shall be paid in full in Cash or, to the extent a Majority of each of Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

STANDARD OF CONDUCT

In exercising any of its or their voting rights, rights to direct and consent or any other rights as a Secured Party under this Indenture, subject to the terms and conditions of this Indenture, including Section 5.9, a Secured Party or Secured Parties shall not have any obligation or duty to any Person or to consider or take into account the interests of any Person and shall not be liable to any Person for any 159

Processed and formatted by SEC Watch - Visit SECWatch.com

action taken by it or them or at its or their direction or any failure by it or them to act or to direct that an action be taken, without regard to whether such action or inaction benefits or adversely affects any Secured Party, the Issuer, or any other Person. ARTICLE XIV MISCELLANEOUS 14.1.

FORM OF DOCUMENTS DELIVERED TO TRUSTEE

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Manager may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Authorized Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Manager or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer, the Co-Issuer, the Collateral Manager or any other Person, stating that the information with respect to such factual matters is in the possession of the Issuer, the Co-Issuer, the Collateral Manager or such other Person, unless such Authorized Officer of the Issuer, the Co-Issuer or the Collateral Manager or such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Any Opinion of Counsel may also be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Manager, stating that the information with respect to such matters is in the possession of the Issuer, the Co-Issuer or the Collateral Manager, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture it is provided that the absence of the occurrence and continuation of a Default is a condition precedent to the taking of any action by the Trustee at the request or direction of the Issuer or the Co-Issuer, then notwithstanding that the satisfaction of such condition is a condition precedent to the Co-Issuers’ rights to make such request or direction, the Trustee shall be protected in acting in accordance with such request or direction if it does not have actual knowledge of the occurrence and continuation of such Default as provided in Section 6.1(d). 14.2.

ACTS OF RATED NOTEHOLDERS (a)

Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Rated Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Rated Noteholders in person or by an agent duly appointed in writing; and, except as 160

Processed and formatted by SEC Watch - Visit SECWatch.com

herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action or actions embodied therein and evidenced thereby) are herein sometimes referred to as the Act of the Rated Noteholders, signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Co-Issuers, if made in the manner provided in this Section 14.2.

14.3.

(b)

The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Trustee deems sufficient.

(c)

The principal amount and registered numbers of Rated Notes held by any Person, and the date of his holding the same, shall be proved by the Note Register.

(d)

Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Rated Notes shall bind the Holder (and any transferee thereof) of such Rated Note and of every Rated Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Co-Issuers in reliance thereon, whether or not notation of such action is made upon such Rated Note.

NOTICES, ETC., TO TRUSTEE, THE CO-ISSUERS AND THE RATING AGENCIES

Any request, demand, authorization, direction, notice, consent, waiver or Act of Rated Noteholders or other documents provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a)

the Trustee or the PAA Issued Note Paying Agent by any Rated Noteholder or by the Issuer or the Co-Issuer shall be sufficient for every purpose hereunder if in writing and sent by facsimile in legible form and confirmed by overnight courier service guaranteed next day delivery to the Trustee or the PAA Issued Note Paying Agent addressed to it at 9062 Old Annapolis Road, Columbia, Maryland 21045, Attn: CDO Trust Services—N-Star REL CDO IV, telephone number 410-8842000, fax number 410-715-3748 or at any other address previously furnished in writing to the Co-Issuers or Rated Noteholder by the Trustee or PAA Issued Note Paying Agent;

(b)

the Issuer by the Trustee or by any Rated Noteholder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, to the Issuer addressed to it at c/o Walkers SPV Limited, P.O. Box 908 GT, Walker House, Mary Street, George Town, Grand Cayman, Cayman Islands, Attention: The Directors, or at any other address previously furnished in writing to the Trustee by the Issuer;

(c)

the Co-Issuer by the Trustee or by any Rated Noteholder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, to the Co-Issuer addressed to it at c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19711, Attention: Donald Puglisi, Esq., 161

Processed and formatted by SEC Watch - Visit SECWatch.com

facsimile no. 302-738-7210, or at any other address previously furnished in writing to the Trustee by the Co-Issuer; or (d)

the Rating Agencies by the Co-Issuers or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, (i) in the case of Moody’s, addressed to Moody’s Investors Service, Inc., 99 Church Street, New York, New York 10007 facsimile no. (212) 553-7820, Attention: Northstar REL CDO IV CBO CLO Monitoring (email: cdomonitoring@moody’s.com); and (ii) in the case of S&P, addressed to S&P, 55 Water Street, 41st Floor, New York, New York, 10041, Attention: CDO Surveillance and all Note Valuation Reports shall be sent to S&P electronically at [email protected];

(e)

the Collateral Manager by the Co-Issuers or by the Trustee or a Majority of the Controlling Class, or by the Collateral Administrator shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and sent by facsimile in legible form and confirmed by overnight courier service guaranteed next day delivery, or by electronic mail (where expressly provided herein) to the Collateral Manager addressed to it at the address specified in the Collateral Management Agreement or at any other address previously furnished in writing to the Co-Issuers or the Trustee by the Collateral Manager;

(f)

the PAA Issued Note Paying Agent by the Trustee in writing sent by facsimile confirmed by overnight courier guaranteed next day delivery;

(g)

Deutsche Bank by the Co-Issuers, the Collateral Manager or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by telecopy in legible form, to Deutsche Bank addressed to Deutsche Bank Securities Inc., 60 Wall Street, telecopy no. (212) 797-4461, Attention: Emile Van den Bol; and

(h)

to the Repository by the Issuer pursuant to this Indenture shall be made available to the Repository by electronic mail as a pdf (portable document format) file to CDO Library, c/o The Bond Market Association, 360 Madison Avenue (18th Floor), New York, NY 10017; Electronic mail address: [email protected].

Delivery of any request, demand, authorization, direction, notice, consent, waiver or Act of Rated Noteholders or other documents made as provided above will be deemed effective: (i) if in writing and delivered in person or by overnight courier service, on the date it is delivered; (ii) if sent by facsimile transmission, on the date that transmission is received by the recipient in legible form (as evidenced by the sender’s written record of a telephone call to the recipient in which the recipient acknowledged receipt of such facsimile transmission); and (iii) if sent by mail, on the date that mail is delivered or its delivery is attempted; in each case, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Business Day. 162

Processed and formatted by SEC Watch - Visit SECWatch.com

14.4.

NOTICES AND REPORTS TO RATED NOTEHOLDERS; WAIVER

Except as otherwise expressly provided herein, where this Indenture provides for a report to Holders or for a notice to Holders of Rated Notes of any event, such notice shall be sufficiently given to Holders of Rated Notes if in writing and mailed, first-class postage prepaid, to each Holder of a Rated Note affected by such event, at the address of such Holder as it appears in the Note Register, not earlier than the earliest date and not later than the latest date, prescribed for the giving of such report or notice and such report or notice shall be in the English language. Notwithstanding any provision to the contrary contained herein or in any agreement or document related hereto, any report, statement or other information to be provided by the Trustee may be provided by providing access to the Trustee’s website containing such information. Such reports and notices will be deemed to have been given on the date of such mailing. The Trustee will deliver to the Holder of any Rated Note shown on the Note Register any readily available information or notice requested to be so delivered, at the expense of the Issuer. In addition, for so long as any Class of Rated Notes is listed on the Irish Stock Exchange and so long as the rules of such exchange so require, notices to the Holders of such Rated Notes shall also be given by the Trustee to the Irish Paying Agent for delivery to the Company Announcements Office of the Irish Stock Exchange. Neither the failure to mail any notice, nor any defect in any notice so mailed, to any particular Holder of a Rated Note shall affect the sufficiency of such notice with respect to other Holders of Rated Notes. Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Rated Noteholders shall be filed with the Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In the event that, by reason of the suspension of the regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Rated Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. 14.5.

EFFECT OF HEADINGS AND TABLE OF CONTENTS The Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

14.6.

SUCCESSORS AND ASSIGNS

All covenants and agreements in this Indenture by the Co-Issuers shall bind their respective successors and assigns, whether so expressed or not. Written notice of any assignment shall be promptly provided by the Issuer to the Holders of Notes of the Controlling Class, the Initial Hedge Counterparty and each Rating Agency. 163

14.7.

SEVERABILITY

In case any provision in this Indenture or in the Rated Notes shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 14.8.

BENEFITS OF INDENTURE

The Rated Noteholders, the Initial Hedge Counterparty and each Income Noteholder is an express third-party beneficiary of this Indenture. Nothing in this Indenture or in the Rated Notes, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the Rated Noteholders, the Initial Hedge Counterparty and each Income Noteholder, any benefit or any legal or equitable right, remedy or claim under this Indenture. 14.9.

GOVERNING LAW

This Indenture and each Rated Note shall be construed in accordance with, and this Indenture and each Rated Note and all matters arising out of or relating in any way whatsoever (whether in contract, tort or otherwise) to this Indenture or any Rated Note shall be governed by, the law of the State of New York. 14.10.

SUBMISSION TO JURISDICTION

The Co-Issuers hereby irrevocably submit to the non-exclusive jurisdiction of the Supreme Court of the State of New York sitting in Manhattan and the U.S. District Court for the Southern District of New York, and any court of appeal therefrom, in any action or proceeding arising out of or relating to the Rated Notes or this Indenture, and the Co-Issuers hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in such New York State or federal court. The Co-Issuers hereby irrevocably waive, to the fullest extent that they may legally do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The CoIssuers hereby irrevocably appoint and designate CT Corporation, 111 Eighth Avenue, 13th Floor, New York, New York 10011, or any other

Processed and formatted by SEC Watch - Visit SECWatch.com

Person having and maintaining a place of business in the State of New York whom the Co-Issuers may from time to time hereafter designate as the true and lawful attorney and duly authorized agent for acceptance of service of legal process of the Co-Issuers. The Co-Issuers agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 14.11.

COUNTERPARTS

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 14.12.

WAIVER OF JURY TRIAL

EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING. Each party hereby (i) certifies that no representative, agent or attorney of the other has represented, expressly or otherwise, that the other would not, in the event of a Proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it has been induced to enter into this Indenture by, among other things, the mutual waivers and certifications in this paragraph. 164

Processed and formatted by SEC Watch - Visit SECWatch.com

14.13.

JUDGMENT CURRENCY

This is an international financing transaction in which the specification of Dollars (the Specified Currency), and the specification of the place of payment, as the case may be (the Specified Place), is of the essence, and the Specified Currency shall be the currency of account in all events relating to payments of or on the Rated Notes. The payment obligations of the Co-Issuers under this Indenture and the Rated Notes shall not be discharged by an amount paid in another currency or in another place, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on conversion to the Specified Currency and transfer to the Specified Place under normal banking procedures does not yield the amount of the Specified Currency at the Specified Place. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder or the Rated Notes in the Specified Currency into another currency (the Second Currency), the rate of exchange which shall be applied shall be that at which in accordance with normal banking procedures the Trustee could purchase the Specified Currency with the Second Currency on the Business Day next preceding that on which such judgment is rendered. The obligation of the Co-Issuers in respect of any such sum due from the Co-Issuers hereunder shall, notwithstanding the rate of exchange actually applied in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by the Trustee of any sum adjudged to be due hereunder or under the Rated Notes in the Second Currency the Trustee may in accordance with normal banking procedures purchase and transfer to the Specified Place the Specified Currency with the amount of the Second Currency so adjudged to be due; and the Co-Issuers hereby, as a separate obligation and notwithstanding any such judgment (but subject to the Priority of Payments as if such separate obligation in respect of each Class of Rated Notes constituted additional principal owing in respect of such Class of Rated Notes), agree to indemnify the Trustee and each Rated Noteholder against, and to pay the Trustee or such Rated Noteholder, as the case may be, on demand in the Specified Currency, any difference between the sum originally due to the Trustee or such Rated Noteholder, as the case may be, in the Specified Currency and the amount of the Specified Currency so purchased and transferred. 14.14.

CONFIDENTIAL TREATMENT OF DOCUMENTS

Except as otherwise provided in this Indenture or as required by law or as required to maintain the listing of the Class A Notes, Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes on the Irish Stock Exchange, this Indenture and any Hedge Agreement shall be treated by the Trustee and the Collateral Manager as confidential. The Trustee shall provide a copy of this Indenture to the PAA Issued Note Paying Agent and to any Holder of a beneficial interest in any Rated Note upon written request therefor certifying that it is such a Holder. ARTICLE XV Assignment of Agreements, Etc. 15.1.

ASSIGNMENT

The Issuer, in furtherance of the covenants of this Indenture and as security for the Rated Notes and amounts payable to the Rated Noteholders hereunder and the performance and observance of the provisions hereof, hereby assigns, transfers, conveys and sets over to the Trustee, for the benefit of the Secured Parties, all of the Issuer’s estate, right, title and interest in, to and under the Corporate Services Agreement, the Collateral Management Agreement, the Asset Transfer Agreement and any Hedge Agreement into which the Issuer may enter, including (i) the right to give all notices, consents and releases thereunder, (ii) the right to give all notices of termination, including the commencement, conduct and consummation of proceedings at law or in equity, (iii) the right to receive all notices, accountings, consents, releases and statements thereunder and (iv) the right to do any and all other things whatsoever 165

Processed and formatted by SEC Watch - Visit SECWatch.com

that the Issuer is or may be entitled to do thereunder; provided that nothing herein shall obligate the Trustee to determine independently whether “cause” exists for the removal of the Collateral Manager pursuant to the Collateral Management Agreement. For the avoidance of doubt, in no event shall the Trustee be required to perform the obligations of the Collateral Manager under the Collateral Management Agreement. 15.2.

NO IMPAIRMENT

The assignment made hereby is executed as collateral security, and the execution and delivery hereby shall not in any way impair or diminish the obligations of the Issuer under the provisions of the Corporate Services Agreement or, the Collateral Management Agreement. 15.3.

TERMINATION, ETC.

Upon the redemption and cancellation of the Rated Notes and the payment of all other Secured Obligations and the release of the Collateral from the lien of this Indenture, this assignment and all rights herein assigned to the Trustee for the benefit of the Secured Parties shall cease and terminate and all the estate, right, title and interest of the Trustee in, to and under the Corporate Services Agreement and the Collateral Management Agreement shall revert to the Issuer and no further instrument or act shall be necessary to evidence such termination and reversion. 15.4.

ISSUER AGREEMENTS, ETC

The Issuer represents that it has not executed any other assignment of the Collateral Administration Agreement or the Collateral Management Agreement. The Issuer agrees that this assignment is irrevocable, and that it will not take any action which is inconsistent with this assignment or make any other assignment inconsistent herewith. The Issuer will, from time to time upon the request of the Trustee, execute all instruments of further assurance and all such supplemental instruments with respect to this assignment as the Trustee may reasonably specify. ARTICLE XVI HEDGE AGREEMENTS 16.1.

HEDGE AGREEMENTS (a)

The Issuer may, after the Closing Date, enter into one or more Hedge Agreements (including one or more Deemed Floating Asset Hedges) with Hedge Counterparties as the Issuer may elect in its sole discretion, in each case (i) subject to Rating Agency Confirmation and (ii) with the delivery to the Issuer of an Opinion of Counsel to the Hedge Counterparty; provided that the Issuer will not be required to obtain Rating Agency Confirmation in connection with entering into any Hedge Agreements (including, without limitation, any Deemed Floating Asset Hedges) which are Form-Approved Hedge Agreements with a Hedge Counterparty that satisfies the Hedge Counterparty Ratings Requirement.

(b)

The Issuer shall assign such Hedge Agreement to the Trustee pursuant to Article 15 hereof. 166

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

The Trustee shall, on behalf of the Issuer and in accordance with the Note Valuation Report, pay amounts due to any Hedge Counterparty under any Hedge Agreement on any Payment Date in accordance with Section 11.1.

(d)

Upon the entry of the Issuer into a Hedge Agreement, the Trustee shall cause the Custodian to establish a segregated, noninterest bearing Securities Account which shall be designated as a “Hedge Counterparty Collateral Account” with respect to the Hedge Counterparty in respect of which the Trustee shall be the Entitlement Holder and which the Trustee shall hold in trust for the benefit of the Secured Parties. The Trustee shall deposit all collateral received from such Hedge Counterparty under the related Hedge Agreement in such Hedge Counterparty Collateral Account. Any and all funds at any time on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be held in trust by the Trustee for the benefit of the Secured Parties. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be (i) for application to obligations of the related Hedge Counterparty to the Issuer under the Hedge Agreement that are not paid when due (whether when scheduled or upon early termination) or (ii) to return collateral to the related Hedge Counterparty when and as required by the related Hedge Agreement in each case upon the direction of the Issuer pursuant to an Issuer Order. No assets credited to any Hedge Counterparty Collateral Account shall be considered an asset of the Issuer for purposes of any of the Coverage Tests unless and until the Issuer or the Trustee on its behalf is entitled to foreclose on such assets in accordance with the terms of the Hedge Agreement.

(e)

Upon its receipt of notice that the Hedge Counterparty has defaulted in the payment when due of its obligations to the Issuer under any Hedge Agreement (or, if earlier, when the Trustee becomes aware of such default) the Trustee shall make a demand on such Hedge Counterparty, or any guarantor, if applicable, demanding payment forthwith. The Trustee shall give notice to the Rated Noteholders and each Rating Agency upon the continuance of the failure by such Hedge Counterparty to perform its obligations for two Business Days following a demand made by the Trustee on such Hedge Counterparty.

(f)

If at any time any Hedge Agreement becomes subject to early termination due to the occurrence of an “event of default” or a “termination event” (each as defined in the related Hedge Agreement) solely attributable to the related Hedge Counterparty or other comparable event, the Issuer and the Trustee shall take such actions (following the expiration of any applicable grace period) to enforce the rights of the Issuer and the Trustee thereunder as may be permitted by the terms of such Hedge Agreement and consistent with the terms hereof, and shall apply any proceeds of any such actions (including the proceeds of the liquidation of any collateral pledged by the related Hedge Counterparty) to enter into a replacement Hedge Agreement on substantially identical terms or on such other terms as to which each Rating Agency shall have provided a Rating Agency Confirmation with a substitute Hedge Counterparty with respect to which the Hedge Counterparty Ratings Requirement is satisfied and each Rating Agency shall have provided a Rating Agency Confirmation. If the Issuer is the sole non-Affected Party or the sole non-Defaulting Party with respect to such “event of default” or “termination event”, the Issuer will (with the assistance of the Collateral Manager) obtain quotations with respect to such replacement Hedge Agreement from five prospective counterparties Independent from the Issuer, the Collateral Manager and each other that satisfy the Hedge Counterparty Ratings Requirement and with respect to which a Rating Agency Confirmation shall have been obtained and enter into a replacement Hedge 167

Processed and formatted by SEC Watch - Visit SECWatch.com

Agreement with the prospective counterparty that provides the lowest quotation (if the Issuer is required to make a payment to such replacement counterparty) or the highest quotation (if such replacement counterparty is required to make a payment to the Issuer). (g)

The Issuer shall notify each Rating Agency if at any time any Hedge Counterparty is required to post collateral or assign its rights and obligations in and under the related Hedge Agreement.

(h)

No Hedge Agreement may be amended or modified at any time other than to effect the appointment of a substitute Hedge Counterparty or to effect a modification which is of a formal, minor or technical nature or is to correct a manifest error and which, in the opinion of the Trustee (based upon an Opinion of Counsel) would not have a material adverse effect on the interests of Holders of the Rated Notes or of Holders of any Class or Classes of Rated Notes or the Holders of the Income Notes unless the Issuer has obtained Rating Agency Confirmation with respect to such amendment or modification. The Trustee shall provide the Collateral Manager and the Rating Agencies with a copy of any such amendment or modification within 10 Business Days before effecting such modification.

(i)

The Issuer shall enter into a Hedge Agreement only if the payments from the Hedge Counterparty thereunder are not subject to withholding tax or if the related Hedge Counterparty shall be required in accordance with the terms of the related Hedge Agreement to pay additional amounts to the Issuer sufficient to cover any withholding tax due on payments made by such Hedge Counterparty to the Issuer under such Hedge Agreement, subject to the Issuer making customary payee tax representations and providing customary tax documentation. At any time at which the Issuer is not a Qualified REIT Subsidiary, the Issuer shall not enter into any Hedge Agreement the acquisition (including the manner of acquisition), ownership, enforcement or disposition of which would subject the Issuer to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation.

(j)

The Issuer will not terminate any Hedge Agreement without receiving Rating Agency Confirmation with respect to such termination. 168

Processed and formatted by SEC Watch - Visit SECWatch.com

IN WITNESS WHEREOF, WE HAVE SET OUR HANDS AS OF THE DATE FIRST ABOVE WRITTEN. Executed as a Deed by N-STAR REL CDO IV LTD., as Issuer By: /s/ Daniel R. Gilbert Name: Daniel R. Gilbert Title: Executive Vice President N-STAR REL CDO IV CORP., as Co-Issuer By: /s/ Daniel R. Gilbert Name: Daniel R. Gilbert Title: Executive Vice President WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By: /s/ Randall S. Reider Name: Randall S. Reider Title: Vice President 169

Processed and formatted by SEC Watch - Visit SECWatch.com

CONFIRMED AND ACCEPTED, as of the date first above written: NS ADVISORS, LLC, as Advancing Agent By: Name: Title:

/s/ Daniel R. Gilbert Daniel R. Gilbert Managing Director 170

Exhibit 10.12

EXECUTION COPY Dated as of September 22, 2005

N-STAR REAL ESTATE CDO V LTD., as Issuer

N-STAR REAL ESTATE CDO V CORP., as Co-Issuer

LASALLE BANK NATIONAL ASSOCIATION, as Trustee

INDENTURE

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS S e ction

Page

PRELIMINARY STATEMENT

1

GRANTING CLAUSES

1

ARTICLE I Definitions and Interpretation 1.1. Definitions 1.2. Assumptions as to Collateral Debt Securities, Fees, Etc. 1.3. Rules of Construction

2 2 52 54

ARTICLE II The Rated Notes 2.1. Forms Generally 2.2. Authorized Amount; Applicable Periodic Interest Rate; Stated Maturity Date; Denominations 2.3. Execution, Authentication, Delivery and Dating 2.4. Registration, Transfer and Exchange of Rated Notes 2.5. Mutilated, Defaced, Destroyed, Lost or Stolen Rated Notes 2.6. Payment of Principal and Interest; Rights Preserved

55 55 56 57 58 66 67

ARTICLE III Conditions Precedent 3.1. General Provisions 3.2. Security for the Rated Notes 3.3. Custodianship; Transfer of Collateral Debt Securities and Eligible Investments

71 71 74 75

ARTICLE IV Satisfaction and Discharge 4.1. Satisfaction and Discharge of Indenture 4.2. Application of Trust Money 4.3. Repayment of Funds Held by Note Paying Agent

78 78 79 80

ARTICLE V Events of Default; Remedies 5.1. Events of Default 5.2. Acceleration of Maturity; Rescission and Annulment 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee 5.4. Remedies 5.5. Preservation of Collateral 5.6. Trustee May Enforce Claims Without Possession 5.7. Application of Funds Collected 5.8. Limitation on Suits 5.9. Unconditional Rights of Rated Noteholders to Receive Principal and Interest 5.10. Restoration of Rights and Remedies 5.11. Rights and Remedies Cumulative 5.12. Delay or Omission Not Waiver 5.13. Control by Controlling Class 5.14. Waiver of Past Defaults 5.15. Undertaking for Costs 5.16. Waiver of Stay or Extension Laws 5.17. Sale of Collateral 5.18. Action on the Rated Notes

80 80 81 82 85 86 88 88 88 89 89 89 90 90 90 91 91 91 92

i

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

ARTICLE VI The Trustee 6.1. Certain Duties and Responsibilities 6.2. Notice of Default 6.3. Certain Rights of Trustee 6.4. Authenticating Agents 6.5. Not Responsible for Recitals or Issuance of Rated Notes 6.6. May Hold Rated Notes 6.7. Funds Held in Trust 6.8. Compensation and Reimbursement 6.9. Corporate Trustee Required; Eligibility 6.10. Resignation and Removal; Appointment of Successor 6.11. Acceptance of Appointment by Successor 6.12. Merger, Conversion, Consolidation or Succession to Business of Trustee 6.13. Co-Trustees 6.14. Certain Duties Related to Delayed Payment of Proceeds; Other Notices 6.15. Representations and Warranties of the Bank 6.16. Exchange Offers, Proposed Amendments etc. 6.17. Fiduciary for Rated Noteholders Only; Agent For Other Secured Parties 6.18. Withholding

92 92 94 94 96 97 97 97 97 99 99 100 101 101 102 102 103 103 103

ARTICLE VII Covenants 7.1. Payment of Principal and Interest 7.2. Maintenance of Office or Agency 7.3. Funds for Rated Note Payments to be Held in Trust 7.4. Existence of Co-Issuers 7.5. Protection of Collateral 7.6. Opinions as to Collateral 7.7. Performance of Obligations 7.8. Negative Covenants 7.9. Statement as to Compliance 7.10. Co-Issuers May Consolidate, Etc., Only on Certain Terms 7.11. Successor Substituted 7.12. No Other Business 7.13. Change or Withdrawal of Rating 7.14. Reporting 7.15. Rated Note Calculation Agent 7.16. Listing 7.17. Amendment of Certain Documents 7.18. Purchase of Collateral; Information Regarding Collateral; Rating Confirmation

104 104 104 105 107 107 109 109 110 111 112 114 115 115 115 116 116 117 117

ARTICLE VIII Supplemental Indentures 8.1. Supplemental Indentures Without Consent of Rated Noteholders 8.2. Supplemental Indentures with Consent of Rated Noteholders 8.3. Execution of Supplemental Indentures 8.4. Effect of Supplemental Indentures 8.5. Reference in Rated Notes to Supplemental Indentures

118 118 121 123 123 123

ii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

ARTICLE IX Redemption of Rated Notes 9.1. Redemption of Rated Notes 9.2. Redemption Procedures; Auction 9.3. Record Date; Notice to Trustee of Redemption 9.4. Notice of Redemption 9.5. Notice of Withdrawal 9.6. Rated Notes Payable on Redemption Date 9.7. Special Amortization

123 123 124 126 126 127 127 127

ARTICLE X Accounts, Accountings and Releases 10.1. Collection of Funds 10.2. General Provisions Applicable to Accounts 10.3. Collateral Account 10.4. Uninvested Proceeds Account 10.5. Collection Account and CPP Sub-Accounts 10.6. Expense Reserve Account 10.7. Interest Reserve Account 10.8. Payment Account 10.9. Reports by Trustee 10.10. Accountings 10.11. Release of Securities 10.12. Reports by Independent Accountants 10.13. Reports to Rating Agencies 10.14. Tax Matters 10.15. Tax Information

128 128 129 129 130 130 131 132 132 132 133 138 138 139 140 140

ARTICLE XI Application of Monies 11.1 Disbursements of Funds from Payment Account; Priority of Payments

140 140

ARTICLE XII Purchase and Sale of Collateral Debt Securities 12.1. Sale of Collateral Debt Securities 12.2. Portfolio Characteristics 12.3. Conditions Applicable to all Transactions Involving Sale or Grant

154 154 158 161

ARTICLE XIII Secured Parties’ Relations 13.1. Subordination 13.2. Standard of Conduct

162 162 166

ARTICLE XIV Miscellaneous 14.1. Form of Documents Delivered to Trustee 14.2. Acts of Rated Noteholders 14.3. Notices, Etc., to Trustee, the Co-Issuers and the Rating Agencies 14.4. Notices and Reports to Rated Noteholders; Waiver 14.5. Effect of Headings and Table of Contents 14.6. Successors and Assigns 14.7. Severability 14.8. Benefits of Indenture 14.9. Governing Law 14.10. Submission to Jurisdiction

166 166 167 167 169 169 170 170 170 170 170

iii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

14.11. 14.12. 14.13. 14.14.

170 171 171 171

Counterparts Waiver of Jury Trial Judgment Currency Confidential Treatment of Documents

ARTICLE XV Assignment of Agreements, Etc. 15.1. Assignment 15.2. No Impairment 15.3. Termination, Etc. 15.4. Issuer Agreements, Etc.

172 172 172 172 172

ARTICLE XVI Hedge Agreement 16.1. Hedge Agreement

173 173

Schedules Schedule A Schedule B Schedule C Schedule D Schedule E Schedule F Schedule G Schedule H Schedule I

Schedule of Collateral Debt Securties as of the Closing Date LIBOR Formula Schedule of Temporar Ramp-Up Securities S&P’s Recovery Rate Matrx Auction Procedures S&P’s Notching Criteria S&P’s Types of Asset-Backed Securities ineligible for Notching S&P’s Industry Classification Groups Fitch Industry Classification Groups

Exhibits Exhibit A-1 Exhibit A-2 Exhibit B-1 Exhibit B-2 Exhibit C-1 Exhibit C-2 Exhibit C-3 Exhibit C-4 Exhibit D Exhibit E-1 Exhibit E-2 Exhibit F Exhibit G Exhibit H Exhibit I

Form of Regulation S Global Note Form of Rule 144A Global Note Form of Definitive Class E Note Form of Definitive Class F Note Form of Rule 144A Transfer Certificate Form of Regulation S Transfer Certificate Form of Definitive Class E Transfer Certificate Form of Definitive Class F Transfer Certificate Form of Funding Certificate Form of Opinion of Clifford Chance US LLP Form of Opinion of Walkers Form of Opinion of Kennedy Covington Lobdell & Hickman, L.L.P. Form of Opinion of Thacher Proffitt & Wood LLP Form of Opinion of In-House Counsel to Bank of America, N.A. Rated Noteholder’s Certificate iv

THIS INDENTURE dated as of September 22, 2005 among: N-STAR REAL ESTATE CDO V LTD., an exempted company incorporated and existing under the law of the Cayman Islands; N-STAR REAL ESTATE CDO V CORP., a corporation organized and existing under the law of the State of Delaware; and LASALLE BANK NATIONAL ASSOCIATION, a national banking association, organized under the law of the United States, as trustee. PRELIMINARY STATEMENT The Co-Issuers are duly authorized to execute and deliver this Indenture to provide for the issuance of the Rated Notes as provided in this Indenture. All covenants and agreements made by the Co-Issuers herein are for the benefit and security of the Secured Parties. The Co-Issuers are entering into this Indenture, and the Trustee is accepting the trusts created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. All things necessary to make this Indenture a valid agreement of the Co-Issuers in accordance with its terms have been done. GRANTING CLAUSES

Processed and formatted by SEC Watch - Visit SECWatch.com

The Issuer hereby Grants to the Trustee, for the benefit and security of the Secured Parties, all of its right, title and interest in, to and under, in each case, whether now owned or existing, or hereafter acquired or arising, the following property (other than the Excepted Property) (a) the Collateral Debt Securities listed on Schedule A, the Temporary Ramp-Up Securities listed on Schedule C, the Collateral Debt Securities acquired after the Closing Date and any Equity Securities which, in each case, are delivered to the Trustee (directly or through a Securities Intermediary) after the Closing Date pursuant to the terms hereof and all payments thereon or with respect thereto, (b) the Collection Account (including each Collateral Sub-Account established therein), the Interest Reserve Account, the Payment Account, the Expense Reserve Account (including each Collateral Sub-Account), the Collateral Account, the Uninvested Proceeds Account, all amounts credited to such accounts, and Eligible Investments purchased with funds credited to such accounts and all income from the investment of funds therein, (c) the rights of the Issuer under each of the Transaction Documents to which the Issuer is a party and all payments to the Issuer thereunder or with respect thereto, (d) all Cash or other property delivered to the Trustee (directly or through a Securities Intermediary) and (e) all proceeds, whether voluntary or involuntary, of and to any of the property of the Issuer described in the preceding clauses (collectively, the Collateral). Such Grants are made to the Trustee to hold in trust, to secure the Rated Notes equally and ratably without prejudice, priority or distinction between any Rated Note and any other Rated Note by reason of difference in time of issuance or otherwise, except as expressly provided in this Indenture, and to secure (i) the payment of all amounts due on the Rated Notes and under the Hedge Agreement and the Collateral Advisory Agreement in accordance with their respective terms, (ii) the payment of all other sums payable under this Indenture and (iii) compliance with the provisions of this Indenture, the Hedge Agreement and the Collateral Advisory Agreement, all as provided in this Indenture (collectively, the Secured Obligations). Except to the extent otherwise provided in this Indenture, the Issuer does hereby constitute and irrevocably appoint the Trustee the true and lawful attorney of the Issuer, with full power (in the name of the Issuer or otherwise), to exercise all rights of the Issuer with respect to the Collateral held for the benefit and security of the Secured Parties and to ask, require, demand, receive, settle, compromise,

Processed and formatted by SEC Watch - Visit SECWatch.com

compound and give acquittance for any and all moneys and claims for moneys due and to become due under or arising out of any of the Collateral held for the benefit and security of the Secured Parties, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Trustee may deem to be necessary or advisable in the premises. The power of attorney granted pursuant to this Indenture and all authority hereby conferred are granted and conferred solely to protect the Trustee’s interest in the Collateral held for the benefit and security of the Secured Parties and shall not impose any duty upon the Trustee to exercise any power. This power of attorney shall be irrevocable as one coupled with an interest prior to the payment in full of all the obligations secured hereby. Except to the extent otherwise provided in this Indenture, this Indenture shall constitute a security agreement under the law of the State of New York. Upon the occurrence of any Event of Default and in addition to any other rights available under this Indenture or any other instruments included in the Collateral held for the benefit and security of the Secured Parties or otherwise available at law or in equity, the Trustee shall have all rights and remedies of a secured party on default under the law of the State of New York and other applicable law to enforce the assignments and security interests contained herein and, in addition, shall have the right, subject to compliance with any mandatory requirements of applicable law, to sell or apply any rights and other interests assigned or pledged hereby in accordance with the terms hereof at public or private sale. It is expressly agreed that anything therein contained to the contrary notwithstanding, the Issuer shall remain liable under any instruments included in the Collateral to perform all the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and except as otherwise expressly provided herein, the Trustee shall not have any obligations or liabilities under such instruments by reason of or arising out of this Indenture, nor shall the Trustee be required or obligated in any manner to perform or fulfill any obligations of the Issuer under or pursuant to such instruments or to make any payment, to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim, or to take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. The designation of the Trustee in any transfer document or record is intended and shall be deemed, first, to refer to the Trustee as custodian on behalf of the Issuer and second, to refer to the Trustee as secured party on behalf of the Secured Parties, provided that the Grant made by the Issuer to the Trustee pursuant to the granting clauses hereof shall apply to any Collateral bearing such designation. The Trustee acknowledges such Grants, accepts the trust hereunder in accordance with the provisions hereof, and agrees to perform the duties herein in accordance with the required standard of care set forth herein such that the interests of the Secured Parties may be protected. Each of the Secured Parties hereby agrees and acknowledges that it shall not have any claim on the funds and property from time to time deposited in or credited to the Income Note Distribution Account and the proceeds thereof. ARTICLE I DEFINITIONS AND INTERPRETATION 1.1.

DEFINITIONS

Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Indenture. Whenever any reference 2

Processed and formatted by SEC Watch - Visit SECWatch.com

is made to an amount the determination of which is governed by Section 1.2, the provisions of Section 1.2 shall be applicable to such determination or calculation, whether or not reference is specifically made to Section 1.2, unless some other method of calculation or determination is expressly specified in the particular provision. In addition, terms defined in Article 9 of the UCC and used but not capitalized herein have the meanings assigned thereto in Article 9 of the UCC. Account means any of the Collection Account (including each Collateral Sub-Account established therein), the Collateral Account, the Uninvested Proceeds Account, the Payment Account, the Interest Reserve Account and the Expense Reserve Account (including each Collateral Sub-Account established therein). Account Control Agreement means that certain Account Control Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, among the Issuer, the Trustee and the Custodian. Accountants’ Report means a report of a firm of Independent certified public accountants of recognized national reputation appointed by the Issuer (or the Collateral Advisor on its behalf) on the Closing Date pursuant to Section 10.12(a), which may be the firm of Independent accountants that reviews or performs procedures with respect to the financial reports prepared by the Issuer. Act has the meanings specified in Section 14.2. Administrative Expenses means amounts (including any applicable indemnities) due from, or accrued for, the account of the Co-Issuers with respect to any Payment Date to (i) the Trustee for Trustee Expenses; (ii) the Income Note Paying Agent pursuant to the Income Note Paying Agency Agreement; (iii) the Collateral Administrator pursuant to the Collateral Administration Agreement; (iv) the independent accountants, agents and counsel of the Co-Issuers for fees and expenses (including, without limitation, tax reports); (v) the Rating Agencies for fees and expenses in connection with any Class of Notes rated by each such Rating Agency (including, without limitation, expenses for credit estimates and ongoing surveillance of the ratings of the Notes); (vi) the Administrator pursuant to the Corporate Services Agreement; (vii) the Collateral Advisor and its counsel for fees, expenses and indemnities under the Transaction Documents to the extent set forth therein (including, without limitation, amounts payable under the Collateral Advisory Agreement but excluding the Collateral Advisory Fee); (viii) any other Person in respect of any governmental fee, charge or tax (including all filing, registration and annual return fees payable to the Cayman Islands’ government and registered office fees); and (ix) any other Person in respect of any other fees or expenses permitted under the Indenture and the documents delivered pursuant to or in connection with this Indenture, the Income Note Paying Agency Agreement, the Collateral Advisory Agreement and the Notes; provided that Administrative Expenses may not include any amounts due or accrued with respect to the actions taken on, or prior to, the Closing Date. Administrator means Walkers SPV Limited and any successor thereto appointed under the Corporate Services Agreement. Affected Party has the meaning given to such term in the standard form 1992 ISDA Master Agreement (Multicurrency-Cross Border). Affiliate means any person, directly or indirectly through one or more intermediaries, controlling, controlled by or under common control with the person; provided that (i) with respect to the Issuer, “Affiliate” shall be deemed not to include Walkers SPV Limited or any entity which Walkers SPV Limited controls and (ii) control of a person shall mean the power, direct or indirect, (a) to vote more than 50% of the securities having ordinary voting power for the election of directors of such person or (b) to 3

Processed and formatted by SEC Watch - Visit SECWatch.com

direct or cause the direction of the management and policies of such person whether by contract or otherwise. Agent Members means members of, or participants in, the Clearing Agencies. Aggregate Fees and Expenses means, on any Payment Date, the sum of (i) the Trustee Fee with respect to such Payment Date and any unpaid Trustee Fee accrued with respect to a previous Payment Date, (ii) the Income Note Paying Agent Fee with respect to such Payment Date and any unpaid Income Note Paying Agent Fee accrued with respect to a previous Payment Date (iii) the Senior Collateral Advisory Fee and all expenses of the Collateral Advisor payable by the Issuer pursuant to the Collateral Advisory Agreement with respect to such Payment Date and any unpaid Senior Collateral Advisory Fee and unpaid expenses of the Collateral Advisor accrued with respect to a previous Payment Date, (iv) the Trustee Expenses and other expenses (including other Administrative Expenses) of the Co-Issuer (including the fees to be paid to the Irish Stock Exchange), (v) taxes payable by the Co-Issuers, if any, and (vi) all other expenses of the Co-Issuers (including, without limitation, Administrative Expenses) payable on such Payment Date pursuant to Sections 11.1(a)(1) and 11.1(b)(1) (in each case to the extent not included in clauses (i) through (vi) above). Aggregate Outstanding Amount means, when used with respect to any of the Rated Notes at any time, the aggregate principal amount of such Rated Notes Outstanding at such time. Except as otherwise provided herein, (i) the Aggregate Outstanding Amount of any Class C Notes at any time shall include the Class C Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class C Notes at such time, (ii) the Aggregate Outstanding Amount of any Class D Notes at any time shall include the D Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class D Notes at such time, (iii) the Aggregate Outstanding Amount of any Class E Notes at any time shall include the Class E Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class E Notes at such time and (iv) the Aggregate Outstanding Amount of any Class F Notes at any time shall include the Class F Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class F Notes at such time. Applicable Periodic Interest Rate means, for any Interest Period, (i) with respect to the Class A Notes, the applicable Class A Note Interest Rate, (ii) with respect to the Class B Notes, the applicable Class B Note Interest Rate, (iii) with respect to the Class C Notes, the applicable Class C Note Interest Rate, (iv) with respect to the Class D Notes, the applicable Class D Note Interest Rate, (v) with respect to the Class E Notes, the applicable Class E Note Interest Rate and (vi) with respect to the Class F Notes, the applicable Class F Note Interest Rate. Applicable Recovery Rate means, with respect to any Collateral Debt Security on any Measurement Date, the applicable S&P Recovery Rate for such Collateral Debt Security on such date. Approved Replacement Person means a replacement or additional Key Manager appointed in accordance with the procedures described in Section 16 of the Collateral Advisory Agreement. Articles means the Amended and Restated Memorandum and Articles of Association of the Issuer, filed under the Companies Law (2004 Revision) of the Cayman Islands, as modified and supplemented and in effect from time to time. Asset-Backed Securities are debt securities that entitle the holders thereof to receive payments that depend primarily on the cash flow from (i) a specified pool of financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities (including, 4

Processed and formatted by SEC Watch - Visit SECWatch.com

for the avoidance of doubt, leases) or (ii) real estate mortgages, either fixed or revolving, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to the holders of such securities. Assumed Reinvestment Rate means, with respect to any Account or fund securing the Rated Notes, the greater of (i) LIBOR minus 0.50% and (ii) zero. Auction has the meaning specified in Section 9.2. Auction Call Redemption has the meaning specified in Section 9.1(c). Auction Date has the meaning specified in Section 9.2; provided that, for the purposes of Section 5.5, “Auction Date” means the date upon which an Auction of the Collateral Debt Securities is conducted in connection with an Event of Default. Auction Procedures has the meaning specified in Section 9.2. Auction Purchase Agreement has the meaning specified in Schedule E. Authenticating Agent means, with respect to the Rated Notes or any Class of the Rated Notes, the Person designated by the Trustee, if any, to authenticate such Rated Notes on behalf of the Trustee pursuant to Section 6.4. Authorized Officer means (i) with respect to the Issuer, any Officer of the Issuer who is authorized to act for the Issuer in matters relating to, and binding upon, the Issuer, (ii) with respect to the Co-Issuer, any Officer who is authorized to act for the Co-Issuer in matters relating to, and binding upon, the Co-Issuer, (iii) with respect to the Collateral Advisor, any officer of the Collateral Advisor who is authorized to act for the Collateral Advisor in matters relating to, and binding upon, the Collateral Advisor, (iv) with respect to the Trustee or any other bank or trust company acting as trustee of an express trust or as custodian, a Trust Officer and (v) with respect to the Income Note Paying Agent, any officer who is authorized to act for the Income Note Paying Agent in matters relating to, and binding upon, the Income Note Paying Agent. 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. Available Funds means, with respect to any Payment Date, the amount of any positive balance of Cash or Eligible Investments in the Collection Account as of the Calculation Date relating to such Payment Date and, with respect to any other date, such amount as of that date. Average Life means, on any Calculation Date with respect to any Collateral Debt Security, the quotient obtained by the Collateral Advisor by dividing (i) the sum of the products of (a) the number of years (rounded to the nearest one tenth thereof) from such Calculation Date to the respective dates of each successive distribution of principal of such Collateral Debt Security (assuming that (1) no Collateral Debt Securities default or are sold, (2) any optional redemption of the Collateral Debt Securities occurs in accordance with their respective terms and (3) any extension of the Real Estate Interests is exercised) and (b) the respective amounts of principal of such scheduled distributions by (ii) the sum of all successive scheduled distributions of principal on such Collateral Debt Security. Balance means at any time, with respect to Cash or Eligible Investments in any Account at such time, the aggregate of the (i) current balance of Cash, demand deposits, time deposits, certificates of deposit and federal funds; (ii) principal amount of interest-bearing corporate and government securities, money 5

Processed and formatted by SEC Watch - Visit SECWatch.com

market accounts and repurchase obligations; and (iii) purchase price (but not greater than the face amount) of non-interest-bearing government and corporate securities and commercial paper. Bank means LaSalle Bank National Association, a national banking association organized under the laws of the United States, in its individual capacity and not as Trustee. Bankruptcy Code means the U.S. Bankruptcy Code, Title 11 of the United States Code, as amended or where the context requires, the applicable insolvency provisions of the laws of the Cayman Islands. BAS means Banc of America Securities LLC. Beneficial Owner means, with respect to any Global Note, each Person that appears on the records of a Clearing Agency (other than each such Clearing Agency to the extent that it is an accountholder with the other Clearing Agency for the purpose of operating the “bridge” between them) as entitled to a particular amount of Rated Notes by reason of an interest in a Global Note (for all purposes other than with respect to the payment of principal of and interest on the Rated Notes, the right to which will be vested, as against the Issuer and the Trustee, solely in the Person in whose name the Global Note is registered in the Note Register (in the case of the Rated Notes) or the Income Note Register (in the case of the Income Notes)); provided that the Trustee and the Income Note Paying Agent may conclusively rely upon the certificate of a Clearing Agency as to the identity of such Persons holding an interest in a Global Note. Benefit Plan Investor means (i) an “employee benefit plan” (as defined in Section 3(3) of ERISA), whether or not subject to Title I of ERISA, including without limitation governmental plans, foreign plans and church plans, (ii) a “plan” (as defined in Section 4975(e)(1) of the Code), whether or not subject to Section 4975 of the Code, including, without limitation, individual retirement accounts and Keogh plans or (iii) an entity whose underlying assets include plan assets by reason of such an employee benefit plan’s or plan’s investment in such entity, including, without limitation, as applicable, an insurance company general account. Board of Directors means, with respect to the Issuer, the directors of the Issuer duly appointed in accordance with the Articles, and, with respect to the Co-Issuer, the directors of the Co-Issuer duly appointed by the shareholders of the Co-Issuer. Board Resolution means, with respect to the Issuer or the Co-Issuer, a resolution of the Board of Directors of the Issuer or the Co-Issuer, as the case may be. Business Day means any day that is not a Saturday, Sunday or other day on which commercial banking institutions in New York, New York, Chicago, Illinois or any other cities in which the Corporate Trust Office of the Trustee is located are authorized or obligated by law or executive order to be closed; provided that, if any action is required of the Irish Paying Agent, solely for purposes of determining when such action of the Irish Paying Agent is required, days on which commercial banking institutions in Dublin, Ireland are authorized or obligated by law or executive order to be closed will also be considered in determining whether such day is a “Business Day”; provided, further that if any action is required of the Issuer (or of the Administrator on its behalf), solely for purposes of determining when such action of the Issuer is required, days on which commercial banking institutions in the Cayman Islands are authorized or obligated by law or executive order to be closed will also be considered in determining whether such day is a “Business Day.” Calculation Date means, with respect to any Payment Date, the last day of the related Due Period. Call Period has the meaning specified in Section 9.1(a) hereof. 6

Processed and formatted by SEC Watch - Visit SECWatch.com

Cash means such funds denominated with currency of the United States as at the time shall be legal tender for payment of all public and private debts, including funds credited to a deposit account or a Securities Account. Cash Release Conditions has the meaning specified in Section 12.1(c). CDO of CDO Securities means securities that entitle the Holders thereof to receive payments that depend on the cash flow from a portfolio of assets, the majority in principal amount of which are collateralized debt obligations. CDS Principal Balance means, prior to the Effective Date, not less than U.S.$425,000,000, and thereafter, the aggregate Principal Balance of (i) Collateral Debt Securities included in the Collateral (including any Collateral Debt Securities that have become Defaulted Securities or Written Down Securities) and (ii) Eligible Investments, in each case, purchased with the proceeds of the issuance of the Notes or thereafter with Collateral Principal Collections. Certificated Security has the meaning specified in Section 8-102(a)(4) of the UCC. Certificate of Authentication has the meaning specified in Section 2.3(f). Class means any class of the Notes, consisting of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Income Notes. Class A Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class A Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class A Notes. Class A Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class A Note Scenario Default Rate from the Class A Note Break-Even Default Rate. Class A Note Interest Rate means the Class A-1 Note Interest Rate or the Class A-2 Note Interest Rate, as applicable. Class A Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class A Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class A Notes means the Class A-1 Notes and the Class A-2 Notes. Class A-1 Note Interest Rate means LIBOR plus 0.265%. Class A-1 Notes means the U.S.$339,735,000 aggregate principal amount of Class A-1 Floating Rate Notes due 2045. Class A-2 Note Interest Rate means LIBOR plus 0.350%. Class A-2 Notes means the U.S.$47,000,000 aggregate principal amount of Class A-2 Floating Rate Notes due 2045. 7

Processed and formatted by SEC Watch - Visit SECWatch.com

Class A/B Coverage Tests means the Class A/B Interest Coverage Test and the Class A/B Principal Coverage Test. Class A/B Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes and the Class B Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Interest Reserve Account for the Payment Date immediately following such Measurement Date. Class A/B Interest Coverage Test means, for so long as any Class A Notes or Class B Notes remain Outstanding, a test that is satisfied on any date of determination if the Class A/B Interest Coverage Ratio as of such date of determination is equal to or greater than 115.0%. Class A/B Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes and the Class B Notes Outstanding as of such Measurement Date. Class A/B Principal Coverage Test means, for so long as any Class A Notes or Class B Notes remain Outstanding, a test satisfied on any date of determination if the Class A/B Principal Coverage Ratio as of such date of determination is equal to or greater than 106.8%. Class B Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class B Notes in full by their Stated Maturity Date and the timely payment of interest on such Class B Notes. Class B Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class B Note Scenario Default Rate from the Class B Note Break-Even Default Rate. Class B Note Interest Rate means LIBOR plus 0.450%. Class B Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class B Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class B Notes means the U.S .$41,400,000 aggregate principal amount of Class B Floating Rate Notes due 2045. Class C Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class C Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes or Class B Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class C Notes. Class C Coverage Tests means the Class C Interest Coverage Test and the Class C Principal Coverage Test. 8

Processed and formatted by SEC Watch - Visit SECWatch.com

Class C Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class C Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class C Interest Coverage Ratio means on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes, the Class B Notes and the Class C Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Interest Reserve Account for such Payment Date immediately following such Measurement Date. Class C Interest Coverage Test means, for so long as any Class A Notes, Class B Notes or Class C Notes remain Outstanding, a test that is satisfied as of any date of determination when the Class C Interest Coverage Ratio as of such date of determination is equal to or exceeds 110.0%. Class C Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class C Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class C Notes. Class C Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class C Note Scenario Default Rate from the Class C Note Break-Even Default Rate. Class C Note Interest Rate means 5.311%. Class C Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class C Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class C Notes means the U.S.$18,125,000 aggregate principal amount of Class C Deferrable Fixed Rate Notes due 2045. Class C Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes, the Class B Notes and the Class C Notes (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) Outstanding as of such Measurement Date. Class C Principal Coverage Test means, for so long as any Class A Notes, Class B Notes or Class C Notes remain Outstanding, a test satisfied on any date of determination if the Class C Principal Coverage Ratio as of such Date of determination is equal to or greater than 105.0%. Class D Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class D Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes or Class C Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class D Notes. 9

Class D Coverage Tests means the Class D Interest Coverage Test and the Class D Principal Coverage Test. Class D Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class D Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class D Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Interest Reserve Account for such Payment Date immediately following such Measurement Date. Class D Interest Coverage Test means, for so long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes remain Outstanding, a test that is satisfied as of any date of determination when the Class D Interest Coverage Ratio as of such date of determination is equal to or exceeds 105.0%. Class D Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class D Notes in full by their Stated

Processed and formatted by SEC Watch - Visit SECWatch.com

Maturity Date and the ultimate payment of interest on such Class D Notes. Class D Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class D Note Scenario Default Rate from the Class D Note Break-Even Default Rate. Class D Note Interest Rate means 6.205%. Class D Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class D Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class D Notes means the U.S.$15,240,000 aggregate principal amount of Class D Deferrable Fixed Rate Notes due 2045. Class D Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes, the Class B Notes, the Class C Notes (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) and the Class D Notes (including any Class D Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) Outstanding as of such Measurement Date. Class D Principal Coverage Test means a test that is satisfied as of any date of determination when the Class D Principal Coverage Ratio is equal to or exceeds 103.3%. Class E Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class E Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A 10

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class E Notes. Class E Coverage Tests means the Class E Interest Coverage Test and the Class E Principal Coverage Test. Class E Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class E Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class E Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Interest Reserve Account for such Payment Date immediately following such Measurement Date. Class E Interest Coverage Test means, for so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes remain Outstanding, a test that is satisfied as of any date of determination when the Class E Interest Coverage Ratio as of such date of determination is equal to or exceeds 104.0%. Class E Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class E Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class E Notes. Class E Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class E Note Scenario Default Rate from the Class E Note Break-Even Default Rate. Class E Note Interest Rate means LIBOR plus 2.100%. Class E Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class E Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class E Notes means the U.S.$5,000,000 aggregate principal amount of Class E Deferrable Floating Rate Notes due 2045. Class E Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes, the Class B Notes, the Class C Notes (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount), the Class D Notes (including any Class D Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) and the Class E Notes (including any Class E Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) Outstanding as of such Measurement Date. 11

Processed and formatted by SEC Watch - Visit SECWatch.com

Class E Principal Coverage Test means a test that is satisfied as of any date of determination when the Class E Principal Coverage Ratio is equal to or exceeds 103.1%. Class F Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class F Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class F Notes. Class F Coverage Tests means the Class F Interest Coverage Test and the Class F Principal Coverage Test. Class F Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class F Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class F Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Interest Reserve Account for such Payment Date immediately following such Measurement Date. Class F Interest Coverage Test means, for so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes remain Outstanding, a test that is satisfied as of any date of determination when the Class E Interest Coverage Ratio as of such date of determination is equal to or exceeds 102.5%. Class F Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class F Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class F Notes. Class F Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class F Note Scenario Default Rate from the Class F Note Break-Even Default Rate. Class F Note Interest Rate means 8.001%. Class F Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class F Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class F Notes means the U.S.$12,750,000 aggregate principal amount of Class F Deferrable Fixed Rate Notes due 2045. Class F Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and 12

Processed and formatted by SEC Watch - Visit SECWatch.com

(ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes, the Class B Notes, the Class C Notes (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount), the Class D Notes (including any Class D Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount), the Class E Notes (including any Class E Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) and the Class F Notes (including any Class F Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) Outstanding as of such Measurement Date. Class F Principal Coverage Test means a test that is satisfied as of any date of determination when the Class F Principal Coverage Ratio is equal to or exceeds 101.8%. Clearing Agency means DTC, Euroclear or Clearstream. Clearing Corporation has the meaning specified in Section 8-102(a)(5) of the UCC. Clearstream means Clearstream Banking, société anonyme. Closing Date means September 22, 2005. CMBS Conduit Securities means Commercial Mortgage Backed Securities (a) issued by a single-seller or multi-seller conduit under which the holders of such Commercial Mortgage Backed Securities have recourse to a specified pool of assets (but not other assets originated by the conduit that support payments on other series of securities) and (b) that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Commercial Mortgage Backed Securities) on the cash flow from a pool of commercial mortgage loans. CMBS Credit Tenant Lease Securities means CMBS Securities (other than CMBS Large Loan Securities and CMBS Conduit Securities) that entitle the holders thereof to receive payments that depend on the cash flow from a pool of commercial mortgage loans made to finance the acquisition, construction and improvement of properties leased to corporate tenants (or on the cash flow from such leases); provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the CMBS Securities such as a financial guaranty insurance policy. CMBS Large Loan Securities means Commercial Mortgage Backed Securities (other than CMBS Conduit Securities) that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Commercial Mortgage Backed Securities) on the cash flow from a commercial mortgage loan or a small pool of commercial mortgage loans made to finance the acquisition or improvement of real properties. CMBS Re-REMIC Securities means any security that entitles a holder thereof to receive payments that depend upon the cash flow from a pool of CMBS Conduit Securities, other CMBS Securities or certificates representing a beneficial interest therein. CMBS Securities means CMBS Conduit Securities, CMBS Large Loan Securities, CMBS Single Borrower Securities, CMBS Re-REMIC Securities or CMBS Credit Tenant Lease Securities, as the case may be. CMBS Single Borrower Securities means CMBS Securities (other than CMBS Large Loan Securities and CMBS Credit Tenant Lease Securities) that entitle the holders thereof to receive payments that 13

Processed and formatted by SEC Watch - Visit SECWatch.com

depend on the cash flow from one or more loans with a single borrower or group of affiliated borrowers secured by one or more properties; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the CMBS Securities such as a financial guaranty insurance policy. Code means the Internal Revenue Code of 1986, as amended. Co-Issuer means N-Star Real Estate CDO V Corp., a corporation organized under the law of the State of Delaware, unless a successor Person shall have become the Co-Issuer pursuant to the applicable provisions of this Indenture, and thereafter Co-Issuer shall mean such successor Person. Co-Issuers means the Issuer and Co-Issuer. Collateral has the meaning specified in the Granting Clauses. Collateral Administration Agreement means the Collateral Administration Agreement, dated September 22, 2005, by and among the Issuer, the Collateral Advisor and the Collateral Administrator, as the same may be amended and modified from time to time in accordance with its terms. Collateral Administrator means LaSalle Bank National Association, solely in its capacity as Collateral Administrator under the Collateral Administration Agreement, unless a successor Person shall have become the Collateral Administrator pursuant to the applicable provisions of Collateral Administration Agreement, in which case Collateral Administrator shall mean such successor Person. Collateral Advisor means NS Advisors, LLC, a Delaware limited liability company, unless a successor Person shall have become Collateral Advisor pursuant to the applicable provisions of the Collateral Advisory Agreement, in which case Collateral Advisor shall mean such successor Person. Collateral Advisory Agreement means the Collateral Advisory Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, between the Issuer and the Collateral Advisor. Collateral Advisory Fee means the Senior Collateral Advisory Fee and the Subordinate Collateral Advisory Fee. Collateral Assignment of Hedge Agreement means the collateral assignment of Hedge Agreement, dated the date that the Issuer enters into the Hedge Agreement, among the Issuer, the Trustee and the Initial Hedge Counterparty, and any other Collateral Assignment of the Hedge Agreement in respect of any Hedge Agreement entered into between the Issuer, the Trustee and a Hedge Counterparty after the Closing Date. Collateral Debt Security means an item of Collateral which satisfies the Eligibility Criteria specified in Section 12.2. Collateral Interest Collections means, with respect to any Due Period and the related Payment Date, without duplication, the sum of (i) all cash payments of interest with respect to any Collateral Debt Securities and Eligible Investments included in the Collateral (including any Sale Proceeds of a Collateral Debt Security sold at a price greater than or equal to its Principal Balance representing unpaid interest accrued thereon to the date of the sale thereof to the extent not treated as Collateral Principal Collections at the option of the Collateral Advisor, but excluding all funds received on a Defaulted Security (including any unpaid interest) and any unpaid interest accrued on a Deferred Interest PIK Bond or a 14

Processed and formatted by SEC Watch - Visit SECWatch.com

Written Down Security to the date of sale) which are received during the related Due Period (excluding any Purchased Accrued Interest), (ii) all payments on Eligible Investments purchased with Collateral Interest Collections, (iii) payments received or scheduled to be received from a Hedge Counterparty under any Hedge Agreement (including the initial Hedge Agreement) on the related Payment Date, excluding any payments received from a Hedge Counterparty upon reduction of the notional amount and any termination payments (provided that so long as the Notes are Outstanding, any termination payments received from a Hedge Counterparty will be used to enter into a substitute Hedge Agreement to the extent required to maintain the then-current rating of the Notes by each Rating Agency), (iv) all amendment and waiver fees, all late payment fees and all other fees and commissions received during the related Due Period (other than fees and commissions received in connection with the sale, restructuring, workout or default of Collateral Debt Securities or in connection with Defaulted Securities or Written Down Securities) (excluding any payments representing exit fees, extension fees or prepayment premiums paid in connection with Real Estate Interests), (v) the Principal Balance of any Eligible Investments purchased with Collateral Interest Collections, (vi) all interest accrued on the Closing Date on Collateral Debt Securities included in the Collateral, (vii) any amounts on deposit in the Interest Reserve Account, (viii) at the option of the Collateral Advisor, any amount on deposit in the Expense Reserve Account in excess of U.S.$25,000 and (ix) all proceeds from the foregoing; provided, however, that Collateral Interest Collections shall not include the funds and other property (including, without limitation, the paid-up share capital of the Issuer) with respect to the Income Notes and the bank account in which such funds and the proceeds thereof are held); provided, further, that Collateral Interest Collections shall not include principal of any Collateral Debt Security representing capitalized interest after the date of purchase thereof by the Issuer but shall include the funds and other property (including, without limitation, the paid-up share capital of the Issuer) with respect to the Income Notes and the bank account in which such funds and the proceeds thereof are held). Collateral Principal Collections means, with respect to any Due Period and the related Payment Date, all amounts received by the Issuer during such Due Period that do not constitute Collateral Interest Collections; provided, however, that Collateral Principal Collections shall include (A) principal of any Collateral Debt Security representing capitalized interest after the date of purchase thereof by the Issuer and (B) any Uninvested Proceeds which have not been invested on or prior to the Effective Date. Collateral Principal Collections Sub-Account has the meaning specified in Section 10.5(a)(1) hereof. Collateral Principal Payments means, with respect to any Due Period and the related Payment Date, Collateral Principal Collections other than Sale Proceeds and any amounts received in respect of Temporary Ramp-Up Securities and Eligible Investments. Collateral Quality Tests will be satisfied if, as of any Measurement Date, the Collateral Debt Securities comply, in the aggregate, with all of the requirements set forth below (collectively, the “Collateral Quality Tests”): (1)

the aggregate Principal Balance of all Collateral Debt Securities with an S&P Rating of below “BBB-” does not exceed the greater of (a) 30% of the CDS Principal Balance and (b) U.S.$150,000,000;

(2)

the aggregate Principal Balance of all Collateral Debt Securities with a rating from S&P of below “BB-” does not exceed the greater of (a) 7% of the CDS Principal Balance and (b) U.S.$35,000,000; 15

Processed and formatted by SEC Watch - Visit SECWatch.com

(3)

the aggregate Principal Balance of all Collateral Debt Securities that are PIK Bonds does not exceed the greater of (a) 5% of the CDS Principal Balance and (b) U.S.$25,000,000;

(4)

the aggregate Principal Balance of all Collateral Debt Securities that are CMBS Securities does not exceed the greater of (a) 80% of the CDS Principal Balance and (b) U.S.$400,000,000; provided that (x) the aggregate Principal Balance of all Collateral Debt Securities that are CMBS Large Loan Securities does not exceed the greater of (a) 25% of the CDS Principal Balance and (b) U.S.$125,000,000, (y) the aggregate Principal Balance of all Collateral Debt Securities that are CMBS Credit Tenant Lease Securities does not exceed the greater of (a) 5% of the CDS Principal Balance and (b) U.S.$25,000,000, and (z) the aggregate Principal Balance of all Collateral Debt Securities that are CMBS Single Borrower Securities does not exceed the greater of (a) 14% of the CDS Principal Balance and (b) U.S.$70,000,000;

(5)

the aggregate Principal Balance of all Collateral Debt Securities that are REIT Debt Securities does not exceed the greater of (a) 26% of the CDS Principal Balance and (b) U.S.$130,000,000;

(6)

the aggregate Principal Balance of all Collateral Debt Securities that are Real Estate CDO Securities does not exceed the greater of (a) 6.5% of the CDS Principal Balance and (b) U.S.$32,500,000;

(7)

the aggregate Principal Balance of all Collateral Debt Securities that are Real Estate Interests does not exceed the greater of (a) 9% of the CDS Principal Balance and (b) U.S.$45,000,000;

(8)

with respect to the particular Issue of the Collateral Debt Security being acquired, (i)

the aggregate Principal Balance of all Collateral Debt Securities that are part of the same Issue does not exceed the greater of (a) 3% of the CDS Principal Balance and (b) U.S.$15,000,000 (except for the Collateral Debt Securities consisting of (1) ARCap 2005-RR5 Resecuritization, Inc. CMBS Pass-Through Certificates, Series 2005-RR5, with a Principal Balance of U.S.$25,072,000 and (2) G-FORCE 2005-RR2 Trust CMBS Pass-Through Certificates, Series 2005-RR2, with a Principal Balance of U.S.$16,182,000); and

(ii)

the aggregate Principal Balance of all Collateral Debt Securities that are rated below “BBB-” by Fitch and below “BBB-” by S&P and are part of the same Issue does not exceed the greater of (a) 2% of the CDS Principal Balance and (b) U.S.$10,000,000 (except for the Collateral Debt Security consisting of Salomon Brothers Mortgage Securities VII, Inc. Commercial Mortgage Pass-Through Certificates, Series 2000-C2, with a Principal Balance of U.S.$11,000,000);

(9)

with respect to the servicer of the security being acquired, (a) the aggregate Principal Balance of all Collateral Debt Securities serviced by such servicer does not exceed the greater of (a) 20% of the CDS Principal Balance and (b) U.S.$100,000,000, except that the aggregate Principal Balance of all Collateral Debt Securities serviced by servicers rated “Below Average” by S&P, or if there is no servicer rating by S&P or Fitch, having long-term unsecured debt securities rated “BB” or lower, shall not exceed the greater of (a) 5% of the CDS Principal Balance and (b) U.S.$25,000,000;

(10)

the aggregate Principal Balance of all Collateral Debt Securities that mature beyond the Stated Maturity Date does not exceed the greater of (a) 15% of the CDS Principal Balance and (b) U.S.$75,000,000; 16

Processed and formatted by SEC Watch - Visit SECWatch.com

(11)

the aggregate Principal Balance of all Fixed Rate Collateral Debt Securities does not exceed the greater of (a) 90% of the CDS Principal Balance and (b) U.S.$450,000,000;

(12)

the Fitch Weighted Average Rating Factor does not exceed 8.00;

(13)

(i) the Weighted Average Fixed Rate Coupon as of such date equals or exceeds 5.80% and (ii) the Weighted Average Spread as of such date equals or exceeds 1.60%;

(14)

the Weighted Average Life Test is satisfied;

(15)

the S&P CDO Monitor Test is satisfied;

(16)

the S&P Minimum Average Recovery Rate Test is satisfied;

(17)

the aggregate Principal Balance of all Collateral Debt Securities that provide for periodic payments of interest in Cash less frequently than monthly does not exceed the greater of (a) 32% of the CDS Principal Balance and (b) U.S.$160,000,000; and

(18)

the aggregate Principal Balance of all Collateral Debt Securities that are Deemed Floating Rate Collateral Debt Securities does not exceed the greater of (a) 17.5% of the CDS Principal Balance and (b) U.S.$87,500,000;

provided that Temporary Ramp-Up Securities will be excluded from the calculation of the Collateral Quality Tests. Collateral Sub-Account means any sub-account established within an Account. Collateralization Event means, provided that no Substitution Event has occurred, any of the following events: (a) if the Hedge Ratings Determining Party’s short-term rating from Fitch is lower than “F1” or the long-term rating of the Hedge Ratings Determining Party from Fitch is withdrawn, suspended or downgraded below “A”, (b) if no short-term rating is available from Fitch, the long-term rating of the Hedge Ratings Determining Party from Fitch is withdrawn, suspended or downgraded below “A”, or (c) the short term rating of the Hedge Ratings Determining Party from S&P is lower than “A-1” or, if the Hedge Ratings Determining Party does not have a short term rating from S&P, the long term rating of such Hedge Ratings Determining Party is lower than “A+”. Collection Account means the Securities Account designated the “Collection Account” and established in the name of the Trustee pursuant to Section 10.5, including the Collateral Principal Collections Sub-Account and each CPP Sub-Account established therein. Collections means, with respect to any Payment Date, the sum of (i) the Collateral Interest Collections collected during the applicable Due Period and (ii) the Collateral Principal Collections collected during the applicable Due Period. Commercial Mortgage Backed Security means securities backed by obligations (including certificates of participations in obligations) that are principally secured by mortgages on real property or interests therein having a multifamily or commercial use, such as regional malls, retail space, office buildings, warehouse or industrial properties, hotels, nursing homes and senior living centers. Commission means the United States Securities and Exchange Commission. 17

Processed and formatted by SEC Watch - Visit SECWatch.com

Controlling Class means the Class A Notes voting as a single Class, so long as any Class A Notes are Outstanding, and then the Class B Notes, so long as any Class B Notes are Outstanding, and then the Class C Notes, so long as any Class C Notes are Outstanding, and then the Class D Notes, so long as any Class D Notes are Outstanding, and then the Class E Notes, so long as any Class E Notes are Outstanding, and then the Class F Notes, so long as any Class F Notes are Outstanding, in each case, based on the Aggregate Outstanding Amount thereof; provided that if any Coverage Test is not satisfied on a Calculation Date (i) the “Controlling Class” shall mean the Class A-1 Notes, so long as any Class A-1 Notes are Outstanding, then, the Class A-2 Notes, so long as any Class A-2 Notes are Outstanding, then, the Class B Notes, so long as any Class B Notes are Outstanding, then the Class C Notes, so long as any Class C Notes are Outstanding, and then the Class D Notes, so long as any Class D Notes are Outstanding, and then the Class E Notes, so long as any Class E Notes are Outstanding, and then the Class F Notes, so long as any Class F Notes are Outstanding, in each case, based on the Aggregate Outstanding Amount thereof and (ii) on any Calculation Date thereafter, the “Controlling Class” shall remain as specified in (i) above notwithstanding any subsequent satisfaction of the failed Coverage Test. Controlling Class Objection means written notice to the Collateral Advisor by the Holders of a majority in aggregate principal amount of Outstanding Notes of the Controlling Class objecting in their reasonable discretion to a proposed replacement Key Manager. Controlling Person any other person (other than a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of the Issuer, a person who provides investment advice for a fee (direct or indirect) with respect to the assets of the Issuer, or any “affiliate” (within the meaning of 29 C.F.R. Section 2510.3-101(f)(3)) of any such person. Corporate Services Agreement means that certain Corporate Services Agreement, dated as of September 22, 2005, as the same may be amended or supplemented from time to time, between the Issuer and the Administrator. Corporate Trust Office means the designated corporate trust office of the Trustee, currently located at 135 South LaSalle Street, Suite 1511, Chicago, Illinois 60603, Attention: CDO Trust Services Group – N-Star Real Estate CDO V Ltd., telephone number 312-904-7815, fax number 312-904-0524, or such other address as the Trustee may designate from time to time by notice to the Rated Noteholders, the Income Noteholders, the Collateral Advisor and the Co-Issuers or the principal corporate trust office of any successor Trustee. Coverage Tests means the Class A/B Coverage Tests, the Class C Coverage Tests, the Class D Coverage Tests, the Class E Coverage Tests and the Class F Coverage Tests. CPP Asset Type means REIT Debt Securities that are Fixed Rate Securities, REIT Debt Securities that are Floating Rate Securities, CMBS Securities that are Fixed Rate Securities, CMBS Securities that are Floating Rate Securities, Real Estate CDO Securities that are Fixed Rate Securities and Real Estate CDO Securities that are Floating Rate Securities. CPP Sub-Account has the meaning specified in Section 10.5(b). Credit Lease Loans means mortgage loans secured by mortgages on commercial real estate properties that are subject to a lease to a single tenant. Credit Risk Event means, with respect to any Collateral Debt Security, (i) if a Note Downgrade Event shall have occurred and be continuing, (a) such Collateral Debt Security has been put on watch for possible downgrade, or has been downgraded, by any Rating Agency or (b) such Collateral Debt Security 18

Processed and formatted by SEC Watch - Visit SECWatch.com

has experienced an increase in credit spread of 10% or more (due to credit related reasons as determined by the Collateral Advisor in its reasonable business judgment) compared to the credit spread at which such Collateral Debt Security was purchased by the Issuer, determined by reference to an applicable index selected by the Collateral Advisor or (ii) if no Note Downgrade Event shall have occurred and be continuing, there has been an event or circumstance that constitutes a change in the condition of the issuer of such Collateral Debt Security (or of available information with respect to such issuer) that evidences, in the good faith judgment of the Collateral Advisor, (a) a significant risk of such Collateral Debt Security materially declining in credit quality, or (b) a significant risk, with a lapse of time, of such Collateral Debt Security becoming a Defaulted Security or a Written Down Security. Credit Risk Security means any Collateral Debt Security with respect to which there shall have occurred a Credit Risk Event. Credit Support Annex means an ISDA Credit Support Annex to a Hedge Agreement, if any. Current Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Debt Securities and the proceeds of the disposition thereof held as Cash and (b) Eligible Investments purchased with proceeds of the disposition of Pledged Collateral Debt Securities, existing immediately prior to the sale, maturity or other disposition of a Pledged Collateral Debt Security or immediately prior to the acquisition of a Pledged Collateral Debt Security, as the case may be. Custodian has the meaning specified in Section 3.3(a). Daily Official List means the Daily Official List of the Irish Stock Exchange. Deemed Floating Asset Hedge means, with respect to a Fixed Rate Collateral Debt Security, an interest rate swap having (i) a notional schedule equal to the Principal Balance as it is reduced by expected amortization of such Fixed Rate Collateral Debt Security over time and (ii) payment dates identical to the Payment Dates of the Issuer under the Indenture; provided that, (w) at the time of entry into the Deemed Floating Asset Hedge, (i) the expected principal payments on the Fixed Rate Collateral Debt Security comprising a Deemed Floating Rate Collateral Debt Security will not extend beyond 10 years after the effective date thereof and (ii) the scheduled notional amount of such Deemed Floating Asset Hedge at any time is equal to the expected principal amount of the related Fixed Rate Collateral Debt Security (as calculated at such time), (x) the Rating Agencies and the Trustee are notified prior to the Issuer’s entry into a Deemed Floating Asset Hedge, and each will be provided with the identity of the proposed hedge counterparty and copies of the hedge documentation and notional schedule, (y) such Deemed Floating Asset Hedge will require Rating Agency Confirmation from S&P to the extent the applicable master agreement or schedule attached thereto is not a hedge agreement with respect to which the documentation thereof conforms in all material respects to a form in respect of which Rating Agency Confirmation was previously obtained by the Issuer and (z) such Deemed Floating Asset Hedge is priced at then-current market rates. Deemed Floating Rate Collateral Debt Security means a Fixed Rate Collateral Debt Security the interest rate of which is hedged into a Floating Rate Collateral Debt Security using a Deemed Floating Asset Hedge; provided that at the time of entry into the Deemed Floating Asset Hedge the Average Life of such Deemed Floating Rate Collateral Debt Security would not increase or decrease by more than one year from its expected average life if it were to prepay at either 50% or 150% of its pricing speed. Pursuant to this Indenture, a Deemed Floating Rate Collateral Debt Security will be deemed a Floating Rate Collateral Debt Security with a spread over LIBOR equal to the related Deemed Floating Spread. 19

Deemed Floating Spread means the difference between the stated rate at which interest accrues on each Fixed Rate Collateral Debt Security that comprises a Deemed Floating Rate Collateral Debt Security (excluding all Defaulted Securities and Deferred Interest PIK Bonds) and the fixed rate that the Issuer agrees to pay on the Deemed Floating Asset Hedge at the time such swap is executed. Default means any Event of Default or any occurrence that, with notice or the lapse of time or both, would become an Event of Default. Defaulted Interest means any interest due and payable in respect of any Class A Note or Class B Note or, if no Class A Notes or Class B Notes are Outstanding, in respect of any Class C Note or, if no Class C Notes are Outstanding, in respect of any Class D Note, or if no Class D Notes are Outstanding, in respect of any Class E Note, or if no Class E Notes are Outstanding, in respect of any Class F Note, and any interest on such Defaulted Interest that (in each case) is not punctually paid or duly provided for on the applicable Payment Date (including the applicable Stated Maturity Date) of the applicable Rated Note. Defaulted Securities Amount means the sum, with respect to each Defaulted Security in the Collateral, of the lesser of (i) the product of the Principal Balance of such Defaulted Security and the Applicable Recovery Rate of such Defaulted Security and (ii) the product of the Principal Balance of such Defaulted Security and the Market Value of such Defaulted Security. Defaulted Security means any Collateral Debt Security or any other security included in the Collateral: (i)

as to which (a) the issuer thereof has defaulted in the payment of principal or interest (without giving effect to any applicable notice or grace period or waiver, unless the Collateral Advisor certifies to the Trustee that in the Collateral Advisor’s judgment such default of up to the lesser of (1) three (3) Business Days and (2) the grace period provided for in the Underlying Instruments is due to non-

Processed and formatted by SEC Watch - Visit SECWatch.com

credit and non-fraud related reasons and the Collateral Advisor has so certified in writing to the Trustee or (b) pursuant to its Underlying Instruments, there has occurred any default or event of default which entitles the holders thereof, with notice or passage of time or both, to accelerate the maturity (whether by mandatory prepayments, mandatory redemption or otherwise) of all or a portion of the outstanding principal amount of such security, unless (1) in the case of a default or event of default consisting of a failure of the obligor on such security to make required interest payments and/or scheduled principal payments, such security has resumed current payments of interest and scheduled principal in cash (including all past due interest and scheduled principal) and, in the Collateral Advisor’s judgment, will continue to make such current payments of interest in cash (provided that no restructuring has been effected) or (2) in the case of any other default or event of default, such default or event of default is no longer continuing (provided that no event of default has been waived with respect to (A) a default in the payment of principal or interest or (B) insolvency in the event that all outstanding amounts have not been paid) and such security satisfies the criteria for inclusion of securities in the definition of “Collateral Debt Security”; (ii)

that ranks pari passu with or subordinate to any other indebtedness for borrowed money owing by the issuer of such security, if any (for purposes hereof, “Other Indebtedness”; provided, however, that such Other Indebtedness of such issuer will not include series of such Other Indebtedness that may be issued or owing by a separate special purpose entity and is not guaranteed by the issuer) if such issuer had defaulted in the payment of principal or interest in respect of such Other Indebtedness (without giving effect to any applicable notice or grace period or waiver, unless the Collateral Advisor certifies to the Trustee that in the Collateral Advisor’s judgment such default of up to the lesser of (a) three (3) Business Days and (b) the grace period provided for in the Underlying Instruments is due to non-credit and non-fraud related reasons and 20

Processed and formatted by SEC Watch - Visit SECWatch.com

the Collateral Advisor has so certified in writing to the Trustee), unless, in the case of a default or event of default consisting of a failure of the obligor on such security to make required interest payments and/or scheduled principal payments, such Other Indebtedness has resumed current payments of interest and scheduled principal (including all due interest and scheduled principal) in cash (whether or not any waiver or restructuring has been effected) and, in the Collateral Advisor’s judgment, will continue to make such current payments of interest and scheduled principal in cash; provided that a security shall be considered a Defaulted Security pursuant to this clause (ii) only if the Collateral Advisor knows, after due inquiry as required pursuant to the Collateral Advisory Agreement, that the issuer thereof is (or is reasonably expected by the Collateral Advisor to be, as of the next scheduled payment distribution date) in default (without giving effect to any applicable grace period or waiver) as to payment of principal and/or interest on another obligation (and such default has not been cured or waived) which is senior or pari passu in right of payment to such Collateral Debt Security; (iii)

with respect to which any bankruptcy, insolvency or receivership proceeding has been initiated in respect of the issuer of such Collateral Debt Security, or there has been proposed or effected any distressed exchange or other debt restructuring where the issuer of such Collateral Debt Security has offered the debt holders a new security or package of securities that, in the judgment of the Collateral Advisor either (a) amounts to a diminished financial obligation or (b) has the purpose of helping the issuer to avoid default. For the avoidance of doubt in applying and interpreting this definition of Defaulted Security, the Collateral Advisor shall be deemed to have knowledge of all information that Authorized Officers of the Collateral Advisor have actually received, and shall be responsible under the Collateral Advisory Agreement for obtaining and reviewing information available to it either in its capacity as an investment manager of national standing or as holder of such Collateral Debt Security;

(iv)

if such Collateral Debt Security has been rated “CC” or lower by S&P or Fitch or if S&P has withdrawn its rating and has not provided the Issuer with a shadow rating;

(v)

which is a Written Down Security unless S&P has affirmed its rating of such Written Down Security.

Defaulting Party has the meaning given to such term in the standard form 1992 ISDA Master Agreement (Multicurrency-Cross Border). Deferred Interest PIK Bond means a PIK Bond with respect to which interest has been deferred or capitalized or does not pay interest when scheduled (other than a Defaulted Security) for each consecutive payment date occurring over a period of the lesser of (i) six months or (ii) two consecutive payment dates, but only until such time as payment of interest on such PIK Bond has resumed and all capitalized and deferred interest and any interest thereon has been paid in cash in accordance with the terms of the Underlying Instruments. Deferred Interest PIK Bond Amount means, with respect to each Deferred Interest PIK Bond in the Collateral, the lesser of (i) the product of the Principal Balance of such Deferred Interest PIK Bond and the Applicable Recovery Rate of such Deferred Interest PIK Bond and (ii) the product of the Principal Balance of such Deferred Interest PIK Bond and the Market Value of such Deferred Interest PIK Bond. Definitive Class A-D Note has the meaning specified in Section 2.1(c). Definitive Class E Note has the meaning specified in Section 2.1(d). 21

Processed and formatted by SEC Watch - Visit SECWatch.com

Definitive Class E Note Transfer Certificate has the meaning specified in Section 2.4(d)(1). Definitive Class F Note has the meaning specified in Section 2.1(d). Definitive Class F Note Transfer Certificate has the meaning specified in Section 2.4(d)(1). Definitive Income Notes means Income Notes issued in the form of physical certificates in definitive, fully registered form. Depositary means, with respect to the Rated Notes issued in the form of one or more Global Notes, the Person designated as Depositary pursuant to Section 2.2(e), or any successor thereto, appointed pursuant to the applicable provisions of this Indenture. Depositary Participant means a broker, dealer, bank or other financial institution or other Person for whom from time to time the Depositary effects book-entry transfers and pledges of notes deposited with the Depositary. Distribution means any payment of principal, interest or fee or any dividend or premium payment made on, or any other distribution in respect of, an obligation or security. Dollar or U.S.$ means currency of the United States as at the time shall be legal tender for all debts, public and private. Double B Excess Percentage means, on any Measurement Date, the greater of (a) zero; and (b) (i) the aggregate Principal Balance of all Collateral Debt Securities with an S&P Rating lower than BBB- and higher than B+ (expressed as a percentage of the CDS Principal Balance) minus (ii) 18%. Double B Principal Coverage Adjustment Percentage means, on any Measurement Date, the greater of (a) zero; and (b) (i) the Double B Excess Percentage minus (ii) 5%. DTC means The Depository Trust Company, a New York corporation, and its nominees and their respective successors. Due Date means each date on which a Distribution is due on a Pledged Security. Due Period means, with respect to each Payment Date, the period beginning on the day following the last day of the preceding Due Period relating to the preceding Payment Date (or, in the case of the Due Period that is applicable to the first Payment Date, beginning on the Closing Date) and ending at the close of business on the fourth (4th) Business Day preceding such Payment Date. Effective Date means the date that is the earliest of (i) the 90th day following the Closing Date, (ii) the date on which the Issuer has purchased Collateral Debt Securities, excluding Temporary Ramp-Up Securities, having an aggregate par amount of U.S.$500,000,000 or (iii) such earlier date (if any) that is designated by the Collateral Advisor by notice to the Trustee under the Indenture; provided that the Collateral Advisor has received Rating Agency Confirmation on such date; provided, further, that in the event that such day does not fall on a Business Day, the Effective Date shall be the next succeeding Business Day. Eligibility Criteria has the meaning specified in Section 12.2. 22

Processed and formatted by SEC Watch - Visit SECWatch.com

Eligible Investments means any U.S. dollar denominated investment that, at the time it is delivered to the Trustee, is one or more of the following obligations or securities, including, without limitation, those investments for which the Trustee or an Affiliate of the Trustee provides services: (i)

cash;

(ii)

direct Registered obligations of, and Registered obligations the timely payment of principal of and interest on which is fully and expressly guaranteed by, the United States of America, or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America;

(iii)

demand and time deposits in, interest bearing trust accounts and certificates of deposit of, bankers’ acceptances issued by, or federal funds sold by any depository institution or trust company (including the Trustee) incorporated under the laws of the United States of America or any state thereof and subject to the supervision and examination by federal and/or state banking authorities so long as the commercial paper and/or debt obligations of such depository institution or trust company (or, in the case of the principal depository institution in a holding company system, the commercial paper or debt obligations of such holding company) at the time of such investment or contractual commitment providing for such investment have a credit rating of: (a)

in the case of long-term debt obligations, not less than “AA+” by S&P; or

(b)

in the case of commercial paper and short-term debt obligations including time deposits, “A-1” by S&P (provided that, in the case of commercial paper and short-term debt obligations with a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment a long-term credit rating of not less than “AA+” by S&P);

(iv)

Registered securities other than mortgage-backed securities bearing interest or sold at a discount issued by any corporation under the laws of the United States of America or any state thereof that have a credit rating of “AA+” by S&P at the time of such investment or contractual commitment providing for such investment;

(v)

unleveraged repurchase obligations (if treated as debt for tax purposes by the issuer) with respect to any security described in clause (ii) above, entered into with a depository institution or trust company (acting as principal) described in clause (iii) or entered into with broker-dealers registered with the Commission (acting as principal) whose short-term debt has a credit rating of “A-1+” by S&P at the time of such investment in the case of any repurchase obligation for a security having a maturity not more than 183 days from the date of its issuance or whose long-term debt has a credit rating of at least “AA+” by S&P at the time of such investment in the case of any repurchase obligation for a security having a maturity more than 183 days from the date of its issuance;

(vi)

commercial paper or other short-term obligations having at the time of such investment a credit rating of (a) (1) “F1” by Fitch and that have a maturity of not more than thirty (30) days from its date of issuance or (2) “F1+” by Fitch and that have a maturity of more than thirty (30) days but less than one year from its date of issuance and (b) “A-1+” by Standard & Poor’s that are registered and are either bearing interest or are sold at a discount from the face amount thereof and that have a maturity of not more than 183 days from its date of issuance; provided that in the case of commercial paper with a maturity of longer than 91 days, the issuer of such commercial paper (or, in the case of a principal depository institution in a holding company system, the 23

Processed and formatted by SEC Watch - Visit SECWatch.com

holding company of such system), if rated by the Rating Agencies, must have at the time of such investment a long-term credit rating of at least “AA+” by S&P; (vii)

money market funds with respect to any investments described in clauses (ii) through (vi) above having, at the time of such investment, a credit rating of not less than “AAA/AAAm/AAAm-G” by S&P (if such funds are rated by S&P), respectively (including those for which the Trustee is investment manager or advisor), provided that such fund or vehicle is formed and has its principal office outside the United States; and

(viii)

any other investments approved in writing by the Rating Agencies;

provided that (a) Eligible Investments purchased with funds in the Collection Account will be held until maturity except as otherwise specifically provided herein and will include only such obligations or securities as mature no later than the Business Day prior to the Payment Date next succeeding the date of investment in such obligations or securities, unless such Eligible Investments are investments of the type described in clause (i) or (iii) above, in which event such Eligible Investments may mature on such Payment Date and (b) none of the foregoing obligations or securities will constitute Eligible Investments if all, or substantially all, of the remaining amounts payable thereunder will consist of interest and not principal payments, if such security is purchased at a price in excess of 100% of par, if such security is subject to substantial non-credit related risk, as determined by the Collateral Advisor in its judgment, if any income from or proceeds of disposition of the obligation or security is or will be subject to deduction or withholding for or on account of any withholding or similar tax or the acquisition (including the manner of acquisition), ownership, enforcement or disposition of the obligation or security will subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation, if such security has an assigned rating with an “r”, “t”, “p”, “pi” or “q” subscript, if such security is a mortgage-backed security or if such security is subject to an Offer. Eligible SPV Jurisdiction means Bahamas, Bermuda, the Cayman Islands, the Channel Islands, the Netherlands Antilles, Luxembourg or any other similar jurisdiction (so long as Rating Agency Confirmation is obtained in connection with the inclusion of such other jurisdiction) generally imposing either no or nominal taxes on the income of companies organized under the laws of such jurisdiction. Emerging Market Issuer means a sovereign or non-sovereign issuer located in a country that is in .Latin America, Asia, Africa, Eastern Europe or the Caribbean or in a country the dollar-denominated sovereign debt obligations of which are rated lower than “AA” by S&P and lower than “AA” by Fitch; provided that an issuer of Asset-Backed Securities located in any Eligible SPV Jurisdiction shall not be an Emerging Market Issuer for purposes hereof if the underlying collateral of such Asset-Backed Securities consists solely of obligations of obligors located in the United States and Qualifying Foreign Obligors. Entitlement Holder has the meaning specified in Section 8-102(a)(7) of the UCC. Entitlement Order has the meaning specified in Section 8-102(a)(8) of the UCC. Equity Security means any security that does not entitle the holder thereof to receive periodic payments of interest and one or more installments of principal acquired by the Issuer as a result of the exercise or conversion of Collateral Debt Securities, in conjunction with the purchase of Collateral Debt Securities or in exchange for a Collateral Debt Security. ERISA means the U.S. Employee Retirement Income Security Act of 1974, as amended. Euroclear means Euroclear Bank S.A/N.V., as operator of the Euroclear system. 24

Processed and formatted by SEC Watch - Visit SECWatch.com

Event of Default has the meaning specified in Section 5.1. Excepted Property means the U.S.$1,000 of capital contributed to the Issuer in respect of the Issuer’s Ordinary Shares in accordance with the Articles and U.S.$1,000 representing a profit fee to the Issuer. Exchange Act means the United States Securities Exchange Act of 1934, as amended. Expense Reserve Account means the Securities Account designated the “Expense Reserve Account” and established in the name of the Trustee pursuant to Section 10.6. Fee Basis Amount means an amount equal, for any Payment Date, to the average of the aggregate CDS Principal Balance (excluding the aggregate Principal Balance of Defaulted Securities) on the first day of the related Due Period and the aggregate CDS Principal Balance (excluding the aggregate Principal Balance of Defaulted Securities) on the last day of such Due Period. Financial Asset has the meaning specified in Section 8-102(a)(9) of the UCC. Financing Statement means a financing statement relating to the Collateral naming the Issuer as debtor and the Trustee on behalf of the Secured Parties as secured party. Fitch means Fitch, Inc. and any successor or successors thereto. Fitch Industry Classification Group means any of the Fitch industrial classification groups as set forth on Schedule I and any additional classification groups established by Fitch with respect to the Collateral Debt Securities and provided, in each case, by the Collateral Advisor or Fitch to the Trustee. Fitch Rating with respect to any Collateral Debt Security, for determining the Fitch Rating as of any date of determination: (i)

if such Collateral Debt Security is rated by Fitch, the Fitch Rating shall be such rating as published in any publicly available source;

(ii)

if such Collateral Debt Security is not rated by Fitch, or the Fitch Rating cannot be determined by the method in clause (i) above, and a rating is publicly available from both S&P and Moody’s, the Fitch Rating shall be the lower of such ratings; and if a rating is publicly available from only one of S&P and Moody’s, the Fitch Rating shall be the equivalent of such rating by S&P or Moody’s, as the case may be; and

(iii)

in all other circumstances, the Fitch Rating shall be the private rating assigned by Fitch upon request of the Collateral Advisor;

provided that (a) if such Collateral Debt Security has been put on rating watch negative for possible downgrade by any Rating Agency, then the rating used to determine the Fitch Rating under either of clauses (i) or (ii) above shall be one (1) rating subcategory below such rating by that Rating Agency, (b) if such Collateral Debt Security has been put on rating watch positive for possible upgrade by any Rating Agency, then the rating used to determine the Fitch Rating under either of clauses (i) or (ii) above shall be one rating subcategory above such rating by that Rating Agency and (c) notwithstanding the rating definition described above, Fitch reserves the right to issue a rating estimate for any Collateral Debt Security at any time. 25

Processed and formatted by SEC Watch - Visit SECWatch.com

Fitch Rating Factor means, for the purpose of computing the Fitch Weighted Average Rating Factor, with respect to any Collateral Debt Security or Eligible Investment on any relevant date, the number set forth in the table below opposite the Fitch Rating of such Collateral Debt Security or Eligible Investment: Fitch Ratin g

AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+

Fitch Ratin g Factor

Fitch Ratin g

Fitch Ratin g Factor

.019 .057 .089 1.15 1.65 1.85 2.44 3.13 3.74 7.26 10.18

BB BBB+ B BCCC+ CCC CC C DDD-D

13.53 18.46 22.84 27.67 34.98 43.36 48.52 77.00 95.00 100.00

Fitch Weighted Average Rating Factor means the number determined on any Calculation Date by dividing (i) the summation of the series of products obtained (a) for any Collateral Debt Security that is not a Defaulted Security or Deferred Interest PIK Bond, by multiplying (1) the Principal Balance on such Calculation Date of each such Collateral Debt Security by (2) its respective Fitch Rating Factor on such Calculation Date and (b) for any Defaulted Security or Deferred Interest PIK Bond, by multiplying (1) the Applicable Recovery Rate for such Defaulted Security or Deferred Interest PIK Bond by (2) the Principal Balance on such Calculation Date of each such Defaulted Security or Deferred Interest PIK Bond by (3) its respective Fitch Rating Factor on such Calculation Date by (ii) the sum of (a) the aggregate Principal Balance on such Calculation Date of all Collateral Debt Securities and Eligible Investments that are not Defaulted Securities or Deferred Interest PIK Bonds, plus (b) the summation of the series of products obtained by multiplying (1) the Applicable Recovery Rate for each Defaulted Security or Deferred Interest PIK Bond by (2) the Principal Balance on such Calculation Date of such Defaulted Security or Deferred Interest PIK Bond, and rounding the result up to the nearest whole number. Five Percent Limit means the maximum cumulative amount that is allowed to be reinvested in Substitute Collateral Debt Securities with Sale Proceeds received in the manner specified in Section 12.1(b) and which amount cannot exceed 5% of the CDS Principal Balance as of the Effective Date. Fixed Rate Collateral Debt Security means any Collateral Debt Security which bears a fixed rate of interest. Fixed Rate 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 zero and the excess, if any, of the Weighted Average Fixed Rate Coupon for such Measurement Date over 5.80%, and (b) the aggregate Principal Balance of all Collateral Debt Securities that are Fixed Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities, Deferred Interest PIK Bonds and Deemed Floating Rate Collateral Debt Securities) and the denominator of which is the aggregate Principal Balance of all Collateral Debt Securities that are Floating Rate Collateral Debt Securities or Deemed Floating Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities and Deferred Interest PIK Bonds). Fixed Rate Notes means, collectively, the Class C Notes, the Class D Notes and the Class F Notes. 26

Processed and formatted by SEC Watch - Visit SECWatch.com

Floating Rate Collateral Debt Security means any Collateral Debt Security that bears interest based upon a floating rate index. Floating Rate Notes means, collectively, the Class A Notes, the Class B Notes and the Class E Notes. Form-Approved Hedge Agreement means a Hedge Agreement relating to a specific Hedge Counterparty with respect to which (a) the related Collateral Debt Security could be purchased by the Issuer without any required action by the Rating Agencies and (b) the documentation of which conforms in all material respects to a form for such Hedge Counterparty which does not require Rating Agency Confirmation (as certified to the Trustee by the Collateral Advisor, following receipt of confirmation by the Collateral Advisor from the Hedge Counterparty and the Rating Agencies); provided that (i) such Form-Approved Hedge Agreement shall not provide for any upfront payments to be made to any Hedge Counterparty (other than the Initial Hedge Counterparty), (ii) any revised Form-Approved Hedge Agreement with respect to a particular Hedge Counterparty shall be approved by each of the Rating Agencies at least 10 days prior to the initial use thereof, (iii) any Rating Agency may withdraw its consent to the use of a particular Form-Approved Hedge Agreement by written notice to the Trustee, the Collateral Advisor and the relevant Hedge Counterparty (provided that such withdrawal of consent shall not affect any existing Hedge Agreement entered into with such Hedge Counterparty) and (iv) the Issuer (or the Collateral Advisor on its behalf) shall deliver to the Trustee and each Rating Agency a copy of each Form-Approved Hedge Agreement specifying the Hedge Counterparty to which it relates upon receipt of Rating Agency Confirmation with respect thereto, and the Trustee’s records (when taken together with any correspondence received from the Rating Agencies pursuant to clause (ii)) shall be conclusive evidence of such form. Four-Month Period means, at any time during the Reinvestment Period, the period of four (4) months following the earliest date as of which the number of Key Managers that are employed on a substantially full-time basis in the position of managing director or other managementlevel employee by the Collateral Advisor (or any of its successors or assigns permitted pursuant to Section 16 of the Collateral Advisory Agreement) becomes less than two. GAAP has the meaning specified in Section 6.3(k). Global Notes means the Rule 144A Global Notes and the Regulation S Global Notes. Grant means to grant, bargain, sell, warrant, alienate, remise, demise, release, convey, assign, transfer, mortgage, pledge, create and grant a security interest in and right of set-off against, deposit, set over and confirm. A Grant of the Pledged Securities, or of any other instrument, shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate continuing right to claim for, collect, receive and receipt for principal, interest and fee payments in respect of the Pledged Securities or such other instruments, and all other amounts payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto. Hedge Agreement means the interest rate protection agreement, as amended from time to time, together with any replacement hedge agreement on substantially identical terms (or that otherwise satisfies the conditions of Section 16.1(d)), entered into pursuant to Section 16.1 or a Deemed Floating Asset Hedge. The Hedge Agreement shall provide that any amount payable to the Hedge Counterparty thereunder shall be subject to the Priority of Payments and that any amount payable upon the early termination or liquidation thereof shall be payable only on a Payment Date in accordance with the Priority of Payments. 27

Processed and formatted by SEC Watch - Visit SECWatch.com

Hedge Counterparty means (a) with respect to the initial Hedge Agreement entered into on the Closing Date, the Initial Hedge Counterparty, (b) any hedge counterparty (or any permitted assignee or successor) under a Hedge Agreement that satisfies the Hedge Counterparty Ratings Requirement and (c) any substitute or additional parties therefore appointed in accordance with Section 16.1(d) or Section 16.1(e). Hedge Counterparty Collateral Account means each Securities Account designated the “Hedge Counterparty Collateral Account” and established in the name of the Trustee pursuant to Section 16.1(f). Hedge Counterparty Ratings Requirement means, with respect to any Hedge Ratings Determining Party: (a) either (i) both (x) the short-term rating of such Hedge Ratings Determining Party by Fitch is not lower than “Fl” and (y) the long-term rating of such Hedge Ratings Determining Party by Fitch is not withdrawn, suspended or downgraded below “A” or is “A” and has been placed and is not remaining on credit watch with negative implications or (ii) if such Hedge Ratings Determining Party has no short-term rating from Fitch, the long-term rating by Fitch of such Hedge Ratings Determining Party is at least “A” and (b) either (i) the short-term rating of such Hedge Ratings Determining Party is not lower than “A-1” by S&P or (ii) if such Hedge Ratings Determining Party does not have a short-term rating from S&P, the longterm rating of such Hedge Ratings Determining Party by S&P is not lower than “A+”. Hedge Payment Amount means, with respect to the Hedge Agreement and any Payment Date, the amount, if any, then payable by the Issuer to the Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement. Hedge Ratings Determining Party means (a) unless clause (b) applies with respect to the Hedge Agreement, the Hedge Counterparty or any transferee thereof or (b) any Affiliate of the Hedge Counterparty or any transferee thereof that unconditionally and absolutely guarantees (with the form of such guarantee meeting S&P’s then-current published criteria with respect to guarantees) the obligations of the Hedge Counterparty or such transferee, as the case may be, under the Hedge Agreement. For the purpose of this definition, no direct or indirect recourse against one or more shareholders of the Hedge Counterparty or any such transferee (or against any Person in control of, or controlled by, or under common control with, any such shareholder) shall be deemed to constitute a guarantee, security or support of the obligations of the Hedge Counterparty or any such transferee. Hedge Receipt Amount means, with respect to the Hedge Agreement and any Payment Date, the amount, if any, then payable to the Issuer by the Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement. Highest Auction Price means, in connection with a Redemption, the bid or bids for the Collateral Debt Securities resulting in the highest auction price of one or more Subpools of Collateral Debt Securities. Holder means (i) with respect to any Rated Note, any Rated Noteholder and (ii) with respect to any Income Note, any Income Noteholder, as the context may require. Income Note Distribution Account means the account designated the “Income Note Distribution Account” and established by the Income Note Paying Agent in the name of the Income Note Paying Agent for the benefit of the Issuer pursuant to the Income Note Paying Agency Agreement. Income Note Excess Funds means all remaining Collateral Interest Collections and Collateral Principal Collections as set forth in Section 11.1(a)(26) and 11.1(b)(20). 28

Income Note Paying Agency Agreement means that certain Income Note Paying Agency Agreement, dated as of September 22, 2005, as the same may be amended or supplemented from time to time, among the Issuer, the Income Note Paying Agent and the Income Note Registrar. Income Note Paying Agent means LaSalle Bank National Association, and any successors or assigns in its capacity as Income Note Paying Agent under the Income Note Paying Agency Agreement. Income Note Paying Agent Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by, or otherwise owing to, the Income Note Paying Agent during the preceding Due Period in accordance with the Income Note Paying Agency Agreement. Income Note Paying Agent Fee means, with respect to any Payment Date, the fee payable to the Income Note Paying Agent in an aggregate amount equal to U.S.$10,000 per annum. Income Note Placement Agent means Banc of America Securities LLC. Income Note Placement Agreement means the agreement, dated as of the Closing Date, among the Co-Issuers and the Income Note Placement Agent relating to the placement of the Income Notes. Income Note Redemption Approval Condition means, in connection with a Tax Redemption at the direction of the Controlling Class and an Auction Call Redemption, the requirement that, unless and to the extent the Holders of 662/3 % of the aggregate principal amount of the

Processed and formatted by SEC Watch - Visit SECWatch.com

Outstanding Income Notes have waived payment in full of the aggregate principal amount of the Income Notes, the Income Noteholders receive in connection with such Tax Redemption or Auction Call Redemption an amount equal to (x) the Income Notes Stated Amount minus (y) the aggregate amount of all cash distributions on the Income Notes (whether in respect of distributions or redemption payments made to the Income Note Paying Agent for distribution to the Income Noteholders) on or prior to the relevant Auction Date. Income Note Register means, with respect to the Income Notes, the Income Note Register maintained by the Income Note Registrar. Income Note Registrar means LaSalle Bank National Association, and any successors or assigns in its capacity as Income Note Registrar under the Income Note Paying Agency Agreement. Income Noteholder means, with respect to any Income Note, the Person in whose name such Income Note is registered in the Income Note Register. Income Notes means the U.S.$20,750,000 Income Notes Due 2045. Income Notes Stated Amount means U.S.$20,750,000. Indenture means this instrument and, if from time to time supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, as so supplemented or amended. Independent means, as to any Person, any other Person (including, in the case of an accountant, or lawyer, a firm of accountants or lawyers and any member thereof) who (i) does not have and is not committed to acquire any material direct or any material indirect financial interest in such Person or in any Affiliate of such Person, (ii) is not connected with such Person as an Officer, employee, promoter, underwriter, voting trustee, partner, director or Person performing similar functions and (iii) if required to deliver an opinion or certificate to the Trustee pursuant to this Indenture, states in such opinion or 29

Processed and formatted by SEC Watch - Visit SECWatch.com

certificate that the signer has read this definition and that the signer is Independent within the meaning hereof. “Independent” when used with respect to any accountant may include an accountant who audits the books of such Person if in addition to satisfying the criteria set forth above the accountant is independent with respect to such Person within the meaning of Rule 101 of the Code of Ethics of the American Institute of Certified Public Accountants. Initial Hedge Counterparty means Bank of America, N.A. under the initial Hedge Agreement and any of its successors, assigns or replacements under the initial Hedge Agreement appointed in accordance with the terms of this Indenture and the initial Hedge Agreement. Initial Payment Date means the Payment Date occurring in December 2005. Instrument has the meaning specified in Section 9-102(a)(47) of the UCC. Interest Coverage Amount means, as of any Measurement Date, an amount equal to (i) the amount received or scheduled to be received as Collateral Interest Collections during the related Due Period, less (ii) the amounts scheduled to be paid on the related Payment Date pursuant to Section 11.1(a)(1) through (3) and (to the extent not covered by Section 11.1(a)(1) through (3)) Section 11.1(b)(1) and, for purposes of calculating the Class A/B Interest Coverage Ratio, the Class C Interest Coverage Ratio, the Class D Interest Coverage Ratio, the Class E Interest Coverage Ratio and the Class F Interest Coverage Ratio, any amounts scheduled to be paid to the Interest Reserve Account on the related Payment Date pursuant to Section 11.1(a)(8); provided that (a) following the date on which a Collateral Debt Security becomes a Defaulted Security, scheduled Collateral Interest Collections shall not include any amount scheduled to be received on Defaulted Securities or any amount scheduled to be received on securities that are currently deferring interest until (1) such amounts are actually received in Cash or (2) the cumulative aggregate amounts actually received on a Defaulted Security exceed the Principal Balance of such Defaulted Security, (b) the expected interest income on Floating Rate Collateral Debt Securities and Eligible Investments shall be calculated using the then-current interest rate applicable thereto and (c) with respect to any Written Down Security, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount. Interest Coverage Tests means the Class A/B Interest Coverage Test, the Class C Interest Coverage Test, the Class D Interest Coverage Test, the Class E Interest Coverage Test and the Class F Interest Coverage Test. Interest Only Security means any security that by its terms provides for periodic payments of interest and does not provide for the repayment of a stated principal amount. Interest Period means (i) with respect to the Initial Payment Date, the period from and including the Closing Date to but excluding the Initial Payment Date and (ii) thereafter with respect to each Payment Date, the period beginning on the first day following the end of the preceding Interest Period and ending on (and including) the day before the next Payment Date. Interest Reserve Account means the account established by the Trustee, held in the name of the Trustee for the benefit and on behalf of the Secured Parties and into which the Trustee will deposit, on each Payment Date, the Interest Reserve Amount, if any, in accordance with the Priority of Payments. Interest Reserve Amount means, as of any Calculation Date, the sum of (i) the aggregate Quarterly Pay Security Interest Reserve Amounts and (ii) the aggregate amount of Semi-Annual Pay Security Interest Reserve Amounts. 30

Processed and formatted by SEC Watch - Visit SECWatch.com

Investment Advisers Act means the United States Investment Advisers Act of 1940, as amended. Investment Company Act means the U.S. Investment Company Act of 1940, as amended, and the rules thereunder. Irish Listing Agent means NCB Stockbrokers Limited. Irish Paying Agent means NCB Stockbrokers Limited. Issue means Collateral Debt Securities issued by the same issuer secured by the same collateral pool. Issuer means N-Star Real Estate CDO V Ltd., an exempted company incorporated and existing under the law of the Cayman Islands, unless a successor Person shall have become the Issuer pursuant to the applicable provisions of this Indenture, and thereafter “Issuer” shall mean such successor Person. Issuer Order and Issuer Request mean, respectively, a written order or a written request, which may be in the form of a standing order or request in each case dated and signed in the name of the Issuer (or, as expressly provided herein, the Collateral Advisor on its behalf) by an Authorized Officer of the Issuer (or, as expressly provided herein, the Collateral Advisor) and (if appropriate) the Co-Issuer, as the context may require or permit. Key Manager means any of David T. Hamamoto, Jean-Michel (Mitch) Wasterlain, Andrew L. Solomon or any such other additional person as may be appointed Key Managers in accordance with the Collateral Advisory Agreement (or if David T. Hamamoto, Jean-Michel (Mitch) Wasterlain, Andrew L. Solomon or any such additional Key Managers have been replaced with one or more Approved Replacement Persons, such Approved Replacement Persons). Key Manager Event means any of the following: (a) the failure by the Collateral Advisor to propose a replacement Key Manager within the applicable Four-Month Period, (b) the failure by the Collateral Advisor, within the Four-Month Period, to propose a different replacement Key Manager following receipt of a Controlling Class Objection or (c) the receipt of another Controlling Class Objection within ten (10) Business Days after delivery of such a proposal for a different replacement Key Manager to the Holders of the Notes of the Controlling Class. LIBOR means, with respect to each Interest Period (other than the first Interest Period), a floating rate equal to the London interbank offered rate for one-month U.S. Dollar deposits determined in the manner described in Schedule B. LIBOR for the first Interest Period will be determined on the second London Banking Day prior to the Closing Date. LIBOR Calculation Date has the meaning specified in Schedule B. Listed Bidders has the meaning specified in Schedule E. London Banking Day has the meaning specified in Schedule B. Majority means (a) with respect to any Class or Classes of Rated Notes, the Holders of more than 50% of the Aggregate Outstanding Amount of the Rated Notes of such Class or Classes of Rated Notes, as the case may be and (b) with respect to Income Notes, the Holders of more than 50% Income Notes Stated Amount. 31

Processed and formatted by SEC Watch - Visit SECWatch.com

Margin Stock means “margin stock” as defined under Regulation U issued by the Board of Governors of the Federal Reserve System. Market Value means, on any date of determination, the average of three or more bid-side prices expressed as a percentage of the par amount, obtained from independent, nationally recognized financial institutions in the relevant market for one or more Collateral Debt Securities, each unaffiliated with each other and the Collateral Advisor, as certified by the Collateral Advisor (to the extent that such bid-side prices may be obtained by the Collateral Advisor using its commercially reasonable efforts and commercially reasonable business judgment). If three or more bid-side prices cannot be so obtained, then the Market Value on such date of determination will be the lower of two bid-side prices, if two bidside prices are obtained in the manner described above, and the sole bid-side price if only one bid-side price is obtained in the manner described above. If no bids can be obtained in the manner described above, the Market Value will be (1) in respect of an amount equal to not greater than 7.5% of the Principal Balance of the Proposed Portfolio, the price, expressed as a percentage of the par amount, determined by the Collateral Advisor in its commercially reasonable judgment or (2) the S&P Recovery Rate with respect to such Collateral Debt Security, to the extent not calculated pursuant to clause (1) above. Measurement Date means any of the following: (a) the Effective Date; (b) any date after the Effective Date upon which the Issuer disposes or acquires (which date of acquisition shall be deemed to be the date on which the Issuer enters into commitments to acquire such Collateral Debt Security) any Collateral Debt Security; (c) each Calculation Date; (d) the last Business Day of each calendar month (other than the calendar month preceding the month in which a Calculation Date occurs and any calendar month prior to and including the month in which the Effective Date occurs); and (e) with reasonable notice to the Issuer, the Collateral Advisor and the Trustee, any other Business Day that any Rating Agency or Holders of more than 50% of the then Aggregate Outstanding Amount of any Class of Rated Notes requests to be a “Measurement Date”; 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 day that is a Business Day. Mezzanine Loans means mezzanine loans secured by ownership interests in entities owning commercial properties. Moneyline Telerate Page 3750 means the display page so designated on Moneyline Telerate Service (or such other page as may replace that page on that service, or such other service as may be nominated as the information vendor, for the purposes of displaying rates comparable to LIBOR). Monitoring Fee means, with respect to each Payment Date, an amount equal to 0.10% per annum of the Fee Basis Amount payable to the Collateral Advisor pursuant to the Collateral Advisory Agreement. Moody’s means Moody’s Investors Service, Inc. and any successor or successors thereto. Morgan Stanley means Morgan Stanley & Co. Incorporated. Note Downgrade Event means any (i) reduction of the Fitch Rating of the Class A Notes to one or more categories below the Fitch Rating assigned to such Notes on the Closing Date or (ii) reduction of the Fitch Rating of the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes or the Class F Notes to two or more categories below the Fitch Rating assigned to such Class of Notes on the Closing Date. Note Paying Agent means any Person authorized by the Issuer to pay the principal of or interest on any Rated Notes on behalf of the Issuer as specified in Section 7.2. Note Register and Note Registrar have the respective meanings specified in Section 2.4(a). 32

Processed and formatted by SEC Watch - Visit SECWatch.com

Note Transfer Agent has the meaning specified in Section 2.4(a). Note Valuation Report has the meaning specified in Section 10.10(a). Notes means the Rated Notes and the Income Notes. Offer means, with respect to any security, (a) any offer by the issuer of such security or by any other Person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related Underlying Instruments) or to convert or exchange such security into or for Cash, securities or any other type of consideration or (b) any solicitation by the issuer of such security or any other Person to amend, modify or waive any provision of such security or any related Underlying Instrument. Offering means the offering of the Rated Notes and the Income Notes under the Offering Circular. Offering Circular means the Offering Circular, prepared and delivered on or prior to the Closing Date in connection with the offer and sale of the Rated Notes and the Income Notes, as amended or supplemented from time to time. Officer means, (a) with respect to the Issuer, the Co-Issuer and any corporation, the Chairman of the Board of Directors (or, with respect to the Issuer, any director), the President, any Vice President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of such entity; and (b) with respect to any bank or trust company acting as trustee of an express trust or as custodian, any Trust Officer. Opinion of Counsel means a written opinion addressed to the Trustee and each Rating Agency (each, a Recipient), in form and substance reasonably satisfactory to each Recipient, of an attorney at law admitted to practice before the highest court of any state of the United States or the District of Columbia (or the Cayman Islands, in the case of an opinion relating to the laws of the Cayman Islands), which attorney may, except as otherwise expressly provided in this Indenture, be inside or outside counsel for the Issuer or the Co-Issuer, as the case may be, and which attorney shall be reasonably satisfactory to the Trustee. Whenever an Opinion of Counsel is required hereunder, such Opinion of Counsel may rely on opinions of other counsel who are so admitted and so satisfactory which opinions of other counsel shall accompany such Opinion of Counsel and shall either be addressed to each Recipient or shall state that each Recipient shall be entitled to rely thereon. Optional Redemption has the meaning specified in Section 9.1(a). Ordinary Shares means the 1,000 ordinary shares, par value U.S.$1.00 per share issued by the Issuer. Outstanding means with respect to the Notes as of any Measurement Date, any and all Notes theretofore authenticated and delivered under the Indenture and the Income Note Paying Agency other than Notes cancelled, redeemed, exchanged or replaced in accordance with the terms of the Indenture or the Income Note Paying Agency Agreement, as applicable; provided that in determining whether the Holders of the requisite percentage of Notes have given any direction, notice, consent, approval or objection, any Notes held or beneficially owned by the Collateral Advisor or any of its Affiliates or by an account or fund for which the Collateral Advisor or any of its Affiliates acts as the investment advisor with discretionary authority will be disregarded with respect to any vote or consent relating to the removal, termination, substitution or replacement of the Collateral Advisor or the assignment by the Collateral Advisor of its rights and obligations under the Collateral Advisory Agreement, except for any assignments or transfers 33

Processed and formatted by SEC Watch - Visit SECWatch.com

by the Collateral Advisor of its rights and obligations to Affiliates of the Collateral Advisor, subject to any applicable requirements under the Investment Advisers Act. Paying Agents means, collectively, the Note Paying Agent and the Income Note Paying Agent. Payment Account means the Securities Account designated the “Payment Account” and established in the name of the Trustee pursuant to Section 10.8. Payment Date means the 22nd day of each calendar month, or if such day is not a Business Day, the next succeeding Business Day, commencing in December 2005 and ending in September 2045 or such earlier date upon which all of the Notes are redeemed as provided herein. Periodic Interest means the amount of interest payable (i) in respect of each Class of Floating Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of business on the day immediately preceding the relevant Payment Date, multiplying the resulting figure by the actual number of days in such Interest Period, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards), and (ii) in respect of each Class of Fixed Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of the Business Day immediately preceding the relevant Payment Date, multiplying the resulting figure by (a) for the first Interest Period, ninety-one (91) days, and (b) for every other Interest Period, 30 days, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards). Permitted NS Purchaser means (i) NS CDO Holdings V, LLC or (ii) NS Advisors, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act. Person means any individual, corporation, partnership, limited liability partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof or any similar entity. PIK Bond means any security that, pursuant to the terms of the related Underlying Instruments, permits the payment of interest thereon to be deferred or capitalized as additional principal thereof or not pay interest when scheduled (but without being a Defaulted Security) or that issues identical securities in lieu of payments of interest in Cash. Placement Agents means, collectively, the Rated Note Placement Agents and the Income Note Placement Agent. Placement Agreements means, collectively, the Rated Note Placement Agreement and the Income Note Placement Agreement. Pledged Collateral Debt Security means as of any date of determination, any Collateral Debt Security that has been Granted to the Trustee and has not been released from the lien of this Indenture pursuant to Section 10.11. Pledged Securities means on any date of determination, (a) the Collateral Debt Securities, Temporary Ramp-Up Securities, Equity Securities and the Eligible Investments that have been Granted to the Trustee 34

Processed and formatted by SEC Watch - Visit SECWatch.com

and (b) all non-Cash proceeds thereof, in each case, to the extent not released from the lien of this Indenture pursuant hereto. Principal Balance means, with respect to any Collateral Debt Security or Eligible Investment, as of any date of determination, the outstanding principal amount of such Collateral Debt Security or Eligible Investment; provided that the Principal Balance of (i) any Collateral Debt Security which permits the deferral or capitalization of interest will not include any outstanding balance of the deferred and/or capitalized interest, (ii) any Equity Security will be zero, (iii) any putable Collateral Debt Security which matures after the Stated Maturity Date will be the lower of the put price and the outstanding principal amount and (iv) any Collateral Debt Security or Eligible Investment in which the Trustee does not have a first priority perfected security interest shall be deemed to be zero. Principal Coverage Amount means, on any Measurement Date, an amount equal to (i) the aggregate Principal Balance of all Collateral Debt Securities (other than Defaulted Securities, Written Down Securities and Deferred Interest PIK Bonds) included in the Collateral on such date, plus (ii) the aggregate Principal Balance of the Eligible Investments in the Collateral Account on such date that represent Collateral Principal Collections, plus (iii) the Defaulted Securities Amount, plus (iv) with respect to Written Down Securities, the Reduced Principal Balance, plus (v) the Deferred Interest PIK Bond Amount, minus, if the aggregate Principal Balance of all Collateral Debt Securities with an S&P Rating lower than “BBB-” and higher than “CCC+” (expressed as a percentage of the CDS Principal Balance) exceeds 33%, (vi) the product of (a) the aggregate Principal Balance of all Collateral Debt Securities, (b) the Double B Principal Coverage Adjustment Percentage and (c) 10%, minus, if the aggregate Principal Balance of all Collateral Debt Securities with an S&P Rating lower than “BBB-” and higher than “CCC+” (expressed as a percentage of the CDS Principal Balance) exceeds 33% and (vii) the product of (a) the aggregate Principal Balance of all Collateral Debt Securities, (b) the Single B Principal Coverage Adjustment Percentage and (c) 20%; provided that if the aggregate Principal Balance of all Collateral Debt Securities and Written Down Securities at their Reduced Principal Balance (other than Defaulted Securities and Deferred Interest PIK Bonds) that have an S&P Rating lower than “BB-” but greater than or equal to “B-”, exceeds 7% of the CDS Principal Balance, the aggregate Principal Balance of such Collateral Debt Securities and Written Down Securities at their Reduced Principal Balance in excess of 7% of the CDS Principal Balance shall be included at 70% of such aggregate Principal Balance; provided further that any Collateral Debt Security and Written Down Security carried at its Reduced Principal Balance (other than any Defaulted Security or any Deferred Interest PIK Bond) that has a Rating of “CCC+” or lower shall be included at 60% of its Principal Balance. Principal Coverage Ratios means the Class A/B Principal Coverage Ratio, the Class C Principal Coverage Ratio, the Class D Principal Coverage Ratio, the Class E Principal Coverage Ratio and the Class F Principal Coverage Ratio. Principal Coverage Tests means the Class A/B Principal Coverage Test, the Class C Principal Coverage Test, the Class D Principal Coverage Test, the Class E Principal Coverage Test and the Class F Principal Coverage Test. Principal Prepayments means, following any failure of any Coverage Test as of any Calculation Date, amounts that would otherwise be used (i) for payments of Income Note Excess Funds, (ii) for the purchase of additional Collateral Debt Securities, (iii) for the payment of certain fees and expenses, (iv) in the case of a failure to satisfy either the Class A/B Interest Coverage Test or the Class A/B Principal Coverage Test, for interest payments on the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes, (v) in the case of a failure to satisfy either the Class C Interest Coverage Test or the Class C Principal Coverage Test, for interest payments on the Class D Notes, the Class E Notes and the Class F Notes, (vi) in the case of a failure to satisfy either the Class D Interest Coverage Test or the Class D 35

Processed and formatted by SEC Watch - Visit SECWatch.com

Principal Coverage Test, for interest payments on the Class E Notes and the Class F Notes, (vii) in the case of a failure to satisfy either the Class E Interest Coverage Test or the Class E Principal Coverage Test, for interest payments on the Class F Notes, and (viii) in the case of a failure to satisfy either the Class F Interest Coverage Test or the Class F Principal Coverage Test, for payments of Income Note Excess Funds, that are instead applied on the related Payment Date, in each case to the extent necessary to satisfy such Coverage Test as of the related Calculation Date, to principal payments on each Class of Notes, starting with the most senior Class of Notes then Outstanding, until such Coverage Test is satisfied as of the related Calculation Date or the Notes are paid in full. Priority of Payments means, collectively, the priority of payments specified in Section 11.1(a), (b) and (c) or upon an Event of Default, the priority of payments in connection therewith. Proceeding means any suit in equity, action at law or other judicial or administrative proceeding. Prohibited Asset means any of the following asset types: aircraft lease securities, enhanced equipment trust certificates, structured settlement securities, tobacco settlement securities, manufactured housing securities, 12(b)-1 fee securities, future flow securities, emerging markets securities, sub and re-performing credit card securities, franchise loan securities, market value collateralized debt obligations, collateralized loan obligations or CDO of CDO Securities. Proposed Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Debt Securities and the proceeds of disposition thereof held as Cash, (b) Uninvested Proceeds held as Cash and (c) Eligible Investments purchased with Uninvested Proceeds or the proceeds of disposition of Pledged Collateral Debt Securities resulting from the sale, maturity or other disposition of a Pledged Collateral Debt Security or a proposed purchase of a Collateral Debt Security, as the case may be. Pro Rata Principal Amortization means, with respect to any Payment Date, any payment by the Issuer in respect of the principal of the Notes that is made pursuant to Clause (15)(iii) of Section 11.1(b) on such Payment Date upon compliance with the Special Amortization Pro Rata Condition, to the extent that the amount applied to such payment of principal constitutes (i) Sale Proceeds applied in accordance with the Substitution Criteria or (ii) Collateral Principal Payments applied in accordance with the Replacement Criteria. Purchased Accrued Interest means all payments of interest received, or amounts collected that are attributable to interest received on Collateral Debt Securities and Eligible Investments, to the extent such payments or amounts constitute accrued interest purchased with Collateral Principal Collections except for interest accrued on Collateral Debt Securities prior to the Closing Date. Qualified Bidder List means a list of not less than three Persons that are Independent from one another and the Issuer prepared by the Collateral Advisor and delivered to the Trustee prior to an Auction, as may be amended and supplemented by the Collateral Advisor from time to time upon written notice to the Trustee; provided that (i) the Qualified Bidder List may include the Collateral Advisor as a Qualified Bidder if it is Independent from the other Persons on such list and (ii) any such notice referred to above shall only be effective on any Auction Date if it was received by the Trustee at least two Business Days prior to such Auction Date. Qualified Bidders means the Persons whose names appear from time to time on the Qualified Bidder List. Qualified Institutional Buyer has the meaning given in Rule 144A under the Securities Act. 36

Processed and formatted by SEC Watch - Visit SECWatch.com

Qualified Purchaser means (i) a “qualified purchaser” as defined in Section 2(a)(51) of the Investment Company Act and the rules thereunder, (ii) a “knowledgeable employee” with respect to the Issuer as defined in rule 3c-5 under the Investment Company Act or (iii) a company beneficially owned exclusively by one or more “qualified purchasers” and/or “knowledgeable employees” with respect to the Issuer. Qualifying Foreign Obligor means a corporation, partnership or other entity organized or incorporated under the law of any of Australia, Canada, France, Germany, Ireland, Italy, New Zealand, Sweden, Switzerland or the United Kingdom, so long as the unguaranteed, unsecured and otherwise unsupported long-term Dollar sovereign debt obligations of such country are rated “AA” or better by S&P. Quarterly Pay Security means a security that provides for periodic payments of interest in cash quarterly. Quarterly Pay Security Interest Reserve Amount means, with respect to each Collateral Debt Security that is a Quarterly Pay Security, as of any Calculation Date, the amount equal to (i) the amount of interest received by the Issuer on the most recent payment date with respect to such Quarterly Pay Security multiplied by (ii) (A) three minus the number of months since the most recent payment date with respect to such Quarterly Pay Security (rounded up to the nearest whole number) divided by (B) three; provided that for any Quarterly Pay Security with respect to which no scheduled interest payments remain, the Quarterly Pay Security Interest Reserve Amount shall be zero. Ramp-Up Collateral Debt Security means each additional Collateral Debt Security selected by the Collateral Advisor for purchase by the Issuer and pledged to the Trustee during the Ramp-Up Period. Ramp-Up Criteria means the following criteria which must be met by each Ramp-Up Collateral Debt Security: (i)

such Ramp-Up Collateral Debt Security is not a Real Estate CDO Security;

(ii)

no more than U.S.$30,000,000 in aggregate Principal Balance of Ramp-Up Collateral Debt Securities is rated “BB+” or lower by S&P or “BB+” or lower by Fitch;

(iii)

none of the Ramp-Up Collateral Debt Securities is Rated “B+” or lower by S&P or “B+” or lower by Fitch;

(iv)

no more than U.S.$20,000,000 in aggregate Principal Balance of Ramp-Up Collateral Debt Securities is issued by a single issuer;

(v)

such Ramp-Up Collateral Debt Security is not on the “credit watch negative” watchlist of S&P; and

(vi)

such Ramp-Up Collateral Debt Security is denominated in U.S. Dollars and all cash flows are to be paid in U.S. Dollars.

Ramp-Up Period means the period commencing on the Closing Date and ending on the Effective Date. Rated Note Calculation Agent has the meaning specified in Section 7.15. Rated Note Placement Agent means each of Banc of America LLC and Morgan Stanley & Co. Incorporated. 37

Rated Note Placement Agreement means the agreement, dated as of the Closing Date, among the Co-Issuers and the Rated Note Placement Agents relating to the placement of the Rated Notes. Rated Notes means, collectively, the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes. Rated Noteholder means, with respect to any Rated Note, the Person in whose name such Note is registered; provided that Beneficial Owners or Agent Members will have no rights under the Indenture with respect to Global Notes, and the Rated Noteholder may be treated by the Issuer and the Trustee (and any agent of any of the foregoing) as the owner of such Global Notes for all purposes whatsoever. Rating means, as the context requires, a Fitch Rating or an S&P Rating. Rating Agency means each of (i) Fitch, for so long as any of the Outstanding Rated Notes are rated by Fitch (including any private or confidential rating) and (ii) S&P, for so long as any of the Outstanding Rated Notes are rated by S&P (including any private or confidential rating) or, with respect to Pledged Securities generally, if at any time Fitch or S&P ceases to provide rating services, any other nationally recognized investment rating agency selected by the Issuer (upon consultation with the Collateral Advisor) and reasonably satisfactory to a Majority of each Class of Rated Notes. In the event that at any time Fitch ceases to be a Rating Agency, references to rating categories of Fitch in this Indenture shall be deemed instead to be references to the equivalent categories of such other rating agency as of the most recent date on which such other rating agency and Fitch’s published ratings for the type of security in respect of which such alternative rating agency is used. In the event that at any time S&P ceases to be a Rating Agency, references to rating categories of S&P in this Indenture shall be deemed instead to be references to the equivalent categories of such other rating agency as of the most recent date on which such other rating agency and S&P’s published ratings for the type of security in respect of which such alternative rating agency is used.

Processed and formatted by SEC Watch - Visit SECWatch.com

Rating Agency Confirmation means, with respect to any specified action or determination, for so long as any of the Rated Notes are Outstanding and rated by S&P or Fitch, the receipt of written confirmation by each Rating Agency rating any Rated Notes, that such specified action or determination will not result in the reduction or withdrawal or other adverse action with respect to their then-current ratings on the Rated Notes (including any private or confidential rating) unless Rating Agency Confirmation is specified herein to be required by only S&P or Fitch, in which case such Rating Agency Confirmation will be sufficient. Rating Confirmation has the meaning specified in Section 7.18(e). Rating Confirmation Failure has the meaning specified in Section 7.18(e). Real Estate CDO Securities means securities that entitle the holders thereof to receive payments that depend on the cash flow from or the credit exposure to a portfolio consisting primarily of (i) REIT Debt Securities, (ii) CMBS Securities or (iii) a combination of the foregoing; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the Real Estate CDO Securities such as a financial guaranty insurance policy. Real Estate Interests means interests (other than REIT Debt Securities and Real Estate CDO Securities but including Tenant Lease Loan Interests) that entitle the holders thereof to receive payments that depend primarily on the cash flow from or sale proceeds of mortgage loans on commercial and multifamily properties, including senior and subordinate mortgage loans, participation interests in 38

Processed and formatted by SEC Watch - Visit SECWatch.com

mortgage loans on commercial and multifamily properties, including subordinate interests, mezzanine loans secured by ownership interests in entities owning commercial properties, mortgage loans secured by mortgages on commercial real estate properties that are subject to a lease to a single tenant or trust certificates representing beneficial ownership interests in the foregoing. Record Date means the date on which the Holders of Rated Notes entitled to (i) vote with respect to any matters under the Indenture are determined, such date being the 15th day (whether or not a Business Day) prior to the date the Trustee delivers notice with respect to such vote and (ii) receive a payment in respect of principal or interest on the succeeding Payment Date or Redemption Date are determined, such date as to any Payment Date or Redemption Date being the 15th day (whether or not a Business Day) prior to such Payment Date or Redemption Date. Redemption means an Optional Redemption, an Auction Call Redemption or a Tax Redemption. Redemption Date means the Payment Date upon which the Rated Notes are redeemed pursuant to an Optional Redemption, an Auction Call Redemption or a Tax Redemption. Redemption Date Statement has the meaning specified in Section 10.10(b). Redemption Premium means the premium payable to Holders of each Class of Fixed Rate Notes in connection with an Optional Redemption of such Class of Fixed Rate Notes in an amount equal to the excess, if any, of (i) the present value (discounted to the applicable Redemption Date using the Reinvestment Yield on a monthly basis using a 360-day year of twelve 30-day months as the discount rate) of the remaining payments of interest and principal due on such Class of Fixed Rate Notes, assuming that the entire outstanding principal amount of such Class of Fixed Rate Notes will be paid on the Payment Date occurring in September 2017 and that each intervening payment of interest on such Class of Fixed Rate Notes will be made on the related Payment Date in its entirety (and therefore there is no Defaulted Interest on such Class of Fixed Rate Notes) over (ii) the outstanding principal amount of such Class of Fixed Rate Notes on the applicable Redemption Date. Redemption Price means, (i) with respect to each Class of Rated Notes, (a) their then Aggregate Outstanding Amount plus (b) accrued interest thereon to the date of redemption to the extent not already paid (including, without limitation, any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Periodic Interest Shortfall Amount and Class F Cumulative Applicable Periodic Interest Shortfall Amount) plus (c) in the case of an Optional Redemption only and with respect to any Fixed Rate Notes, the applicable Redemption Premium and (ii) if the Income Notes are redeemed, the “Redemption Price” for the Income Notes, except to the extent the Income Note Redemption Approval Condition applies, means an amount equal to the aggregate of any residual amounts distributable on the Income Notes in respect of such redemption pursuant to Section 11.1(a) and (b) and in any instance where the Income Note Redemption Approval Condition applies, an amount equal to the amounts necessary to satisfy the Income Note Redemption Approval Condition. Redemption Spread means, with respect to the Class C Notes, 0.75%, the Class D Notes, 1.65% and the Class F Notes, 3.50%. Reduced Principal Balance means, with respect to each Written Down Security, the original Principal Balance of such Written Down Security minus the Written Down Amount. Reference Banks has the meaning specified in Schedule B. 39

Processed and formatted by SEC Watch - Visit SECWatch.com

Registered means in registered form for U.S. federal income tax purposes and issued after July 18, 1984; provided that a certificate of interest in a trust that is treated as a grantor trust for U.S. federal income tax purposes will not be treated as Registered unless each of the obligations or securities held by the trust was issued after that date. Registered Form has the meaning specified in Section 8-102(a)(13) of the UCC. Regulation S means Regulation S under the Securities Act. Regulation S Definitive Note has the meaning specified in Section 2.4(c)(1)(vi). Regulation S Global Note has the meaning specified in Section 2.1(a). Regulation S Note has the meaning specified in Section 2.1(a). Regulation S Transfer Certificate has the meaning specified in Section 2.4(c)(1)(iii). 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 Criteria means, with respect to any reinvestment of Collateral Principal Payments, the following criteria: (i)

Each Collateral Principal Payment must be reinvested in one or more Substitute Collateral Debt Securities of the same CPP Asset Type as the Collateral Debt Security on which such Collateral Principal Payment occurred;

(ii)

The spread from a comparable index or security (Spread) of the Substitute Collateral Debt Security may not exceed the Spread of the original Collateral Debt Security on which the applicable Collateral Principal Payment was received as set forth in a schedule provided to the Trustee; provided that in the event Collateral Principal Payments for any CPP Asset Type are comprised of proceeds from multiple Collateral Debt Securities, the Spread of each Substitute Collateral Debt Security may not exceed the Spread of a single Collateral Debt Security on which the Collateral Principal Payments being reinvested were received; and

(iii)

The lowest explicit rating by either Rating Agency of the Substitute Collateral Debt Security must be equal to or higher than the lowest explicit rating by either Rating Agency at purchase by the Issuer of the Collateral Debt Security on which the applicable Collateral Principal Payment was received; provided that in the event that Collateral Principal Payments for any CPP Asset Type are comprised of proceeds from multiple Collateral Debt Securities, the lowest explicit rating by either Rating Agency of each Substitute Collateral Debt Security must be no lower than the lowest explicit rating as of the Effective Date of a single original Collateral Debt Security on which the applicable Collateral Principal Payment was received (or such earlier date, if any, of purchase by the Issuer);

provided, however, that in determining whether the Reinvestment Criteria are satisfied, Collateral Principal Payments on Real Estate Interests bearing interest at a fixed rate shall be treated as though such amounts were Collateral Principal Payments on CMBS Securities that are Fixed Rate Securities and Collateral Principal Payments on Real Estate Interests bearing interest at a floating rate shall be treated as though such amounts were Collateral Principal Payments on CMBS Securities that are Floating Rate Securities. 40

Processed and formatted by SEC Watch - Visit SECWatch.com

Reinvestment Period means the period beginning on the Closing Date and ending and including the Payment Date in September 2010; provided, however that if (i) a Key Manager Event occurs and (ii) the Holders of a majority in aggregate principal amount of the Outstanding Notes of the Controlling Class direct in writing that the Trustee terminate the Reinvestment Period, then the Reinvestment Period shall instead end upon the Trustee’s issuance of written notice of such termination to the Collateral Advisor. Reinvestment Threshold Amount means an amount that equal or exceeds U.S.$5,000,000; provided that for purposes of determining whether the Reinvestment Threshold Amount has been met, Collateral Principal Payments on Real Estate Interests bearing interest at a fixed rate shall be treated as though such amounts were Collateral Principal Payments on CMBS Securities that are Fixed Rate Securities and Collateral Principal Payments on Real Estate Interests bearing interest at a floating rate shall be treated as though such amounts were Collateral Principal Payments on CMBS Securities that are Floating Rate Securities. Reinvestment Trigger Date means any Business Day, prior to the end of the Reinvestment Period, on which the Collateral Advisor directs the Issuer to reinvest Collateral Principal Payments in Substitute Collateral Debt Securities in accordance with the Reinvestment Criteria. Reinvestment Yield means with respect to either class of the Fixed Rate Notes, the rate equal to the sum of the Redemption Spread with respect to such Fixed Rate Note and the applicable yield to maturity implied by (i) the yields reported as of 10:00 a.m. (New York City time) on the tenth Business Day preceding the related Optional Redemption Date on the display page designated as “Page 678” on the Telerate Service (or such other display as may replace Page 678 on the Telerate Service) for actively traded U.S. Treasury securities having a maturity as nearly as practicable equal to the Payment Date occurring in September 2017 or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the tenth Business Day preceding the Optional Redemption Date, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity as nearly as practicable equal to the Payment Date occurring in September 2017. REIT Debt Securities means, collectively, REIT Debt Securities—Diversified, REIT Debt Securities— Health Care, REIT Debt Securities—Hotel, REIT Debt Securities—Industrial, REIT Debt Securities—Mortgage, REIT Debt Securities—Multi-Family, REIT Debt Securities—Office, REIT Debt Securities—Residential, REIT Debt Securities—Retail and REIT Debt Securities—Storage. REIT Debt Securities—Diversified means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of diverse real property interests; provided that any Collateral Debt Security falling within any other REIT Debt Security description set forth herein will be excluded from this definition. REIT Debt Securities—Health Care means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including hospitals, clinics, sport clubs, spas and other health care facilities and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Hotel means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights 41

Processed and formatted by SEC Watch - Visit SECWatch.com

or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including hotels, motels, youth hostels, bed and breakfasts and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Industrial means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including warehouse, industrial and distribution facilities, factories, refinery plants, breweries and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Mortgage means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of mortgages, commercial mortgage-backed securities, collateralized mortgage obligations and other similar mortgage-related securities (including Collateral Debt Securities issued by a hybrid form of such trust that invests in both commercial real estate and commercial mortgages). REIT Debt Securities—Multi-Family means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including multi-family dwellings such as apartment blocks, condominiums and co-operative owned buildings. REIT Debt Securities—Office means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including office buildings, conference facilities and other similar real property interests used in the commercial real estate business. REIT Debt Securities—Residential means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of residential mortgages (other than multi-family dwellings) and other similar real property interests. REIT Debt Securities—Retail means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of regional malls, neighborhood shopping centers, big box centers, retail stores, restaurants, bookstores, clothing stores and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Storage means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) a portfolio of properties including storage facilities and other similar real property interests used in one or more similar businesses. Relevant Jurisdiction means, as to any obligor on any Collateral Debt Security, any jurisdiction (a) in which the obligor is incorporated, organized, managed and controlled or considered to have its seat, 42

Processed and formatted by SEC Watch - Visit SECWatch.com

(b) where an office through which the obligor is acting for purposes of the relevant Collateral Debt Security is located, (c) in which the obligor executes Underlying Instruments or (d) in relation to any payment, from or through which such payment is made. Replacement Criteria means, with respect to any reinvestment of Sales Proceeds in accordance with Section 12.1(b) hereof, the following criteria: (i)

If the Collateral Debt Security being replaced was a REIT Debt Security, then the Substitute Collateral Debt Security must be a REIT Debt Security;

(ii)

If the Collateral Debt Security being replaced was a CMBS Security or a Real Estate Interest, then the Substitute Collateral Debt Security must be a CMBS Security;

(iii)

If the Collateral Debt Security being replaced was a Real Estate CDO Security, then the Substitute Collateral Debt Security must be either a CMBS Security or a REIT Debt Security;

(iv)

The lowest explicit rating of the Substitute Collateral Debt Security must be as good or better than the lowest explicit rating at purchase by the Issuer of the Collateral Debt Security being replaced;

(v)

If the Collateral Debt Security being replaced was a Fixed Rate Collateral Debt Security, the Substitute Collateral Debt Security must be a Fixed Rate Collateral Debt Security;

(vi)

If the Collateral Debt Security being replaced was a Floating Rate Collateral Debt Security, the Substitute Collateral Debt Security must be a Floating Rate Collateral Debt Security;

(vii)

The price of the Substitute Collateral Debt Security must be between 90% and 110% of the original issue price of such Substitute Collateral Debt Security (as determined by the Collateral Advisor), as adjusted to reflect the accretion of any original issue discount or the amortization of any original issue premium calculated on a yield-to-maturity basis;

(viii)

The legal final maturity date of the Substitute Collateral Debt Security must be earlier than that of the Collateral Debt Security being replaced; and

(ix)

The Average Life of the Substitute Collateral Debt Security must be the same or lower than that of the Collateral Debt Security being replaced as of the date of the Issuer’s sale thereof.

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 and maintained by the Bond Market Association. Requisite Noteholders means the Holders of 662/3% or more of the Outstanding aggregate principal amount of (i) the Class A-1 Notes, so long as any Class A-1 Notes remain Outstanding, (ii) thereafter the Class A-2 Notes, so long as any Class A-2 Notes remain Outstanding, (iii) thereafter the Class B Notes so long as any Class B Notes remain Outstanding, (iv) thereafter the Class C Notes so long as any Class C Notes remain Outstanding, (v) thereafter the Class D Notes so long as any Class D Notes remain Outstanding, (vi) thereafter the Class E Notes so long as any Class E Notes remain Outstanding and (vii) thereafter the Class F Notes so long as any Class F Notes remain Outstanding. Reserved Matters has the meaning specified in Section 8.2(j). 43

Processed and formatted by SEC Watch - Visit SECWatch.com

Rule 144A means Rule 144A under the Securities Act. Rule 144A Definitive Note has the meaning specified in Section 2.4(c)(1)(vi). Rule 144A Global Note has the meaning specified in Section 2.1(b). Rule 144A Information means such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto). Rule 144A Note has the meaning specified in Section 2.1(b). Rule 144A Transfer Certificate has the meaning specified in Section 2.4(c)(1)(ii). S&P means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and any successor or successors thereto. S&P CDO Monitor means the dynamic, analytical computer model provided by S&P to the Collateral Advisor and the Trustee (together with such instructions and assumptions as are necessary to run such model) on or prior to the Effective Date used to determine the credit risk of a portfolio of Collateral Debt Securities, as may be modified by S&P from time to time. S&P CDO Monitor Test means the test which is satisfied, as of any Calculation Date, if each of the Class A Note Default Differential, the Class B Note Default Differential, the Class C Note Default Differential, the Class D Note Default Differential, the Class E Note Default Differential and the Class F Note Default Differential of the Current Portfolio or the Proposed Portfolio, as applicable, is positive. The S&P CDO Monitor Test will be considered to be improved if the Class A Note Default Differential of the Proposed Portfolio is greater than the Class A Note Default Differential of the Current Portfolio, the Class B Note Default Differential of the Proposed Portfolio is greater than the Class B Note Default Differential of the Current Portfolio, the Class C Note Default Differential of the Proposed Portfolio is greater than the Class C Note Default Differential of the Current Portfolio, the Class D Note Default Differential of the Proposed Portfolio is greater than the Class D Note Default Differential of the Current Portfolio, the Class E Note Default Differential of the Proposed Portfolio is greater than the Class E Note Default Differential of the Current Portfolio and the Class F Note Default Differential of the Proposed Portfolio is greater than the Class F Note Default Differential of the Current Portfolio. S&P Industry Classification Group means any of the S&P industrial classification groups as set forth on Schedule H and any additional classification groups established by S&P with respect to the Collateral Debt Securities and provided, in each case, by the Collateral Advisor or S&P to the Trustee. S&P Minimum Average Recovery Rate Test means a test that will be satisfied as of any Measurement Date if the S&P Weighted Average Recovery Rate is greater than or equal to (i) 28.25% with respect to the Class A Notes, (ii) 31.79% with respect to the Class B Notes, (iii) 35.29% with respect to the Class C Notes, (iv) 38.38% with respect to the Class D Notes, (v) 38.38% with respect to the Class E Notes and (vi) 42.44% with respect to the Class F Notes. S&P’s Preferred Format means an electronic spreadsheet file to be provided to S&P, which file shall include the following information, if available (to the extent such information is not confidential) with respect to each Collateral Debt Security: (a) the name and country of domicile of the issuer thereof and the particular issue held by the Issuer, (b) the CUS1P or other applicable identification number associated with such Collateral Debt Security, (c) the par value of such Collateral Debt Security, (d) the type of issue (including, by way of example, whether such Collateral Debt Security is a bond, loan or asset-backed 44

Processed and formatted by SEC Watch - Visit SECWatch.com

security), using such abbreviations as may be selected by the Trustee, (e) a description of the index or other applicable benchmark upon which the interest payable on such Collateral Debt Security is based (including, by way of example, fixed rate, step-up rate, zero coupon and LIBOR), (f) the coupon (in the case of a Collateral Debt Security which bears interest at a fixed rate) or the spread over the applicable index (in the case of a Collateral Debt Security which bears interest at a floating rate), (g) the S&P Industry Classification Group for such Collateral Debt Security, (h) the Stated Maturity Date of such Collateral Debt Security, (i) the S&P Rating of such Collateral Debt Security or the issuer thereof, as applicable, (j) the Principal Balance in cash and in Eligible Investments, (k) the priority category assigned by S&P to such Collateral Debt Security, if available, and (1) such other information as the Trustee may determine to include in such file. S&P Rating means the rating by S&P of any Collateral Debt Security determined as follows: (a)

if S&P has assigned a rating to such Collateral Debt Security either publicly or privately (in the case of a private rating, with the written consent of the issuer of such Collateral Debt Security for use of such private rating and provided a copy of such consent has been delivered to S&P), the S&P’s Rating shall be the rating assigned thereto by S&P; provided that, solely for purposes of determining compliance with the S&P CDO Monitor Test, if such Collateral Debt Security is placed on a watch list for possible upgrade or downgrade by S&P, the S&P Rating applicable to such Collateral Debt Security shall be one rating subcategory above or below, respectively, the S&P Rating applicable to such Collateral Debt Security immediately prior to such Collateral Debt Security being placed on such watch list;

(b)

if such Collateral Debt Security is not rated by S&P but the Issuer or the Collateral Advisor on behalf of the Issuer has requested that S&P assign a rating to such Collateral Debt Security, the S&P Rating shall be the rating so assigned by S&P; provided that pending receipt from S&P of such rating, if such Collateral Debt Security is not eligible for notching in accordance with Schedule G, such Collateral Debt Security shall have a Rating of “CCC-”, otherwise such S&P Rating shall be the rating assigned according to Schedule F until such time as S&P shall have assigned a rating thereto; or

(c)

if any Collateral Debt Security is a Collateral Debt Security that has not been assigned a rating by S&P and is not a Collateral Debt Security listed in Schedule G, as identified by the Collateral Advisor, the S&P Rating of such Collateral Debt Security shall be the rating determined by reference to Schedule F; provided that (i) if any Collateral Debt Security shall, at the time of its purchase by the Issuer, be listed for a possible upgrade or downgrade on either Fitch or Fitch then current credit rating watch list, then the S&P Rating of such Collateral Debt Security shall be one subcategory above or below, respectively, the rating then assigned to such item as set forth in Schedule A, (ii) for purposes of determining compliance with S&P CDO Monitor Test, if the rating assigned to such Collateral Debt Security pursuant to this subparagraph (c) is placed on a watch list for possible upgrade or downgrade by any Rating Agency, the S&P Rating applicable to such Collateral Debt Security shall be one rating subcategory above or below, respectively, the S&P Rating applicable to such Collateral Debt Security immediately prior to such Collateral Debt Security being placed on such watch list and (iii) the aggregate Principal Balance that may be given a rating based on this subparagraph (c) may not exceed 20% of the aggregate Principal Balance of all Collateral Debt Securities; provided that if any Collateral Debt Security has not been assigned a rating by S&P and is a type of Collateral Debt Security not listed on Schedule G, subsequent to the Closing Date, the acquisition of any such Collateral Debt Security will require an estimate or shadow rating from S&P, the assignment of an S&P Recovery Rate to such Collateral Debt Security and receipt of Rating Agency Confirmation from S&P prior to the acquisition by the Issuer of such Collateral Debt Security. 45

Processed and formatted by SEC Watch - Visit SECWatch.com

Notwithstanding the foregoing, if any Collateral Debt Security shall, at the time of its purchase by the Issuer, be listed for a possible upgrade or downgrade by S&P’s then current credit rating watch list, then the S&P Rating of such Collateral Debt Security shall be one subcategory above or below, respectively, the rating then assigned to such item by S&P, as applicable; provided that if such Collateral Debt Security is removed from such list at any time, it shall be deemed to have its then-current actual rating by S&P. S&P Recovery Rate means, with respect to a Collateral Debt Security on any Calculation Date, an amount equal to the percentage for such Collateral Debt Security set forth in the S&P Recovery Rate Matrix attached as Schedule D (determined in accordance with procedures prescribed by S&P for such Collateral Debt Security on such Calculation Date or, in the case of Defaulted Securities, the S&P Rating immediately prior to default). S&P Weighted Average Recovery Rate means, as of any Calculation Date, a rate expressed as a percentage equal to the number obtained by (i) summing the products obtained by multiplying the Principal Balance of each Collateral Debt Security by its S&P Recovery Rate and (ii) dividing such sum by the aggregate Principal Balance of the Collateral Debt Securities and (iii) rounding up to the first decimal place. For this purpose, the Principal Balance of a Defaulted Security or Deferred Interest PIK Bond will be deemed to be equal to its outstanding principal amount (excluding any capitalized interest thereon). Sale has the meaning specified in Section 5.17(a). Sale Proceeds means all proceeds (including accrued interest) received with respect to Collateral Debt Securities and Equity Securities as a result of sales of such Collateral Debt Securities and Equity Securities pursuant to the Indenture, net of any reasonable amounts expended by the Collateral Advisor or the Trustee in their good faith determination in connection with such sale or disposition. Schedule of Collateral Debt Securities means the list of Collateral Debt Securities securing the Rated Notes that is attached as Schedule A. Scheduled Distribution means, with respect to any Pledged Security, for each Due Date, the scheduled payment in Cash of principal and/or interest and/or fees due on such Due Date with respect to such Pledged Security, determined in accordance with the assumptions specified in Section 1.2. Second Currency has the meaning specified in Section 14.13. Secured Parties means the Trustee, for the benefit of the Rated Noteholders, the Collateral Advisor and the Initial Hedge Counterparty. Securities Account has the meaning specified in Section 8-501(a) of the UCC. Securities Act means the U.S. Securities Act of 1933, as amended. Securities Intermediary has the meaning specified in Section 8-102(a)(14) of the UCC. Security has the meaning specified in Section 8-102(a)(15) of the UCC. Semi-Annual Pay Security means a security that provides for periodic payments of interest in Cash semi-annually. 46

Semi-Annual Pay Security Interest Reserve Amount means, with respect to each Collateral Debt Security that is a Semi-Annual Pay Security, as of any Calculation Date, the amount equal to (i) the amount of interest received by the Issuer on the most recent payment date with respect to such Semi-Annual Pay Security multiplied by (ii) (A) six (6) minus the number of months since the most recent payment date with respect to such Semi-Annual Pay Security (rounded up to the nearest whole number) divided by (B) six (6); provided that for any Semi-Annual Pay Security with respect to which no scheduled interest payments remain, the Semi-Annual Pay Security Interest Reserve Amount shall be zero. Senior Collateral Advisory Fee means with respect to each Payment Date, a senior fee equal to the sum of (a) the Monitoring Fee and (b) the Senior Structuring Fee payable to the Collateral Advisor pursuant to the Collateral Advisory Agreement; provided that the Senior Collateral Advisory Fee will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Senior Collateral Advisory Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Senior Collateral Advisory Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Senior Collateral Advisory Fee accrued but not paid prior to the resignation or removal of the Collateral Advisor shall continue to be payable to the Collateral Advisor on the Payment Date immediately following the effectiveness of such resignation or removal. Senior Structuring Fee means, with respect to each Payment Date, an amount equal to 0.05% per annum of the Fee Basis Amount payable to the Collateral Advisor pursuant to the Collateral Advisory Agreement. Single B Excess Percentage means, on any Measurement Date, the greater of (a) zero; and (b) (i) the aggregate Principal Balance of all Collateral Debt Securities with an S&P Rating lower than BB- and higher than CCC+ (expressed as a percentage of the CDS Principal Balance) minus (ii) 10%.

Processed and formatted by SEC Watch - Visit SECWatch.com

Single B Principal Coverage Adjustment Percentage means, on any Measurement Date, the greater of (a) zero; and (b) (i) the Single B Excess Percentage minus (ii) the greater of (x) zero; and (y) (A) 5% minus (B) the Double B Excess Percentage. Sixty-Day Reinvestment Window means (i) with respect to Sale Proceeds received in respect of any Credit Risk Security, Defaulted Security, Equity Security, Withholding Tax Security, Credit-Improved Security or Written Down Security, the period from (and including) the date of receipt of such Sale Proceeds by the Issuer to (but including) the sixtieth (60th) calendar day thereafter and (ii) with respect to Collateral Principal Payments received in respect of any CPP Asset Type, the period from (and including) the date on which the cumulative amount of such Collateral Principal Payments for such CPP Asset Type equals or exceeds the Reinvestment Threshold Amount for such CPP Asset Type, to (but including) the sixtieth (60th) calendar day thereafter. Special Amortization Pro Rata Condition means with respect to any Payment Date that either: (A)

(I)(x) the aggregate CDS Principal Balance as of the related Calculation Date is at least equal to 50% of the aggregate CDS Principal Balance on the Closing Date and (y) the S&P CDO Monitor Test has been satisfied and (II) the Collateral Quality Tests (except the items specified in clauses (xiii), (xiv) and (xv) of the definition thereof) are satisfied; or

(B)

if clause (A) above is not satisfied, Rating Agency Confirmation has been provided by S&P with respect to the pro rata payment of principal of the Rated Notes. 47

Processed and formatted by SEC Watch - Visit SECWatch.com

Specified Currency has the meaning specified in Section 14.13. Specified Person has the meaning specified in Section 2.5(a). Specified Place has the meaning specified in Section 14.13. Specified Types means CMBS Securities, REIT Debt Securities, Real Estate CDO Securities and Real Estate Interests. Spread has the meaning specified in the definition of Reinvestment Criteria. 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 greater of zero and the excess, if any, of the Weighted Average Spread for such date over 1.87%, and (b) the aggregate Principal Balance of all Floating Rate Collateral Debt Securities and Deemed Floating Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities or Deferred Interest PIK Bonds) and the denominator of which is the aggregate Principal Balance of all Collateral Debt Securities that are Fixed Rate Collateral Debt Securities (excluding Defaulted Securities, Written Down Securities, Deferred Interest PIK Bonds and Deemed Floating Rate Collateral Debt Securities). Stated Maturity Date means the Payment Date occurring in September 2045. Subordinate Collateral Advisory Fee means the fee payable to the Collateral Advisor at a per annum rate in arrears on each Payment Date pursuant to the Collateral Advisory Agreement, in an amount (as certified by the Collateral Advisor to the Trustee) equal to 0.20% of the Fee Basis Amount for such Payment Date; provided that the Subordinate Collateral Advisory Fee will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Subordinate Collateral Advisory Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Subordinate Collateral Advisory Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Subordinate Collateral Advisory Fee accrued but not paid prior to the resignation or removal of the Collateral Advisor shall continue to be payable to the Collateral Advisor on the Payment Date immediately following the effectiveness of such resignation or removal. Subordinate Interests has the meaning specified in Section 13.1(a), (b), (c), (d), (e) or (f), as applicable. Subpool means each of the groups of the Collateral Debt Securities designated by the Collateral Advisor in accordance with the Auction Procedures on which the Listed Bidders may provide a separate bid in an Auction. Substitute Collateral Debt Security means a debt obligation meeting the Eligibility Criteria acquired by or on behalf of the Issuer with Collateral Principal Proceeds or Sale Proceeds that are reinvested in accordance with the provisions of the Indenture. Substitute Party has the meaning specified in Section 16.1(d). Substitution Event means, in connection with the Initial Hedge Counterparty, any of the following: (i)

So long as any of the Notes are Outstanding and rated by S&P, the short-term rating from S&P of the Initial Hedge Counterparty is withdrawn, suspended or downgraded below 48

Processed and formatted by SEC Watch - Visit SECWatch.com

“A-3” or, if no short-term rating is available, the long-term rating from S&P of the Initial Hedge Counterparty is withdrawn, suspended or downgraded below “BBB-”; or (ii)

The short-term rating of the Initial Hedge Counterparty from Fitch is withdrawn, suspended or downgraded below “F2” or, if no short-term rating is available, the long term rating of the Initial Hedge Counterparty from Fitch is withdrawn, suspended or downgraded below “BBB+”.

Synthetic Security means any swap transaction, debt security, security issued by a trust or similar vehicle or other investment, the returns on which (as determined by the Collateral Advisor) are linked to the credit performance of a reference obligation, but which may provide for a different maturity, payment date, interest rate, credit exposure or other credit or non-credit related characteristics from such reference obligation. Taxed Collateral Debt Security has the meaning specified in Section 7.7(e). Taxes means any present or future taxes, duties, assessments or governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by any governmental authority having power to tax. Tax Event means a new, or change in any, U.S. or foreign tax statute, treaty, regulation, rule, ruling, practice, procedure or judicial decision or interpretation, occurring in each case after the Closing Date, which results in (i) any portion of any payment due from any issuer or obligor under any Collateral Debt Security becoming properly subject to the imposition of U.S. or foreign withholding tax, which withholding tax is not compensated for by a “gross up” provision under the terms of the related Collateral Debt Security, (ii) any jurisdiction imposing net income, profits, or similar tax on the Issuer, (iii) the Issuer being required to deduct or withhold from any payment under a Hedge Agreement for or on account of any tax and the Issuer being obligated to make a gross up payment (or otherwise pay additional amounts) to the Hedge Counterparty, or (iv) a Hedge Counterparty being required to deduct or withhold from any payment under a Hedge Agreement for or on account of any tax for whatever reason if such Hedge Counterparty is not required to pay to the Issuer such additional amount as is necessary to 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 where the sum of the amount of (i) such a tax or taxes imposed on the Issuer or withheld from payments to the Issuer to the extent the Issuer receives less than the full amount that the Issuer would have received had no such deduction occurred, and (ii) such gross up payments required to be made by the Issuer to the extent they exceed the amounts that the Issuer would have been required to pay had no deduction or withholding been required, in the aggregate, equals ten percent (10%) or more of the amount of aggregate interest payments on all of the related Collateral Debt Securities during the related Due Period. Tax Redemption has the meaning specified in Section 9.1(b). Tax Subsidiary has the meaning specified in Section 7.7(e). Temporary Ramp-Up Security means each security that is listed on Schedule C hereto that (i) is a direct unsecured debt obligation of the Federal National Mortgage Corporation or the Federal Home Loan Mortgage Corporation, (ii) bears interest at a fixed rate, (iii) is acquired by the Issuer on the Closing Date in furtherance of interest rate hedging of the Issuer’s portfolio by being sold on or prior to the Effective Date in conjunction with the acquisition of one or more Ramp-Up Collateral Debt Securities that are 49

Processed and formatted by SEC Watch - Visit SECWatch.com

Fixed Rate Collateral Debt Securities and (iv) is rated in the highest rating category by at least one nationally recognized rating agency. Tenant Lease Loan Interests means securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities) on the cash flow from a commercial mortgage loan made to finance the acquisition, construction and improvement of properties leased to corporate tenants (or on the cash flow from such leases). Three-Year Period means the period beginning on the Closing Date and up to and including the Payment Date in September 2008. Transaction Documents means the Indenture, the Collateral Advisory Agreement, the Account Control Agreement, the Hedge Agreement, the Corporate Services Agreement, the Collateral Administration Agreement, the Income Note Paying Agency Agreement and the Placement Agreements. Trust Officer means, when used with respect to the Trustee, any Officer within the CDO Trust Services Group of the Corporate Trust Office working on the transaction described in this Indenture and (or any successor group of the Trustee) authorized to act for and on behalf of the Trustee, including any vice president, assistant vice president or other Officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such Officers, respectively, or to whom any corporate trust matter is referred at the CDO Trust Services Group of the Corporate Trust Office because of such person’s knowledge of and familiarity with the particular subject. Trustee means LaSalle Bank National Association, and any successors or assigns, in its capacity as trustee under this Indenture. Trustee Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by or otherwise owing to the Trustee during the preceding Due Period in accordance with the Indenture, other than the Trustee Fee, including, without limitation, any expenses or indemnities incurred by the Trustee (and the Bank) in any of its capacities (including in its capacity as Collateral Administrator, Calculation Agent, Note Paying Agent, Income Note Paying Agent and Registrar). Trustee Fee means, with respect to any Payment Date, the fee payable to the Trustee in an aggregate amount equal to 0.018% per annum of the CDS Principal Balance as of the first day of the related Due Period; provided that in no event shall, so long as any Class of Rated Notes remains Outstanding, such fee be an annual amount less than U.S.$25,000. UCC means the Uniform Commercial Code as in effect in the State of New York. Underlying Instrument means the agreement pursuant to which a Pledged Security has been issued or created and each other agreement that governs the terms of or secures the obligations represented by such Pledged Security or of which the holders of such Pledged Security are the beneficiaries. Uninvested Proceeds means, at any time, the net proceeds received by the Issuer on the Closing Date from the initial issuance of the Rated Notes and Income Notes, to the extent such proceeds have not theretofore been invested in Collateral Debt Securities. Uninvested Proceeds Account has the meaning specified in Section 10.4. 50

Processed and formatted by SEC Watch - Visit SECWatch.com

United States or U.S. means the United States of America, including the States thereof and the District of Columbia. Unregistered Securities has the meaning specified in Section 5.17(c). U.S. Person has the meaning given in Regulation S under the Securities Act. USA PATRIOT Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56 (2001). Weighted Average Fixed Rate Coupon means, as of any Measurement Date, the sum (rounded up to the next 0.001%): (a)

obtained by (i) multiplying the Principal Balance of each Fixed Rate Collateral Debt Security (except Collateral Debt Securities that are currently deferring interest) held in the portfolio as of such date by the then-current interest rate, (ii) summing the amounts determined pursuant to clause (i) for all Fixed Rate Collateral Debt Securities held in the portfolio as of such date and (iii) dividing such sum by the aggregate Principal Balance of all Fixed Rate Collateral Debt Securities held in the portfolio as of such date; provided that for purposes of calculating the Weighted Average Fixed Rate Coupon of Collateral Debt Securities that are Defaulted Securities, the Written Down Amount with respect to Written Down Securities and Equity Securities will be excluded, except for those Defaulted Securities that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument; plus

(b)

if the number obtained pursuant to the calculations in clause (a) is less than 5.80%, the Spread Excess.

Weighted Average Life means, on any Calculation Date with respect to all Collateral Debt Securities (excluding any Defaulted Securities), the number obtained by the Collateral Advisor by (i) summing the products obtained by multiplying (a) the Average Life at such time of each Collateral Debt Security by (b) the outstanding Principal Balance of such Collateral Debt Security and (ii) dividing such sum by the aggregate Principal Balance at such time of all Collateral Debt Securities. Weighted Average Life Test means a test that shall be satisfied as of any Measurement Date during any period set forth below if the Weighted Average Life of all Collateral Debt Securities as of such Measurement Date is less than or equal to the number of years set forth in the table below: As of an y C alculation Date O ccurrin g Du rin g th e Pe riod Be low

W e ighte d Ave rage Life (in Ye ars)

Closing Date – ≤1.0 year >1.0 years – ≤2.0 years >2.0 years – ≤3.0 years >3.0 years – ≤4.0 years >4.0 years – ≤5.0 years >5.0 years – Stated Maturity Date

10.0 years 9.0 years 8.0 years 7.0 years 6.0 years 5.0 years 51

Processed and formatted by SEC Watch - Visit SECWatch.com

Weighted Average Spread means, as of any Measurement Date, the sum (rounded up to the next 0.001%) of: (a)

the number obtained by (i) summing the products obtained by multiplying (A) for each Floating Rate Collateral Debt Security (other than any Defaulted Security, Written Down Security or Deferred Interest PIK Bond), the stated spread above LIBOR at which interest accrues on such Collateral Debt Security as of such date and, for each Deemed Floating Rate Collateral Debt Security (other than any Defaulted Security, Written Down Security or Deferred Interest PIK Bond), the Deemed Floating Spread by (B) the Principal Balance of such Collateral Debt Security as of such date and (ii) dividing such sum by the aggregate Principal Balance of all Floating Rate Collateral Debt Securities and all Deemed Floating Rate Collateral Debt Securities (excluding, in each case, all Defaulted Securities, Written Down Securities and Deferred Interest PIK Bonds, except for those Defaulted Securities that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument); plus

(b)

if the number obtained pursuant to the calculations in clause (a) is less than 1.60%, the Fixed Rate Excess.

Withholding Tax Security means a Collateral Debt Security if: (i)

any payments thereon to the Issuer are subject to withholding tax imposed by any jurisdiction (other than U.S. backup withholding tax or other similar withholding tax); and

(ii)

under the underlying documentation with respect to such Collateral Debt Security, the issuer of or counterparty with respect to such Collateral Debt Security is not required to make “gross-up” payments to the Issuer that cover the full amount of such withholding tax on an after-tax basis.

Written Down Amount means, with respect to each Written Down Security, the amount by which the original Principal Balance of such Written Down Security is reduced as notified by or on behalf of the related issuer or trustee to the holders of such Written Down Security (including appraisal reductions on CMBS Securities). Written Down Security means any Collateral Debt Security as to which the aggregate par amount of such Collateral Debt Security and all other securities secured by the same pool of collateral that rank pari passu with or senior in priority of payment to such Collateral Debt Security exceeds the aggregate par amount (including reserved interest or other amounts available for overcollateralization) of all collateral securing such securities (excluding defaulted collateral); provided that the Issuer shall immediately send notice to S&P by facsimile and e-mail upon any Collateral Debt Security becoming a Written Down Security. 1.2.

ASSUMPTIONS AS TO COLLATERAL DEBT SECURITIES, FEES, ETC.

The provisions set forth in this Section 1.2 shall be applied in connection with all calculations required to be made pursuant to this Indenture with respect to Scheduled Distributions on any Pledged Security, or any payments on any other assets included in the Collateral, and with respect to the income that can be earned on Scheduled Distributions on such Pledged Securities and on any other amounts that may be received for deposit in the Collection Account. (a)

All calculations with respect to Scheduled Distributions on the Pledged Securities securing the Rated Notes shall be made by the Issuer or the Collateral Administrator on 52

Processed and formatted by SEC Watch - Visit SECWatch.com

behalf of the Issuer using (in the case of the Collateral Debt Securities) the assumptions that (i) no Pledged Security defaults or is sold, (ii) prepayment of any Pledged Security during any month occurs at a rate equal to the average rate of prepayment during the period of six consecutive months immediately preceding the current month (or, with respect to any Pledged Security that has not been outstanding for at least six consecutive calendar months, at the rate of prepayment assumed at the time of issuance of such Pledged Security), (iii) any clean-up call with respect to a Pledged Security will be exercised when economic to the Person or Persons entitled to exercise such call and (iv) no other optional redemption of any Pledged Security will occur except for those that have actually occurred or as to which irrevocable notice thereof shall have been given. (b)

For purposes of determining compliance with the Interest Coverage Tests, except as otherwise specified in the Interest Coverage Tests, there shall be excluded all payments in respect of Defaulted Securities and Deferred Interest PIK Bonds unless the Trustee or Collateral Advisor has actual knowledge such payments will be made in Cash and will be received on or before the Due Date therefor and all other scheduled payments (whether of principal, interest, fees or other amounts) including payments to the Issuer under any Hedge Agreement, as to which the Trustee or Collateral Advisor has actual knowledge will not be made in Cash or will not be received when due. For purposes of calculating the Class A/B Interest Coverage Ratio and the Class C Interest Coverage Ratio: (1)

the expected interest income on Collateral Debt Securities and Eligible Investments and the expected interest payable on the Rated Notes and amounts, if any, payable under the Hedge Agreement will be calculated using the interest rates applicable thereto on the applicable date of determination;

(2)

accrued original issue discount on Eligible Investments will be deemed to be a scheduled interest payment thereon due on the date such original issue discount is scheduled to be paid; and

(3)

it will be assumed that no principal payments are made on the Rated Notes during the applicable periods.

(c)

For each Due Period, the Scheduled Distribution on any Pledged Security (other than (i) a Defaulted Security, (ii) a Deferred Interest PIK Bond or (iii) an Equity Security, which, in each case except as otherwise provided herein, shall be assumed to have a Scheduled Distribution of zero and with respect to any Written Down Security, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount) shall be the sum of (x) the total amount of payments and collections in respect of such Pledged Security (including the proceeds of the sale of such Pledged Security received during the Due Period) that, if paid as scheduled, will be available in the Collection Account at the end of the Due Period for payment on the Rated Notes or other amounts payable pursuant to this Indenture and of certain expenses of the Issuer and the Co-Issuer plus (y) any such amounts received in prior Due Periods that were not disbursed on a previous Payment Date (provided that such sum shall be computed without regard to any amounts excluded from the determination of compliance with the Coverage Tests pursuant to Section 1.2(b)).

(d)

Subject to Section 1.2(b), each Scheduled Distribution receivable with respect to a Pledged Security shall be assumed to be received on the applicable Due Date, and each such Scheduled Distribution shall be assumed to be immediately deposited in the 53

Processed and formatted by SEC Watch - Visit SECWatch.com

Collection Account and, except as otherwise specified, to earn interest at the Assumed Reinvestment Rate. All such funds shall be assumed to continue to earn interest until the date on which they are required to be available in the Collection Account for transfer to the Payment Account and application, in accordance with the terms hereof, to payments of principal of or interest on the Rated Notes or other amounts payable pursuant to this Indenture.

1.3.

(e)

With respect to any Collateral Debt Security as to which any interest or other payment thereon is subject to withholding tax of any Relevant Jurisdiction, each Distribution thereon shall, for purposes of the Coverage Tests and each Collateral Quality Test, be deemed to be payable net of such withholding tax unless the issuer thereof or obligor thereon is required to make additional payments sufficient on an after tax basis to cover any withholding tax imposed on payments to the Issuer with respect thereto (including in respect of any such additional payment). On any date of determination, the amount of any Scheduled Distribution due on any future date shall be assumed to be made net of any such uncompensated withholding tax based upon withholding tax rates in effect on such date of determination.

(f)

For purpose of determining compliance with the Interest Coverage Tests, it will be assumed that any amount required to be paid for taxes, filing and registration fees on the Payment Date immediately following the relevant Due Period shall be equal to the aggregate amount for which the Trustee has received an invoice or demand for payment on or prior to the relevant Measurement Date.

(g)

Any reference in the definition of “Senior Collateral Advisory Fee” or “Subordinate Collateral Advisory Fee” in Section 1.1(a) to an amount calculated with respect to a period at a per annum rate shall be computed on the basis of a 360 day year and the actual number of days elapsed during the applicable Due Period.

(h)

Unless otherwise specified, test calculations that evaluate to a percentage will be rounded to the nearest one-hundredth, and test calculations that evaluate to a number or decimal will be rounded to the nearest one hundredth.

(i)

Unless otherwise specified, all calculations required to be made and all reports which are to be prepared pursuant to this Indenture with respect to the Collateral Debt Securities, shall be made on the basis of the date on which the Issuer makes a commitment to acquire or to sell an asset, as applicable (the trade date), not the settlement date for such sale.

(j)

For the purpose of determining fees constituting Administrative Expenses payable under the Priority of Payments hereunder, periods longer or shorter than a one-month period shall be prorated based on the number of days in such period.

RULES OF CONSTRUCTION Unless the context otherwise clearly requires: (a)

the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined; 54

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms;

(c)

the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”;

(d)

the word “will” shall be construed to have the same meaning and effect as the word “shall”;

(e)

any definition of or reference to any agreement, statute, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein);

(f)

any reference herein to any Person, or to any Person in a specified capacity, shall be construed to include such Person’s successors and assigns or such Person’s successors in such capacity, as the case may be;

(g)

all references in this instrument to designated “Sections”, “clauses” and other subdivisions are to the designated Sections, clauses and other subdivisions of this instrument as originally executed, and the words “herein”, “hereof’, “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Section, clause or other subdivision; and

(h)

unless otherwise stated to the contrary herein, any payments to be made by the Issuer (or by the Trustee on behalf of the Issuer) in respect of a Class of Notes shall be payable pari passu between any subclasses of such Class of Notes. ARTICLE II THE RATED NOTES

2.1.

FORMS GENERALLY (a)

The Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes offered and sold in reliance on Regulation S (each, a Regulation S Note) shall be issued in fully Registered form without interest coupons substantially in the form of the note attached as Exhibit A-1 (each, a Regulation S Global Note) with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office in Chicago, Illinois, as custodian for DTC and registered in the name of DTC or a nominee of DTC, duly executed by the Co-Issuers and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be.

(b)

The Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes offered and sold in the United States pursuant to an exemption from the registration requirements 55

Processed and formatted by SEC Watch - Visit SECWatch.com

of the Securities Act (Rule 144A Notes) shall be issued in fully Registered form without interest coupons substantially in the form of the note attached as Exhibit A-2 (each, a Rule 144A Global Note), with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for DTC and registered in the name of DTC or a nominee of DTC, duly executed by the Co-Issuers and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be.

2.2.

(c)

Regulation S Global Notes and Rule 144A Global Notes may also be exchanged under the limited circumstances set forth in Section 2.4 for notes in definitive fully Registered form without interest coupons (each, a Definitive Class A-D Note), which may be either a Regulation S Definitive Class A-D Note or a Rule 144A Definitive Class A-D Note, with such legends as may be applicable thereto, which shall be duly executed by the Issuer and the Co-Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided.

(d)

The Class E Notes and the Class F Notes offered or sold in the United States or to U.S. Persons pursuant to Rule 144A or another applicable exemption from registration under the Securities Act shall be issued in the form of physical certificates in definitive fully Registered form without interest coupons substantially in the form of the certificated note attached as Exhibit B-1 (each, a Definitive Class E Note) or as Exhibit B-2 (each, a Definitive Class F Note), as the case may be, with such legends as may be applicable thereto, which shall be duly executed by the Issuer and the Co-Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided.

(e)

The Co-Issuers in issuing the Rated Notes may use “CUSIP” or “private placement” numbers (if then generally in use), and, if so, the Trustee will indicate the “CUSIP” or “private placement” numbers of the Rated Notes in notices of redemption and related materials as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Rated Notes or as contained in any notice of redemption and related materials.

AUTHORIZED AMOUNT; APPLICABLE PERIODIC INTEREST RATE; STATED MATURITY DATE; DENOMINATIONS (a)

The aggregate principal amount of Rated Notes which may be issued under this Indenture may not exceed U.S.$479,250,000, excluding Rated Notes issued upon registration of, transfer of, or in exchange for, or in lieu of, other Rated Notes pursuant to Section 2.4, 2.5 or 8.5.

(b)

Such Rated Notes shall be divided into nine Classes having designations, original principal amounts, original Applicable Periodic Interest Rates and Stated Maturities as follows: 56

Processed and formatted by SEC Watch - Visit SECWatch.com

De signation

Class A-1 Notes Class A-2 Notes Class B Notes Class C Notes Class D Notes Class E Notes Class F Notes

O rigin al Prin cipal Am ou n t

Applicable Pe riodic In te re st Rate

Rate d Note S tate d Maturity Date

U.S.$339,735,000 U.S.$47,000,000 U.S.$41,400,000 U.S.$18,125,000 U.S.$15,240,000 U.S.$5,000,000 U.S.$12,750,000

LIBOR + 0.265% LIBOR + 0.350% LIBOR + 0.450% 5.311% 6.205% LIBOR + 2.100% 8.001%

2045 2045 2045 2045 2045 2045 2045

The Rated Notes will be issuable in minimum denominations of U.S.$250,000 and, in each case, only in integral multiples of U.S.$1,000 in excess of such minimum denominations. After issuance, (x) a Rated Note may fail to be in compliance with the minimum denomination requirement as a result of the repayment of principal thereon in accordance with the Priority of Payments and (y) the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes or the Class F Notes may fail to be in an amount which is an integral multiple of U.S.$1,000 due to the addition to the principal amount thereof of deferred interest.

2.3.

(c)

Interest shall accrue on the Aggregate Outstanding Amount of each Class of Rated Notes (determined as of the first day of each Interest Period and after giving effect to any payment of principal occurring on such day) from the Closing Date and will be payable in arrears on each Payment Date. Interest on each Class of Rated Notes and interest on Defaulted Interest will be calculated in accordance with the definition of Periodic Interest.

(d)

The Rated Notes shall be redeemable as provided in Section 9.

(e)

The Depositary for the Global Notes shall initially be DTC.

(f)

The Rated Notes shall be numbered, lettered or otherwise distinguished in such manner as may be consistent herewith, determined by the Authorized Officers of the Co-Issuers executing such Rated Notes as evidenced by their execution of such Rated Notes.

EXECUTION, AUTHENTICATION, DELIVERY AND DATING (a)

The Rated Notes shall be executed on behalf of the Co-Issuers by an Authorized Officer of each of the Co-Issuers. The signatures of such Authorized Officers on the Rated Notes may be manual or facsimile (including in counterparts).

(b)

Rated Notes bearing the manual or facsimile signatures of individuals who were at any time the Authorized Officers of either of the Co-Issuers shall bind such Person, notwithstanding the fact that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Rated Notes or did not hold such offices at the date of issuance of such Rated Notes. 57

2.4.

(c)

At any time and from time to time after the execution and delivery of this Indenture, the Co-Issuers may deliver Rated Notes executed by the Co-Issuers or the Issuer, as the case may be, to the Trustee or the Authenticating Agent for authentication, and the Trustee or the Authenticating Agent, upon Issuer Order, shall authenticate and deliver such Rated Notes as provided in this Indenture and not otherwise.

(d)

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

(e)

Rated Notes issued upon transfer, exchange or replacement of other Rated Notes shall be issued in authorized denominations reflecting the original aggregate principal amount of the Rated Notes so transferred, exchanged or replaced, but shall represent only the current Aggregate Outstanding Amount of the Rated Notes so transferred, exchanged or replaced. In the event that any Rated Note is divided into more than one Rated Note in accordance with this Section 2, the original principal amount of such Rated Note shall be proportionately divided among the Rated Notes delivered in exchange therefor and shall be deemed to be the original aggregate principal amount of such subsequently issued Rated Notes.

(f)

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

REGISTRATION, TRANSFER AND EXCHANGE OF RATED NOTES

Processed and formatted by SEC Watch - Visit SECWatch.com

(a)

Registration of Rated Notes. The Trustee is hereby appointed as the registrar hereunder (the Note Registrar). The Trustee is hereby appointed as a transfer agent with respect to the Rated Notes (the Note Transfer Agent). The Note Registrar shall (acting solely for this purpose as agent for the Issuer) keep a register (the Note Register) at the Corporate Trust Office in which, subject to such reasonable regulations as it may prescribe, the Note Registrar shall provide for the registration of Rated Notes and the registration of transfers of Rated Notes. Upon any resignation or removal of the Note Registrar, the Issuer (after consultation with the Collateral Advisor) shall propose a replacement for approval by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class. The Co-Issuers may not terminate the appointment of the Note Registrar or any Note Transfer Agent without the consent of each Holder of Rated Notes. Subject to this Section 2.4, upon surrender for registration of transfer of any Rated Notes at the office or agency of the CoIssuers to be maintained as provided in Section 7.2, the Co-Issuers shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Rated Notes of any authorized denomination and of a like aggregate principal amount. At the option of the Holder, Rated Notes may be exchanged for Rated Notes of like terms, in any authorized denominations and of like aggregate principal amount, upon 58

Processed and formatted by SEC Watch - Visit SECWatch.com

surrender of the Rated Notes to be exchanged at such office or agency. Whenever any Rated Note is surrendered for exchange, the Co-Issuers shall execute and the Trustee shall authenticate and deliver the Rated Notes that the Rated Noteholder making the exchange is entitled to receive. All Rated Notes issued and authenticated upon any registration of transfer or exchange of Rated Notes shall be the valid obligations of the Co-Issuers, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Rated Notes surrendered upon such registration of transfer or exchange. Every Rated Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Co-Issuers and the Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to a Holder for any registration of transfer or exchange of Rated Notes, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith and delivery charges, if any, not made by regular mail. (b)

The initial sale of each Note may be made in accordance with Section 4(2) of (or another applicable exemption from registration under) the Securities Act or in accordance with Regulation S under the Securities Act.

(c)

Transfers of Class A Notes, Class B Notes, Class C Notes and Class D Notes (1)

Subject to Section 2.4(c)(4), exchanges or transfers of beneficial interests in a Global Note may be made only in accordance with the rules and regulations of the Depositary and the transfer restrictions contained in the legend on such Global Note and exchanges or transfers of interests in a Global Note may be made only in accordance with the following: (i)

Subject to Section 2.4(c)(1)(ii) through (vi), transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor’s nominee.

(ii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Regulation S Global Note for a beneficial interest in a Rule 144A Global Note upon provision to the Trustee and the Co-Issuers of a written certification in the form of Exhibit C-1 (a Rule 144A Transfer Certificate).

(iii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Rule 144A Global Note for a beneficial interest in a Regulation S Global Note upon provision to the Trustee and the Co-Issuers of a written certification substantially in the form of Exhibit C-2 (a Regulation S Transfer Certificate).

(iv)

An owner of a beneficial interest in a Regulation S Global Note may transfer such interest in the form of a beneficial interest in such 59

Processed and formatted by SEC Watch - Visit SECWatch.com

Regulation S Global Note without the provision of written certification; provided that (1) such transfer is made to a Person who is not a U.S. Person in an offshore transaction in reliance on an exemption from the registration requirements of the Securities Act under Regulation S and (2) the transferee, by purchase of such interest in such Regulation S Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Regulation S Transfer Certificate. (v)

An owner of a beneficial interest in a Rule 144A Global Note may transfer such interest in the form of a beneficial interest in such Rule 144A Global Note without the provision of written certification; provided that the transferee, by purchase of such interest in such Rule 144A Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Rule 144A Transfer Certificate.

(vi)

In the event Definitive Class A-D Notes are issued pursuant to Section 2.4(c)(5), the Trustee shall cause the transfer of (i) any beneficial interest in a Global Note for a Definitive A-D Note that is a Regulation S Note (a Regulation S Definitive Note), upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any beneficial interest in a Global Note for a Definitive A-D Note that is a Rule 144A Note (a Rule 144A Definitive Note), upon provision to the Trustee, the Co-Issuers and the Note Registrar of a Rule 144A Transfer Certificate.

(2)

Subject to Section 2.4(c)(4), in the event Definitive Class A-D Notes are issued pursuant to Section 2.4(c)(5), the Trustee shall cause the transfer of (i) any Definitive A-D Note for a beneficial interest in a Regulation S Global Note, upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any Definitive A-D Note for a beneficial interest in a Rule 144A Global Note, upon provision to the Trustee and the Co-Issuers of a Rule 144A Transfer Certificate.

(3)

Upon acceptance for exchange or transfer of a beneficial interest in a Global Note for a Definitive A-D Note, or upon acceptance for exchange or transfer of a Definitive A-D Note for a beneficial interest in a Global Note, each as provided herein, the Trustee shall approve the instruction at the Depositary to adjust the principal amount of such Global Note on its records to evidence the date of such exchange or transfer and the change in the principal amount of such Global Note.

(4)

Subject to the restrictions on transfer and exchange set forth in this Section 2.4 and to any additional restrictions on transfer or exchange specified in the Definitive Class A-D Notes, the Holder of any Definitive A-D Note may transfer or exchange the same in whole or in part (in a principal amount equal to the minimum authorized denomination or any larger authorized amount) by surrendering such Definitive A-D Note at the Corporate Trust Office or at the office of any Note Transfer Agent, together with (x) in the case of any transfer, an executed instrument of assignment and (y) in the case of any exchange, a written request for exchange. Following a proper request for transfer or exchange, the Trustee shall (provided it has available in its possession an inventory of Definitive Class A-D Notes), within five Business Days of such 60

Processed and formatted by SEC Watch - Visit SECWatch.com

request if made at such Corporate Trust Office, or within ten Business Days if made at the office of a Note Transfer Agent (other than the Trustee), authenticate and make available at such Corporate Trust Office or at the office of such Note Transfer Agent, as the case may be, to the transferee (in the case of transfer) or Rated Noteholder (in the case of exchange) or send by first class mail (at the risk of the transferee in the case of transfer or Rated Noteholder in the case of exchange) to such address as the transferee or Rated Noteholder, as applicable, may request, a Definitive A-D Note or Notes, as the case may require, for a like aggregate principal amount and in such authorized denomination or denominations as may be requested. The presentation for transfer or exchange of any Definitive Note shall not be valid unless made at the Corporate Trust Office or at the office of a Note Transfer Agent or by a duly authorized attorney-in-fact. Beneficial interests in Global Notes shall be exchangeable for Definitive Class A-D Notes only under the limited circumstances described in Section 2.4(c)(5). (5)

Interests in a Global Note deposited with or on behalf of the Depositary pursuant to Section 2.1 hereunder shall be transferred (A) to the Beneficial Owners thereof in the form of Definitive Class A-D Notes only if such transfer otherwise complies with this Section 2.4 (including Section 2.4(c)(1) and (2) and (1) the Depositary notifies the Issuer that it is unwilling or unable to continue as Depositary for the Rated Notes, (2) the Depositary ceases to be a “clearing agency” registered under the Exchange Act and a successor Depositary is not appointed by the Issuer within 90 days of such notice or (3) as a result of any amendment to or change in the laws or regulations of the Cayman Islands, or of any authority therein or thereof having power to tax, or in the interpretation or administration of such laws or regulations which become effective on or after the Closing Date, the Issuer, the Trustee or any Note Paying Agent becomes aware that it is or will be required to make any deduction or withholding from any payment in respect of the Global Notes which would not be required if the Global Notes were not represented by a global certificate or (B) to the purchaser thereof in the form of one or more Definitive Notes in accordance with the provisions of Section 2.4(c)(1).

(6)

If interests in any Global Note are to be transferred to the Beneficial Owners thereof in the form of Definitive Class A-D Notes pursuant to Section 2.4(c)(5), such Global Note shall be surrendered by the Depositary, or its custodian on its behalf, to the Corporate Trust Office or to the Note Transfer Agent located in Chicago, Illinois and the Trustee shall authenticate and deliver without charge, upon such transfer of interests in such Global Note, an equal aggregate principal amount of Definitive Notes of authorized denominations. The Definitive Class A-D Notes transferred pursuant to this Section 2.4 shall be executed, authenticated and delivered only in the denominations specified in Section 2.2(b) and registered in such names as the Depositary shall direct in writing.

(7)

For so long as one or more Global Notes are Outstanding: (i)

the Trustee and its directors, officers, employees and agents may deal with the Depositary for all purposes (including the making of distributions on, and the giving of notices with respect to, the Global Notes); 61

Processed and formatted by SEC Watch - Visit SECWatch.com

(d)

(ii)

unless otherwise provided herein and subject to Section 2.4(c)(7)(i) above, the rights of Beneficial Owners shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such Beneficial Owners and the Depositary;

(iii)

for purposes of determining the identity of and principal amount of Rated Notes beneficially owned by a Beneficial Owner, the records of the Depositary shall be conclusive evidence of such identity and principal amount and the Trustee may conclusively rely on such records when acting hereunder;

(iv)

the Depositary will make book-entry transfers among the Depositary Participants of the Depositary and will receive and transmit distributions of principal of and interest on the Global Notes to such Depositary Participants; and

(v)

the Depositary Participants of the Depositary shall have no rights under this Indenture under or with respect to any of the Global Notes held on their behalf by the Depositary, and the Depositary may be treated by the Trustee and its agents, employees, officers and directors as the absolute owner of the Global Notes for all purposes whatsoever.

Transfers of Class E Notes and Class F Notes. (1)

If a holder of a beneficial interest in a Definitive Class E Note or a Definitive Class F Note wishes at any time to transfer its interest in such Definitive Class E Note or Definitive Class F Note, such holder may transfer or cause the transfer of such interest for an equivalent beneficial interest in one or more such Definitive Class E Notes or Definitive Class F Notes as provided below. Upon receipt by the Issuer and the Note Registrar of (A) such holder’s Definitive Class E Note or Definitive Class F Note properly endorsed for assignment to the transferee and (B) a certificate in the form of Exhibit C-3 (a Definitive Class E Note Transfer Certificate) or Exhibit C-4 (a Definitive Class F Note Transfer Certificate), as the case may be, given by the transferee of such beneficial interest then the Note Registrar shall cancel such Definitive Class E Note or Definitive Class F Note, record the transfer in the Note Register and authenticate and deliver one or more Definitive Class E Notes or Definitive Class F Notes bearing the same designation as the Definitive Class E Notes or Definitive Class F Notes endorsed for transfer, registered in the names specified in the assignment described in clause (A) above, in principal amounts designated by the transferee (the Class and the aggregate of such amounts being the same as the beneficial interest in the Definitive Class E Notes or Definitive Class F Notes surrendered by the transferor), and in the minimum denominations and integral multiples in excess thereof If any Definitive Class E Notes are upon issuance acquired and held by a Permitted NS Purchaser, then no such Definitive Class E Notes may be sold, transferred or otherwise disposed of to a Benefit Plan Investor unless and until the Co-Issuers have furnished to the Trustee an opinion of recognized U.S. tax counsel to the effect that the Definitive Class E Notes will be treated as debt for U.S. federal income tax purposes. Unless and until such tax opinion is delivered, each investor and transferee of an interest in a Definitive Class E Note shall 62

Processed and formatted by SEC Watch - Visit SECWatch.com

deliver an ERISA Restriction Letter to the Issuer, the Trustee and the Rated Note Placement Agents acknowledging the transfer restrictions applicable to such Definitive Class E Notes and agreeing to cause any future transferee of such Definitive Class E Notes to deliver a letter substantially in the form of the ERISA Restriction Letter. In addition, the Note Registrar shall not register any transfer of Definitive Class F Notes to a proposed transferee of Definitive Class F Notes that has represented that it is a Benefit Plan Investor or a Controlling Person if the transfer would result in Benefit Plan Investors owning 25% or more of the value of the outstanding Definitive Class F Notes (as determined without regard to interests held by Controlling Persons, and otherwise contemplated by the applicable regulations under ERISA) immediately after such transfer, based on assurances received from investors. Without limiting the generality of the forgoing, the Note Registrar shall not register any transfer of Definitive Class F Notes represented by Regulation S Notes to a proposed transferee of such Definitive Class F Notes that has represented that it is or may become a Benefit Plan Investor or a Controlling Person. Without limiting the generality of the foregoing, a transfer of beneficial interests in a Definitive Class F Note will not be permitted unless an ERISA Restriction Letter is obtained from each transferee of a Definitive Class F Note, for the benefit of the Issuer, the Trustee and the Rated Note Placement Agents, (i) in the case of a Definitive Class F Note not represented by a Regulation S Note, regarding whether it is, or is not and will not be, a Benefit Plan Investor or Controlling Person, or (ii) in the case of a Definitive Class F Note represented by a Regulation S Note, to the effect that it is not and will not be a Benefit Plan Investor or Controlling Person. Any purported transfer in violation of the foregoing requirements shall be null and void ab initio, and the Note Registrar shall not register any such purported transfer and shall not authenticate and deliver such Definitive Class F Notes. (2)

If a holder of a beneficial interest in one or more Definitive Class E Notes or Definitive Class F Notes wishes at any time to exchange its interest in such Definitive Class E Notes or Definitive Class F Notes for an interest in one or more such Definitive Class E Notes or Definitive Class F Notes of different principal amounts, such holder may exchange or cause the exchange of such interest for an equivalent beneficial interest in the Definitive Class E Notes or Definitive Class F Notes bearing the same designation as the Definitive Class E Notes or Definitive Class F Notes endorsed for exchange as provided below. Upon receipt by the Note Registrar of (A) such holder’s Definitive Class E Notes or Definitive Class F Notes properly endorsed for such exchange and (B) written instructions from such holder designating the number and principal amounts of the applicable Definitive Class E Notes or Definitive Class F Notes to be issued (the aggregate principal amounts of such Definitive Class E Notes or Definitive Class F Notes being the same as the Definitive Class E Notes or Definitive Class F Notes surrendered for exchange), then the Note Registrar shall cancel such Definitive Class E Notes or Definitive Class F Notes, record the exchange in the Note Register and authenticate and deliver one or more Definitive Class E Notes or Definitive Class F Notes bearing the same designation endorsed for exchange, registered in the same names as the Definitive Class E Notes or Definitive Class F Notes surrendered by such holder or such different names as are specified in the endorsement described in clause (A) above, in different principal amounts designated by such holder (the Class and the aggregate principal amounts being the same as the beneficial interest in the Definitive Class E Notes or Definitive 63

Processed and formatted by SEC Watch - Visit SECWatch.com

Class F Notes surrendered by such holder), and the minimum denominations and integral multiples in excess. (e)

Denominations; Qualified Purchaser Status. No Person may hold a beneficial interest in any Rated Note except in a denomination authorized for the Rated Notes of such Class under Section 2.2(b). In addition, no transfer of a Rated Note (or any interest therein) may be made to any Person that is a U.S. Person unless such Person is (A) a Qualified Institutional Buyer (or, with respect to the Class E Notes and the F Notes only, an Institutional Accredited Investor) or an NS Purchaser and (B) a Qualified Purchaser. In addition, no transfer of a Rated Note (or any interest therein) may be made to any Person that is a U.S. Person unless such Person (A) was not formed for the purpose of investing in either of the Co-Issuers (except when each beneficial owner of the purchaser is a Qualified Purchaser, (B) has received the necessary consent from its beneficial owners if it is a private investment company formed before April 30, 1996, (C) 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, (D) is not a pension, profit, sharing or other retirement trust fund or plan in which the partners, beneficiaries or participants, as applicable, may designate the particular investments to be made, and in a transaction that may be effected without loss of any applicable Investment Company Act exemption, (E) will provide notice to any subsequent transferee of the transfer restrictions provided in the legend, (F) will hold and transfer in a principal amount of not less than U.S.$250,000, for it or for each account for which it is acting and (G) will provide the Issuer from time to time such information as it may reasonably request in order to ascertain compliance with the foregoing. Any purported transfer that is not in compliance with this Section 2.4 or the legends on the Rated Notes 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. If any purported transfer of Rated Notes or any beneficial interest therein to a purported transferee does not comply with the requirements set forth in this Section 2.4 or the legends on the Rated Notes, then the purported transferor of such Rated Notes or beneficial interest therein shall be required to cause the purported transferee to surrender the Rated Notes or any beneficial interest therein in return for a refund of the consideration paid therefor by such transferee (together with interest thereon) or to cause the purported transferee to dispose of such Rated Notes or beneficial interest promptly in one or more open market sales to one or more persons each of whom satisfies the requirements of this Section 2.4 and the legends on the Rated Notes and such purported transferor shall take, and shall cause such transferee to take, all further action necessary or desirable, in the judgment of the Trustee, to ensure that such Rated Notes or any beneficial interest therein are held by persons in compliance therewith.

(f)

Requirement to Sell. (1)

If, notwithstanding the restrictions set forth in this Section 2.4, either of the Co-Issuers determines that any beneficial owner of a Rule 144A Note (A) is a U.S. Person and (B) is not a Qualified Institutional Buyer and also a Qualified Purchaser, either of the Co-Issuers may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Rated Note (or interest therein) to a Person that is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser, with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (x) upon 64

Processed and formatted by SEC Watch - Visit SECWatch.com

written direction from the Issuer, the Trustee shall, and is hereby irrevocably authorized by such beneficial owner to cause its interest in such Rated Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9-611 of the UCC as applied to securities that are customarily sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser and (y) pending such transfer, no further payments will be made in respect of such Rated Note (or beneficial interest therein) held by such beneficial owner. (2)

If, notwithstanding the restrictions set forth in this Section 2.4, either of the Co-Issuers determines that any beneficial owner of a Regulation S Note is (A) a U.S. Person or (B) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), either of the Co-Issuers may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Rated Note (or interest therein) to a Person that is not (1) a U.S. Person or (2) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (x) upon written direction from the Issuer, the Trustee shall, and is hereby irrevocably authorized by such beneficial owner to cause its interest in such Rated Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9-611 of the UCC as applied to securities that are customarily sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is neither (1) a U.S. Person nor (2) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA) and (y) pending such transfer, no further payments will be made in respect of such Rated Note (or beneficial interest therein) held by such beneficial owner.

(g)

Legends. Any Rated Note issued upon the transfer, exchange or replacement of Rated Notes shall bear such applicable legend set forth in the relevant Exhibit hereto unless there is delivered to the Trustee, the Note Registrar, the Issuer and the Co-Issuer such satisfactory evidence, which may include an Opinion of Counsel, as may be reasonably required by any of the Trustee, the Note Registrar, the Issuer and the Co-Issuer to the effect that neither such applicable legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A or another exemption from registration under the Securities Act and to ensure that neither of the Co-Issuers nor the pool of Collateral becomes an investment company required to be registered under the Investment Company Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Issuer and the Co-Issuer, shall authenticate and deliver Rated Notes that do not bear such applicable legend.

(h)

Expenses; Acknowledgment of Transfer. Transfer, registration and exchange shall be permitted as provided in this Section 2.4 without any charge to the Rated Noteholder except for a sum sufficient to cover any tax or other governmental charge payable in connection therewith or the expenses of delivery (if any) not made by regular mail and payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith pursuant to Section 2.4(a). Registration of the transfer of a Rated 65

Processed and formatted by SEC Watch - Visit SECWatch.com

Note by the Trustee shall be deemed to be the acknowledgment of such transfer on behalf of the Co-Issuers.

2.5.

(i)

Surrender upon Final Payment. Upon final payment due on the date on which all outstanding unpaid principal of a Rated Note becomes due and payable as therein or herein provided, whether at the Stated Maturity Date or by declaration of acceleration, call for redemption or otherwise, the Holder thereof shall present and surrender such Rated Note at the Corporate Trust Office of the Trustee in Chicago, Illinois.

(j)

Repurchase and Cancellation of Rated Notes. The Co-Issuers will not purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the Outstanding Rated Notes except upon the redemption of the Rated Notes in accordance with the terms of this Indenture and the Rated Notes. The Co-Issuers will promptly cancel all Rated Notes acquired by them pursuant to any payment, purchase, redemption, prepayment or other acquisition of Rated Notes pursuant to any provision of this Indenture and no Rated Notes may be issued in substitution or exchange for any such Rated Notes.

(k)

Compliance with Transfer Restrictions. Notwithstanding anything contained herein to the contrary, neither the Trustee nor the Note Registrar shall be responsible for ascertaining whether any transfer complies with the registration provisions of or exemptions from the Securities Act, applicable state securities laws, the rules of any Depositary, ERISA, the Code or the Investment Company Act; provided that if a certificate is specifically required by the express terms of this Section 2.4 to be delivered to the Trustee or the Note Registrar by a purchaser or transferee of a Rated Note, the Trustee or the Note Registrar, as the case may be, shall be under a duty to receive and examine the same to determine whether the transfer contemplated thereby substantially complies with the express terms of this Indenture and shall promptly notify the party delivering the same if such transfer does not comply with such terms. To the extent applicable to the Issuer, the Issuer shall impose additional restrictions to comply with the USA PATRIOT Act, and any such transfer restrictions shall be binding on each Holder or Beneficial Owner of a Rated Note. The Issuer shall notify the Trustee and the Note Registrar of the imposition of any such transfer restrictions.

(1)

Physical Rated Notes. The Co-Issuers will promptly make available to the Trustee without charge a reasonable supply of Definitive Notes in definitive, fully Registered Form, without interest coupons.

MUTILATED, DEFACED, DESTROYED, LOST OR STOLEN RATED NOTES

If (a) any mutilated or defaced Rated Note is surrendered to a Note Transfer Agent, or if there shall be delivered to the Co-Issuers or the Issuer, the Trustee and the Note Transfer Agent (each, a Specified Person) evidence to their reasonable satisfaction of the destruction, loss or theft of any Rated Note, and (b) there is delivered to the Specified Persons such security or indemnity as may reasonably be required by them to save each of them harmless then, in the absence of notice to the Specified Persons that such Rated Note has been acquired by a bona fide purchaser, the Co-Issuers or the Issuer shall execute and shall direct the Trustee to authenticate, and upon Issuer Request the Trustee shall authenticate and deliver, in lieu of any such mutilated, defaced, destroyed, lost or stolen Rated Note, a new Rated Note of the same Class as such mutilated, defaced, destroyed, lost or stolen Rated Note, of like tenor (including the same date of issuance) and equal principal amount, registered in the same manner, dated the date of its authentication, bearing interest from the date to which interest has been paid on the mutilated, defaced, destroyed, lost or stolen Rated Note and bearing a number not contemporaneously outstanding. 66

If, after delivery of such new Rated Note, a bona fide purchaser of the predecessor Rated Note presents for payment, transfer or exchange such predecessor Rated Note, the Specified Persons shall be entitled to recover such new Rated Note from the Person to whom it was delivered or any Person taking therefrom, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Specified Persons in connection therewith. In case any such mutilated, defaced, destroyed, lost or stolen Rated Note has become due and payable, the Co-Issuers or the Issuer in their or its (as applicable) discretion may, instead of issuing a new Rated Note, pay such Rated Note without requiring surrender thereof except that any mutilated Rated Note shall be surrendered. Upon the issuance of any new Rated Note under this Section 2.5, the Co-Issuers, the Trustee or any Note Transfer Agent may require the payment by the registered Holder thereof of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Rated Note issued pursuant to this Section 2.5 in lieu of any mutilated, defaced, destroyed, lost or stolen Rated Note, shall constitute an original additional contractual obligation of the Co-Issuers and such new Rated Note shall be entitled, subject to the second paragraph of this Section 2.5, to all the benefits of this Indenture equally and proportionately with any and all other Rated Notes duly issued hereunder. The provisions of this Section 2.5 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, defaced, destroyed, lost or stolen Rated Notes. 2.6.

PAYMENT OF PRINCIPAL AND INTEREST; RIGHTS PRESERVED

Processed and formatted by SEC Watch - Visit SECWatch.com

(a)

Each Class of Rated Notes shall accrue interest during each Interest Period applicable to such Class in the manner and at the Applicable Periodic Interest Rate specified in Section 2.2. Interest on each Class of Rated Notes shall be due and payable on each Payment Date; provided that (i) interest on the Class A-2 Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A-1 Notes (together with any Defaulted Interest thereon), (ii) interest on the Class B Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), (iii) interest on the Class C Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon) and on the Class B Notes (together with any Defaulted Interest thereon), (iv) interest on the Class D Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon) and on the Class C Notes (together with any Defaulted Interest thereon), (v) interest on the Class E Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon) and the Class D Notes (together with any Defaulted Interest thereon), (vi) interest on the Class F Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes 67

Processed and formatted by SEC Watch - Visit SECWatch.com

(together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon) and the Class E Notes (together with any Defaulted Interest thereon), and (vii) interest on all Rated Notes is subordinated in right of payment to the prior payment in full on each Payment Date of other amounts in accordance with Section 11.1. Except as provided in Section 5.5, no payment shall be made by the Co-Issuers hereunder other than on a Payment Date. So long as any Class A Notes or Class B Notes are Outstanding, any Class C Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class C Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class C Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, any Class D Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class D Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class D Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding, any Class E Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class E Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class E Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding, any Class F Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class F Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class F Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. (b)

The principal of each Rated Note shall be payable no later than the Stated Maturity Date thereof unless the unpaid principal of such Rated Note becomes due and payable at an earlier date by declaration of acceleration, call for redemption or otherwise; provided that: (1)

so long as any Class A-1 Notes are Outstanding, except as provided in Section 9 and Section 11.1(b)(15) and (16), the payment of principal of the Class A-2 Notes, the B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes (x) may only occur after principal of the Class A Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and other amounts payable in accordance with Section 11.1; 68

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

(2)

so long as any Class A Notes are Outstanding, except as provided in Section 9 and Section 11.1(b)(15) and (16), the payment of principal of the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes (x) may only occur after principal of the Class A Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and other amounts payable in accordance with Section 11.1;

(3)

so long as any Class A Notes or Class B Notes are Outstanding, except as provided in Section 11.1(b)(15) and (16), the payment of principal of the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes (x) may only occur after principal of the Class A Notes and the Class B Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and Class B Notes and other amounts payable in accordance with Section 11.1;

(4)

so long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, except as provided in Section 9 and Section 11.1(b)(15) and (16), the payment of principal of the Class D Notes, the Class E Notes and the Class F Notes (x) may only occur after principal of the Class A Notes, the Class B Notes and the Class C Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes and the Class C Notes and other amounts payable in accordance with Section 11.1;

(5)

so long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding, except as provided in Section 9 and Section 11.1(b)(15) and (16), the payment of principal of the Class E Notes and the Class F Notes (x) may only occur after principal of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes and other amounts payable in accordance with Section 11.1.

(6)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding, except as provided in Section 9 and Section 11.1(b)(15) and (16), the payment of principal of the Class F Notes (x) may only occur after principal of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and other amounts payable in accordance with Section 11.1.

So long as the Coverage Tests are satisfied, principal will not be payable on any Class of Rated Notes except (i) upon the occurrence of a Redemption, (ii) in the case of any Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes, to pay amounts in respect of the Class C Cumulative Applicable Periodic Interest Shortfall Amount, the Class D Cumulative Applicable Periodic Interest Shortfall Amount, the Class E Cumulative Applicable Periodic Interest Shortfall Amount or the Class F Cumulative 69

Processed and formatted by SEC Watch - Visit SECWatch.com

Applicable Periodic Interest Shortfall Amount, as the case may be, in accordance with Section 11.1 and (iii) on each Payment Date, in accordance with Section 11.1. (d)

As a condition to the payment of any principal of or interest on any Rated Note without the imposition of withholding tax, any Note Paying Agent shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor 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 Internal Revenue Service Form W-8 (or applicable successor 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) or other certification acceptable to it to enable the Co-Issuers, the Trustee and any Note Paying Agent to determine their duties and liabilities with respect to any taxes or other charges that they may be required to pay, deduct or withhold in respect of such Rated Note or the Holder of such Rated Note under any present or future law or regulation of the Cayman Islands or the United States or any present or future law or regulation of any political subdivision thereof or taxing authority therein or to comply with any reporting or other requirements under any such law or regulation.

(e)

All payments made by the Issuer under the Rated Notes will be made without any deduction or withholding for or on the account of any tax unless such deduction or withholding is required by applicable law, as modified by the practice of any relevant governmental authority, then in effect. If the Issuer is so required to deduct or withhold, then neither the Issuer nor the Co-Issuer will be obligated to pay any additional amounts in respect of such withholding or deduction.

(f)

Payments in respect of principal of and interest on the Rated Notes shall be payable by wire transfer in immediately Available Funds to a Dollar account maintained by the Rated Noteholders in accordance with wire transfer instructions received by any Note Paying Agent on or before the Record Date or, if no wire transfer instructions are received by a Note Paying Agent, by a Dollar check drawn on a bank in the United States mailed to the address of such Rated Noteholder as it appears on the Note Register at the close of business on the Record Date for such payment.

(g)

The principal of and interest on any Rated Note which is payable on a Redemption Date or in accordance with Section 11.1 on a Payment Date and is punctually paid or duly provided for on such Redemption Date or Payment Date shall be paid to the Person in whose name that Rated Note (or one or more predecessor Rated Notes) is registered at the close of business on the Record Date for such payment. All such payments that are mailed or wired and returned to the Note Paying Agent shall be held for payment as herein provided at the office or agency of the Co-Issuers to be maintained as provided in Section 7.2. Payments to Holders of the Rated Notes of each Class shall be made in the proportion that the Aggregate Outstanding Amount of the Rated Notes of such Class registered in the name of each such Holder on the Record Date for such payment bears to the Aggregate Outstanding Amount of all Rated Notes of such Class on such Record Date.

(h)

Payment of any Defaulted Interest may be made in any other lawful manner in accordance with Section 11.1 if notice of such payment is given by the Trustee to the 70

Processed and formatted by SEC Watch - Visit SECWatch.com

Co-Issuers and the Rated Noteholders, and such manner of payment shall be deemed practicable by the Trustee. (i)

All reductions in the principal amount of a Rated Note (or one or more predecessor Rated Notes) effected by payments of installments of principal made on any Payment Date or Redemption Date shall be binding upon all future Holders of such Rated Note and of any Rated Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Rated Note.

(j)

Notwithstanding anything to the contrary herein, the obligations of the Co-Issuers or the Issuer, as the case may be, under the Rated Notes or this Indenture or arising in connection herewith are limited recourse obligations of the Co-Issuers or the Issuer, as the case may be, payable solely from the Collateral and following realization of the Collateral, all obligations of and all claims against the Co-Issuers or the Issuer, as the case may be, hereunder or arising in connection herewith shall be extinguished and shall not thereafter revive. No recourse shall be had against any Officer, member, director, employee, security holder or incorporator of the Co-Issuers or their respective successors or assigns for the payment of any amounts payable under the Rated Notes or this Indenture. It is understood that the foregoing provisions of this Section 2.6(j) shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or agreement which is part of the Collateral or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Rated Notes or secured by this Indenture until such Collateral has been realized, whereupon any outstanding indebtedness or obligation shall be extinguished. It is further understood that the foregoing provisions of this Section 2.6(j) shall not limit the right of any Person to name the Issuer or the Co-Issuer as a party defendant in any action or suit or in the exercise of any other remedy under the Rated Notes or this Indenture, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity.

(k)

Subject to the foregoing provisions of this Section 2.6 and the provisions of Sections 2.4 and 2.5, each Rated Note delivered under this Indenture and upon registration of transfer of or in exchange for or in lieu of any other Rated Note shall carry the rights of unpaid interest and principal that were carried by such other Rated Note. ARTICLE III CONDITIONS PRECEDENT

3.1.

GENERAL PROVISIONS

The Rated Notes may be executed by the Co-Issuers and delivered to the Trustee for authentication and thereupon the same shall be authenticated and delivered by the Trustee (or an Authenticating Agent on its behalf) upon Issuer Request, upon receipt by the Trustee of the following: (a)

(1)

an Officer’s certificate of the Issuer, (A) evidencing the authorization by Board Resolution of the execution and delivery of, and the performance of the Issuer’s obligations under, each Transaction Document, in each case as may be amended on or prior to, and as in effect on, the Closing Date, and the execution, authentication and delivery of the Rated Notes and specifying the Stated Maturity Date, the principal amount and the Applicable Periodic Interest Rate with respect 71

Processed and formatted by SEC Watch - Visit SECWatch.com

to each Class of Rated Notes to be authenticated and delivered, and (B) certifying that (1) the attached copy of such Board Resolution is a true and complete copy thereof, (2) such resolutions have not been rescinded and are in full force and effect on and as of the Closing Date and (3) the Officers authorized to execute and deliver such documents hold the offices and have the signatures indicated thereon; and

(b)

(c)

(2)

an Officer’s certificate of the Co-Issuer (A) evidencing the authorization by Board Resolution of the execution and delivery of, and the performance of the Co-Issuer’s obligations under, this Indenture, as may be amended on or prior to, and as in effect on, the Closing Date, and the execution, authentication and delivery of the Rated Notes and specifying the Stated Maturity Date, the principal amount and the Applicable Periodic Interest Rate of each Class of Rated Notes to be authenticated and delivered, and (B) certifying that (1) the attached copy of such Board Resolution is a true and complete copy thereof, (2) such resolutions have not been rescinded and are in full force and effect on and as of the Closing Date and (3) the Officers authorized to execute and deliver such documents hold the offices and have the signatures indicated thereon;

(1)

either (A) a certificate of the Issuer, or other official document evidencing the due authorization, approval or consent of any governmental body or bodies, at the time having jurisdiction in the premises, together with an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee and the Initial Hedge Counterparty on which the Trustee and the Initial Hedge Counterparty are entitled to rely to the effect that no other authorization, approval or consent of any governmental body is required for the valid issuance of the Rated Notes, or (B) an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee and the Initial Hedge Counterparty to the effect that no such authorization, approval or consent of any governmental body is required for the valid issuance of the Rated Notes except as may have been given; and

(2)

either (A) a certificate of the Co-Issuer or other official document evidencing the due authorization, approval or consent of any governmental body or bodies, at the time having jurisdiction in the premises, together with an Opinion of Counsel to the Co-Issuer satisfactory in form and substance to the Trustee and the Initial Hedge Counterparty on which the Trustee and the Initial Hedge Counterparty are entitled to rely to the effect that no other authorization, approval or consent of any governmental body is required for the valid issuance of the Rated Notes, or (B) an Opinion of Counsel to the Co-Issuer satisfactory in form and substance to the Trustee and the Initial Hedge Counterparty that no such authorization, approval or consent of any governmental body is required for the valid issuance of the Rated Notes except as may have been given;

(1)

an opinion of Clifford Chance US LLP, special New York counsel to the Co-Issuers, dated the Closing Date, substantially in the form of Exhibit E-1;

(2)

an opinion of Walkers, special Cayman Islands counsel to the Issuer, dated the Closing Date, substantially in the form of Exhibit E-2;

(3)

an opinion of Kennedy Covington Lobdell & Hickman, L.L.P., counsel to the Trustee, dated the Closing Date, substantially in the form of Exhibit F; 72

Processed and formatted by SEC Watch - Visit SECWatch.com

(4)

an opinion of Thacher Proffitt & Wood LLP, counsel to the Collateral Advisor, dated the Closing Date, substantially in the form of Exhibit G; and

(5)

an opinion of in-house counsel to the Initial Hedge Counterparty, dated the Closing Date, substantially in the form of Exhibit H;

(d)

an Officer’s certificate of the Issuer, stating that the Issuer is not in Default under this Indenture and that the issuance of the Rated Notes will not result in a breach of any of the terms, conditions or provisions of, or constitute a Default under, the Articles, any indenture or other agreement or instrument to which the Issuer is a party or by which it is bound, or any order of any court or administrative agency entered in any Proceeding to which the Issuer is a party or by which it may be bound or to which it may be subject; that no Event of Default shall have occurred and be continuing; that all of the representations and warranties contained herein are true and correct as of the Closing Date; that all conditions precedent provided in this Indenture relating to the authentication and delivery of the Rated Notes applied for (including in Section 3.2) have been complied with; and that all expenses due or accrued with respect to the Offering or relating to actions taken on or in connection with the Closing Date have been paid;

(e)

an Officer’s certificate of the Co-Issuer stating that the Co-Issuer is not in Default under this Indenture and that the issuance of the Rated Notes will not result in a breach of any of the terms, conditions or provisions of, or constitute a Default under, the Certificate of Incorporation or By-Laws of the Co-Issuer, any indenture or other agreement or instrument to which the Co-Issuer is a party or by which it is bound, or any order of any court or administrative agency entered in any Proceeding to which the Co-Issuer is a party or by which it may be bound or to which it may be subject; that no Event of Default shall have occurred and be continuing; that all of the representations and warranties contained herein are true and correct as of the Closing Date; that all conditions precedent provided in this Indenture relating to the authentication and delivery of the Rated Notes applied for have been complied with; and that all expenses due or accrued with respect to the Offering or relating to actions taken on or in connection with the Closing Date have been paid;

(f)

an Accountants’ Report (A) confirming the information with respect to each Collateral Debt Security (other than its price) set forth on a schedule setting forth each Collateral Debt Security and the information provided by the Issuer with respect to every other asset forming part of the Collateral, by reference to such sources as shall be specified therein, (B) confirming that, on the Closing Date, the Collateral Debt Securities set forth on Schedule A meet the Collateral Quality Tests (with the exception of the S&P CDO Monitor Test), (C) calculating each of the Coverage Tests as of the Closing Date and (D) specifying the procedures undertaken by them to review data and computations relating to the foregoing statement;

(g)

executed counterparts of this Indenture, the Account Control Agreement, the Collateral Administration Agreement, the Collateral Advisory Agreement and the other Transaction Documents;

(h)

an executed copy of the initial Hedge Agreement and an executed copy of the Collateral Assignment of Hedge Agreement with respect thereto (and all acknowledgments thereto); 73

Processed and formatted by SEC Watch - Visit SECWatch.com

3.2.

(i)

execution and delivery of the Financing Statement for filing against the Issuer with the Recorder of Deeds in the District of Columbia; and

(j)

evidence of an entry having been made in the Issuer’s Register of Mortgages and Charges in respect of the charge.

SECURITY FOR THE RATED NOTES Prior to the issuance of the Rated Notes on the Closing Date, the Issuer shall cause the following conditions to be satisfied: (a)

Grant of Security Interest; Delivery of Collateral Debt Securities. The Grant pursuant to the Granting clauses of this Indenture of all of the Issuer’s right, title and interest in and to the Collateral and the transfer of all Collateral Debt Securities purchased by the Issuer on the Closing Date (as set forth in Schedule A) to the Trustee in the manner provided in Section 3.3(b).

(b)

Certificate of the Issuer. The delivery to the Trustee of a certificate of an Authorized Officer of the Issuer or the Collateral Advisor, for and on behalf of the Issuer, dated as of the Closing Date, to the effect that (x) the Issuer has no assets other than the Collateral, (y) the Issuer has no investments that do not qualify as Collateral Debt Securities or Eligible Investments and (z) in the case of each Collateral Debt Security identified on Schedule A and pledged to the Trustee for inclusion in the Collateral on the Closing Date: (1)

the Issuer is the owner of such Collateral Debt Security free and clear of any liens, claims or encumbrances of any nature whatsoever except for those which are being released on the Closing Date and except for those Granted pursuant to this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on such Collateral Debt Security prior to the first Payment Date and owed by the Issuer to the seller of such Collateral Debt Security;

(2)

the Issuer has acquired its ownership in such Collateral Debt Security in good faith without notice of any adverse claim (within the meaning given to such term by Section 8-102(a)(1) of the UCC), except as described in clause (1) above;

(3)

the Issuer has not assigned, pledged or otherwise encumbered any interest in such Collateral Debt Security (or, if any such interest has been assigned, pledged or otherwise encumbered, it has been released) other than interests Granted pursuant to this Indenture;

(4)

the Issuer has full right to Grant a security interest in and assign and pledge all of its right, title and interest in such Collateral Debt Security to the Trustee;

(5)

the information set forth with respect to such Collateral Debt Security on Schedule A is correct and each such Collateral Debt Security is transferred to the Trustee as required by Section 3.2(a) (or, if any such Collateral Debt Security is not so transferred to the Trustee on the Closing Date, the Issuer has entered into a binding agreement to purchase such Collateral Debt Security for settlement within 10 days after the Closing Date); 74

Processed and formatted by SEC Watch - Visit SECWatch.com

3.3.

(6)

each such Collateral Debt Security satisfies the requirements of the definition of “Collateral Debt Security” and is not a Defaulted Security; and

(7)

upon Grant by the Issuer, the Trustee has a first priority perfected security interest in the Collateral (assuming that any Clearing Corporation, Securities Intermediary or other entity not within the control of the Issuer involved in the Grant of Collateral takes the actions required of it under Section 3.3(b) for perfection of that interest) and a “securities entitlement” (as defined in the UCC) with respect to Financial Assets.

(c)

Rating Letters. The delivery to the Trustee of an Officer’s certificate of the Issuer, to the effect that (i) attached thereto are true and correct copies of (A) a letter signed by Fitch confirming that the Class A Notes have been rated “AAA”, the Class B Notes have been rated at least “AA”, the Class C Notes have been rated at least “A”, the Class D Notes have been rated at least “BBB”, the Class E Notes have been rated at least “BBB-” and the Class F Notes have been rated at least “BB” by Fitch and (B) a letter signed by S&P confirming that the Class A Notes have been rated “AAA”, the Class B Notes have been rated at least “AA”, the Class C Notes have been rated at least “A”, the Class D Notes have been rated at least “BBB”, the Class E Notes have been rated at least “BBB-” and the Class F Notes have been rated at least “BB” by S&P and (ii) each such rating is in full force and effect on the Closing Date.

(d)

Accounts. The delivery by the Trustee of evidence of the establishment of the Payment Account, the Collection Account (including each Collateral Sub-Account established therein), the Expense Reserve Account, the Interest Reserve Account, the Collateral Account and the Uninvested Proceeds Account and, to be established on the Closing Date.

(e)

Funding Certificate. The delivery to the Trustee of a funding certificate (the Funding Certificate), duly executed by an Authorized Officer of the Issuer, relating to, among other things, the disposition of the proceeds of the issuance of the Rated Notes, dated the Closing Date, in substantially the form of Exhibit D hereto.

(f)

Purchases. The delivery to the Trustee of a certification of the Issuer that it shall have entered into one or more agreements to purchase, for settlement on or following the Closing Date in accordance with customary settlement procedures in the relevant markets, Collateral Debt Securities having an aggregate Principal Balance of not less than U.S.$425,000,000.

CUSTODIANSHIP; TRANSFER OF COLLATERAL DEBT SECURITIES AND ELIGIBLE INVESTMENTS (a)

The Trustee shall hold all Certificated Securities and Instruments in physical form at the office of a custodian appointed by it in Illinois (together with any successor, the Custodian). Initially, such Custodian shall be LaSalle Bank National Association with its address at 135 South LaSalle Street, Suite 1511, Chicago, Illinois 60603, Attention: CDO Trust Services Group – NStar Real Estate CDO V Ltd. Any successor custodian shall be a state or national bank or trust company that is not an Affiliate of the Issuer or the Co-Issuer, has a long-term debt rating of at least “BBB+” by S&P and has a combined capital and surplus of at least U.S.$250,000,000. 75

(b)

Each Collateral Debt Security, Equity Security and Eligible Investment shall be credited to the appropriate Account. Each time that the Issuer shall direct or cause the acquisition of any Collateral Debt Security, Equity Security or Eligible Investment, the Trustee (on behalf of the Issuer) shall, if such Collateral Debt Security, Equity Security or Eligible Investment has not already been transferred to the Collateral Account and credited thereto, cause the transfer of such Collateral Debt Security, Equity Security or Eligible Investment to the Custodian to be held in and credited to the Collateral Account for the benefit of the Trustee in accordance with the terms of this Indenture. The security interest of the Trustee in the funds or other property utilized in connection with such acquisition shall, immediately and without further action on the part of the Trustee, be released. The security interest of the Trustee shall nevertheless come into existence and continue in the Collateral Debt Security, Equity Security or Eligible Investment so acquired, including all rights of the Issuer in and to any contracts related to and proceeds of such Collateral Debt Security, Equity Security or Eligible Investment.

(c)

On the Closing Date, on each day thereafter, if any, that any Collateral is acquired or otherwise becomes subject to the lien of this Indenture and on the Effective Date, the Issuer represents and warrants to the Trustee as follows: (1)

This Indenture creates a valid and continuing security interest (as defined in the applicable Uniform Commercial Code) in the Collateral in favor of the Trustee on behalf and for the benefit of the Secured Parties, which security interest is prior to all other liens and security interests, and is enforceable as such as against creditors of and purchasers from the Issuer and, upon delivery of the Collateral Debt Securities and filing of the appropriate financing statements in the appropriate filing offices, the lien and security interest created by this Indenture shall be a perfected first priority security interest in favor of the Trustee for the benefit of the Secured Parties.

(2)

The Issuer owns and has good and marketable title to the Collateral free and clear of any liens, claims, encumbrances or defects of any nature whatsoever except for those which are being released on the Closing Date or on the date of purchase by the Issuer or those created pursuant to or contemplated under this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on any Collateral

Processed and formatted by SEC Watch - Visit SECWatch.com

Debt Security prior to the first payment date and owed by the Issuer to the seller of such Collateral Debt Security. (3)

The Issuer has acquired its ownership in each such Collateral Debt Security, or will acquire in the case of any Collateral Debt Securities which the Issuer has on or before the Closing Date committed to purchase but which will not have settled on or before the Closing Date or any additional Collateral Debt Securities or Substitute Collateral Debt Securities acquired by the Issuer after the Closing Date, in good faith without notice of any adverse claim, except as described in clause (2) above.

(4)

The Issuer (a) has delivered each such Collateral Debt Security, or will deliver any Collateral Debt Securities which the Issuer has on or before the Closing Date committed to purchase but which will not have settled on or before the Closing Date or any additional Collateral Debt Securities or Substitute Collateral Debt Securities acquired by the Issuer after the Closing Date, to the Trustee and 76

Processed and formatted by SEC Watch - Visit SECWatch.com

(b) has not assigned, pledged, sold, granted a security interest in or otherwise encumbered any interest in such Collateral Debt Security other than interests granted pursuant to this Indenture. (5)

The Issuer has full right to grant all security interests granted herein.

(6)

All Collateral is comprised of either “securities”, “instruments”, “tangible chattel paper”, “accounts”, “security entitlements” or “general intangibles”, in each case as defined in the applicable Uniform Commercial Code.

(7)

Each of the Accounts, and all subaccounts thereof, constitute securities accounts as defined in the applicable Uniform Commercial Code.

(8)

All items of the Collateral that constitute security entitlements have been and will have been credited to one of the securities accounts. The securities intermediary for each of the Accounts has agreed to treat all assets credited to the securities accounts as financial assets under the applicable Uniform Commercial Code.

(9)

Other than the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Collateral. The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer that include a description of collateral covering the Collateral other than any financing statement relating to the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder or that has been terminated. The Issuer is not aware of any judgment, Pension Benefit Guarantee Corporation lien or tax lien filings against it.

(10)

The Issuer has caused or will have caused, within ten (10) days of the Closing Date, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Collateral granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder that constitutes chattel paper, instruments, accounts, securities entitlements or general intangibles under the applicable Uniform Commercial Code, if any.

(11)

The Trustee or the Accountholder has in its possession all original copies of the instruments that constitute or evidence the Collateral, if any. The instruments, loan agreements and leases that constitute or evidence the Collateral do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties. All financing statements filed or to be filed against the Issuer in favor of the Trustee on behalf and for the benefit of the Secured Parties in connection herewith describing the Collateral contain a statement to the following effect: “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Trustee on behalf and for the benefit of (A) itself and for the benefit of the Noteholders, (B) the Collateral Advisor and (C) each Hedge Counterparty.”

(12)

The authoritative copy of any chattel paper that constitutes or evidences the Collateral, if any, has been communicated to the Trustee and has no marks or 77

Processed and formatted by SEC Watch - Visit SECWatch.com

notations indicating that it has been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties. (13)

The Issuer has received or will receive all consents and approvals required by the terms of the underlying loan agreement, indenture or other underlying documentation, if any, relating to the Collateral to the transfer to the Trustee on behalf and for the benefit of the Secured Parties of its interest and rights in the Collateral hereunder.

(14)

The Issuer, the Accountholder and the Trustee have entered into the Account Control Agreement pursuant to which the Accountholder has agreed to comply with all instructions originated by the Trustee relating to the Accounts without further consent by the Issuer.

(15)

None of the Accounts is in the name of any person other than the Trustee, held on behalf and for the benefit of the Secured Parties. The Issuer has not consented to the Trustee or the Accountholder maintaining any of the Accounts to comply with entitlement orders or instructions of any Person other than the Trustee.

(16)

Notwithstanding any other provision of this Indenture or any other related Transaction Document, the representations in this Section 3.3(c) shall be continuing and deemed to be updated on any day a new item of Collateral is acquired, and remain in full force and effect until such time as all obligations under this Indenture and the Notes have been finally and fully paid and performed and shall survive the termination of this Indenture for any other reason.

(17)

The parties to this Indenture (i) shall not, without obtaining a Rating Agency Confirmation, waive any of the representations in this Section 3.3(c); (ii) shall provide each of the Rating Agencies with prompt written notice of any breach of the representations contained in this Section 3.3(c) upon becoming aware thereof; and (iii) shall not, without obtaining a Rating Agency Confirmation (as determined after any adjustment or withdrawal of the ratings following notice of such breach), waive a breach of any of the representations in this Section 3.3(c). ARTICLE IV SATISFACTION AND DISCHARGE

4.1.

SATISFACTION AND DISCHARGE OF INDENTURE

This Indenture shall be discharged and shall cease to be of further effect with respect to the Collateral securing the Rated Notes and the Rated Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Rated Notes, (iii) rights of Rated Noteholders to receive payments of principal thereof and interest thereon, (iv) the rights, obligations and immunities of the Trustee hereunder, (v) the rights, obligations and immunities of the Collateral Advisor hereunder and under the Collateral Advisory Agreement and (vi) the rights of the Secured Parties as beneficiaries hereof with respect to the property deposited with the Trustee and payable to all or any of them; and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when: 78

Processed and formatted by SEC Watch - Visit SECWatch.com

(a)

either: (1)

all Rated Notes theretofore authenticated and delivered (other than (A) Rated Notes which have been mutilated, defaced, destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.5 and (B) Rated Notes for whose payment funds have theretofore irrevocably been deposited in trust and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 7.3) have been delivered to the Trustee for cancellation; or

(2)

all Rated Notes not theretofore delivered to the Trustee for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity Date within one year, or (C) are to be called for redemption pursuant to Section 9.1 under an arrangement satisfactory to the Trustee for the giving of notice of redemption by the Co-Issuers pursuant to Section 9.3 and the Issuer has irrevocably deposited or caused to be deposited with the Trustee, in trust for such purpose, Cash or non-callable direct obligations of the United States in an amount sufficient, according to the Priority of Payments as verified by a firm of nationally recognized Independent certified public accountants, to pay and discharge the entire indebtedness on all Rated Notes not theretofore delivered to the Trustee for cancellation, including all principal and interest (including Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Periodic Interest Shortfall Amount and Class F Cumulative Applicable Periodic Interest Shortfall Amount accrued to the date of such deposit) (in the case of Rated Notes which have become due and payable) or to the Stated Maturity Date or the Redemption Date, as the case may be; provided that (x) such obligations are entitled to the full faith and credit of the United States and (y) this subclause (2) shall not apply if an election to act in accordance with the provisions of Section 5.5(a) shall have been made and not rescinded;

(b)

the Issuer has paid or caused to be paid all other sums payable hereunder (including amounts payable pursuant to the Hedge Agreement, the Income Note Paying Agency Agreement, the Corporate Services Agreement, the Collateral Advisory Agreement and the Collateral Administration Agreement) and no other amounts will become due and payable by the Issuer; and

(c)

the Co-Issuers have delivered to the Trustee and the Initial Hedge Counterparty Officer’s certificates and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the rights and obligations of the Co-Issuers, the Trustee and the Hedge Counterparty and, if applicable, the Rated Noteholders, as the case may be, under Sections 2.6, 4.1, 4.2, 5.9, 5.18, 6.7, 6.8, 7.1 and 7.3 shall survive. 4.2.

APPLICATION OF TRUST MONEY

All funds deposited with the Trustee pursuant to Section 4.1 for the payment of principal of and interest on the Rated Notes and amounts payable pursuant to the Hedge Agreement, the Collateral Advisory Agreement, the Income Note Paying Agency Agreement, the Corporate Services Agreement and the Collateral Administration Agreement shall be held in trust and applied by it in accordance with 79

Processed and formatted by SEC Watch - Visit SECWatch.com

the provisions of the Rated Notes and this Indenture, including the Priority of Payments, for the payment either directly or through any Note Paying Agent, as the Trustee may determine, to the Person entitled thereto of the respective amounts in respect of which such funds has been deposited with the Trustee; but such funds need not be segregated from other funds except to the extent required herein or required by law. 4.3.

REPAYMENT OF FUNDS HELD BY NOTE PAYING AGENT

In connection with the satisfaction and discharge of this Indenture with respect to the Rated Notes, all funds then held by any Note Paying Agent other than the Trustee under the provisions of this Indenture shall, upon demand of the Co-Issuers, be paid to the Trustee to be held and applied pursuant to Section 7.3 and in accordance with the Priority of Payments and thereupon such Note Paying Agent shall be released from all further liability with respect to such funds. ARTICLE V EVENTS OF DEFAULT; REMEDIES 5.1.

EVENTS OF DEFAULT

Event of Default, is defined as any one of the following wherever used herein, means any one of the following events as set forth in Section 5.1(a) through (h) (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a)

a default for five (5) Business Days in the payment, when due and payable, of any interest on any Class A Note or Class B Note or, if there are no Class A Notes or Class B Notes Outstanding, on any Class C Note or, if there are no Class A Notes, Class B Notes or Class C Notes Outstanding, on any Class D Note or, if there are no Class A Notes, Class B Notes, Class C Notes or Class D Notes Outstanding, on any Class E Note or, if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes Outstanding, on any Class F Note;

(b)

a default in the payment of any principal, when due and payable of any Rated Note (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent or the Note Registrar, such default continues for a period of five (5) Business Days);

(c)

the failure on any Payment Date to disburse amounts available in accordance with Section 11.1 (except as provided in Section 5.1(a) and (b) above) and a continuation of such failure for three (3) Business Days (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent or the Note Registrar, such default continues for a period of five (5) Business Days);

(d)

on any Measurement Date, the Class A/B Principal Coverage Ratio is less than 100%;

(e)

either of the Co-Issuers or the pool of Collateral becomes an investment company required to be registered under the Investment Company Act; 80

Processed and formatted by SEC Watch - Visit SECWatch.com

(f)

a default in the performance, or breach, of any other covenant (it being understood that non-compliance with any of the Coverage Tests or the Collateral Quality Tests will not constitute a default or breach) or of any representation or warranty of either of the Co-Issuers under the Indenture of any representation or if any certificate or writing delivered pursuant thereto proves to be incorrect when made, which default or breach has a material adverse effect on the Rated Noteholders and continues for a period of thirty (30) days (or, in the case of a default, breach or failure of a representation or warranty regarding the Collateral, fifteen (15) days) of the earlier of knowledge by the Co-Issuers or the Collateral Advisor or notice to the Co-Issuers and the Collateral Advisor by the Trustee or to the Co-Issuers and the Collateral Advisor by the Holders of at least 25%, of the then Aggregate Outstanding Amount of the Rated Notes of any Class, specifying such default, breach or failure and requiring it to be remedied and stating that such notice is a “Notice of Default” under this Indenture;

(g)

the entry of a decree or order by a court having competent jurisdiction adjudging the Issuer or the Co-Issuer as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer or the Co-Issuer under the Bankruptcy Code or any other applicable law, or appointing a receiver, liquidator, assignee, or sequestrator (or other similar official) of the Issuer or the Co-Issuer or of any substantial part of its property; 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 ninety (90) consecutive days; or

(h)

the institution by the Issuer or the Co-Issuer of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, 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, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of the Issuer or the Co-Issuer or of any substantial part of its property, respectively, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of any action by the Issuer or the Co-Issuer in furtherance of any such action.

If either of the Co-Issuers shall obtain actual knowledge that an Event of Default shall have occurred and be continuing, such CoIssuer shall (unless the Trustee shall have provided notice of such Event of Default pursuant to Section 6.2) promptly notify the Trustee, the Rated Noteholders, the Hedge Counterparty, the Collateral Advisor and each Rating Agency in writing of such Event of Default. 5.2.

ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT (a)

If an Event of Default occurs and is continuing, the Trustee may or, if so directed by the Holders of a Majority in aggregate principal amount of the Outstanding Notes of the Controlling Class, will declare the principal of and accrued interest on all Notes to be immediately due and payable (except that in the case of an Event of Default described in Section 5.1(g) or 5.1(h) above, such an acceleration will occur automatically).

(b)

Any Hedge Agreement existing on or after such acceleration may not be terminated by the Issuer unless and until liquidation of the Collateral has commenced and annulment of such acceleration may no longer be affected. 81

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

At any time after such acceleration of maturity has been made and before a judgment or decree for payment of the amount due has been obtained by the Trustee as hereinafter provided in this Section 5, the Trustee may reverse such acceleration and its consequences if the Trustee determines that: (1)

the Issuer has paid or deposited with the Trustee funds sufficient to pay: (i)

all overdue installments of principal of and interest on the Notes (including interest upon the Class C Cumulative Applicable Periodic Interest Shortfall Amount, the Class D Cumulative Applicable Periodic Interest Shortfall Amount, the Class E Cumulative Applicable Periodic Interest Shortfall Amount and the Class F Cumulative Applicable Periodic Interest Shortfall Amount, respectively, at the Applicable Periodic Interest Rate and, to the extent that payment of such interest is lawful, upon Defaulted Interest at the Applicable Periodic Interest Rate);

(ii)

any accrued and unpaid amounts (including termination payments, if any) payable by the Issuer pursuant to the Hedge Agreement;

(iii)

all unpaid taxes and Administrative Expenses, any accrued and unpaid Senior Collateral Advisory Fee, and other sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and

(2)

the Trustee has determined that all Events of Default of which it has actual knowledge, other than the nonpayment of the principal of or interest on the Rated Notes that have become due solely by such acceleration, have been cured; and

(3)

the Hedge Agreement in effect immediately prior to such acceleration shall remain in effect,

provided that the Trustee shall have obtained (and shall be entitled to rely upon) a certification of an Independent accounting firm of national reputation as to the sufficiency of the amounts in Section 5.2(c)(1) above, which certification shall be conclusive evidence as to such sufficiency. In addition, the Trustee may, but is not required to, obtain, at the Issuer’s expense (and may rely upon), an Opinion of Counsel as to the matters in Sections 5.2(c)(2) and (3) above. At any such time as the Trustee shall reverse such acceleration and its consequences, the Trustee shall preserve the Collateral in accordance with the provisions of Section 5.5; provided that, if the conditions for liquidation of the Collateral are satisfied pursuant to Section 5.5, the Rated Notes may be accelerated pursuant to Section 5.2(a), notwithstanding any previous reversal of acceleration pursuant to this Section 5.2(b). No such reversal of acceleration shall affect any subsequent Default or impair any right consequent thereon. 5.3.

COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE

The Co-Issuers covenant that if a Default shall occur in respect of the payment of any principal of or interest on any Class A-1 Note, the payment of principal of or interest on any Class A-2 Note (but with respect to interest, only after the Class A-1 Notes and all interest accrued thereon have been paid in full), 82

Processed and formatted by SEC Watch - Visit SECWatch.com

the payment of principal of or interest on any Class B Note (but with respect to interest, only after the Class A Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class C Note (but with respect to interest, only after the Class A Notes and Class B Notes and all interest accrued thereon have been paid in full) the payment of principal of or interest on any Class D Note (but with respect to interest, only after the Class A Notes, the Class B Notes and the Class C Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class E Note (but with respect to interest, only after the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes and all interest accrued thereon have been paid in full) or the payment of principal of or interest on any Class F Note (but with respect to interest, only after the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and all interest accrued thereon have been paid in full), the Co-Issuers will, upon demand of the Trustee or any affected Rated Noteholder, pay to the Trustee, for the benefit of the Holder of such Rated Note, the whole amount, if any, then due and payable on such Rated Note for principal and interest, with interest upon the overdue principal and, to the extent that payments of such interest shall be legally enforceable, upon overdue installments of interest, at the Applicable Periodic Interest Rate and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee and such Rated Noteholder and their respective agents and counsel. If the Issuer or the Co-Issuer fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may, and shall, upon the direction by a the Holders of Majority of the then Aggregate Outstanding Amount of the Notes of Controlling Class (and, if the action of the Issuer or the CoIssuer pursuant to such direction would have a material adverse effect on the Hedge Counterparty, the Initial Hedge Counterparty), prosecute such Proceeding to judgment or final decree, and may enforce the same against the Co-Issuers or any other obligor upon the Rated Notes and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the Collateral; provided that a Holder of a Rated Note may institute any proceeding if (i) such Holder previously has given to the Trustee written notice of an Event of Default, (ii) except in the case of a default in the payment of principal or interest, the Holders of at least 25% of the then Aggregate Outstanding Amount of the Notes of the Controlling Class have made a written request upon the Trustee to institute such proceedings in its own name as Trustee and such Holders have offered the Trustee reasonable indemnity, (iii) the Trustee has, for thirty (30) days after receipt of notice, request and offer of such indemnity, failed to institute any such proceeding and (iv) no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Secured Parties by such appropriate Proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law. The Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class may, in certain cases, waive any default with respect to such Notes, except (i) a default for more than five (5) Business Days in the payment, when due and payable, of any interest on any Note, (ii) a default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date, (iii) the failure on any Payment Date to disburse amounts available in the Collection Account in accordance with Section 11.1 and continuation of such failure for a period of three (3) Business Days, (iv) certain events of bankruptcy or insolvency with respect to the Co-Issuers or (v) a default in respect of 83

Processed and formatted by SEC Watch - Visit SECWatch.com

any provision of the Indenture that cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby. In case there shall be pending Proceedings relative to the Issuer or the Co-Issuer or any other obligor upon the Rated Notes or Hedge Agreement under the Bankruptcy Code or any other applicable bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer, the Co-Issuer or their respective property or such other obligor or its property, or in case of any other comparable Proceedings relative to the Issuer, the Co-Issuer or other obligor upon the Rated Notes or Hedge Agreement, or the creditors or property of the Issuer, the CoIssuer or such other obligor, the Trustee, regardless of whether the principal of any Rated Notes or Hedge Agreement shall then be due and payable as therein expressed or by declaration or otherwise and regardless of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.3, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (a)

to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Rated Notes or Hedge Agreement upon direction by a Majority of the Controlling Class, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee) and of the Rated Noteholders allowed in any Proceedings relative to the Issuer, the Co-Issuer or other obligor upon the Rated Notes or to the creditors or property of the Issuer, the Co-Issuer or such other obligor;

(b)

unless prohibited by applicable law and regulations, to vote on behalf of the Holders of the Rated Notes, upon the direction of such Holders, in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency Proceedings or person performing similar functions in comparable Proceedings; and

(c)

to collect and receive any amounts or other property payable to or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Rated Noteholders and of the Trustee on behalf of the Rated Noteholders and the Trustee; and any trustee, receiver or liquidator, custodian or other similar official is hereby authorized by each of the Rated Noteholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Rated Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other reasonable expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Rated Noteholder or the Initial Hedge Counterparty, any plan of reorganization, arrangement, adjustment or composition affecting the Rated Notes, the initial Hedge Agreement or the rights of any Holder thereof or the Initial Hedge Counterparty, or to authorize the Trustee to vote in respect of the claim of any Rated Noteholder or the Initial Hedge Counterparty in any such Proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. 84

In any Proceedings brought by the Trustee on behalf of the Holders, the Trustee shall be held to represent, subject to Section 6.17, all the Secured Parties if applicable, pursuant to Section 6.17. Notwithstanding anything in this Section 5.3 to the contrary, the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to this Section 5.3 except in accordance with Section 5.5(a). 5.4.

REMEDIES (a)

If an Event of Default shall have occurred and be continuing, and the Notes have been declared due and payable and such declaration and its consequences have not been rescinded and annulled, the Co-Issuers agree that, in addition to the requirements of Section 5.5(a), the Trustee may, after giving notice to the Noteholders, the Collateral Advisor, the Initial Hedge Counterparty and each Rating Agency, and with the consent of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class, and shall, upon written direction by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class, to the extent permitted by applicable law, exercise one or more of the following rights, privileges and remedies: (1)

institute Proceedings for the collection of all amounts then payable on the Notes or otherwise payable under this Indenture, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Collateral any amounts adjudged due;

(2)

institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Collateral;

(3)

exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and

Processed and formatted by SEC Watch - Visit SECWatch.com

enforce the rights and remedies of the Secured Parties hereunder; and (4)

subject to Section 5.4(d) below, exercise any other rights and remedies that may be available at law or in equity;

provided that the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to this Section 5.4 except in accordance with Section 5.5(a). The Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking firm of national reputation as to the feasibility of any action proposed to be taken in accordance with this Section 5.4 and as to the sufficiency of the proceeds and other amounts receivable with respect to the Collateral to make the required payments of principal of and interest on the Notes and amounts due to the Initial Hedge Counterparty, which opinion shall be conclusive evidence as to such feasibility or sufficiency. (b)

If an Event of Default as described in Section 5.1(f) shall have occurred and be continuing, the Trustee may, and at the request of at least 25% of the Holders of the then Aggregate Outstanding Amount of the Notes of the Controlling Class shall, institute a Proceeding solely to compel performance of the covenant or agreement or to cure the 85

Processed and formatted by SEC Watch - Visit SECWatch.com

representation or warranty, the breach of which gave rise to the Event of Default under such Section, and enforce any equitable decree or order arising from such proceeding; provided that (i) such request does not conflict with any provision in the Indenture, (ii) the Trustee determines that such action will not involve the Trustee incurring any liability (unless the Trustee is indemnified to its satisfaction against any such liability) and (iii) the Trustee may take other action deemed proper by the Trustee, that is not inconsistent with such direction. (c)

Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the Placement Agents, any Hedge Counterparty, any Noteholder or Noteholders may bid for and purchase the Collateral or any part thereof and, upon compliance with the terms of sale, may hold, retain, possess or dispose of such property in its or their own absolute right without accountability. Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the receipt of the Trustee, or of the Officer making a sale under judicial proceedings, shall be a sufficient discharge to the purchaser or purchasers at any sale for its or their purchase price, and such purchaser or purchasers shall not be obliged to see to the application thereof. Any such sale, whether under any power of sale hereby given or by virtue of judicial proceedings, shall bind the Co-Issuers, the Trustee and the Noteholders, shall operate to divest all right, title and interest whatsoever, either at law or in equity, of each of them in and to the property sold, and shall be a perpetual bar, both at law and in equity, against each of them and their successors and assigns, and against any and all Persons claiming through or under them.

(d)

5.5.

Notwithstanding any other provision of this Indenture, the Trustee may not, prior to the date which is one year and one day, or if longer the applicable preference period then in effect, after the payment in full of all Notes, institute against, or join any other Person in instituting against, the Issuer or the Co-Issuer any bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceedings, or other proceedings under federal or state bankruptcy or similar laws (of any jurisdiction). Nothing in this Section 5.4 shall preclude, or be deemed to stop, the Trustee (i) from taking any action prior to the expiration of the aforementioned one year and one day period, or if longer the applicable preference period then in effect, in (A) any case or proceeding voluntarily filed or commenced by the Issuer or the Co-Issuer or (B) any involuntary insolvency proceeding filed or commenced by a Person other than the Trustee, or (ii) from commencing against the Issuer or the Co-Issuer or any of its properties any legal action which is not a bankruptcy, reorganization, arrangement, insolvency, moratorium, liquidation or similar proceeding.

PRESERVATION OF COLLATERAL (a)

If an Event of Default shall have occurred and be continuing when any Class of Rated Notes is Outstanding, the Trustee shall retain the Collateral securing the Rated Notes and the Hedge Agreement intact, collect and cause the collection of the proceeds thereof and make all payments and deposits and maintain all accounts in respect of the Collateral and the Rated Notes and the Hedge Agreement in accordance with Section 11.1 and the provisions of Sections 10, 12 and 13 unless: 86

Processed and formatted by SEC Watch - Visit SECWatch.com

(1)

the Trustee, pursuant to Section 5.5(c), determines (such determinations may be based upon a certificate from the Collateral Advisor) that the anticipated proceeds of a sale or liquidation of the Collateral (after deducting reasonable expenses relating to such sale or liquidation) would be sufficient to discharge in full the Redemption Prices then due on the Rated Notes, any amounts required to be paid under the Hedge Agreement, all unpaid Administrative Expenses and any accrued and unpaid Senior Collateral Advisory Fee (to the extent not waived by the Collateral Advisor) and the Holders of a Majority of the then Aggregate Outstanding Amount of Notes of the Controlling Class agrees with such determination; or

(2)

the Holders of at least 662/3% of the Aggregate Outstanding Amount of the Rated Notes of the Controlling Class (and, unless it will be paid in full all amounts owing to it by the Issuer, the Initial Hedge Counterparty), subject to the provisions hereof, and subject to the Trustee determining that such action will not involve the Trustee incurring any liability, (unless the Trustee is indemnified to its satisfaction against any such liability) direct the sale and liquidation of the Collateral.

For purposes of Section 5.5(a)(2), if the Initial Hedge Counterparty shall fail to vote to direct the sale and liquidation of the Collateral within three Business Days after written notice from the Issuer or the Trustee requesting a vote pursuant to such Section 5.5(a)(2), the Initial Hedge Counterparty shall not be entitled to participate in the vote requested by such notice. The Trustee shall give written notice of the retention of the Collateral to the Issuer with a copy to the Co-Issuer, each Holder of the Controlling Class of Notes and the Initial Hedge Counterparty. So long as such Event of Default is continuing, any such retention pursuant to this Section 5.5(a) may be rescinded at any time when the conditions specified in clause Section 5.5(a)(1) or (2) exist. (b)

Nothing contained in Section 5.5(a) shall be construed to require the Trustee to preserve the Collateral securing the Rated Notes if prohibited by applicable law.

(c)

In determining whether the condition specified in Section 5.5(a)(1) exists, the Trustee shall obtain bid prices with respect to each security contained in the Collateral from two nationally recognized dealers (or if it is unable in good faith to obtain such bid prices from two nationally recognized dealers, one nationally recognized dealer), as specified by the Collateral Advisor in writing, which are Independent from each other and the Collateral Advisor, at the time making a market in such securities and shall compute the anticipated proceeds of sale or liquidation on the basis of the lower of such bid prices for each such security. In addition, for the purposes of determining issues relating to the execution of a sale or liquidation of the Pledged Securities and the execution of a sale or other liquidation thereof in connection with a determination whether the condition specified in Section 5.5(a)(1) exists, the Trustee may retain and rely on an opinion of an Independent investment banking firm of national reputation. The Trustee shall deliver to the Noteholders, the Initial Hedge Counterparty, the Rating Agencies and the Co-Issuers a report stating the results of any determination required pursuant to Section 5.5(a)(1) no later than ten (10) days after making such determination but in any event prior to the sale or liquidation of the Collateral. The Trustee shall make the determinations required by Section 5.5(a)(1) within thirty (30) days after an Event of Default and at the request of the Holders of a Majority of the then Aggregate Outstanding 87

Processed and formatted by SEC Watch - Visit SECWatch.com

Amount of the Notes of the Controlling Class at any time during which the Trustee retains the Collateral pursuant to Section 5.5(a)(1). In the case of each calculation made by the Trustee pursuant to Section 5.5(a)(1), the Trustee shall obtain a letter of an Independent certified public accountant confirming the accuracy of the computations of the Trustee and certifying their conformity to the requirements of this Indenture. In determining whether the Holders of the requisite percentage of any Class of Rated Notes or the requisite percentage of Income Noteholders have given any direction or notice or have agreed pursuant to Section 5.5(a), any Holder of a Rated Note of a Class or Income Notes who is also a Holder of Rated Notes of another Class or of Income Notes or any Affiliate of any such Holder shall be counted as a Holder of each such Rated Note and/or Income Note for all purposes. (d)

5.6.

If an Event of Default shall have occurred and be continuing at a time when no Rated Note is Outstanding, the Trustee shall retain the Collateral securing the Hedge Agreements and the Rated Notes intact, collect and cause the collection of the proceeds thereof and make and apply all payments and deposits and maintain all accounts in respect of the Collateral and the Rated Notes in accordance with Section 11.1 and the provisions of Section 10 and Section 12 unless a Majority of the Income Noteholders direct the sale and liquidation of the Collateral.

TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION

All rights of action and of asserting claims under this Indenture, or under any of the Rated Notes, may be enforced by the Trustee without the possession of any of Hedge Agreements or the Rated Notes or the production thereof in any trial or other Proceedings relative thereto, and any action or Proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the reasonable expenses, disbursements and compensation of the Trustee, each predecessor trustee and their respective agents and attorneys and counsel, shall be for the benefit of the Secured Parties and shall be applied as set forth in Section 5.7. 5.7.

APPLICATION OF FUNDS COLLECTED

Any funds collected by the Trustee with respect to the Hedge Agreements or the Rated Notes pursuant to this Section 5 and any funds that may then be held or thereafter received by the Trustee with respect to the Hedge Agreements or the Rated Notes hereunder shall be applied subject to Section 13.1 and in accordance with the provisions of Section 11.1(c), at the date or dates fixed by the Trustee. 5.8.

LIMITATION ON SUITS

Only the Trustee may pursue remedies available hereunder and no Holder of any Note shall have any right to institute any Proceedings, judicial or otherwise, with respect to this Indenture, or its Note or otherwise, for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a)

such Holder has previously given to the Trustee written notice of a continuing Event of Default;

(b)

except in the case of a default in the payment of principal or interest, the Holders or Holders of at least 25% of the then Aggregate Outstanding Amount of the Rated Notes of the Controlling Class shall have made a written request to the Trustee to institute Proceedings in respect of such Event of Default in its own name as Trustee hereunder and 88

Processed and formatted by SEC Watch - Visit SECWatch.com

such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (c)

the Trustee for thirty (30) days after its receipt of such notice, request and offer of indemnity has failed to institute any such Proceeding; and

(d)

no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class;

it being understood and intended that no one or more Holders of Rated Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders of the Notes of the same Class or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders of Notes of the same Class. In addition, any action taken by any one or more of the Holders of Notes shall be subject to and in accordance with Sections 13.1 and 11.1(d). Notwithstanding any other provisions of this Indenture but subject to Section 5.8(d), if the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of the Notes of the Controlling Class, each representing less than a Majority of the then Aggregate Outstanding Amount of Notes of this Controlling Class, the Trustee shall follow the instructions of the group representing the higher percentage of aggregate principal amount of Outstanding Notes of the Controlling Class. 5.9.

UNCONDITIONAL RIGHTS OF RATED NOTEHOLDERS TO RECEIVE PRINCIPAL AND INTEREST

Notwithstanding any other provision in this Indenture (other than Section 2.6(i)), the Holder of any Rated Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest (if any) on such Rated Note as such principal and/or interest become due and payable in accordance with Sections 13.1 and 11.1(c) and, subject to the provisions of Section 5.8, to institute proceedings for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. Holders of the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes shall have no right to institute proceedings for the enforcement of any such payment until such time as no Class of Rated Note that is senior to such Class of them remains Outstanding, which right shall be subject to the provisions of Section 5.8, and shall not be impaired without the consent of any such Holder. 5.10.

RESTORATION OF RIGHTS AND REMEDIES

If the Trustee or any Rated Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Rated Noteholder, then and in every such case the Co-Issuers, the Trustee and the Rated Noteholder shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Secured Parties shall continue as though no such Proceeding had been instituted. 5.11.

RIGHTS AND REMEDIES CUMULATIVE

No right or remedy herein conferred upon or reserved to the Trustee or to the Rated Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent 89

Processed and formatted by SEC Watch - Visit SECWatch.com

permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing by law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 5.12.

DELAY OR OMISSION NOT WAIVER

No delay or omission of the Trustee or any Rated Noteholder or the Initial Hedge Counterparty to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Section 5 or by law to the Trustee, the Rated Noteholders or the Initial Hedge Counterparty may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Rated Noteholders or the Initial Hedge Counterparty, as the case may be. 5.13.

CONTROL BY CONTROLLING CLASS

Notwithstanding any other provision of this Indenture (but subject to the proviso in the definition of “Outstanding” in Section 1.1(a)), the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class shall have the right to cause the institution of and direct the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or of any sale of the Collateral, in whole or in part, provided that:

5.14.

(a)

such direction shall not conflict with any rule of law or with this Indenture;

(b)

the Trustee may take any other action deemed proper by it that is not inconsistent with such direction; provided that, subject to Section 6.1, the Trustee need not take any action that it determines might involve it in liability (unless the Trustee has received an indemnity reasonably satisfactory to it against such liability as set forth below);

(c)

the Trustee shall have been provided with an indemnity reasonably satisfactory to it; and

(d)

any direction to the Trustee to undertake a Sale of the Collateral shall be made only pursuant to, and in accordance with, Sections 5.4 and 5.5.

WAIVER OF PAST DEFAULTS

The Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class may, in certain cases waive any past Default and its consequences, except: (a)

a Default for more than five (5) Business Days in the payment, when due and payable, of any interest on any Rated Note; or

(b)

a Default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date; or

(c)

the failure on any Payment Date to disburse amounts available in the Collection Account in accordance with Section 11.1 and the continuation of such failure for a period of three (3) Business Days; or

(d)

a Default arising under Section 5.1(g) or 5.1(h); or 90

Processed and formatted by SEC Watch - Visit SECWatch.com

(e)

a Default in respect of any provision of this Indenture that under Section 8.2 cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby.

In the case of any such waiver, (i) the Co-Issuers, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto, and (ii) the Trustee shall promptly give written notice of any such waiver to the Collateral Advisor and each Holder of Rated Notes. The Rating Agencies shall be notified by the Issuer of any such waiver. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. 5.15.

UNDERTAKING FOR COSTS

All parties to this Indenture agree, and each Holder of any Rated Note by its acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.15 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Rated Noteholder, or group of Rated Noteholders, holding in the aggregate more than 10% in Aggregate Outstanding Amount of the Controlling Class, or to any suit instituted by any Rated Noteholder for the enforcement of the payment of the principal of or interest on any Rated Note on or after the Stated Maturity Date expressed in such Rated Note (or, in the case of redemption, on or after the applicable Redemption Date). 5.16.

WAIVER OF STAY OR EXTENSION LAWS

The Co-Issuers covenant (to the extent that they may lawfully do so) that they will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force (including but not limited to filing a voluntary petition under Chapter 11 of the Bankruptcy Code and by the voluntary commencement of a proceeding or the filing of a petition seeking winding up, liquidation, reorganization or other relief under any bankruptcy, insolvency, receivership or similar law now or hereafter in effect), which may affect the covenants, the performance of or any remedies under this Indenture; and the Co-Issuers (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 5.17.

SALE OF COLLATERAL (a)

The power to effect any sale (a Sale) of any portion of the Collateral pursuant to Sections 5.4 and 5.5 shall not be exhausted by any one or more Sales as to any portion of such Collateral remaining unsold, but shall continue unimpaired until the entire Collateral shall have been sold or all amounts secured by the Collateral shall have been paid. The Trustee hereby expressly waives its rights to any amount fixed by law as compensation for any Sale; provided that the Trustee shall be authorized to deduct the reasonable costs, 91

Processed and formatted by SEC Watch - Visit SECWatch.com

charges and expenses incurred by it in connection with such Sale from the proceeds thereof notwithstanding the provisions of Section 6.7.

5.18.

(b)

The Trustee may bid for and acquire any portion of the Collateral in connection with a public Sale thereof, by crediting all or part of the net proceeds of such Sale after deducting the reasonable costs, charges and expenses incurred by the Trustee in connection with such Sale notwithstanding the provisions of Section 6.7. The Rated Notes and the Hedge Agreement need not be produced in order to complete any such Sale, or in order for the net proceeds of such Sale to be credited against amounts owing on the Rated Notes. The Trustee may hold, lease, operate, manage or otherwise deal with any property so acquired in any manner permitted by law in accordance with this Indenture.

(c)

If any portion of the Collateral consists of securities not registered under the Securities Act (Unregistered Securities), the Trustee may, but shall not be required to, seek an Opinion of Counsel, or, if no such Opinion of Counsel can be obtained, with the consent of a Majority of the Controlling Class seek, a no-action position from the Commission or any other relevant federal or state regulatory authorities, regarding the legality of a public or private sale of such Unregistered Securities. In no event will the Trustee be required to register Unregistered Securities under the Securities Act.

(d)

The Trustee shall execute and deliver an appropriate instrument of conveyance transferring its interest in any portion of the Collateral in connection with a sale thereof. In addition, the Trustee is hereby irrevocably appointed the agent and attorneyin-fact of the Issuer to transfer and convey its interest in any portion of the Collateral in connection with a sale thereof, and to take all action necessary to effect such sale. No purchaser or transferee at such a sale shall be bound to ascertain the Trustee’s authority, to inquire into the satisfaction of any conditions precedent or see to the application of any funds.

ACTION ON THE RATED NOTES

The Trustee’s right to seek and recover judgment on the Rated Notes or under this Indenture shall not be affected by the seeking or obtaining of or application for any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Secured Parties shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer or the Co-Issuer. ARTICLE VI THE TRUSTEE 6.1.

CERTAIN DUTIES AND RESPONSIBILITIES (a)

Except during the continuance of an Event of Default: (1)

the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and 92

Processed and formatted by SEC Watch - Visit SECWatch.com

(2)

in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided that, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they substantially conform to the requirements of this Indenture and shall promptly, but in any event within three Business Days in the case of an Officer’s certificate furnished by the Issuer, notify the party delivering the same if such certificate or opinion does not conform. If a corrected form shall not have been delivered to the Trustee within 15 days after such notice from the Trustee, the Trustee shall promptly notify the Rated Noteholders and the Initial Hedge Counterparty.

(b)

In case an Event of Default actually known to the Trustee has occurred and is continuing, the Trustee shall, prior to the receipt of directions, if any, from a Majority of the Controlling Class, exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(c)

No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1)

This Section 6.1(c) shall not be construed to limit the effect of Section 6.1(a);

(2)

the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it shall be proven that the Trustee was negligent in ascertaining the pertinent facts;

(3)

the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Issuer or the Co-Issuer in accordance with this Indenture and/or a Majority (or such other percentage as may be required by the terms hereof) of the Aggregate Outstanding Amount of the Controlling Class (or other Class if required or permitted by the terms hereof) relating to the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;

(4)

no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers contemplated hereunder, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it (if the amount of such funds or risk or liability does not exceed the amount payable to the Trustee pursuant to Section 11.1(a)(1) net of the amounts specified in Section 6.8(a)(1), the Trustee shall be deemed to be reasonably assured of such repayment) unless such risk or liability relates to performance of its ordinary services, including under Section 5, under this Indenture; and 93

Processed and formatted by SEC Watch - Visit SECWatch.com

(5)

6.2.

the Trustee shall not be liable to the Rated Noteholders for any action taken or omitted by it at the direction of the Issuer, the Co-Issuer, the Collateral Advisor and/or the Holders of the Rated Notes under the circumstances in which such direction is required or permitted by the terms of this Indenture.

(d)

For all purposes under this Indenture, the Trustee shall not be deemed to have notice or knowledge of any Event of Default described in Section 5.1(e), 5.1(f), 5.1(g) or 5.1(h) unless a Trust Officer assigned to and working in the Corporate Trust Office has actual knowledge thereof or unless written notice of any event which is in fact such an Event of Default or such a Default, as the case may be, is received by the Trustee at the Corporate Trust Office. For purposes of determining the Trustee’s responsibility and liability hereunder, whenever reference is made in this Indenture to such an Event of Default or such a Default, as the case may be, such reference shall be construed to refer only to such an Event of Default or such a Default, as the case may be, of which the Trustee is deemed to have notice as described in this Section 6.1(d).

(e)

Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.

(f)

The Trustee shall, upon receipt of reasonable (but no less than three Business Days’) prior written notice, permit any representative of a Holder of a Rated Note or the Initial Hedge Counterparty, during the Trustee’s normal business hours, to examine all books of account, records, reports and other papers of the Trustee relating to the Rated Notes or the Hedge Agreement, to make copies and extracts therefrom (the reasonable out-of- pocket expenses incurred in making any such copies or extracts to be reimbursed to the Trustee by such Holder) and to discuss the Trustee’s actions, as such actions relate to the Trustee’s duties with respect to the Rated Notes or the Hedge Agreement, with the Trustee’s officers and employees responsible for carrying out the Trustee’s duties with respect to the Rated Notes; provided that under no circumstances shall the Initial Hedge Counterparty be permitted to review any documentation containing the names or other indicia of identity of any of the Noteholders unless any such information (including the number of shares held by such Noteholder) has been redacted from such documentation.

(g)

With respect to the security interests created hereunder, the Trustee acts as a fiduciary for the Rated Noteholders only, and serves as a collateral agent for the other Secured Parties.

NOTICE OF DEFAULT

Promptly (and in no event later than three Business Days) after the occurrence of any Default actually known to a Trust Officer of the Trustee or after acceleration has been made pursuant to Section 5.2, the Trustee shall send to the Issuer, the Income Note Paying Agent, each Rating Agency (for so long as any Class of Rated Notes is Outstanding), the Collateral Advisor, the Initial Hedge Counterparty and to all Holders of Rated Notes, as their names and addresses appear on the Note Register, notice of all Defaults hereunder known to the Trustee, unless such Default shall have been cured or waived. 6.3.

CERTAIN RIGHTS OF TRUSTEE Except as otherwise provided in Sections 6.1 and 8: 94

(a)

the Trustee may rely and shall be protected in acting or refraining from acting in good faith and in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b)

any request or direction of the Issuer or the Co-Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or Issuer Order, as the case may be;

(c)

whenever in the administration of this Indenture the Trustee shall (i) deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer’s certificate or (ii) be required to determine the value of any Collateral or funds hereunder or the cashflows projected to be received therefrom, the Trustee may, in the absence of bad faith on its part, rely on reports of nationally recognized accountants, investment bankers or other Persons qualified to provide the information required to make such determination, including nationally recognized dealers in securities of the type being valued and securities quotation services;

(d)

as a condition to the taking or omitting of any action by it hereunder, the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in reliance thereon;

(e)

the Trustee shall be under no obligation to exercise or to honor any of the rights or powers vested in it by this Indenture at the request or direction of any of the Rated Noteholders pursuant to this Indenture, unless such Rated Noteholders shall

Processed and formatted by SEC Watch - Visit SECWatch.com

have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might reasonably be incurred by it in compliance with such request or direction; (f)

the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper documents, but the Trustee, in its discretion, may and, upon the written direction of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of any Class, the Initial Hedge Counterparty or any Rating Agency shall make such further inquiry or investigation into such facts or matters as it may see fit or as it shall be directed, and, the Trustee shall be entitled, on reasonable prior notice to the Co-Issuers, to examine the books and records of the Co-Issuers or the Collateral Advisor relating to the Rated Notes and the Collateral, personally or by agent or attorney at a time acceptable to the CoIssuers or the Collateral Advisor in their reasonable judgment during normal business hours; provided that the Trustee shall, and shall cause its agents, to hold in confidence all such information, except (i) to the extent disclosure may be required by law by any regulatory authority and (ii) to the extent that the Trustee, in its sole judgment, may determine that such disclosure is consistent with its obligations hereunder;

(g)

the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys; provided that the Trustee shall not be responsible for any misconduct or negligence on the part of any agent (other 95

Processed and formatted by SEC Watch - Visit SECWatch.com

than any Affiliate of the Trustee) appointed and supervised, or attorney appointed, with due care by it hereunder;

6.4.

(h)

the Trustee shall not be liable for any action it takes or omits to take in good faith that it reasonably and, after the occurrence and during the continuance of an Event of Default, prudently believes to be authorized or within its rights or powers hereunder;

(i)

nothing herein shall be construed to impose an obligation on the part of the Trustee to recalculate, evaluate or verify any report, certificate or information received from the Issuer or Collateral Advisor (unless and except to the extent otherwise expressly set forth herein or upon the request of the Initial Hedge Counterparty, a Rating Agency or a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class);

(j)

the Trustee shall not be responsible or liable for the actions or omissions of, or any inaccuracies in the records of, any nonAffiliated custodian, clearing agency, common depository, Euroclear or Clearstream or for the acts or omissions of the Collateral Advisor or either Co-Issuer;

(k)

to the extent any defined term hereunder, or any calculation required to be made or determined by the Trustee hereunder, is dependent upon or defined by reference to generally accepted accounting principles in the United States (GAAP), the Trustee shall be entitled to request and receive (and rely upon) instruction from the Issuer or the accountants appointed pursuant to 10.13 as to the application of GAAP in such connection, in any instance;

(1)

to the extent permitted by law, the Trustee shall not be required to give any bond or surety in respect of the execution of this Indenture or otherwise; and

(m)

the permissive right of the Trustee to take or refrain from taking any actions enumerated in this Indenture shall not be construed as a duty.

AUTHENTICATING AGENTS

If the Trustee so chooses the Trustee may appoint one or more Authenticating Agents with power to act on its behalf and subject to its direction in the authentication of Rated Notes in connection with issuance, transfers and exchanges under Sections 2.4, 2.5 and 8.5, as fully to all intents and purposes as though each such Authenticating Agent had been expressly authorized by those Sections to authenticate such Rated Notes. For all purposes of this Indenture, the authentication of Rated Notes by an Authenticating Agent pursuant to this Section 6.4 shall be deemed to be the authentication of Rated Notes “by the Trustee”. Any entity into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any entity succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, without the execution or filing of any further act on the part of the parties hereto or such Authenticating Agent or such successor entity. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and the Issuer. The Trustee may at any time terminate the agency of any Authenticating Agent by 96

Processed and formatted by SEC Watch - Visit SECWatch.com

giving written notice of termination to such Authenticating Agent and the Co-Issuers. Upon receiving such notice of resignation or upon such a termination, the Trustee shall promptly appoint a successor Authenticating Agent and shall give written notice of such appointment to the Co-Issuers. The Issuer agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services (provided, however, that, so long as an Authenticating Agent is the Trustee, or an Affiliate thereof, such compensation shall be payable by the Trustee, rather than by the Issuer), and reimbursement for its reasonable expenses relating thereto and the Trustee shall be entitled to be reimbursed for such payments, subject to Section 6.8. The provisions of Sections 2.8, 6.5 and 6.6 shall be applicable to any Authenticating Agent. 6.5.

NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF RATED NOTES

The recitals contained herein and in the Rated Notes, other than the Certificate of Authentication thereon, shall be taken as the statements of the Co-Issuers, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or sufficiency of this Indenture (except as may be made with respect to the validity of the Trustee’s obligations hereunder), of the Collateral or of the Rated Notes. The Trustee shall not be accountable for the use or application by the Co-Issuers of the Rated Notes or the proceeds thereof or any amounts paid to the Co-Issuers pursuant to the provisions hereof. 6.6.

MAY HOLD RATED NOTES

The Trustee, any Note Paying Agent, the Note Registrar or any other agent of the Co-Issuers, in its individual or any other capacity, may become the owner or pledgee of Rated Notes and, may otherwise deal with the Co-Issuers or any of their Affiliates, with the same rights it would have if it were not Trustee, Note Paying Agent, Note Registrar or such other agent. 6.7.

FUNDS HELD IN TRUST

Funds held by the Trustee hereunder shall be held in trust to the extent required herein. The Trustee shall be under no liability for interest on any funds received by it hereunder except as otherwise agreed upon with the Issuer and except to the extent of income or other gain on investments which are deposits in or certificates of deposit of the Trustee in its commercial capacity and income or other gain actually received by the Trustee on Eligible Investments. 6.8.

COMPENSATION AND REIMBURSEMENT (a)

The Issuer agrees: (1)

to pay the Trustee on each Payment Date the Trustee Fee, the Income Note Paying Agent Fee and reasonable compensation for all other services, including custodial services, rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

(2)

except as otherwise expressly provided herein, to reimburse the Trustee (subject to any written agreement between the Issuer and the Trustee) in a timely manner upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture or in the enforcement of any provision hereof and expenses related to 97

Processed and formatted by SEC Watch - Visit SECWatch.com

the maintenance and administration of the Collateral (including securities transaction charges and the reasonable compensation and expenses and disbursements of its agents and legal counsel and of any accounting firm or investment banking firm employed by the Trustee pursuant to Section 5.2, 5.4, 5.5, 6.3(c), 6.3(k), 10.11 or 10.13, except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith but only to the extent any such securities transaction charges have not been waived during a Due Period due to the Trustee’s receipt of a payment from a financial institution with respect to certain Eligible Investments); (3)

to indemnify the Trustee and its Officers, directors, employees and agents for, and to hold them harmless against, any loss, liability or expense incurred by it without negligence, willful misconduct or bad faith on their part, arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs and expenses (including reasonable counsel fees) of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties hereunder; and

(4)

to pay the Trustee reasonable additional compensation together with its expenses (including reasonable counsel fees) for any collection action taken pursuant to Section 6.14.

(b)

The Issuer may remit payment for such fees and expenses to the Trustee or, in the absence thereof, the Trustee may from time to time deduct payment of its fees and expenses hereunder from funds on deposit in the Expense Account pursuant to Section 11.1.

(c)

The Trustee hereby agrees not to cause the filing of a petition in bankruptcy against the Issuer for the non-payment to the Trustee of any amounts provided by this Section 6.8 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 Rated Notes issued under this Indenture.

(d)

The amounts payable to the Trustee pursuant to Sections 6.8(a)(2) through (4) (other than amounts received by the Trustee from financial institutions under Section 6.8(a)(2) above) shall not, except as provided by Section 11.1(a)(23), exceed on any Payment Date the limitation described in Section 11.1(a)(1) for such Payment Date; provided that (A) the Trustee shall not institute any proceeding for enforcement of such lien except in connection with an action pursuant to Section 5.3 or 5.4 for the enforcement of the lien of this Indenture for the benefit of the Secured Parties and (B) the Trustee may only enforce such a lien in conjunction with the enforcement of the rights of the Secured Parties in the manner set forth in Section 5.4.

The Trustee shall, subject to the Priority of Payments, receive amounts pursuant to this Section 6.8 and Section 11.1 only to the extent that the payment thereof will not result in an Event of Default and the failure to pay such amounts to the Trustee will not, by itself, constitute an Event of Default. Subject to Section 6.10, the Trustee shall continue to serve as Trustee under this Indenture notwithstanding the fact that the Trustee shall not have received amounts due it hereunder and hereby agrees not to cause the filing of a petition in bankruptcy against the Co-Issuers for the nonpayment to the Trustee of any amounts provided by this Section 6.8 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 Rated Notes issued under this Indenture. No direction by the Holders of a Majority of the then Aggregate Outstanding Amount of the 98

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes of the Controlling Class shall affect the right of the Trustee to collect amounts owed to it under this Indenture. The indemnifications in favor of the Trustee in this Section 6.8 shall (i) survive any resignation or removal of any Person acting as Trustee (to the extent of any indemnified liabilities, costs, expenses and other amounts arising or incurred prior to, or arising out of actions or omissions occurring prior to, such resignation or removal) and (ii) apply to the Trustee in its capacities as Custodian, Note Paying Agent, Rated Note Calculation Agent and Authenticating Agent. 6.9.

CORPORATE TRUSTEE REQUIRED; ELIGIBILITY

There shall at all times be a Trustee hereunder which shall be a bank, corporation or trust company 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.$250,000,000, subject to supervision or examination by federal or state banking authorities, having a rating of at least “BBB+” by S&P and having an office within the United States. If such entity publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.9, the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.9, it shall resign immediately in the manner and with the effect hereinafter specified in this Section 6. 6.10.

RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR (a)

No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Section 6 shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11.

(b)

The Trustee may resign at any time by giving 90 days prior written notice thereof to the Co-Issuers, the Rated Noteholders, the Initial Hedge Counterparty, the Collateral Advisor and each Rating Agency. Upon receiving such notice of resignation, or if the Trustee is removed or becomes incapable of acting, or if a vacancy shall occur in the office of the Trustee for any reason, the Issuer shall (after consultation with the Collateral Advisor) promptly propose a successor trustee for approval by the Holders of 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes. A proposed successor trustee approved in accordance with the preceding sentence shall be appointed by the Co-Issuers as successor trustee by written instrument, in duplicate, executed by an Authorized Officer of the Issuer and an Authorized Officer of the Co-Issuer, one copy of which shall be delivered to the Trustee so resigning and one copy to the successor trustee or trustees, together with a copy to each Rated Noteholder. If no successor trustee shall have been appointed and an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee or any Holder of a Rated Note or the Initial Hedge Counterparty on behalf of itself and all others similarly situated, subject to Section 5.15, may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c)

The Trustee may be removed at any time by an Act of the Holders of at least 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes delivered to the Trustee and to the Co-Issuers. 99

Processed and formatted by SEC Watch - Visit SECWatch.com

(d)

If at any time: (1)

the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by any Holder; or

(2)

the Trustee shall become incapable of acting or shall be adjudged as bankrupt or insolvent or a receiver or liquidator of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case (subject to Section 6.10(a)), (A) the Co-Issuers, by Issuer Order shall remove the Trustee, or (B) subject to Section 5.15, any Holder or the Initial Hedge Counterparty may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e)

6.11.

The Co-Issuers shall give prompt notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first class mail, postage prepaid, to each Rating Agency, the Initial Hedge Counterparty, the Collateral Advisor and the Holders as their names and addresses appear in the Note Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. If the Co-Issuers fail to mail such notice within ten days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Co-Issuers.

ACCEPTANCE OF APPOINTMENT BY SUCCESSOR

Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Co-Issuers and the retiring Trustee (with copies to the Initial Hedge Counterparty and the Collateral Advisor) an instrument accepting such appointment. Upon delivery of the required instruments, the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any other act, deed or conveyance, shall become vested with all the rights, powers, trusts, duties and obligations of the retiring Trustee; but, on request of the CoIssuers or a Majority of the then Aggregate Outstanding Amount of the Notes of any Class of Notes, the Initial Hedge Counterparty or the successor Trustee, such retiring Trustee shall, upon payment of its charges, fees, indemnities and expenses then unpaid, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and funds held by such retiring Trustee hereunder, subject nevertheless to its lien, if any, provided for in Section 6.8(d). Upon request of any such successor Trustee, the Co-Issuers shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless (a) at the time of such acceptance such successor shall be qualified and eligible under Section 6.9 and the other provisions of this Section 6 and (b) a Rating Agency Confirmation shall have been obtained with respect to the appointment of such successor Trustee shall have been satisfied. No appointment of a successor Trustee shall become effective if the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class objects to such appointment; and no appointment of a successor Trustee shall become effective until the date ten days after notice of such appointment has been given to each Rated Noteholder and each Rating Agency. 100

Processed and formatted by SEC Watch - Visit SECWatch.com

6.12.

MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF TRUSTEE

Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided such Person shall be otherwise qualified and eligible under this Section 6, without the execution or filing of any paper or any further act on the part of any of the parties hereto. The successor Trustee will notify each Rating Agency of any such merger, conversion or consolidation. In case any of the Rated Notes have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Rated Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Rated Notes. 6.13.

CO-TRUSTEES

At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any part of the Collateral may at the time be located, the Trustee shall have power to appoint one or more Persons to act as Co-trustee, jointly with the Trustee of all or any part of the Collateral, with the power to file such proofs of claim and take such other actions pursuant to Section 5.6 and to make such claims and enforce such rights of action on behalf of the Holders of the Rated Notes subject to the other provisions of this Section 6.13. The Co-Issuers shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint a Co-trustee. If the Co-Issuers do not join in such appointment within 15 days after the receipt by them of a request to do so, the Trustee shall have power to make such appointment. Should any written instrument from the Co-Issuers be required by any Co-trustee so appointed for more fully confirming to such Cotrustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the CoIssuers. The Co-Issuers agree to pay (subject to the Priority of Payments) for any reasonable fees and expenses in connection with such appointment. Every Co-trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms: (a)

the Rated Notes shall be authenticated and delivered and all rights, powers, duties and obligations hereunder in respect of the custody of securities, funds and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely by the Trustee;

(b)

the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by the appointment of a Co-trustee shall be conferred or imposed upon and exercised or performed by the Trustee or by the Trustee and such Co-trustee jointly, as shall be provided in the instrument appointing such Co-trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by a Co-trustee; 101

Processed and formatted by SEC Watch - Visit SECWatch.com

6.14.

(c)

the Trustee at any time, by an instrument in writing executed by it, may accept the resignation of or remove any Co-trustee appointed under this Section 6.13. A successor to any Co-trustee so resigned or removed may be appointed in the manner provided in this Section 6.13;

(d)

no Co-trustee hereunder shall be personally liable by reason of any act or omission of the Trustee or any other Co-trustee hereunder;

(e)

the Trustee shall not be liable by reason of any act or omission of a Co-trustee;

(f)

any Act of Rated Noteholders delivered to the Trustee shall be deemed to have been delivered to each Co-trustee; and

(g)

each Co-trustee hereunder shall at the time of such acceptance satisfy the qualification required of a Trustee under Section 6.9 and the other provisions of this Section 6.

CERTAIN DUTIES RELATED TO DELAYED PAYMENT OF PROCEEDS; OTHER NOTICES

In the event that the Trustee shall not have received a payment with respect to any Pledged Security within two Business Days after its Due Date, the Trustee shall (i) notify the Issuer and Collateral Advisor in writing and (ii) promptly request the issuer of such Pledged Security, the trustee under the related Underlying Instrument or paying agent designated by either of them, as the case may be, to make such payment as soon as practicable after such request but in no event later than three Business Days after the date of such request. In the event that such payment is not made within such time period, the Trustee, subject to the provisions of Section 6.1(c)(4), shall, subject to the restrictions on the sale of Collateral Debt Securities set forth in Section 12.1, take such action as the Collateral Advisor shall direct in writing. Any such action shall be without prejudice to any right to claim a Default under this Indenture. The Trustee will promptly notify the Issuer if the Collateral Advisor has determined that (i) any Collateral Debt Security has become a Defaulted Security, a Deferred Interest PIK Bond, a Credit Risk Security or a Written Down Security or (ii) the Trustee has received an Equity Security in connection with any Collateral Debt Security. 6.15.

REPRESENTATIONS AND WARRANTIES OF THE BANK (a)

Organization. The Bank has been duly organized and is validly existing as a national banking association under the laws of the United States and has the power to conduct its business and affairs as a trustee.

(b)

Authorization; Binding Obligations. The Bank has the power and authority to perform the duties and obligations of Trustee, Note Registrar and Note Transfer Agent or any other capacity to which it is appointed under this Indenture. The Bank has taken all necessary action to authorize the execution, delivery and performance of this Indenture, and all of the documents required to be executed by the Bank pursuant hereto. This Indenture has been duly executed and delivered by the Bank. Upon execution and delivery by the Co-Issuers, this Indenture will constitute the legal, valid and binding obligation of the Bank enforceable in accordance with its terms.

(c)

Eligibility. The Bank is eligible under Section 6.9 to serve as Trustee hereunder.

(d)

No Conflict. Neither the execution, delivery and performance of this Indenture, nor the consummation of the transactions contemplated by this Indenture, (i) is prohibited by, or 102

Processed and formatted by SEC Watch - Visit SECWatch.com

requires the Bank to obtain any consent, authorization, approval or registration under, any law, statute, rule, regulation, judgment, order, writ, injunction or decree that is binding upon the Bank or any of its properties or assets, or (ii) will violate any provision of, result in any default or acceleration of any obligations under, result in the creation or imposition of any lien pursuant to, or require any consent under, any agreement to which the Bank is a party or by which it or any of its property is bound. (e)

6.16.

No Proceedings. There are no proceedings pending, or to the best knowledge of the Bank, threatened against the Bank before any federal, state or other governmental agency, authority, administrator or regulatory body, arbitrator, court or other tribunal, foreign or domestic, that could have a material adverse effect on the Collateral or any action taken or to be taken by the Bank under this Indenture.

EXCHANGE OFFERS, PROPOSED AMENDMENTS ETC.

The Collateral Advisor may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, take any of the following actions with respect to a Collateral Debt Security or Equity Security as to which an Offer has been made or as to which any consent, waiver, vote or exercise has been requested: (i) exchange such instrument for other securities or a mixture of securities and other consideration pursuant to such Offer (and in making a determination whether or not to exchange any security, none of the restrictions set forth in Section 12 shall be applicable); and (ii) give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Debt Security or Equity Security. In the event that the Trustee does not receive instruction from the Collateral Advisor, the Trustee shall have no obligation to take action with respect to such exchange or such request for consent, waiver, vote or exercise. In the event that the Trustee receives written notice of any proposed amendment, consent or waiver under the Underlying Instruments of any Collateral Debt Securities (before or after any default), the Trustee shall promptly deliver copies of such notice to the Issuer and the Collateral Advisor. The Collateral Advisor may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, with respect to a Collateral Debt Security as to which a consent or waiver under the Underlying Instruments of such Collateral Debt Security (before or after any default) has been proposed, give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Debt Security only in accordance with such Issuer Order. In the absence of any instruction from the Collateral Advisor, the Trustee shall not engage in any vote with respect to such Collateral Debt Security. 6.17.

FIDUCIARY FOR RATED NOTEHOLDERS ONLY; AGENT FOR OTHER SECURED PARTIES

With respect to the security interests created hereunder, the pledge of any portion of the Collateral to the Trustee is to the Trustee as representative of the Rated Noteholders and agent for other Secured Parties. In furtherance of the foregoing, the possession by the Trustee of any portion of the Collateral and the endorsement to or registration in the name of the Trustee of any portion of the Collateral (including without limitation as entitlement holder of the Collateral Account) are all undertaken by the Trustee in its capacity as representative of the Rated Noteholders and as agent for the other Secured Parties. The Trustee shall not by reason of this Indenture be deemed to be acting as fiduciary for the Initial Hedge Counterparty or the Collateral Advisor, provided that the foregoing shall not limit any of the express obligations of the Trustee under this Indenture. 6.18.

WITHHOLDING

If any withholding tax is imposed on the Issuer’s payment (or allocations of income) under the Rated Notes to any Rated Noteholder, such tax shall reduce the amount otherwise distributable to such 103

Processed and formatted by SEC Watch - Visit SECWatch.com

Rated Noteholder. The Trustee is hereby authorized and directed to retain from amounts otherwise distributable to any Rated Noteholder sufficient funds for the payment of any tax that is required to be withheld or deducted by the Issuer (but such authorization shall not prevent the Trustee from contesting any such tax in appropriate proceedings and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding tax imposed with respect to any Rated Noteholder shall be treated as Cash distributed to such Rated Noteholder at the time it is withheld by the Trustee and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution, the Trustee may in its sole discretion withhold such amounts in accordance with this Section 6.18. If any Rated Noteholder wishes to apply for a refund of any such withholding tax, the Trustee shall reasonably cooperate with such Rated Noteholder in making such claim so long as such Rated Noteholder agrees to reimburse the Trustee for any out-of-pocket expenses incurred. Nothing herein shall impose an obligation on the part of the Trustee to determine the amount of any tax or withholding obligation on the part of the Issuer or in respect of the Income Notes. ARTICLE VII COVENANTS 7.1.

PAYMENT OF PRINCIPAL AND INTEREST

The Co-Issuers will duly and punctually pay all principal (including the Class C Cumulative Periodic Interest Shortfall Amount, the Class D Cumulative Periodic Interest Shortfall Amount, the Class E Cumulative Periodic Interest Shortfall Amount and the Class F Cumulative Periodic Interest Shortfall Amount), interest (including Defaulted Interest and interest thereon, if any) in accordance with the terms of the Rated Notes and this Indenture and amounts due under the Hedge Agreement in accordance with this Indenture. Amounts properly withheld under the Code or other applicable law by any Person from a payment to any Rated Noteholder of principal and/or interest shall be considered as having been paid by the Co-Issuers to such Rated Noteholder for all purposes of this Indenture. The Trustee shall, unless prevented from doing so for reasons beyond its reasonable control, give notice to each Rated Noteholder and each Rating Agency of any such withholding requirement no later than ten days prior to the date of the payment from which amounts are required to be withheld; provided that despite the failure of the Trustee to give such notice, amounts withheld pursuant to applicable tax laws shall be considered as having been paid by the Co-Issuers as provided above. 7.2.

MAINTENANCE OF OFFICE OR AGENCY

The Co-Issuers hereby appoint the Trustee as Note Paying Agent for the payment of principal of and interest on the Rated Notes. Rated Notes may be surrendered for registration of transfer or exchange at the Corporate Trust Office. The Issuer hereby appoints NCB Stockbroker Limited, 3 George’s Dock, Dublin 1, Ireland, as offshore Note Paying Agent and as the Issuer’s agent where notices and demands to or upon the Issuer in respect of any Rated Notes listed on the Irish Stock Exchange may be served and where such Rated Notes may be surrendered for registration of transfer or exchange. The Co-Issuers may at any time and from time to time, terminate the appointment of any such agent or appoint any additional agents for any or all of such purposes; provided that (A) the Co-Issuers will maintain in the Borough of Manhattan, The City of New York, an office or agency where notices and demands to or upon the Co-Issuers in respect of the Rated Notes and this Indenture may be served, (B) no Note Paying Agent shall be appointed in a jurisdiction which subjects payments on the Rated Notes to withholding tax and (C) the Co-Issuers may not terminate the appointment of any Note Paying Agent 104

Processed and formatted by SEC Watch - Visit SECWatch.com

without the consent of each Income Noteholder. The Co-Issuers shall give prompt written notice to the Trustee and each Rating Agency and the Rated Noteholders of the appointment or termination of any such agent and of the location and any change in the location of any such office or agency. If at any time the Co-Issuers shall fail to maintain any such required office or agency in the Borough of Manhattan, The City of New York or shall fail to furnish the Trustee with the address thereof, presentations and surrenders may be made at and notices and demands may be served on the Co-Issuers and Rated Notes may be presented and surrendered for payment to the Note Paying Agent at its office in Illinois (and the Co-Issuers hereby appoint the same as their agent to receive such respective presentations, surrenders, notices and demands). For so long as any Class of Rated Notes is listed on the Irish Stock Exchange and such exchange shall so require, the Co-Issuers shall maintain a listing agent, a paying agent and an agent where notices and demands to or upon the Co-Issuers in respect of any Rated Notes listed on the Irish Stock Exchange may be served and where such Rated Notes may be surrendered for registration of transfer or exchange. 7.3.

FUNDS FOR RATED NOTE PAYMENTS TO BE HELD IN TRUST

All payments of amounts due and payable with respect to any Rated Notes that are to be made from amounts withdrawn from the Payment Account shall be made on behalf of the Co-Issuers by the Trustee or a Note Paying Agent with respect to payments on the Rated Notes. When the Co-Issuers shall have a Note Paying Agent that is not also the Note Registrar, they shall direct the Note Registrar to furnish, no later than the fifth calendar day after each Record Date a list, if necessary, in such form as such Note Paying Agent may reasonably request, of the names and addresses of the Holders and of the certificate numbers of individual Rated Notes held by each such Holder. The initial Note Paying Agent shall be as set forth in Section 7.2. Any additional or successor Paying Agents shall be appointed by Issuer Order with written notice thereof to the Trustee and the Rating Agencies; provided that so long as any Class of Rated Notes is rated by the Rating Agencies and with respect to any additional or successor Note Paying Agent for the Rated Notes, (a) the Note Paying Agent for the Rated Notes has a rating of not less than “AA-” and not less than “A-1+” by S&P or (b) a Rating Agency Confirmation from S&P shall have been obtained with respect to the appointment of such Note Paying Agent. In the event that (i) the Co-Issuers have actual knowledge that such successor Note Paying Agent ceases to have a rating of at least “AA-” and of “A-1+” by S&P or (ii) a Rating Agency Confirmation from S&P shall not have been obtained with respect to the appointment of such Note Paying Agent, the Co-Issuers shall promptly remove such Note Paying Agent and appoint a successor Note Paying Agent. The Co-Issuers shall not appoint any Note Paying Agent (other than an initial Note Paying Agent) that is not, at the time of such appointment, a depository institution or trust company subject to supervision and examination by federal and/or state and/or national banking authorities. The Co-Issuers shall cause each Note Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Note Paying Agent shall agree with the Trustee (and if the Trustee acts as Note Paying Agent, it hereby so agrees), subject to the provisions of this Section 7.3, that such Note Paying Agent will: (a)

allocate all sums received for payment to the Holders of Rated Notes for which it acts as Note Paying Agent on each Payment Date and Redemption Date among such Holders in the proportion specified in the instructions set forth in the applicable Note Valuation Report or Redemption Date Statement or as otherwise provided herein, in each case to the extent permitted by applicable law; 105

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

hold all amounts held by it for the payment of amounts due with respect to the Rated Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided;

(c)

if such Note Paying Agent is not the Trustee, immediately resign as a Note Paying Agent and forthwith pay to the Trustee all amounts held by it in trust for the payment of Rated Notes if at any time it ceases to meet the standards set forth above required to be met by a Note Paying Agent at the time of its appointment;

(d)

if such Note Paying Agent is not the Trustee, immediately give the Trustee notice of any Default by the Issuer or the CoIssuer (or any other obligor upon the Rated Notes) in the making of any payment required to be made; and

(e)

if such Note Paying Agent is not the Trustee at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all amounts so held in trust by such Note Paying Agent.

If the Co-Issuers shall have appointed a Note Paying Agent other than the Trustee, the Trustee shall deposit on or prior to the Business Day next preceding each Payment Date or Redemption Date, as the case may be, with such Note Paying Agent, if necessary, an aggregate amount sufficient to pay the amounts then becoming due (to the extent funds are then available for such purpose in the Collection Account, as the case may be), such amount to be held in trust for the benefit of the Persons entitled thereto. Any funds deposited with a Note Paying Agent (other than the Trustee) in excess of an amount sufficient to pay the amounts then becoming due on the Rated Notes with respect to which such deposit was made shall be paid over by such Note Paying Agent to the Trustee for application in accordance with Section 11. The Co-Issuers may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, direct any Note Paying Agent to pay, to the Trustee all amounts held in trust by such Note Paying Agent, such amounts to be held by the Trustee upon the same trusts as those upon which such amounts were held by such Note Paying Agent; and, upon such payment by any Note Paying Agent to the Trustee, such Note Paying Agent shall be released from all further liability with respect to such amounts. Except as otherwise required by applicable law, any funds deposited with the Trustee or any Note Paying Agent in trust for the payment of the principal of or interest on any Rated Note and remaining unclaimed for two years after the same has become due and payable shall be paid to the Co-Issuers on Issuer Request; and the Holder of such Rated 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 Note Paying Agent with respect to such trust funds (but only to the extent of the amounts so paid to the Co-Issuers) shall thereupon cease. The Trustee or such Note Paying Agent, before being required to make any such release of payment, may, but shall not be required to, adopt and employ, at the expense of the Co-Issuers, any reasonable means of notification of such release of payment, including mailing notice of such release to Holders whose Rated Notes have been called but have not been surrendered for redemption or whose right to or interest in amounts due and payable but not claimed is determinable from the records of any Note Paying Agent, at the last address of record of each such Holder. 106

7.4.

EXISTENCE OF CO-ISSUERS

The Issuer and the Co-Issuer shall maintain in full force and effect their existence and rights as an exempted company incorporated and registered under the laws of the Cayman Islands and as a corporation incorporated under the laws of the State of Delaware, respectively, and shall obtain and preserve their qualification to do business in each jurisdiction in which such qualifications are or shall be necessary to protect the validity and enforceability of this Indenture, the Rated Notes or any of the Collateral. The Issuer and the Co-Issuer shall ensure that all corporate or other formalities regarding their respective existences (including holding regular board of directors’ and shareholders’, or other similar, meetings) or registrations are followed. Neither the Issuer nor the CoIssuer shall take any action, or conduct its affairs in a manner, that is likely to result in its separate existence being ignored or in its assets and liabilities being substantively consolidated with any other Person in a bankruptcy, reorganization or other insolvency proceeding. At least one director of the Issuer and of the Co-Issuer shall be Independent of other parties to the Transaction Documents. Without limiting the foregoing, (a) the Issuer shall not have any subsidiaries (other than the Co-Issuer and any Tax Subsidiary), (b) the Co-Issuer shall not have any subsidiaries and (c) the Issuer and the Co-Issuer shall not (i) have any employees, (ii) engage in any transaction with any shareholder that would constitute a conflict of interest or (iii) pay dividends, provided that the foregoing shall not prohibit the Issuer from entering into the transactions contemplated by the Corporate Services Agreement with the Administrator. 7.5.

PROTECTION OF COLLATERAL (a)

The Issuer shall from time to time, execute and deliver all such supplements and amendments hereto and all such Financing Statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action as may be necessary or advisable or desirable to secure the rights and remedies of the Secured Parties hereunder and to: (1)

Grant more effectively all or any portion of the Collateral;

Processed and formatted by SEC Watch - Visit SECWatch.com

(2)

maintain, preserve and perfect the lien (and the first priority nature thereof) of this Indenture or to carry out more effectively the purposes hereof;

(3)

perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations);

(4)

enforce any of the Pledged Securities or other instruments or property included in the Collateral;

(5)

preserve and defend title to the Collateral and the rights therein of the Trustee, the Initial Hedge Counterparty and the Holders of the Rated Notes against the claims of all Persons and parties; or

(6)

pay or cause to be paid any and all taxes levied or assessed upon all or any part of the Collateral.

The Issuer hereby designates the Trustee its agent and attorney-in-fact to execute any Financing Statement, continuation statement or other instrument delivered to it pursuant 107

Processed and formatted by SEC Watch - Visit SECWatch.com

to this Section 7.5, and the Trustee, as agent of the Issuer, agrees to file such continuation statements as are necessary to maintain perfection of the Collateral perfected by the filing of Financing Statements, provided that the Issuer retains ultimate responsibility to maintain the perfection of the Collateral perfected by the filing of Financing Statements and any failure of the Trustee to file continuation statements pursuant to this undertaking shall not result in any liability of the Trustee and the Trustee shall be entitled to indemnification pursuant to Section 6.8(a) with respect to any claim, loss, liability or expense incurred by the Trustee with respect to the filing of such continuation statements. The Trustee agrees that it will from time to time, at the direction of any Secured Party, execute and cause to be filed Financing Statements and continuation statements. The Issuer shall otherwise cause the perfection and priority of the security interest in the Collateral and the maintenance of such security interest at all times. Notwithstanding anything to the contrary herein, the right of a Secured Party to provide direction to the Trustee shall not impose upon the Trustee, as Secured Party, any obligation to provide any such direction. The Issuer agrees that a carbon, photographic, photostatic or other reproduction of this Indenture or of a Financing Statement is sufficient as an Indenture or a Financing Statement as the case may be. (b)

The Trustee shall not (i) except in accordance with Section 10.11(a) or (b), as applicable, remove any portion of the Collateral that consists of Cash or is evidenced by an Instrument, certificate or other writing (A) from the jurisdiction in which it was held at the date the most recent Opinion of Counsel was delivered pursuant to Section 7.6 (or from the jurisdiction in which it was held as described in the Opinion of Counsel delivered at the Closing Date pursuant to Section 3.1(c), if no Opinion of Counsel has yet been delivered pursuant to Section 7.6) or (B) from the possession of the Person who held it on such date or (ii) cause or permit ownership or the pledge of any portion of the Collateral that consists of book-entry securities to be recorded on the books of a Person (A) located in a different jurisdiction from the jurisdiction in which such ownership or pledge was recorded at such date or (B) other than the Person on whose books such ownership or pledge was recorded at such date, unless the Trustee shall have first received an Opinion of Counsel to the effect that the lien and security interest created by this Indenture with respect to such property will continue to be maintained after giving effect to such action or actions.

(c)

The Issuer shall pay or cause to be paid taxes, if any, levied on account of the beneficial ownership by the Issuer of any Pledged Securities that secure the Rated Notes; provided that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which disputed amounts or adequate reserves have been made or the failure of which to pay or discharge could not reasonably be expected to have a material adverse effect upon the ability of the Issuer to timely and fully perform any of its payment or other material obligations under this Indenture or upon the interests of the Rated Noteholders in the Collateral.

(d)

The Issuer shall enforce all of its material rights and remedies under the Transaction Documents to which it is a party.

(e)

Without at least thirty (30) days’ prior written notice to the Trustee, the Issuer shall not change its name, or the name under which it does business, from the name shown on the signature pages hereto. 108

Processed and formatted by SEC Watch - Visit SECWatch.com

7.6.

OPINIONS AS TO COLLATERAL

On or before September 15 in each calendar year, commencing in 2006, the Issuer shall furnish to the Trustee and each Rating Agency (with copies to the Initial Hedge Counterparty) an Opinion of Counsel (which shall include assumptions and qualifications substantially similar to those set forth in Exhibit E-1) stating that, in the opinion of such counsel, as of the date of such opinion, the lien and security interest created by this Indenture with respect to the Collateral remains a valid and perfected first priority lien and describing the manner in which such security interest shall remain perfected. 7.7.

PERFORMANCE OF OBLIGATIONS (a)

The Trustee shall notify the Issuer, the Initial Hedge Counterparty and each Rated Noteholder of any request for an amendment, waiver or supplement to any Underlying Instrument included in the Collateral or of any other notice of a vote in respect of any Collateral Debt Security included in the Collateral. The Issuer shall not enter into any such amendment, waiver or supplement; provided that, notwithstanding anything in this Section 7.7(a) to the contrary, the Issuer may enter into any amendment or waiver of or supplement to any such Underlying Instrument if such amendment, supplement or waiver: (1)

is required by the provisions of any Underlying Instrument or by applicable law (other than pursuant to an Underlying Instrument);

(2)

is necessary to cure any ambiguity, inconsistency or formal defect or omission in such Underlying Instrument; or

(3)

(x) is deemed necessary by the Issuer or the Collateral Advisor and does not materially and adversely affect the Secured Parties or (y) is effected pursuant to Section 6.16.

The Issuer shall be entitled to rely on an Opinion of Counsel as to material adverse effect and as to whether the entry into an amendment, supplement or waiver is permitted pursuant to this Indenture. (b)

The Issuer or the Co-Issuer may, with the prior written consent of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes and the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes and the Initial Hedge Counterparty, contract with other Persons, including the Collateral Administrator, the Collateral Advisor and the Bank, for the performance of actions and obligations to be performed by the Issuer or the Co-Issuer hereunder by such Persons. Notwithstanding any such arrangement, the Issuer or the Co-Issuer, as the case may be, shall remain liable for all such actions and obligations. In the event of such contract, the performance of such actions and obligations by such Persons shall be deemed to be performance of such actions and obligations by the Issuer or the Co-Issuer, as the case may be; and the Issuer or Co-Issuer, as the case may be, will punctually perform, and use its best efforts to cause such other Person to perform, all of their obligations and agreements contained in related agreement.

(c)

The Co-Issuers shall treat all acquisitions of Collateral Debt Securities as a “purchase” for tax, accounting and reporting purposes. 109

Processed and formatted by SEC Watch - Visit SECWatch.com

7.8.

(d)

Each of the Co-Issuers shall file, or cause to be filed, any tax returns, including information tax returns, required by any governmental authority.

(e)

In the event that (i) the ownership of a Collateral Debt Security or property acquired in respect of a Collateral Debt Security would result in the Issuer being or becoming subject to U.S. tax on a net income basis or being or becoming subject to the U.S. branch profits tax (in either case, such Collateral Debt Security becoming a “Taxed Collateral Debt Security” and such property becoming a “Taxed Property”), and (ii) the Issuer does not sell or otherwise dispose of all or a portion of such Taxed Collateral Debt Security or Taxed Property in accordance with the provisions of the Indenture, the Collateral Advisor on behalf of the Issuer shall, prior to such Collateral Debt Security becoming a Taxed Collateral Debt Security or such property becoming a Taxed Property, (a) set up a special purpose subsidiary meeting S&P’s then current published criteria for bankruptcy remote special purpose entities (a “Tax Subsidiary”) to receive and hold any such Taxed Collateral Debt Security or Taxed Property or transfer such Taxed Collateral Debt Security or Taxed Property to the Tax Subsidiary or (b) contribute such taxed Collateral Debt Security or Taxed Property to a REMIC or other pass-through entity, unless the Issuer has received an opinion of nationally recognized counsel to the effect that the Issuer can hold such Taxed Collateral Debt Security directly without causing the Issuer to be treated as engaged in a trade or business in the United States for United States federal income tax purposes. The Issuer shall cause the purposes and permitted activities of any such Tax Subsidiary to be restricted solely to the acquisition, holding and disposition of such Taxed Collateral Debt Security or Taxed Property and shall require such subsidiary to distribute 100% of the proceeds of any sale of such Taxed Collateral Debt Security or Taxed Property, net of any tax liabilities, to the Issuer.

NEGATIVE COVENANTS (a)

The Issuer will not and, with respect to Section 7.8(a)(3), (4), (5) and (9), the Co-Issuer will not: (1)

intentionally operate so as to be subject to U.S. federal income taxes on its net income;

(2)

sell, assign, participate, transfer, exchange or otherwise dispose of, or pledge, mortgage, hypothecate or otherwise encumber (or permit such to occur or suffer such to exist), any part of the Collateral, except as expressly permitted by this Indenture;

(3)

claim any credit on, make any deduction from, or dispute the enforceability of, the payment of the principal or interest (or any other amount) payable in respect of the Rated Notes (other than amounts required to be paid, deducted or withheld in accordance with any applicable law or regulation of any governmental authority) or assert any claim against any present or future Rated Noteholder by reason of the payment of any taxes levied or assessed upon any part of the Collateral;

(4)

(A) incur or assume or guarantee any indebtedness, other than the Rated Notes and this Indenture and the transactions contemplated hereby; (B) issue any additional class of securities other than the Income Notes; or (C) issue any additional shares of stock; 110

Processed and formatted by SEC Watch - Visit SECWatch.com

7.9.

(5)

(A) take any action that would impair the validity or effectiveness of this Indenture or any Grant hereunder or the lien of this Indenture, amend hypothecate, subordinate, terminate, discharge or release any Person from any covenants or obligations with respect to this Indenture or the Rated Notes, except as may be permitted hereby, (B) create or extend any lien, charge, adverse claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) on or to the Collateral or any part thereof, any interest therein or the proceeds thereof, or (C) take any action that would cause the lien of this Indenture not to constitute a valid first priority security interest in the Collateral;

(6)

use any of the proceeds of the Rated Notes issued hereunder (A) to extend “purpose credit” within the meaning given to such term in Regulation U or (B) to purchase or otherwise acquire any Margin Stock;

(7)

permit the aggregate book value of all Margin Stock held by the Issuer on any date to exceed the net worth of the Issuer on such date (excluding any unrealized gains and losses) on such date;

(8)

dissolve or liquidate in whole or in part, except as permitted hereunder; or

(9)

except for any agreements involving the purchase and sale of Collateral Debt Securities having customary purchase or sale terms and documents with customary loan trading documentation (but not excepting the Hedge Agreement), enter into any agreements unless such agreements contain “non-petition” and “limited recourse” provisions with respect to the Issuer, nor shall the Issuer amend any such “non-petition” or “limited recourse” provisions without first obtaining Rating Agency Confirmation from S&P.

(b)

Except as permitted by this Indenture, the Issuer will not do business under any other name other than the name set forth in the Articles and neither the Issuer nor the Trustee shall acquire any Collateral after the Closing Date, sell, transfer, exchange or otherwise dispose of Collateral, or enter into or engage in any business with respect to any part of the Collateral.

(c)

The Co-Issuer will not invest any of its assets in “securities” (as such term is defined in the Investment Company Act), and will keep all of its assets in Cash.

STATEMENT AS TO COMPLIANCE

On or before September 15 in each calendar year commencing in 2006, or immediately if there has been a Default in the fulfillment of an obligation under this Indenture, the Issuer shall deliver to the Trustee, the Income Note Paying Agent, each Rated Noteholder making a written request therefor, the Irish Paying Agent, the Initial Hedge Counterparty, the Collateral Advisor and each Rating Agency a certificate of the Issuer stating, as to each signer thereof; that: (a)

the Officer executing such certificate has conducted a review of the activities of the Issuer and of the Issuer’s performance under this Indenture during the 12-month period ending on December 31 of such year (or from the Closing Date until December 31, 2005, in the case of the first such certificate) based on reports and other information delivered to such Officer by the Trustee, the Collateral Advisor and the Collateral Administrator 111

Processed and formatted by SEC Watch - Visit SECWatch.com

and a review of the Accountant’s Reports prepared pursuant to Section 10.10 and such other materials as such Officer deems appropriate; and (b)

7.10.

to the best of knowledge of the Issuer, based on such review, the Issuer has fulfilled all of its material obligations under this Indenture throughout the period, or, if there has been a Default in the fulfillment of any such obligation, specifying each such Default known to such Officer and the nature and status thereof, including actions undertaken to remedy the same.

CO-ISSUERS MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS (a)

The Issuer shall not consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any Person, unless permitted by Cayman Islands law and unless: (1)

the Issuer shall be the surviving entity, or the Person (if other than the Issuer) formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall be an exempted limited liability company organized and existing under the laws of the Cayman Islands or such other jurisdiction outside the United States as may be approved by a Majority of each Class and the Initial Hedge Counterparty, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, the Initial Hedge Counterparty and each Rated Noteholder, the due and punctual payment of the principal of and interest on all Rated Notes and the performance of every covenant of this Indenture and the Hedge Agreement on the part of the Issuer to be performed or observed, all as provided herein;

(2)

each Rating Agency and the Initial Hedge Counterparty shall have received written notification from the Issuer of such consolidation, merger, transfer or conveyance and the identity of the surviving entity and a Rating Agency Confirmation shall have been obtained with respect to the consummation of such transaction;

(3)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have agreed with the Trustee (A) to observe the same legal requirements for the recognition of such formed or surviving entity as a legal entity separate and apart from any of its Affiliates as are applicable to the Issuer with respect to its Affiliates and (B) not to consolidate or merge with or into any other Person or transfer or convey the Collateral or all or substantially all of its assets to any other Person except in accordance with the provisions of this Section 7.10;

(4)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have delivered to the Trustee, the Initial Hedge Counterparty and each Rating Agency an Officer’s certificate and an Opinion of Counsel each stating that such Person shall be duly organized, validly existing and (if applicable) in good standing in the jurisdiction in which such Person is organized; that such Person has sufficient power and authority to 112

Processed and formatted by SEC Watch - Visit SECWatch.com

assume the obligations set forth in Section 7.10(a)(1) above and to execute and deliver an indenture supplemental hereto for the purpose of assuming such obligations; that such Person has duly authorized the execution, delivery and performance of an indenture supplemental hereto for the purpose of assuming such obligations and that such supplemental indenture is a valid, legal and binding obligation of such Person, enforceable in accordance with its terms, subject only to bankruptcy, reorganization, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); that, immediately following the event which causes such Person to become the successor to the Issuer, (A) such Person has good and marketable title, free and clear of any lien, security interest or charge, other than the lien and security interest of this Indenture, to the Collateral; (B) the Trustee continues to have a valid perfected first priority security interest in the Collateral securing all of the Rated Notes; (C) such Person has received an Opinion of Counsel to the effect that such Person will not be subject to net income tax or be treated as engaged in a trade or business within the United States for U.S. federal income tax purposes and such other matters as the Trustee, the Initial Hedge Counterparty or any Rated Noteholder may reasonably require;

(b)

(5)

immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(6)

the Issuer shall have delivered to the Trustee, the Initial Hedge Counterparty and each Rated Noteholder an Officer’s certificate and an Opinion of Counsel each stating that such consolidation, merger, transfer or conveyance and such supplemental indenture comply with this Section 7, that all conditions precedent in this Section 7 provided for relating to such transaction have been complied with and that no adverse tax consequences will result therefrom to any Rated Noteholder or the Initial Hedge Counterparty; and

(7)

the Issuer shall have delivered to the Trustee an Opinion of Counsel stating that after giving effect to such transaction, neither of the Co-Issuers will be required to register as an investment company under the Investment Company Act.

The Co-Issuer shall not consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any Person, unless: (1)

the Co-Issuer shall be the surviving corporation, or the Person (if other than the Co-Issuer) formed by such consolidation or into which the Co-Issuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, the due and punctual payment of the principal of and interest on all Rated Notes and the performance of every covenant of this Indenture on the part of the Co-Issuer to be performed or observed, all as provided herein;

(2)

each Rating Agency shall have received written notification from the Co-Issuer of such consolidation, merger, transfer or conveyance and the identity of the surviving entity and a Rating Agency Confirmation shall have been obtained with respect to the consummation of such transaction; 113

Processed and formatted by SEC Watch - Visit SECWatch.com

7.11.

(3)

if the Co-Issuer is not the surviving corporation, the Person formed by such consolidation or into which the CoIssuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall have agreed with the Trustee (A) to observe the same legal requirements for the recognition of such formed or surviving corporation as a legal entity separate and apart from any of its Affiliates as are applicable to the CoIssuer with respect to its Affiliates and (B) not to consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any other Person except in accordance with the provisions of this Section 7.10;

(4)

if the Co-Issuer is not the surviving corporation, the Person formed by such consolidation or into which the CoIssuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall have delivered to the Trustee and each Rating Agency an Officer’s certificate and an Opinion of Counsel each stating that such Person shall be duly organized, validly existing and (if applicable) in good standing in the jurisdiction in which such Person is organized; that such Person has sufficient power and authority to assume the obligations set forth in Section 7.10(b)(1) above and to execute and deliver an indenture supplemental hereto for the purpose of assuming such obligations; that such Person has duly authorized the execution, delivery and performance of an indenture supplemental hereto for the purpose of assuming such obligations and that such supplemental indenture is a valid, legal and binding obligation of such Person, enforceable in accordance with its terms, subject only to bankruptcy, reorganization, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and such other matters as the Trustee or any Rated Noteholder may reasonably require;

(5)

immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(6)

the Co-Issuer shall have delivered to the Trustee and each Rated Noteholder an Officer’s certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance or transfer and such supplemental indenture comply with this Section 7 and that all conditions precedent in this Section 7 provided for relating to such transaction have been complied with and that no adverse tax consequences will result therefrom to any Rated Noteholder;

(7)

after giving effect to such transaction, neither of the Co-Issuers will be required to register as an investment company under the Investment Company Act; and

(8)

after giving effect to such transaction, the outstanding stock of the Co-Issuer will not be beneficially owned by any Person other than the Issuer.

SUCCESSOR SUBSTITUTED

Upon any consolidation or merger, or transfer or conveyance of all or substantially all of the assets of the Issuer or the Co-Issuer, in accordance with Section 7.10, the Person formed by or surviving such consolidation or merger (if other than the Issuer or the Co-Issuer), or, the Person to which such transfer or conveyance is made, shall succeed to, and be substituted for, and may exercise every right and 114

Processed and formatted by SEC Watch - Visit SECWatch.com

power of, and shall be bound by each obligation or covenant of, the Issuer or the Co-Issuer, as the case may be, under this Indenture with the same effect as if such Person had been named as the Issuer or the Co-Issuer, as the case may be, herein. In the event of any such consolidation, merger, transfer or conveyance, the Person named as the “Issuer” or the “Co-Issuer” in the first paragraph of this Indenture or any successor which shall theretofore have become such in the manner prescribed in this Section 7 may be dissolved, wound-up and liquidated at any time thereafter, and such Person thereafter shall be released from its liabilities as obligor and maker on all the Rated Notes and from its obligations under this Indenture. 7.12.

NO OTHER BUSINESS

The Issuer shall not engage in any business or activity other than (i) issuing and selling the Rated Notes pursuant to this Indenture, (ii) issuing and selling the Income Notes in accordance with the Income Note Paying Agency Agreement (iii) issuing the Ordinary Shares pursuant to the Issuer Charter, (iv) acquiring, pledging, holding and disposing of, solely for its own account, Collateral Debt Securities, Eligible Investments and other Collateral described in clauses (a) to (e) of the granting clauses hereof, (vi) holding the capital stock of the CoIssuer and (vi) such other activities that are incidental thereto and connected therewith. The Co-Issuer shall not engage in any business or activity other than issuing and selling the Rated Notes pursuant to this Indenture and such other activities incidental thereto or connected therewith. The Issuer shall not hold itself out as a derivatives dealer willing to enter into either side of, or to offer to enter into, assume, offset, assign or otherwise terminate positions in (i) interest rate, currency, equity or commodity swaps or caps or (ii) derivative financial instruments (including options, forward contracts, short positions and similar instruments) in any commodity, currency, share of stock, partnership or trust, note, bond, debenture or other evidence of indebtedness, swap or cap. The foregoing shall not limit the ability of the Issuer to enter into Hedge Agreements. Furthermore, the Issuer shall not hold itself out, whether through advertising or otherwise, as a bank, insurance company or finance company, or as originating loans, lending funds, making a market in loans or other assets or selling loans or other assets to customers. The Issuer will not amend the Issuer Charter and the Co-Issuer will not amend its Certificate of Incorporation or By-Laws, if such amendment would result in the rating (including any private or confidential rating) of any Class of Rated Notes being reduced or withdrawn. The Issuer shall not engage in any business or activity or hold any asset that would cause the Issuer to be engaged in a U.S. trade or business for U.S. federal income tax purposes, except as the result of ownership of Equity Securities or securities received in an Offer in accordance with the provisions of this Indenture. 7.13.

CHANGE OR WITHDRAWAL OF RATING

The Issuer shall promptly notify the Trustee in writing and upon receipt of such notice the Trustee shall promptly notify the Rated Noteholders and the Initial Hedge Counterparty if at any time the rating of any Class of Rated Notes has been, or is known will be, changed or withdrawn. 7.14.

REPORTING

At any time when the Co-Issuers are not subject to Section 13 or 15(d) of the Exchange Act and are not exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, upon the request of a Holder or Beneficial Owner of a Rated Note or Income Note, the CoIssuers shall promptly furnish or cause to be furnished Rule 144A Information to such Holder or Beneficial Owner, to a prospective purchaser of such Rated Note or Income Note designated by such Holder or Beneficial Owner or to the Trustee for delivery to such Holder or Beneficial Owner or a prospective purchaser designated by such Holder or Beneficial Owner, as the case may be, in order to permit compliance by such Holder or Beneficial Owner with Rule 144A in connection with the resale of such Rated Note or Income Note by such Holder or Beneficial Owner. 115

7.15.

RATED NOTE CALCULATION AGENT (a)

The Issuer hereby agrees that for so long as any of the Rated Notes remain Outstanding the Issuer will at all times cause there to be an agent appointed to calculate LIBOR in respect of each Interest Period in accordance with the terms of Schedule B (the Rated Note Calculation Agent), which agent shall be a financial institution, subject to supervision or examination by federal or state authority, having a rating of at least “BBB+” by S&P and having an office within the United States. Whenever the Note Calculation Agent is required to act or exercise judgment, it will do so in good faith and in a commercially reasonable manner. The Issuer has initially appointed the Trustee as Rated Note Calculation Agent for purposes of determining LIBOR for each Interest Period. If the Rated Note Calculation Agent is unable or unwilling to act as such or is removed by the Issuer, the Issuer (after consultation with the Collateral Advisor) will propose a leading bank which is engaged in transactions in Dollar deposits in the international Eurodollar market and which does not control or is not controlled by or under common control with the Co-Issuers or any of their Affiliates as a replacement Rated Note Calculation Agent for approval by Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes. The Rated Note Calculation Agent may not resign its duties without a successor having been duly appointed.

(b)

As soon as possible after 11:00 a.m. (London time) on each LIBOR Calculation Date, but in no event later than 11:00 a.m. (New York time) on the London Banking Day immediately following each LIBOR Calculation Date, the Rated Note Calculation Agent will calculate LIBOR for the next Interest Period and the Periodic Interest payable for such Interest Period in respect of the Outstanding Rated Notes, rounded to the nearest cent, with half a cent being rounded upward, on the

Processed and formatted by SEC Watch - Visit SECWatch.com

related Payment Date to be given to the Co-Issuers, the Trustee, the Collateral Advisor, the Depositary, Euroclear, Clearstream, the Note Paying Agent and the Irish Paying Agent. The Rated Note Calculation Agent will also specify to the Co-Issuers and the Collateral Advisor the quotations upon which the Applicable Periodic Interest Rate for each Class of Rated Notes is based, and in any event the Rated Note Calculation Agent must notify the Co-Issuers and the Collateral Advisor before 5:00 p.m. (New York time) on each applicable LIBOR Calculation Date if it has not determined and is not in the process of determining LIBOR with respect to the Rated Notes and the Periodic Interest with respect to each Class of Rated Notes, together with its reasons for the delay. The Irish Paying Agent also will cause the Applicable Periodic Interest Rate for each Interest Period for each Class of Rated Notes listed on the Irish Stock Exchange, the amount of interest payable in respect of each Class of Rated Notes listed on the Irish Stock Exchange and each Payment Date to be delivered to the Company Announcements Office of the Irish Stock Exchange as soon as possible after the Irish Paying Agent has received notice from the Rated Note Calculation Agent of such Applicable Periodic Interest Rates and amounts. 7.16.

LISTING

The Issuer will use its commercially reasonable efforts to obtain and maintain the listing of each Class of Rated Notes on the Irish Stock Exchange. 116

Processed and formatted by SEC Watch - Visit SECWatch.com

7.17.

AMENDMENT OF CERTAIN DOCUMENTS

The Issuer will not agree to any amendment to or modification of the Corporate Services Agreement, the Collateral Advisory Agreement, the Account Control Agreement or the Hedge Agreement at any time without obtaining Rating Agency Confirmation with respect to any such modification and will not amend, modify or waive any “non-petition” or “limited recourse” provisions of any Transaction Document to which it is a party without obtaining a Rating Agency Confirmation with respect to such modification. The Trustee shall provide each of the Initial Hedge Counterparty, the Holders of Rated Notes of the Controlling Class, the Collateral Advisor and the Rating Agencies with a copy of any such amendment or modification within 10 Business Days before effecting such amendment or modification. Prior to entering into any waiver in respect of the any of the foregoing agreements, the Issuer will provide to each Rating Agency and the Trustee with written notice of such waiver. 7.18.

PURCHASE OF COLLATERAL; INFORMATION REGARDING COLLATERAL; RATING CONFIRMATION (a)

The Issuer will use reasonable efforts to purchase or enter into agreements to purchase, on or before the Effective Date, Collateral Debt Securities having an aggregate Principal Balance, together with the aggregate Principal Balance of all Eligible Investments purchased with Collateral Principal Collections, of not less than U.S.$500,000,000 (assuming, for these purposes, settlement (in accordance with customary settlement procedures in the relevant markets) of all agreements entered into by the Issuer to acquire Collateral Debt Securities scheduled to settle on or following the Effective Date).

(b)

The Issuer (or the Collateral Advisor on behalf of the Issuer) shall cause to be delivered to the Trustee on the Effective Date an amended Schedule A listing all Collateral Debt Securities purchased on or before the Effective Date, which schedule will supersede any prior Schedule A delivered to the Trustee.

(c)

On or before the Effective Date, the Issuer (or the Collateral Advisor on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Rated Notes of the Controlling Class, the Initial Hedge Counterparty and each Rating Agency (in addition to any such Officer’s Certificate, the information set forth in such Officer’s Certificate shall also be provided to S&P in a form that complies with and includes the information required by S&P’s Preferred Format) demonstrating compliance by the Issuer with its obligations under Section 7.18(a) and satisfaction of each applicable Collateral Quality Test (with the exception of S&P’s CDO Monitor Test), and Coverage Test or, if on the Effective Date, the Issuer shall be in default in the performance of its obligations under this Section 7.18 or any of the Collateral Quality Tests (with the exception of S&P’s CDO Monitor Test) or the specified Coverage Tests shall fail to be satisfied, the Issuer (or the Collateral Advisor on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Rated Notes of the Controlling Class, the Initial Hedge Counterparty and each Rating Agency specifying the details of such default or failure; provided that the failure to satisfy any of the Collateral Quality Tests or Coverage Tests does not constitute an Event of Default but such failure may result in a Rating Confirmation Failure.

(d)

No later than fifteen (15) Business Days after the Effective Date, the Issuer (or the Collateral Advisor on its behalf) shall deliver or cause to be delivered to the Trustee an accountant’s certificate (the Accountant’s Certificate) (i) confirming the information with respect to each Collateral Debt Security set forth on the amended schedule delivered pursuant to Section 7.18(b) as of the Effective Date, and the information provided by the 117

Processed and formatted by SEC Watch - Visit SECWatch.com

Issuer with respect to every other asset included in the Collateral, (ii) certifying as of the Effective Date the procedures applied and their associated findings with respect to the Coverage Tests and the Collateral Quality Tests and (iii) specifying the procedures undertaken to review data and computations relating to the foregoing clause (ii) held by the Issuer on the Effective Date. (e)

The Issuer (or the Collateral Advisor on its behalf) shall request in writing that each of the Rating Agencies confirm in writing (a Rating Confirmation), within thirty (30) Business Days after the Effective Date, the ratings (including any private or confidential ratings) assigned by it on the Closing Date to the Rated Notes. In the event that the Issuer fails to obtain a Rating Confirmation within 30 days after the Effective Date (a Rating Confirmation Failure), Collateral Interest Collections and, to the extent Collateral Interest Collections are insufficient therefor, Collateral Principal Collections shall be applied on the first Payment Date and any succeeding Payment Dates, as applicable as provided in Section 11.1 to the extent necessary for each of the Rating Agencies to provide a Rating Confirmation.

(f)

No later than fifteen (15) Business Days following the Effective Date, the Trustee shall (i) run the S&P CDO Monitor and report to S&P whether or not the S&P CDO Monitor Test has been satisfied and (ii) report the S&P scenario default and break-even default rate for each Class of Notes. ARTICLE VIII SUPPLEMENTAL INDENTURES

8.1.

SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF RATED NOTEHOLDERS

Without the consent of the Holders of any Rated Notes, the Initial Hedge Counterparty (except as specified below) or the Income Noteholders, but with Rating Agency Confirmation for so long as any Class of Notes are rated as such time by any Rating Agency, the CoIssuers, when authorized by Board Resolutions, and the Trustee, at any time and from time to time subject to the requirement provided below in this Section 8.1 with respect to the ratings of the Rated Notes and subject to Section 8.3, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for certain limited purposes including, inter alia, to: (a)

evidence the succession of another Person to the Issuer or the Co-Issuer and the assumption by any such successor Person of the covenants of the Issuer or the Co-Issuer herein and in the Rated Notes pursuant to Section 7.10 or 7.11;

(b)

add to the covenants of the Co-Issuers or the Trustee for the benefit of the Holders of all of the Rated Notes;

(c)

pledge any additional property to the Trustee;

(d)

add to the conditions, limitations or restrictions on the authorized amount, terms and purposes of the issue, authentication and delivery of the Rated Notes;

(e)

effect the appointment of a successor;

(f)

reduce the permitted minimum denomination of the Rated Notes; 118

Processed and formatted by SEC Watch - Visit SECWatch.com

(g)

take any action necessary or advisable to prevent the Issuer, any Note Paying Agent or the Trustee from being subject to withholding or other taxes, fees or assessments, to prevent the Issuer (without adverse effect to the Issuer) from failing to qualify as a Qualified REIT Subsidiary or to prevent the Issuer from being treated as engaged in a U.S. trade or business or otherwise being subjected to U.S. federal, state or local income tax on a net income tax basis; provided that such action will not cause the Noteholders to experience any material change to the timing, character or source of income from the Notes and will not be considered a significant modification resulting in an exchange for purposes of section 1.1001-3 of the U.S. Treasury regulations;

(h)

modify the restrictions on and procedures for resale and other transfer of the Rated 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 (in addition to that provided under Section 3(c)(7) thereunder) or to remove restrictions on resale and transfer to the extent not required thereunder;

(i)

grant, convey, transfer, assign, mortgage or pledge any property to or with the Trustee for the benefit of the Secured Parties;

(j)

correct or amplify the description of any property at any time subject to the lien of this Indenture, or to better assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations) or to subject to the lien of this Indenture any additional property;

(k)

make any change required by the stock exchange on which any Class of Rated Note is listed, if any, in order to permit or maintain such listing;

(1)

correct, amend, cure any manifest error, inconsistency, defect or ambiguity or correct any typographical error in this Indenture;

(m)

modify this Indenture to conform the terms herein to the terms set forth in the then current Offering Circular;

(n)

modify any provision (other than in respect of a Reserved Matter), with respect to restrictions upon the Issuer’s rights to acquire and dispose of Collateral Debt Securities and other assets, that the Issuer or the Collateral Advisor determines to be necessary or desirable in order for the Issuer to maintain any desired exemption from registration of the Issuer under the Investment Company Act or of the Notes under the Securities Act;

(o)

with the consent of the Collateral Advisor, modify the calculation of the Collateral Quality Tests and the definitions applicable thereto to correspond with published or written changes in the guidelines, methodology or standards established by the Rating Agencies;

(p)

agree to any modification of the Indenture or any other Transaction Document (other than in respect of a Reserved Matter), which is, in the opinion of the Trustee, proper to make if, in the opinion of the Trustee (based upon an opinion of counsel), such modification will not have a material adverse effect on the interests of Holders of any Class or Classes 119

Processed and formatted by SEC Watch - Visit SECWatch.com

of Notes or the Initial Hedge Counterparty and which is of a formal, minor or technical nature or is to correct a manifest error. In addition, the Trustee may, but is not obligated to, without the consent of the Rated Noteholders or of the Holders of any relevant Class or Classes of Rated Notes, agree to any modification of any other Transaction Document which is of a formal, minor or technical nature or is to correct a manifest error and which is, in the opinion of the Trustee, proper to make, in the opinion of the Trustee (based upon an opinion of counsel); provided such modification will not have a material adverse effect on the interests of the Initial Hedge Counterparty or the Holders of any Class or Classes of Notes. For so long as any Rated Notes are Outstanding, no such supplemental indenture shall be effective unless and until Rating Agency Confirmation has been received. The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. No modification to the Indenture will be effective until the Collateral Advisor has received written notice of such amendment and, if such amendment affects the rights, obligations or compensation of the Collateral Advisor, the Collateral Advisor has consented in writing to the terms of the proposed amendment. In addition, the consent of any predecessor Collateral Advisor will be required to implement any such supplemental indenture that would change any provision of the Indenture entitling such predecessor Collateral Advisor to any fee or other amount payable to it under the Indenture or to reduce or delay the right of such predecessor to such payment. Without obtaining the requisite consents of the applicable parties pursuant to this Section 8.1, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of the Initial Hedge Counterparty, any Holder of Rated Notes or the Income Notes would be materially and adversely affected thereby. In determining whether or not the interests of any Holder of Rated Notes or Income Notes will be materially and adversely affected, the Trustee shall be entitled to rely upon an Opinion of Counsel as to whether the interests of any Holder of Rated Notes or of Income Notes would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the Income Note Paying Agent). The Collateral Advisor will not be bound by any supplemental indenture that affects the obligations of the Collateral Advisor unless the Collateral Advisor has consented thereto (which consent will not be unreasonably withheld). The Co-Issuers will not consent to any supplemental indenture that would have a material adverse effect on the Initial Hedge Counterparty without the consent of the Initial Hedge Counterparty. At the cost of the Co-Issuers, the Trustee shall provide to the Rated Noteholders, the Income Note Paying Agent, the Initial Hedge Counterparty and each Rating Agency a copy of any proposed supplemental indenture at least 10 days prior to the execution thereof by the Trustee and, for so long as any Rated Notes are Outstanding, request a Rating Agency Confirmation from each Rating Agency with respect to such supplemental indenture. As soon as practicable after the execution by the Trustee and the Issuer of any such supplemental indenture, the Trustee shall provide to the Rated Noteholders, the Income Note Paying Agent, the Initial Hedge Counterparty and each Rating Agency a copy of the executed supplemental indenture. For so long as any Rated Notes are Outstanding and rated by either of the Rating Agencies, no supplemental indenture shall be effective unless and until a Rating Agency Confirmation from each Rating Agency has been received. 120

Processed and formatted by SEC Watch - Visit SECWatch.com

8.2.

SUPPLEMENTAL INDENTURES WITH CONSENT OF RATED NOTEHOLDERS

Except as provided below, with the prior written consent of the Initial Hedge Counterparty (but only if the right of the Initial Hedge Counterparty to payments in accordance with the Priority of Payments is adversely affected), the Holders of not less than a majority of the aggregate principal amount of the Outstanding Rated Notes of each Class (in principal amount) adversely affected thereby and the written consent of Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes (if materially and adversely affected thereby), the Trustee and the Co-Issuers may execute a supplemental indenture to add provisions to, or change in any manner or eliminate any provisions of, the Indenture or modify in any manner the rights of the Holders of the Rated Notes of such Class or of the Income Notes or the Hedge Counterparty under the Indenture. With the written consent of the Holders of not less than 75% of the then Aggregate Outstanding Amount of each adversely affected Class of Rated Notes and the written consent of 75% of the Holders of the aggregate principal amount of the Outstanding Income Notes if materially and adversely affected thereby (which consent shall be evidenced by an Officer’s certificate of the Issuer certifying that such consent has been obtained), Rating Agency Confirmation and the written consent of the Initial Hedge Counterparty (which shall be required only if the right of the Initial Hedge Counterparty to payments in accordance with the Priority of Payments is adversely affected), the Trustee and Co-Issuers may, subject to Section 8.3, enter into one or more indentures supplemental hereto in order to: (a)

change the applicable Stated Maturity Date of the Rated Notes or scheduled redemption of the principal of or the due date of any installment of interest on the Rated Notes, reduce the principal amount thereof or the rate of interest thereon, or the Redemption Price with respect thereto, or change the earliest date on which Rated Notes 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 the Rated Notes or change any place where, or the coin or currency in which, Rated Notes or the principal thereof or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity Date thereof (or, in the case of redemption, on or after the Redemption Date);

(b)

reduce the percentage, in principal amount, of Holders of Rated Notes of each Class, or the percentage of Income Noteholders, whose consent is required for the authorization of any supplemental indenture or for any waiver of compliance with certain provisions of the Indenture or certain defaults thereunder or their consequences;

(c)

impair or adversely affect the Collateral other than as permitted by the Indenture;

(d)

permit the creation of any security interest ranking prior to or on a parity with the security interest of the Indenture with respect to any part of the Collateral or terminate such security interest on any property at any time subject thereto (other than in accordance with the Indenture) or deprive the Holder of any Rated Note or the Initial Hedge Counterparty of the security afforded by the security interest of the Indenture;

(e)

reduce the percentage of the aggregate principal amount of Holders of Rated Notes of each Class whose consent is required to request the Trustee to preserve the Collateral or rescind the Trustee’s election to preserve the Collateral pursuant to Section 5.5 or to sell or liquidate the Collateral pursuant to Section 5.4 or 5.5; 121

Processed and formatted by SEC Watch - Visit SECWatch.com

(f)

modify any of the provisions of this Section 8.2, except to increase the percentage of the aggregate principal amount of Outstanding Rated Notes of each Class whose Holders’ consent is required for any such action or to provide that other provisions of the Indenture cannot be modified or waived without the written consent of the Holders of 75% of the then Aggregate Outstanding Amount of each affected Class of Rated Notes Outstanding or the Initial Hedge Counterparty;

(g)

modify the definition of the term “Outstanding” or Section 11.1;

(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 or principal of any Rated Note on any Payment Date or to affect the right of the Holders of Rated Notes or the Initial Hedge Counterparty to the benefit of any provisions for the redemption of such Rated Notes contained therein;

(i)

modify provisions related to the bankruptcy or insolvency of the Co-Issuers; or

(j)

modify provisions stating that the obligations of the Co-Issuers are joint and several limited recourse obligations of the CoIssuers payable solely from the Collateral in accordance with the terms of the Indenture (Section 8.2(a) through (j) collectively, the Reserved Matters).

The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. Not later than 15 Business Days prior to the execution of any proposed supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Co-Issuers, shall mail to the Rated Noteholders, Income Note Paying Agent, the Initial Hedge Counterparty, the Collateral Advisor and each Rating Agency a copy of such proposed supplemental indenture (or a description of the substance thereof) and shall request Rating Agency Confirmation with respect to such supplemental indenture. If any Class of Rated Notes is then rated by any Rating Agency, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, Rating Agency Confirmation would not be received with respect to such supplemental indenture, unless each Holder of Rated Notes of each Class whose rating will be reduced or withdrawn has, after notice that the proposed supplemental indenture would result in such reduction or withdrawal of the rating of the Class of Rated Notes held by such Holder, consented to such supplemental indenture. Without having obtained the consent of the applicable parties pursuant to this Section 8.2, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of the Initial Hedge Counterparty, any Holder of Rated Notes or of the Income Noteholders would be materially and adversely affected thereby. Unless notified by (i) the Holders of a Majority of the then Aggregate Outstanding Amount of any Class of Rated Notes that such Class will be materially and adversely affected or (ii) the Holders of a Majority of aggregate principal amount of the Income Notes that the Income Noteholders will be materially and adversely affected, the Trustee shall be entitled to rely upon an Opinion of Counsel as to whether the interests of any Holder of Rated Notes or of the Income Noteholders would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the Income Note Paying Agent). 122

Processed and formatted by SEC Watch - Visit SECWatch.com

It shall not be necessary for any Act of Rated Noteholders or any consent of Income Noteholders under this Section 8.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act or consent shall approve the substance thereof. Promptly after the execution by the Co-Issuers and the Trustee of any supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Co-Issuers, shall mail or make available to the Rated Noteholders, the Income Note Paying Agent (for forwarding to the Income Noteholders), the Initial Hedge Counterparty, the Collateral Advisor and each Rating Agency a copy thereof. Any failure of the Trustee to publish or mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. In addition, the Issuer shall cause to be delivered a copy of the executed supplemental indenture to the Repository for posting on the Repository in the manner described in Section 14.3. 8.3.

EXECUTION OF SUPPLEMENTAL INDENTURES

In executing or accepting the additional trusts created by any supplemental indenture permitted by this Section 8 or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Sections 6.1 and 6.3) shall be fully protected in relying in good faith upon an Opinion of Counsel, stating that the execution of such supplemental indenture is authorized, or permitted by this Indenture and that all conditions precedent thereto have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or indemnities under this Indenture or otherwise. Such supplemental indenture will not be binding on the Collateral Advisor to the extent that it reduces the rights or increases the obligations of the Collateral Advisor, unless such supplemental indenture is consented to in writing by the Collateral Advisor. 8.4.

EFFECT OF SUPPLEMENTAL INDENTURES

Upon the execution of any supplemental indenture under this Section 8, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Rated Notes theretofore and thereafter authenticated and delivered hereunder shall be bound thereby. 8.5.

REFERENCE IN RATED NOTES TO SUPPLEMENTAL INDENTURES

Rated Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Section 8 may, and if required by the Trustee shall, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Co-Issuers shall so determine, new Rated Notes, so modified as to conform in the opinion of the Trustee and the Co-Issuers to any such supplemental indenture, may be prepared and executed by the Co-Issuers and authenticated and delivered by the Trustee in exchange for Outstanding Rated Notes. ARTICLE IX REDEMPTION OF RATED NOTES 9.1.

REDEMPTION OF RATED NOTES

The Rated Notes will be subject to redemption in whole but not in part at their respective Redemption Prices, in each case, in accordance with the procedures, and subject to the satisfaction of the conditions, in Section 9.2 below, in the following circumstances: 123

Processed and formatted by SEC Watch - Visit SECWatch.com

9.2.

(a)

on or after the Payment Date occurring in September 2010 and continuing until the Stated Maturity Date (the Call Period), at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes (an Optional Redemption);

(b)

on any Payment Date following the occurrence and during the continuation of a Tax Event, (i) at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes or (ii) subject to the satisfaction of the Income Note Redemption Approval Condition, at the direction of the Holders of a Majority of the then Aggregate Outstanding Amount of the Controlling Class (such a redemption, a Tax Redemption); and

(c)

automatically and without any direction by any Person, (i) if the Notes have not been redeemed in full on or after the Payment Date occurring in September 2017, and (ii) if any of the conditions set forth in Sections 9.2(a) through (d) below have not been met or if the highest bidder fails to pay the purchase price within six (6) Business Days following such Payment Date, the Payment Date thereafter, unless the Notes are redeemed in full prior to the next Auction Date (such a redemption, an Auction Call Redemption).

REDEMPTION PROCEDURES; AUCTION

In connection with any Redemption, the Trustee and the Collateral Advisor will, in accordance with the procedures set forth in Schedule E (the Auction Procedures) and at the expense of the Issuer, conduct an auction (an Auction) of the Collateral Debt Securities included in the Collateral on a date (each such date, an Auction Date) occurring no later than ten (10) Business Days prior to any scheduled Redemption Date. Any of the Placement Agents, the Collateral Advisor, the Income Noteholders, the Trustee or their respective Affiliates may, but will not be required to, bid at the Auction. (a)

Any Redemption will be subject to the satisfaction of each of the following conditions: (1)

the related Auction has been conducted in accordance with the Auction Procedures;

(2)

the Trustee has received bids for the Collateral Debt Securities (or for each of the related Subpools) from at least two Qualified Bidders (including the winning Qualified Bidder) identified on a list of qualified bidders provided by the Collateral Advisor to the Trustee;

(3)

the Collateral Advisor certifies that the Highest Auction Price would result in the Sale Proceeds from the Collateral Debt Securities (or the related Subpools) for a purchase price (paid in cash) plus the Balance of all Eligible Investments and cash held by the Issuer plus any termination payments payable by a Hedge Counterparty to the Issuer (in excess of any amounts payable by the Issuer to a Hedge Counterparty) resulting from the termination of the Hedge Agreement pursuant to the Redemption being at least equal to the sum of (i) the aggregate Redemption Prices of the Notes plus (ii) any accrued but unpaid fees and expenses of the Issuer pursuant to Section 11.1(b)(1) and (17) through (19) (including any termination payments payable by the Issuer resulting from the termination of the Hedge Agreement pursuant to the Redemption) plus (iii) (a) in connection with a Tax Redemption at the direction of the Controlling Class and 124

Processed and formatted by SEC Watch - Visit SECWatch.com

(b) an Auction Call Redemption, any additional amounts necessary to satisfy the Income Note Redemption Approval Condition; and (4)

(b)

the bidder(s) who offered the Highest Auction Price for the Collateral Debt Securities (or the related Subpools) enter(s) into a written agreement with the Issuer (which the Issuer will execute if the conditions set forth above and in the Indenture are satisfied, which execution will constitute certification by the Issuer that such conditions have been satisfied) that obligates the highest bidder(s) (or the highest bidder for each Subpool) to purchase all of the Collateral Debt Securities (or the relevant Subpool) and provides for payment in full (in Cash) of the purchase price to the Trustee on or prior to the sixth Business Day following the relevant Auction Date.

In addition, any Optional Redemption requires the occurrence of the following: (1)

at least four (4) Business Days before the scheduled Redemption Date, the Collateral Advisor has furnished to the Trustee evidence, in form satisfactory to the Trustee, that the Collateral Advisor on behalf of the Issuer has entered into a binding agreement or agreements with an institution or institutions (or guarantor or guarantors of the obligations): (A) with regard to which Rating Agency Confirmation has been received; or (B) whose long-term unsecured debt obligations (other than such obligations whose rating is based on the credit of a person other than such institution) have a credit rating from Fitch, if rated by Fitch, of “F 1” and of at least “A-1” from S&P; and in each case, to sell, not later than the Business Day immediately preceding the scheduled Redemption Date, in immediately available funds, all or part of the Collateral Debt Securities at a purchase price (paid in Cash) which together with the Balance of all Eligible Investments and Cash held by the Issuer will be at least equal to the sum of (i) the aggregate Redemption Prices of the Notes plus (ii) any accrued but unpaid fees and expenses of the Issuer pursuant to Section 11.1(b)(1) and (17) through (19) (including any termination payments payable by the Issuer resulting from the termination of the Hedge Agreement pursuant to the Redemption); or

(2)

prior to selling any Collateral Debt Securities or any other collateral, the Collateral Advisor certifies that the expected proceeds from such sale will, in the aggregate, equal or exceed, in each case, the sum of (A) any amounts payable in connection with an Optional Redemption pursuant to Section 9.2 of the Notes plus (B) all expenses of such redemption and all other administrative fees and expenses payable on the related Redemption Date.

Provided that all of the conditions set forth in Section 9.2(a) through (d) have been met, the Trustee will sell and transfer the Collateral Debt Securities (or each related Subpool), without representation, warranty or recourse, to the bidder(s) who offered the Highest Auction Price for the Collateral Debt Securities (or the related Subpools) in accordance with and upon completion of the Auction Procedures. If any of the conditions set forth in Section 9.2(a) through (d) are not met, (i) the Redemption will not occur on the Payment Date following the relevant Auction Date, (ii) the Trustee will give notice of the withdrawal of the Redemption, (iii) subject to clause (iv) below, the Trustee will decline to consummate such sale and may not solicit any further bids or otherwise negotiate any further sale of Collateral Debt Securities in relation to such Auction and (iv) unless the Rated Notes are redeemed in full prior to the next succeeding Auction Date, the Trustee will conduct another Auction on the next succeeding Auction Date. 125

Processed and formatted by SEC Watch - Visit SECWatch.com

The Trustee will deposit the purchase price for the Collateral Debt Securities in the Collection Account, and the Rated Notes and, to the extent funds are available therefor, the Income Notes, will be redeemed on the Payment Date immediately following the relevant Auction Date in the order of priorities set forth in Section 11.1. Any Redemption will only be effected on a Payment Date. Installments of principal and interest due on or prior to a Redemption Date shall continue to be payable to the Holders of such Rated Notes as of the relevant Record Dates according to their terms. 9.3.

9.4.

RECORD DATE; NOTICE TO TRUSTEE OF REDEMPTION (a)

The Issuer shall set the Redemption Date and the applicable Record Date and give notice thereof to the Trustee pursuant to Section 9.3(b) below and shall issue an Issuer Request to the Trustee for the provision of the information necessary for the Issuer to compile the Redemption Date Statement in accordance with Section 10.10(b).

(b)

In the event of any Redemption, the Issuer shall, at least 45 days (but not more than 90 days) prior to the Redemption Date, notify the Trustee and the Initial Hedge Counterparty of such Redemption Date, the applicable Record Date, the principal amount of each Class of Notes to be redeemed on such Redemption Date and the Redemption Price of such Notes.

NOTICE OF REDEMPTION

Notice of Redemption will be given by first-class mail, postage prepaid, mailed not less than eight (8) Business Days prior to the applicable Redemption Date, to the Initial Hedge Counterparty, each Rating Agency and each Holder of Rated Notes at such Holder’s address in the Note Register maintained by the Note Registrar in accordance with the provisions of this Indenture and to the Collateral Advisor. Rated Notes called for Redemption must be surrendered at the office of any Note Paying Agent appointed pursuant to this Indenture in order to receive the Redemption Price. The Issuer will also deliver notice of Redemption to the Irish Paying Agent if and so long as any Class of Rated Notes to be redeemed is listed on the Irish Stock Exchange. All notices of redemption shall state: (a)

the applicable Redemption Date;

(b)

the applicable Record Date;

(c)

the Redemption Price;

(d)

that all the Notes of the relevant Class are being redeemed in full and that interest on the applicable principal amount of Notes shall cease to accrue on the date specified in the notice; and

(e)

the place or places where such Rated Notes are to be surrendered for payment of the Redemption Price, which shall be the office or agency of the Note Paying Agent to be maintained as provided in Section 7.2.

Notice of redemption shall be given by the Co-Issuers or, at the Co-Issuers’ request, by the Trustee in the name and at the expense of the Co-Issuers. Failure to give notice of redemption, or any defect therein, to any Holder of any Note selected for redemption shall not impair or affect the validity of the redemption of any other Notes. 126

9.5.

NOTICE OF WITHDRAWAL

With regard to an Optional Redemption or a Tax Redemption, any notice of redemption may be withdrawn by the Issuer up to the fourth Business Day prior to the Redemption Date by written notice to the Trustee and the Collateral Advisor only if the Collateral Advisor is unable to deliver such sale agreement or agreements or certifications, as the case may be, in form satisfactory to the Trustee. With regard to any Redemption, notice of any withdrawal pursuant to Section 9.2 shall be given by the Trustee to each Holder of Rated Notes at such Holder’s address in the Note Register maintained by the Note Registrar by overnight courier guaranteeing next day delivery (or second day delivery outside the United States) sent not later than the third Business Day prior to such Redemption Date. In addition, the Trustee will, if any Class of Rated Notes to have been redeemed is listed on the Irish Stock Exchange, deliver a notice of such withdrawal to the Irish Stock Exchange not less than three (3) Business Days prior to such Redemption Date. 9.6.

RATED NOTES PAYABLE ON REDEMPTION DATE

Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after the Redemption Date (unless the Issuer shall default in the payment of the Redemption Price) such Rated Notes shall cease to bear interest. Upon final payment on a Note to be redeemed, the Holder shall present and surrender such Note at the place specified in the notice of redemption on or prior to such Redemption Date; provided that if there is delivered to the Co-Issuers (i) such security or indemnity as may be required by them to save each of them harmless and (ii) an undertaking thereafter to surrender such Note, then, in the absence of notice to the Co-Issuers that the applicable Note has been acquired by a bona fide purchaser, such final payment shall be made without presentation or surrender. Installments of interest on Rated Notes of a Class so to be

Processed and formatted by SEC Watch - Visit SECWatch.com

redeemed whose Stated Maturity Date is on or prior to the Redemption Date shall be payable to the Holders of such Rated Notes, or one or more predecessor Rated Notes, registered as such at the close of business on the relevant Record Date according to the terms and provisions of Section 2.6(e). If any Rated Note called for redemption shall not be paid upon surrender thereof for redemption, the principal thereof shall, until paid, bear interest from the Redemption Date at the Applicable Periodic Interest Rate for each successive Interest Period the Rated Note remains Outstanding. 9.7.

SPECIAL AMORTIZATION

Amounts constituting Collateral Principal Collections that are Sale Proceeds not reinvested in Substitute Collateral Debt Securities during the applicable Sixty-Day Reinvestment Window (“Unreinvested Sale Proceeds”) shall, in each case, be applied to the payment of principal on the Notes on the next succeeding Payment Date in accordance with Section 11.1(b)(15)(iii)(B)(2) hereof. Amounts constituting Collateral Principal Collections that are (i) Collateral Principal Payments not reinvested in Substitute Collateral Debt Securities during the applicable Sixty-Day Reinvestment Window (“Unreinvested Collateral Principal Payments”), or (ii) Collateral Principal Payments for any CPP Asset Type that are below the Reinvestment Threshold Amount and as to which the Cash Release Conditions are satisfied (“Unaccumulated Collateral Principal Payments”) shall, in each case, be applied to the payment of principal on the Notes on the next succeeding Payment Date in accordance with Section 11.1(b)(15)(iii) hereof. If on any Payment Date the Issuer is obligated to make payments of principal on the Notes pursuant to Section 11.1(b)(15)(iii), then such payments of principal shall be made: 127

Processed and formatted by SEC Watch - Visit SECWatch.com

(i) pro rata to the respective Classes of the Rated Notes pursuant to Section 11.1(b)(15)(iii)(A) of the Priority of Principal Payments (a “Special Amortization”) if the Special Amortization Pro Rata Condition is satisfied, a Special Amortization Notice is delivered by the Collateral Advisor to the Issuer and the Trustee and certain other criteria specified in the Indenture are complied with; or (ii) sequentially to the respective Classes of the Rated Notes pursuant to Section 11.1(b)(15)(iii)(B) of the Priority of Principal Payments if the criteria for a Special Amortization are not satisfied or with respect to Collateral Principal Collections consisting of Unreinvested Sale Proceeds. In order for amounts to be applied for a Special Amortization on any Payment Date, the Collateral Advisor is required to deliver, to each of the Trustee and each Rating Agency, advance written notice (which may be included in the related Note Report) (each, a “Special Amortization Notice”) specifying the identity and principal amount of each Class of Rated Notes to be paid pursuant to such Special Amortization and (i) in the case of Unreinvested Collateral Principal Payments, that the Collateral Advisor has been unable to identify for purchase by the Issuer Substitute Collateral Debt Securities that comply with the Reinvestment Criteria and the other applicable requirements of the Indenture, and (ii) in the case of Unaccumulated Collateral Principal Payments, that the Collateral Advisor has determined that identification of Substitute Collateral Debt Securities of the required CPP Asset Type for purchase by the Issuer, assuming that such Collateral Principal Payments were to accumulate to the level of the Reinvestment Trigger Amount, would not be practicable, that the Cash Release Conditions are satisfied and that all other Indenture requirements for such Special Amortization are complied with. On each Payment Date on which a Special Amortization occurs, each related Hedge Agreement will be terminated in part in accordance with the terms and conditions thereof, including compliance with any applicable requirement that the Issuer receive Rating Agency Confirmation from S&P, and any amounts due and payable pursuant to such Hedge Agreement in connection with such termination thereof will be paid on such Payment Date in accordance with the terms thereof subject to this Indenture. ARTICLE X ACCOUNTS, ACCOUNTINGS AND RELEASES 10.1.

COLLECTION OF FUNDS (a)

Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all funds and other property payable to or receivable by the Trustee pursuant to this Indenture, including all payments due on the Pledged Securities, in accordance with the terms and conditions of such Pledged Securities. The Trustee shall segregate and hold all such funds and property received by it in trust for the Secured Parties and shall apply such funds as provided in this Indenture.

(b)

Each of the parties hereto hereby agrees to cause the Custodian or any other Securities Intermediary that holds any funds or other property for the Issuer or the Co-Issuer in an Account to agree with the parties hereto that (1) each Account is a Securities Account in respect of which the Trustee is the Entitlement Holder, (2) each Account is held by a financial institution that has a combined capital and surplus of at least U.S.$250,000,000 and being subject to supervision or examination by federal or state banking authority, (3) the Cash, Securities and other property credited to any Account is to be treated as a 128

Processed and formatted by SEC Watch - Visit SECWatch.com

Financial Asset under Article 8 of the UCC and (4) the securities intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC) for that purpose will be the State of New York. In no event may any Financial Asset held in any Account be registered in the name of, payable to the order of, or specially Indorsed to, the Issuer unless such Financial Asset has also been Indorsed in blank or to the Custodian or other Securities Intermediary that holds such Financial Asset in such Account. Each Account shall be held and maintained at an office located in Chicago, Illinois. 10.2.

GENERAL PROVISIONS APPLICABLE TO ACCOUNTS

The Payment Account, Collateral Account, Uninvested Proceeds Account, Collection Account (including each Collateral SubAccount therein), Expense Reserve Account, each Hedge Counterparty Collateral Account and Interest Reserve Account shall remain at all times with a financial institution having a long-term debt rating of at least “BBB+” by S&P.

10.3.

(a)

The Trustee agrees to give the Issuer prompt notice (with a copy to the Hedge Counterparty, the Collateral Advisor, each Rating Agency and the Income Note Paying Agent) if any Account or any funds on deposit therein, or otherwise standing to the credit of any Account, shall become subject to any writ, order, judgment, warrant of attachment, execution or similar process.

(b)

The Collateral Advisor shall direct the Trustee to invest and reinvest any funds on deposit in any of the Accounts (other than the Payment Account). In the event that the Collateral Advisor has not delivered investment instructions to the Trustee or after the occurrence of an Event of Default, the Trustee shall invest and reinvest any funds on deposit in any Account (other than the Payment Account) as fully as practicable in investments described in clause (iii) of the definition of Eligible Investments maturing not later than the earlier of (i) 30 days after the date of such investment or (ii) the Business Day immediately preceding the next Payment Date. With respect to each Account, all interest and other income from Eligible Investments purchased with funds on deposit in such Account shall be deposited in such Account, any gain realized from such investments shall be credited to such Account, and any loss resulting from such investments shall be charged to such Account. Any gain or loss with respect to an Eligible Investment shall be allocated in such a manner as to increase or decrease, respectively, Collateral Principal Collections and/or Collateral Interest Collections in the proportion that the amount of Collateral Principal Collections and/or Collateral Interest Collections used to acquire such Eligible Investment bears to the purchase price thereof. The Trustee shall not in any way be held liable by reason of any insufficiency of any such Account resulting from any loss relating to any such investment. Nothing herein shall be deemed to relieve the Bank or its Affiliates from any duties or liabilities with respect to investments in obligations of the Bank or any Affiliate thereof.

(c)

All funds deposited from time to time in the Collection Account, the Expense Reserve Account or the Interest Reserve Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided.

COLLATERAL ACCOUNT

The Trustee shall, prior to the Closing Date, cause the Custodian to establish a Securities Account which shall be designated as the “Collateral Account”, which shall be in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties and into which the Trustee shall from 129

Processed and formatted by SEC Watch - Visit SECWatch.com

time to time deposit Collateral. All Collateral from time to time deposited in, or otherwise standing to the credit of, the Collateral Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided. The CoIssuers shall not have any legal, equitable or beneficial interest in the Collateral Account other than in accordance with the Priority of Payments. 10.4.

UNINVESTED PROCEEDS ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Uninvested Proceeds Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties, into which the Trustee shall deposit all Uninvested Proceeds (other than the organizational and structuring fees and expenses of the Co-Issuers (including, without limitation, the legal fees and expenses of counsel to the Co-Issuers, the Placement Agents and the Collateral Advisor), the expenses of offering the Rated Notes and the Income Notes and amounts deposited in the Expense Reserve Account on such date). On or prior to the Effective Date, the Collateral Advisor on behalf of the Issuer may direct the Trustee to, and upon such direction the Trustee shall, apply funds in the Uninvested Proceeds Account to purchase additional Collateral Debt Securities and, pending such investment in additional Collateral Debt Securities, such funds will be invested in Eligible Investments, as directed by the Collateral Advisor, with stated maturities no later than the Business Day immediately preceding the next Payment Date. The Trustee shall transfer any Uninvested Proceeds remaining on deposit in the Uninvested Proceeds Account on the Effective Date to the Collection Account to be treated as Collateral Principal Collections on the first Payment Date and distributed in accordance with the Priority of Payments. 10.5.

COLLECTION ACCOUNT AND CPP SUB-ACCOUNTS (a)

Collection Account (1)

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Collection Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. The Trustee shall cause to be established two sub-accounts of the Collection Account. The Trustee shall deposit Collateral Principal Collections into one sub-account (the Collateral Principal Collections Sub-Account) and Collateral Interest Collections into the other sub-account. The Trustee shall cause to be established within the Collateral Principal Collections Sub-Account seven further sub-accounts, six of which shall constitute the “CPP Sub-Accounts”. At the direction of the Issuer (or the Collateral Advisor on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Collection Account (including the Collateral Principal Collection Sub-Account and each CPP Sub-Account) in Eligible Investments or Substitute Collateral Debt Securities in accordance with the requirements and limitations contained in Section 12.1(c).

(2)

The Trustee, within one Business Day after receipt of any Distribution or other proceeds that are not Cash shall so notify the Issuer and the Issuer shall sell such Distribution or other proceeds for Cash in accordance with Section 12.1.

(3)

The Trustee shall transfer to the Payment Account for application pursuant to Section 11.1(a) and in accordance with the calculations and the instructions contained in the Note Valuation Report prepared by the Issuer pursuant to 130

Processed and formatted by SEC Watch - Visit SECWatch.com

Section 10.10(a), on or prior to the Business Day prior to each Payment Date, funds on deposit in the Collection Account (including reinvestment income) other than Collections received after the end of the Due Period with respect to such Payment Date. (4)

(b)

10.6.

The Trustee shall withdraw and apply amounts on deposit in the Collection Account in accordance with any Redemption Date Statement delivered to the Trustee in connection with the redemption of Rated Notes pursuant to Section 9.1.

CPP Sub-Accounts. The Trustee shall, prior to the Closing Date, cause to be established, within the Collateral Principal Collections Sub-Account (and as sub-sub-accounts of the Collection Account) six Securities Accounts to be designated each individually as a “CPP Sub-Account” and all collectively as the “CPP Sub-Accounts”. Each CPP Sub-Account shall be established in the name of the Trustee as Entitlement Holder and held in trust for the benefit of the Secured Parties. Each CPP Sub-Account shall contain Collateral Principal Payments received from time to time with respect to the Collateral Debt Securities of one particular CPP Asset Type. The CPP Sub-Accounts shall be named respectively as follows: (i) “CPP SubAccount — REIT Debt Securities- Fixed Rate”, (ii) “CPP Sub-Account — REIT Debt Securities - Floating Rate”, (iii) “CPP Sub-Account — CMBS Securities - Fixed Rate”, (iv) “CPP Sub-Account — CMBS Securities — Floating Rate”, (v) “CPP Sub-Account — Real Estate CDO Securities - Fixed Rate”, and (vi) “CPP Sub-Account — Real Estate CDO Securities Floating Rate”. During the Reinvestment Period, the Trustee will deposit the Collateral Principal Payments received by it with respect to all Collateral Debt Securities of a particular CPP Asset Type into the CPP Sub-Account for such CPP Asset Type.

EXPENSE RESERVE ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Expense Reserve Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. On the Closing Date, the Trustee shall deposit into the Expense Reserve Account an amount equal to U.S.$25,000 together with an amount sufficient to pay any outstanding fees and expenses of the Issuer in relation to the offering of the Rated Notes and the Income Notes which are not paid on the Closing Date. At the direction of the Issuer (or the Collateral Advisor on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Expense Reserve Account in Eligible Investments. Any amounts held in the Expense Reserve Account in excess of U.S.$25,000 on the day which is 60 days following the Closing Date (or, if such day is not a Business Day, the next following Business Day) shall be transferred by the Trustee into the Uninvested Proceeds Account. Thereafter, the Trustee shall transfer to the Expense Reserve Account from the Payment Account amounts required to be deposited therein pursuant to Section 11.1(a) and in accordance with the calculations and the instruction contained in the Note Valuation Report prepared by the Issuer pursuant to Section 10.10(a). Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be to pay (on any day other than a Payment Date) accrued and unpaid Administrative Expenses of the Co-Issuers; provided that the Trustee shall deposit all amounts remaining on deposit in the Expense Reserve Account at the time when substantially all of the Issuer’s assets have been sold or otherwise disposed of into the Collections Account for application as Collateral Interest Collections on the immediately succeeding Payment Date. 131

Processed and formatted by SEC Watch - Visit SECWatch.com

10.7.

INTEREST RESERVE ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Interest Reserve Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Interest Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. At the direction of the Issuer (or the Collateral Advisor on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Interest Reserve Account in Eligible Investments. On each Payment Date, in accordance with the Priority of Payments, the Trustee will deposit the Interest Reserve Amount, if any, into the Interest Reserve Account. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Interest Reserve Account shall be to deposit into the Payment Account, on the Business Day prior to each Payment Date, the Balance of the Interest Reserve Account (including reinvestment income) for distribution as Collateral Interest Collections in accordance with the Priority of Payments on the related Payment Date. 10.8.

PAYMENT ACCOUNT

The Trustee shall, prior to the Closing Date, establish a Securities Account which shall be designated as the “Payment Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Payment Account shall be held in trust by the Trustee for the benefit of the Secured Parties. Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Payment Account shall be to pay the interest on and the principal of the Rated Notes in accordance with their terms and the provisions of this Indenture and, upon Issuer Order, to pay Administrative Expenses and other amounts specified therein, each in accordance with the Priority of Payments. The Co-Issuers shall not have any legal, equitable or beneficial interest in the Payment Account other than in accordance with the Priority of Payments. 10.9.

REPORTS BY TRUSTEE

The Trustee shall supply, in a timely fashion to each Rating Agency (so long as any Rated Notes are rated by such Rating Agency), the Initial Hedge Counterparty, the Holders of Rated Notes of the Controlling Class, the Collateral Advisor, the Income Note Paying Agent, the Placement Agents and the Issuer any information regularly maintained by the Trustee that each such Person may from time to time request with respect to the Pledged Securities or the Accounts reasonably needed to complete the Note Valuation Report or to provide any other information reasonably available to the Trustee by reason of its acting as Trustee hereunder and required to be provided by Section 10.10. The Trustee shall forward to the Collateral Advisor, the Holders of Rated Notes of the Controlling Class, or upon request therefor, any Holder of a Rated Note shown on the Note Register, the Placement Agents, the Initial Hedge Counterparty or the Income Note Paying Agent, copies of notices and other writings received by it from the issuer of any Collateral Debt Security or from any Clearing Agency with respect to any Collateral Debt Security advising the holders of such security of any rights that the holders might have with respect thereto (including notices of calls and redemptions of securities) as well as all periodic financial reports received from such issuer and Clearing Agencies with respect to such issuer; provided that the Trustee shall not disclose any unpublished S&P Rating assigned by S&P with respect to any Collateral Debt Security without the prior consent of S&P. 132

Processed and formatted by SEC Watch - Visit SECWatch.com

So long as any Class of Rated Notes is listed on the Irish Stock Exchange, the Irish Paying Agent shall notify the Irish Stock Exchange not later than the Business Day preceding each Payment Date of the amount of principal payments to be made on the Rated Notes of each Class on such Payment Date, any Class C Cumulative Periodic Interest Shortfall Amount, any Class D Cumulative Periodic Interest Shortfall Amount, any Class E Cumulative Periodic Interest Shortfall Amount, any Class F Cumulative Periodic Interest Shortfall Amount and the Aggregate Outstanding Amount of the Rated Notes of each Class and as a percentage of the original Aggregate Outstanding Amount of the Rated Notes of such Class after giving effect to the principal payments, if any, on such Payment Date. As promptly as possible following the delivery of each Note Valuation Report to the Trustee pursuant to Section 10.10(a) or (b), as applicable, the Issuer shall cause a copy of such report to be delivered the Repository for posting on the Repository in the manner described in Section 14.3. In connection therewith, each of the Co-Issuers acknowledges and agrees that each Note Valuation Report shall be posted to the Repository for use in the manner described in the section headed “Terms of Use” on the Repository. 10.10.

ACCOUNTINGS (a)

Payment Date Accounting. The Issuer shall, not later than the related Payment Date and after the reconciliation process described in this Section 10.10, render an accounting (a Note Valuation Report), determined as of each Calculation Date, and deliver the Note Valuation Report to each Rating Agency, the Trustee and the Collateral Advisor and make available via the Trustee’s internet website, initially located at www.cdotrustee.net to the Trustee, the Irish Paying Agent, the Initial Hedge Counterparty, the Income Note Paying Agent, each Note Transfer Agent, the Placement Agents and, upon written request therefor, any Holder of a Rated Note shown on the Note Register. The Note Valuation Report shall contain the following information (which shall, in the case of any Note Valuation Report delivered to S&P, be presented in a form that complies with and includes the information required by S&P’s Preferred Format) determined, unless otherwise specified below, as of the related Calculation Date: (1)

the calculation showing compliance with each of the Coverage Tests, accompanied by a list setting forth the applicable maximum or minimum value, percentage or ratio which must be maintained pursuant to this Agreement with respect to each of the Coverage Tests and a list setting forth the results of the calculation of each of the Coverage Tests with respect to the Collateral Debt Securities, the calculation showing whether the S&P CDO Monitor Test is satisfied (including the weighted average rating, the default measure, variability measure and correlation measure, the scenario default rate and/or such other information required to be computed with respect to the S&P CDO Monitor Test), and the calculation showing the Fitch Weighted Average Rating Factor, the Weighted Average Fixed Rate Coupon, the Weighted Average Spread, the Weighted Average Life and the S&P Weighted Average Recovery Rate;

(2)

the estimated remaining Average Life of each of the Collateral Debt Securities;

(3)

the Applicable Periodic Interest Rate in respect of each Class of Notes and the amount of Periodic Interest payable to the Holders of the Notes for such Payment Date (in the aggregate and by Class); 133

Processed and formatted by SEC Watch - Visit SECWatch.com

(4)

the amount (if any) payable to each Hedge Counterparty pursuant to the related Hedge Agreement;

(5)

the amount (if any) payable by each Hedge Counterparty pursuant to the related Hedge Agreement:

(6)

the Aggregate Fees and Expenses payable on the next Payment Date on an itemized basis;

(7)

the Aggregate Fees and Expenses paid during a period of twelve (12) months ending on the next Payment Date on an itemized basis;

(8)

for the Collection Account:

(9)

(10)

(i)

the Balance on deposit in the Collection Account, the Collateral Principal Collections Sub-Account and each of the respective CPP Sub-Accounts at the end of the related Due Period;

(ii)

the nature and source of any Collections in the Collection Account, the Collateral Principal Collections Sub-Account and each of the respective CPP Sub-Accounts, including Collections received since the date of the last Note Valuation Report;

(iii)

the amounts payable from the Collection Account in accordance with the priority set forth in Section 11.1 on the next Payment Date; and

(iv)

the Balance remaining in the Collection Account immediately after all payments and deposits to be made on such Payment Date;

(v)

the Balance on deposit in the Collateral Principal Collections Sub-Account and each of the respective CPP Sub-Accounts.

for the Interest Reserve Account: (i)

the balance on deposit in the Interest Reserve Account at the end of the related Due Period;

(ii)

the amount payable from the Interest Reserve Account pursuant to the Priority of Payments on the next Payment Date;

(iii)

the Interest Reserve Amount to be paid into the Interest Reserve Account on the next Payment Date; and

(iv)

the Balance remaining in the Interest Reserve Account immediately after all payments and deposits to be made on such Payment Date;

for the Expense Reserve Account: (i)

the amount to be paid into the Expense Reserve Account on the next Payment Date; and 134

Processed and formatted by SEC Watch - Visit SECWatch.com

(ii)

the Balance remaining in the Expense Reserve Account immediately after all payments and deposits to be made on such Payment Date;

(11)

the Hedge Receipt Amount or the Hedge Payment Amount for the related Payment Date, and for each Hedge Agreement, the outstanding notional amount of such Hedge Agreement and the amounts, if any, scheduled to be received or paid, as the case may be, by the Issuer pursuant to such Hedge Agreement for the related Payment Date, separately stating the portion payable in accordance with Section 11.1;

(12)

the amount of Income Note Excess Funds on the related Payment Date;

(13)

the amount of the Senior Collateral Advisory Fee and the amount of the Subordinate Collateral Advisory Fee;

(14)

such other information as the Collateral Advisor, the Placement Agents, the Trustee, S&P, Fitch or any Hedge Counterparty may reasonably request;

(15)

with respect to each Collateral Debt Security, the Principal Balance, the annual coupon rate or spread to the relevant floating rate index, the frequency of coupon payments, the amount of principal payments received, the maturity date, the issuer, the country in which the issuer is incorporated or organized, the S&P Industry Classification Group, the Fitch Industry Classification Group, the S&P Recovery Rate, the S&P Rating and the Fitch Rating (provided that if any Fitch Rating for any Collateral Debt Security is an “estimated” or “shadow” rating, such rating shall be identified as “estimated” or “shadow rated”, shall be disclosed with an asterisk in the place of the applicable estimated or shadow rating and shall include the date as of which such rating was first provided by Fitch to the Issuer); and any S&P Rating which is determined from an implied rating, a credit estimate, a confidential rating or another non-public rating, shall not be distinguished and shall either (i) be reported in a single column with the public ratings of S&P (without distinguishing the source) or (ii) be reported in a separate column labeled “Non-public and Implied S&P Rating.”

(16)

the Principal Balance, the maturity date, the S&P Rating, the Fitch Rating and the issuer of each Eligible Investment included in the Collateral;

(17)

(A) the identity and Principal Balance of each Collateral Debt Security that became a Credit Risk Security, a Defaulted Security, an Equity Security, a Written Down Security, a Withholding Tax Security, a Deferred Interest PIK Bond, (B) the date, as provided by the Collateral Advisor, on which any Collateral Debt Security became a Credit Risk Security, a Defaulted Security, an Equity Security, a Written Down Security or a Withholding Tax Security, (C) the date by which the Issuer or the Collateral Advisor is required to declare its intention to sell or to hold such Collateral Debt Security, (D) whether the Collateral Advisor has directed the Issuer to sell or not to sell such Collateral Debt Security, and (E) the date by which any such sale must occur;

(18)

the identity of each Collateral Debt Security that was upgraded or downgraded or placed on watch for upgrade or downgrade by any Rating Agency since the date of the last Note Valuation Report; 135

Processed and formatted by SEC Watch - Visit SECWatch.com

(19)

the Principal Balance and identity of each Collateral Debt Security that was released for sale indicating the reason for such sale and the amount and identity of each Collateral Debt Security that was granted since the date of the last Note Valuation Report;

(20)

the identity and Principal Balance of each Collateral Debt Security that was a Credit Risk Security, a Defaulted Security, an Equity Security, a Written Down Security, a Withholding Tax Security or a Deferred Interest PIK Bond;

(21)

the purchase price of each Pledged Security granted and the sale price of each Pledged Security subject to a sale since the date of the last Note Valuation Report; and whether such Pledged Security is a Collateral Debt Security, an Eligible Investment or proceeds in the Collection Account;

(22)

the amount of Purchased Accrued Interest;

(23)

a description of any transactions with the Collateral Advisor, the Issuer, the Collateral Administrator and the Trustee and any Affiliates thereof;

(24)

the Class A Note Break-Even Default Rate, the Class B Note Break-Even Default Rate, the Class C Note Break-Even Default Rate, the Class D Note Break-Even Default Rate, the Class E Note Break-Even Default Rate and the Class F Note Break-Even Default Rate;

(25)

the Class A Note Default Differential, the Class B Note Default Differential, the Class C Note Default Differential, the Class D Note Default Differential, the Class E Note Default Differential and the Class F Note Default Differential; and

(26)

the Class A Note Scenario Default Rate, the Class B Note Scenario Default Rate, the Class C Note Scenario Default Rate, the Class D Note Scenario Default Rate, the Class E Note Scenario Default Rate and the Class F Note Scenario Default Rate.

Upon receipt of each Note Valuation Report, the Trustee and the Collateral Advisor shall compare the information contained therein to the information contained in their respective records with respect to the Collateral and shall, within two (2) Business Days after receipt of such Note Valuation Report, notify each of the Issuer, the Initial Hedge Counterparty, the Collateral Advisor, the Trustee, Fitch and S&P if the information contained in the Note Valuation Report does not conform to the information maintained by the Trustee or the Collateral Advisor as applicable, with respect to the Collateral, and detail any discrepancies. In the event that any discrepancy exists, the Trustee and the Issuer, or the Collateral Advisor shall attempt to promptly resolve the discrepancy. If such discrepancy cannot be promptly resolved, the Trustee shall within five (5) Business Days after discovery of such discrepancy cause the Independent Accountants of recognized international reputation to review such Note Valuation Report and the Trustee’s and the Collateral Advisor’s records to determine the cause of such discrepancy. If such review reveals an error in the Note Valuation Report or the records of the Trustee or the Collateral Advisor, as the case may be, such item shall be revised accordingly and, as so revised, shall be utilized in making further calculations. Subject to the terms of this Agreement, the Trustee shall be entitled to rely on the information supplied by the Collateral Advisor in relation to the preparation of the Note Valuation Report and shall not be liable for the accuracy or completeness of such information or the lack thereof 136

In addition to the foregoing information, each Note Valuation Report shall include a statement to the following effect: “The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act), or under any state securities laws, and the Co-Issuers have not been and will not be registered under the United States Investment Company Act of 1940, as amended (the 1940 Act). Each Holder of the Notes, other than those Holders that are not “U.S. persons” (U.S. Person) within the meaning of Regulation S (Regulation S) under the Securities Act and have acquired their Notes outside the United States pursuant to Regulation S, is required to be both (i) (A) with respect to any Rated Note, a “qualified institutional buyer” as defined in Rule 144A under the Securities Act (Qualified Institutional Buyer), (B) solely with respect to the Class E Notes and the Class F Notes, either (1) an “accredited investor” as defined in paragraphs (1), (2), (3) or (7) of Rule 501(A) under the Securities Act (each an Institutional Accredited Investor) or (2) any of NS CDO Holdings V, LLC, NS Advisors, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(A) under the Securities Act (each of the foregoing, a Permitted NS Purchaser) or (C) solely with respect to the Income Notes, a Permitted NS Purchaser and a “qualified purchaser” (Qualified Purchaser) within the meaning of Section 3(c)(7) of the 1940 Act, purchasing for its own account or for the account of another Qualified Purchaser, that can make all of the representations in the Indenture applicable to a holder that is a U.S. Person. The beneficial interest in the Notes may be transferred only to a transferee that meets both of the criteria in clauses (i) and (ii) above and can make all of the representations in the Indenture applicable to a Holder that is a U.S. Person, except that any such transfer in reliance on Regulation S can be made only to a transferee that is not a U.S. Person. The Issuer has the right to compel any Holder that does not meet the qualifications and the transfer restrictions set forth in the Indenture to sell its interest in the Notes, or may sell such interest on behalf of such owner, pursuant to the Indenture.” (b)

Redemption Date Instructions. Not less than five (5) Business Days after receiving an Issuer Request requesting

Processed and formatted by SEC Watch - Visit SECWatch.com

information regarding a redemption pursuant to Section 9.1 of the Rated Notes of a Class as of a proposed Redemption Date set forth in such Issuer Request, the Trustee shall provide the necessary information (to the extent it is available to the Trustee) to the Issuer, and the Issuer shall compute the following information and provide such information in a statement (the Redemption Date Statement) delivered to the Trustee:

(c)

(1)

the Aggregate Outstanding Amount of the Rated Notes of the Class or Classes to be redeemed as of such Redemption Date;

(2)

the amount of accrued interest due on such Rated Notes as of the last day of the Interest Period immediately preceding such Redemption Date; and

(3)

the amount in the Collection Account available for application to the redemption of such Rated Notes.

If the Trustee shall not have received any accounting provided for in this Section 10.10 on the first Business Day after the date on which such accounting is due to the Trustee, the Trustee shall use reasonable efforts to cause such accounting to be made by the applicable Payment Date or Redemption Date. To the extent the Trustee is required to provide any information or reports pursuant to this Section 10.10 as a result of the failure of the Issuer to provide such information or reports, the Trustee shall be entitled to retain an Independent certified public accountant in connection therewith and the reasonable 137

Processed and formatted by SEC Watch - Visit SECWatch.com

costs incurred by the Trustee for such Independent certified public accountant shall be reimbursed pursuant to Section 6.8. The Trustee will make the Note Valuation Report available via its internet website initially located at www.cdotrustee.net. All information made available on the Trustee’s website will be restricted and the Trustee will only provide access to such reports to those parties entitled thereto pursuant to the Indenture. In connection with providing access to its website, the Trustee may require registration and the acceptance of a disclaimer. 10.11.

10.12.

RELEASE OF SECURITIES (a)

If no Event of Default has occurred and is continuing and subject to Section 12, the Issuer shall, in connection with any sale required pursuant to Section 12.1, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the settlement date for any sale of a security certifying that the conditions set forth in Section 12.1 are satisfied, direct the Trustee to release such security from the lien of this Indenture against receipt of payment therefor.

(b)

The Issuer shall, if notified that the issuer of the Pledged Security requires delivery of such Pledged Security as a condition to redemption or payment in full, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the date set for redemption or payment in full of a Pledged Security, certifying that such security is being redeemed or paid in full, direct the Trustee or, at the Trustee’s instructions, the Custodian, to deliver such security, if in physical form, duly endorsed, or, if such security is a Clearing Corporation Security, to cause it to be presented, to the appropriate paying agent therefor on or before the date set for redemption or payment, in each case against receipt of the redemption price or payment in full thereof.

(c)

The Trustee shall deposit any proceeds received by it from the disposition of a Pledged Security in the appropriate CPP SubAccount.

(d)

The Trustee shall, upon receipt of an Issuer Order at such time as there are no Rated Notes Outstanding and all obligations of the Co-Issuers hereunder have been satisfied, release the Collateral from the lien of this Indenture.

(e)

The Issuer may retain agents (including the Collateral Advisor) to assist the Issuer in preparing any notice or other report required under Section 10.11 and this Section 10.12.

REPORTS BY INDEPENDENT ACCOUNTANTS (a)

At the Closing Date the Issuer (or the Collateral Advisor on its behalf) shall appoint a firm of Independent certified public accountants of recognized national reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Indenture. Upon any resignation by such firm, the Issuer shall (after consultation with the Collateral Advisor) propose a replacement firm meeting the criteria set forth in the preceding sentence for approval by a Majority of the Controlling Class. Upon approval by a Majority of the Controlling Class, the Issuer shall promptly appoint such firm by Issuer Order delivered to the Trustee, the Initial Hedge Counterparty, the Collateral Advisor and each Rating Agency. If the Issuer shall fail to appoint a successor to a firm of Independent certified public accountants which has resigned within 30 days 138

Processed and formatted by SEC Watch - Visit SECWatch.com

after such resignation, the Issuer shall promptly notify the Trustee of such failure in writing. The fees of such Independent certified public accountants and its successor shall be payable by the Issuer as provided in Section 11.1.

10.13.

(b)

On or before September 15 of each year (commencing with September 15, 2006), the Issuer shall cause to be delivered to the Trustee, the Income Note Paying Agent and each Rating Agency an Accountants’ Report specifying the procedures applied and their associated findings with respect to the Note Valuation Reports and any Redemption Date Statements prepared in the preceding year. At least 60 days prior to the Payment Date in September 2006 (and, if at any time a successor firm of Independent certified public accountants is appointed, prior to the Payment Date in August following the date of such appointment), the Issuer shall deliver to the Trustee an Accountant’s Report specifying in advance the procedures that such firm will apply in making the aforementioned findings throughout the term of its service as accountants to the Issuer. The Trustee shall promptly forward a copy of such Accountant’s Report to the Initial Hedge Counterparty, the Rating Agencies, the Income Note Paying Agent and each Holder of Class A Notes (or, if no Class A Notes are Outstanding, each Holder of Class B Notes or, if no Class B Notes are Outstanding, each Holder of Class C Notes or, if no Class C Notes are Outstanding, each Holder of Class D Notes or, if no Class D Notes are Outstanding, each Holder of Class E Notes or, if no Class E Notes are Outstanding, each Holder of Class F Notes), at the address shown on the Note Register. The Issuer shall not approve the institution of such procedures if a Majority of the Controlling Class or the Collateral Advisor, by notice to the Issuer and the Trustee within 30 days after the date of the related notice to the Trustee, object thereto.

(c)

Any statement delivered to the Trustee pursuant to Section 10.12(b) above shall be made available by the Trustee to any Holder of a Rated Note shown on the Note Register upon written request therefor.

REPORTS TO RATING AGENCIES

In addition to the information and reports specifically required to be provided to the Rating Agencies, the Income Note Paying Agent, the Holders of Rated Notes of the Controlling Class, and the Initial Hedge Counterparty pursuant to the terms of this Indenture, the Income Note Paying Agency Agreement or the Hedge Agreement (as the case may be), the Issuer shall provide or procure to provide the Rating Agencies and the Initial Hedge Counterparty with (a) all information or reports delivered to the Trustee hereunder and (b) such additional information as the Rating Agencies, the Income Note Paying Agent or the Initial Hedge Counterparty may from time to time reasonably request and such information may be obtained and provided without unreasonable burden or expense. The Issuer shall promptly notify the Trustee, the Income Note Paying Agent and the Initial Hedge Counterparty if the rating of any Class of Rated Notes has been, or it is known by the Issuer that such rating will be, changed or withdrawn. The Issuer shall notify each Rating Agency in the case of (i) termination or amendment of any Transaction Document or organizational document of the Issuer or Co-Issuer, (ii) termination or change of party to any of the Transaction Documents or (iii) material breach of any of the Transaction Documents by any party thereto. From time to time Fitch may request information or reports from the Collateral Advisor on the properties underlying the Collateral, including, without limitation, information on underwritten cash flow and occupancy. 139

Processed and formatted by SEC Watch - Visit SECWatch.com

10.14.

TAX MATTERS

The Issuer and the Co-Issuer agree to treat, and hereby notify the Trustee to treat, and, by accepting a Rated Note, each Holder of the Rated Notes agrees to treat, the Rated Notes, for U.S. federal, state and local income tax purposes, as indebtedness of the Issuer (and not as obligations of the Co-Issuer), to report all income (or loss) in accordance with such treatment and not to take any action inconsistent with such treatment except as otherwise required by any taxing authority under applicable law. The Issuer agrees not to elect to be treated as other than a corporation for U.S. federal income tax purposes. 10.15.

TAX INFORMATION

The Issuer will furnish to any Holder of Rule 144A Definitive Notes (or its designee), Rule 144A Global Notes (or its designees), Definitive Class E Notes (or its designees) and Definitive Class F Notes (or its designee), upon the request of any such Holder, the necessary information, and will permit such Holder reasonable access to its books of account, in order to allow such Holder to make a “qualifying electing fund” election pursuant to Section 1295 of the Code. The Issuer shall provide on a timely basis to any holder of a beneficial interest in Rule 144A Definitive Notes (or its designee), Rule 144A Global Notes (or its designee), Definitive Class E Notes (or its designee) and Definitive Class F Notes (or its designee), upon written request therefor certifying that it is such a holder, (i) all information that a U.S. shareholder making a “qualified electing fund” election (as defined in the Code) is required to obtain for U.S. federal income tax purposes and (ii) a “PFIC Annual Information Statement” as described in Treasury Regulation 1.1295-1 (or any successor Internal Revenue Service release or Treasury Regulation), including all representations and statements required by such statement, and will take any other steps necessary to facilitate such election by a holder of a beneficial interest in any Rule 144A Definitive Notes, Rule 144A Global Notes, Definitive Class E Notes and Definitive Class F Notes. The Issuer shall also provide, upon request of a Holder of, or a holder of a beneficial interest in, any Rule 144A Definitive Notes, Rule 144A Global Notes, Definitive Class E Notes and Definitive Class F Notes, any information that such Holder or holder of a beneficial interest reasonably requests to assist such Holder or holder of a beneficial interest with regard to any filing requirements the Holder or holder of a beneficial interest may have as a result of the controlled foreign corporation rules under the Code. The cost and expense of the preparation and delivery of the PFIC Annual Information Statement shall be at the expense of the Issuer. ARTICLE XI APPLICATION OF MONIES 11.1.

DISBURSEMENTS OF FUNDS FROM PAYMENT ACCOUNT; PRIORITY OF PAYMENTS (a)

Collateral Interest Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Rated Notes in connection with an Event of Default, in accordance with a Note Valuation Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Interest Collections, to the extent of Available Funds in the Collection Account, will be applied by the Trustee in the following order of priority: (1)

to pay, in the following order: 140

Processed and formatted by SEC Watch - Visit SECWatch.com

(i)

taxes and filing fees and registration fees (including, without limitation, annual return fees) payable by the Co-Issuers, if any; and then,

(ii)

pro rata the amount of any due and unpaid Trustee Fee and Income Note Paying Agent Fee; and then,

(iii)

the amount of any due and unpaid fees to the Administrator; and then,

(iv)

the amount of any due and unpaid Trustee Expenses; and then,

(v)

the amount of any due and unpaid fees and expenses of the Rating Agencies; and then,

(vi)

the amount of any due and unpaid expenses of the Administrator and any due and unpaid Administrative Expenses not included in (iii), (iv) and (v) above, including amounts payable to the Collateral Advisor under the Collateral Advisory Agreement but excluding the Collateral Advisory Fee; and then,

(vii)

to deposit to the Expense Reserve Account the amount needed to bring the amount on deposit therein to U.S.$25,000 (unless the Collateral Advisor directs that a lesser amount be deposited to the Expense Reserve Account);

provided that the cumulative amount paid under (iii) through (vii) above (excluding any Administrative Expenses due or accrued with respect to the actions taken on or prior to the Closing Date and accounting fees that the Trustee is required to pay (other than certain accountants’ fees related to annual reviews) and fees the Trustee pays in connection with any Event of Default and any default of the Collateral Debt Securities) may not exceed U.S.$250,000 in the aggregate in any consecutive 12-month period; (2)

to pay the Senior Collateral Advisory Fee with respect to such Payment Date and any Senior Collateral Advisory Fee with respect to a previous Payment Date that was not paid on a previous Payment Date;

(3)

to pay any Hedge Counterparty, any amounts due to such Hedge Counterparty under any Hedge Agreement, pro rata, including any termination payments other than any termination payments payable under Section 11.1(a)(22) below;

(4)

to pay Periodic Interest on the Class A-1 Notes and any Defaulted Interest;

(5)

to pay Periodic Interest on the Class A-2 Notes and any Defaulted Interest;

(6)

to pay Periodic Interest on the Class B Notes and any Defaulted Interest;

(7)

if either of the Class A/B Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal of the most senior Class of Notes then Outstanding until such Class A/B Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such 141

Processed and formatted by SEC Watch - Visit SECWatch.com

Class A/B Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class A/B Coverage Test is satisfied or until the Class B Notes are paid in full; provided that for purposes of determining if the Class A/B Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(7), the denominator of the Class A/B Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to any of the clauses above and pursuant to this Section 11.1(a)(7) on the related Payment Date; (8)

to pay an amount equal to the Interest Reserve Amount for deposit into the Interest Reserve Account;

(9)

if a Ratings Confirmation Failure occurs, on each Payment Date commencing with the Payment Date immediately following the Effective Date, to pay principal on the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes, in that order, in the amounts necessary for each Rating Agency to confirm its respective ratings of the Notes assigned on the Closing Date or until each Class of Notes is paid in full;

(10)

to pay Periodic Interest on the Class C Notes and, if no Class A Notes and no Class B Notes are Outstanding, any Defaulted Interest on the Class C Notes;

(11)

if either of the Class C Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount) of the most senior Class of Notes then Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class C Coverage Test is satisfied or until the Class C Notes, are paid in full; provided that for purposes of determining if the Class C Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(11), the denominator of the Class C Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes pursuant to any of the clauses above and pursuant to this Section 11.1(a)(11) on the related Payment Date; provided, further, that with respect to the Class C Notes, payment of principal not constituting Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(12)

to pay the Class C Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(13)

to pay Periodic Interest on the Class D Notes and, if no Class A Notes, no Class B Notes and no Class C Notes are Outstanding, any Defaulted Interest on the Class D Notes;

(14)

if either of the Class D Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class C Cumulative Applicable 142

Processed and formatted by SEC Watch - Visit SECWatch.com

Periodic Interest Shortfall Amount or Class D Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class D Coverage Test is satisfied or until the Class D Notes are paid in full; provided that for purposes of determining if the Class D Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(14), the denominator of the Class D Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes pursuant to any of the clauses above and pursuant to this Section 11.1(a)(14) on the related Payment Date; provided, further, that with respect to (i) the Class C Notes, payment of principal not constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (ii) the Class D Notes, payment of principal not constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any; (15)

to pay the Class D Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(16)

to pay Periodic Interest on the Class E Notes and, if no Class A Notes, no Class B Notes, no Class C Notes and no Class D Notes are Outstanding, any Defaulted Interest on the Class E Notes;

(17)

if either of the Class E Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount or Class E Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class E Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class E Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class E Coverage Test is satisfied or until the Class E Notes are paid in full; provided that for purposes of determining if the Class E Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(17), the denominator of the Class E Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes pursuant to any of the clauses above and pursuant to this Section 11.1(a)(17) on the related Payment Date; provided, further, that with respect to (i) the Class C Notes, payment of principal not constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any; (ii) the Class D Notes, payment of principal not constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any; and 143

Processed and formatted by SEC Watch - Visit SECWatch.com

(iii) the Class E Notes, payment of principal not constituting the Class E Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class E Cumulative Applicable Periodic Interest Shortfall Amount, if any; (18)

to pay the Class E Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(19)

to pay Periodic Interest on the Class F Notes and, if no Class A Notes, no Class B Notes, no Class C Notes, no Class D Notes and no Class E Notes are Outstanding, any Defaulted Interest on the Class F Notes;

(20)

if either of the Class F Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Periodic Interest Shortfall Amount or Class F Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class F Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class F Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class F Coverage Test is satisfied or until the Class F Notes are paid in full; provided that for purposes of determining if the Class F Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(20), the denominator of the Class F Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes pursuant to any of the clauses above and pursuant to this Section 11.1(a)(20) on the related Payment Date; provided, further, that with respect to (i) the Class C Notes, payment of principal not constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any; (ii) the Class D Notes, payment of principal not constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any; (iii) the Class E Notes, payment of principal not constituting the Class E Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class E Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (iv) the Class F Notes, payment of principal not constituting the Class F Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class F Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(21)

to pay the Class F Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(22)

to pay termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, pro rata, if such termination occurred solely as the result of an event of default or a termination event with 144

Processed and formatted by SEC Watch - Visit SECWatch.com

respect to any Hedge Counterparty as Defaulting Party or sole Affected Party, as the case may be; (23)

(b)

to pay, in the following order: (i)

any due and unpaid Trustee Fee, Trustee Expenses and any due Income Note Paying Agent Fee and unpaid Administrative Expenses, including amounts payable to the Collateral Advisor under the Collateral Advisory Agreement but excluding the Collateral Advisory Fee, in each case, in the same order of priority as provided in Section 11.1(a)(1) above and to the extent not paid in full under Section 11.1(a)(1) above without regard to any limitation on any maximum amounts payable on such date contained therein; and

(ii)

on a pro rata basis, any due and unpaid expenses and other liabilities of the Co-Issuers to the extent not paid under clause (1) above, whether as a result of an amount limitation imposed thereunder or otherwise;

(24)

to pay the Subordinate Collateral Advisory Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Advisory Fee with respect to a previous Payment Date that was not paid on a previous Payment Date;

(25)

after the Payment Date occurring in September 2017, to pay from remaining Collateral Interest Collections on any Payment Date the principal on the Class F Notes, until paid in full, then the principal on the Class E Notes, until paid in full, then the principal on the Class D Notes, until paid in full, then the principal of the Class C Notes, until paid in full, then the principal on the Class B Notes, until paid in full, then the principal on the Class A-2 Notes, until paid in full, and then the principal on the Class A-1 Notes until paid in full; and

(26)

all Income Note Excess Funds to the Income Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Income Note Paying Agency Agreement.

Collateral Principal Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Rated Notes in connection with an Event of Default, in accordance with a Note Valuation Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Principal Collections, to the extent of Available Funds in the Collection Account, will be applied by the Trustee in the following order of priority: (1)

to the payment of the amounts referred to in Section 11.1(a)(1) through (6), in the same order of priority specified therein, but only to the extent not paid in full thereunder;

(2)

if either of the Class A/B Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(7) are insufficient to cause the Class A/B Coverage Tests to be satisfied, to pay principal of the most senior Class of Notes then Outstanding until such Class A/B Coverage Test is satisfied as of such Calculation Date or 145

Processed and formatted by SEC Watch - Visit SECWatch.com

until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class A/B Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class A/B Coverage Test is satisfied or until the Class B Notes are paid in full; provided that for purposes of determining if the Class A/B Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(2), the denominator of the Class A/B Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to any clause or subclause of Section 11.1(a) on the related Payment Date and pursuant to Section 11.1(b)(1) above and this clause (2); provided, further, that the numerator of the Class A/B Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections applied pursuant to any of the clauses above and pursuant to this Section 11.1(b)(2) on the related Payment Date; (3)

If the Class A Notes and the Class B Notes are no longer Outstanding, to pay Periodic Interest on the Class C Notes and any Defaulted Interest on the Class C Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(10) are insufficient to pay such amounts in full thereunder;

(4)

if either of the Class C Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(11) are insufficient to cause the Class C Coverage Tests to be satisfied, to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount) of the most senior Class of Notes then Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class C Coverage Test is satisfied or until the Class C Notes are paid in full; provided that for purposes of determining if the Class C Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(4), the denominator of the Class C Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes made pursuant to any clause or subclause of Section 11.1(a) on the related Payment Date and pursuant to any clause above and this Section 11.1(b)(4); provided, further, that for purposes of determining if the Class C Principal Coverage Test is satisfied, the numerator of the Class C Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections to be applied pursuant to any clause above and this Section 11.1(b)(4) on the related Payment Date; and provided, further, that with respect to the Class C Notes, payment of principal not constituting Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(5)

If the Class A Notes and the Class B Notes are no longer Outstanding, to pay the Class C Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that the amounts paid pursuant to Section 11.1(a)(12) are insufficient to pay such amounts in full thereunder; 146

(6)

If the Class A Notes, the Class B Notes and the Class C Notes are no longer Outstanding, to pay Periodic Interest on the Class D Notes and any Defaulted Interest on the Class D Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(13) are insufficient to pay such amounts in full thereunder;

(7)

If either of the Class D Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that amounts paid pursuant to Section 11.1(a)(14) are insufficient to cause the Class D Coverage Tests to be satisfied, to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount or Class D Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class D Coverage Test is satisfied or until the Class D Notes are paid in full; provided that for purposes of determining if the Class D Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(7), the denominator of the Class D Principal Coverage Ratio shall be determined after giving effect to any payment of principal on the Notes made pursuant to any clause or subclause of Section 11.1(a) on the related Payment Date and pursuant to any clause or subclause above and this Section 11.1(b)(7); provided, further, that for purposes of determining if the Class D Principal Coverage Test is satisfied, the numerator of the Class D Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections to be applied pursuant to any clause or subclause above and this Section 11.1(b)(7) on the related Payment Date; and provided, further, that with respect to (i) the Class C Notes, payment of principal not constituting Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (ii) the Class D Notes, payment of principal not constituting Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(8)

if the Class A Notes, the Class B Notes, and the Class C Notes are no longer Outstanding, to pay the Class D Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that amounts paid pursuant to

Processed and formatted by SEC Watch - Visit SECWatch.com

Section 11.1(a)(15) are insufficient to pay such amounts in full thereunder; (9)

If the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes are no longer Outstanding, to pay Periodic Interest on the Class E Notes and any Defaulted Interest on the Class E Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(16) are insufficient to pay such amounts in full thereunder;

(10)

If either of the Class E Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that amounts paid pursuant to Section 11.1(a)(17) are insufficient to cause the Class E Coverage Tests to be satisfied, to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount or Class E Cumulative Applicable Period Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until 147

Processed and formatted by SEC Watch - Visit SECWatch.com

such Class E Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class E Coverage Test is satisfied or until the Class E Notes are paid in full; provided that for purposes of determining if the Class E Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(10), the denominator of the Class E Principal Coverage Ratio shall be determined after giving effect to any payment of principal on the Notes made pursuant to any clause or subclause of Section 11.1(a) on the related Payment Date and pursuant to any clause or subclause above and this Section 11.1(b)(10); provided, further, that for purposes of determining if the Class D Principal Coverage Test is satisfied, the numerator of the Class E Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections to be applied pursuant to any clause or subclause above and this Section 11.1(b)(10) on the related Payment Date; and provided, further, that with respect to (i) the Class C Notes, payment of principal not constituting Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any; (ii) the Class D Notes, payment of principal not constituting Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (iii) the Class E Notes, payment of principal not constituting Class E Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class E Cumulative Applicable Periodic Interest Shortfall Amount, if any; (11)

if the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes are no longer Outstanding, to pay the Class E Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that amounts paid pursuant to Section 11.1(a)(18) are insufficient to pay such amounts in full thereunder;

(12)

If the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes are no longer Outstanding, to pay Periodic Interest on the Class F Notes and any Defaulted Interest on the Class F Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(19) are insufficient to pay such amounts in full thereunder;

(13)

If either of the Class F Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that amounts paid pursuant to Section 11.1(a)(20) are insufficient to cause the Class F Coverage Tests to be satisfied, to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Period Interest Shortfall Amount or Class F Cumulative Applicable Period Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class F Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class F Coverage Test is satisfied or until the Class F Notes are paid in full; provided that for purposes of determining if the Class F Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(13), the denominator of the Class F Principal Coverage Ratio shall be determined after giving effect to any payment of principal on the Notes made pursuant to any clause or subclause of 148

Processed and formatted by SEC Watch - Visit SECWatch.com

Section 11.1(a) on the related Payment Date and pursuant to any clause or subclause above and this Section 11.1(b)(13); provided, further, that for purposes of determining if the Class F Principal Coverage Test is satisfied, the numerator of the Class F Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections to be applied pursuant to any clause or subclause above and this Section 11.1(b)(13) on the related Payment Date; and provided, further, that with respect to (i) the Class C Notes, payment of principal not constituting Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any; (ii) the Class D Notes, payment of principal not constituting Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any; (iii) the Class E Notes, payment of principal not constituting Class E Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class E Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (iv) the Class F Notes, payment of principal not constituting Class F Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class F Cumulative Applicable Periodic Interest Shortfall Amount, if any; (14)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes are no longer Outstanding, to pay the Class F Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that amounts paid pursuant to Section 11.1(a)(21) are insufficient to pay such amounts in full thereunder;

(15)

to pay, in the following order: (i)

on each Payment Date through and including the last Payment Date during the Reinvestment Period, to pay to the Collection Account: (A)

to the extent the accumulated Collateral Principal Payments for a CPP Asset Type have not reached an aggregate amount that is equal to or greater than the Reinvestment Threshold Amount, (x) if the Issuer, acting through the Collateral Advisor, delivers notice that the Cash Release Conditions are satisfied with respect to such Collateral Principal Payments for such CPP Asset Type, then to apply all such Collateral Principal Payments in accordance with subclause (iii) below or (y) in the absence of such notice, then to hold such amounts for further accumulation and eventual reinvestment or application hereunder on a later Payment Date; and

(B)

to the extent the accumulated Collateral Principal Payments for a CPP Asset Type have reached an aggregate amount that is equal to or greater than the Reinvestment Threshold Amount with respect to such CPP Asset Type; 1)

during the Sixty-Day Reinvestment Window applicable to such Collateral Principal Payments for such CPP 149

Processed and formatted by SEC Watch - Visit SECWatch.com

Asset Type, to remain available in the applicable CPP Sub-Account for application to the purchase of one or more Substitute Collateral Debt Securities in an aggregate amount equal to the lesser of (x) the amount of such Collateral Principal Payments and (y) the amount of such funds available in the Collection Account; or 2)

(ii)

(iii)

after the Sixty-Day Reinvestment Window applicable to such Collateral Principal Payments for such CPP Asset Type, then to apply any remaining amount of such Collateral Principal Payments in accordance with subclause (iii) below;

on each Payment Date through and including the last Payment Date during the Three-Year Period, with respect to the Sale Proceeds received in respect of any Credit Risk Security, Defaulted Security, Equity Security, Withholding Tax Security or Written Down Security, to pay to the Collection Account, (A)

during the Sixty-Day Reinvestment Window applicable to such Sale Proceeds, to remain available for application to the purchase of one or more Substitute Collateral Debt Securities, an aggregate amount equal to the lesser of (x) such Sale Proceeds and (y) the amount of such funds available in the Collection Account, or

(B)

after the Sixty-Day Reinvestment Window applicable to such Sale Proceeds, to apply any remaining amount of such Sale Proceeds in accordance with subclause (iii) below;

(A) on each Payment Date through and including the last Payment Date during the Reinvestment Period, to pay each Class of Rated Notes in full, pro rata, if the Special Amortization Pro Rata Condition is satisfied; and (B)

otherwise, (1) if the Special Amortization Pro Rata Condition is not satisfied or (2) with respect to Collateral Principal Collections consisting of Unreinvested Sale Proceeds (regardless of whether the Special Amortization Pro Rata Condition is satisfied), to pay: 1)

first to the Class A-1 Notes, until the Class A-1 Notes have been paid in full;

2)

second, to the Class A-2 Notes, until the Class A-2 Notes have been paid in full;

3)

third, to the Class B Notes, until the Class B Notes have been paid in full; 150

Processed and formatted by SEC Watch - Visit SECWatch.com

(16)

4)

fourth, to the Class C Notes, until the Class C Notes have been paid in full;

5)

fifth, to the Class D Notes, until the Class D Notes have been paid in full;

6)

sixth, to the Class E Notes, until the Class E Notes have been paid in full; and

7)

seventh, to the Class F Notes, until the Class F Notes have been paid in full;

after the end of the Reinvestment Period, to pay each Class of Rated Notes: (i)

first, to the Class A-1 Notes, until the Class A-1 Notes have been paid in full;

(ii)

second, to the Class A-2 Notes, until the Class A-2 Notes have been paid in full;

(iii)

third, to the Class B Notes, until the Class B Notes have been paid in full;

(iv)

fourth, to the Class C Notes, until the Class C Notes have been paid in full;

(v)

fifth, to the Class D Notes, until the Class D Notes have been paid in full;

(vi)

sixth, to the Class E Notes, until the Class E Notes have been paid in full; and

(vii)

seventh, to the Class F Notes, until the Class F Notes have been paid in full;

(17)

to pay termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, pro rata, if such termination occurred solely as the result of an event of default or a termination event with respect to any Hedge Counterparty as Defaulting Party or sole Affected Party, as the case may be, to the extent that the amounts paid pursuant to Section 11.1(a)(22) are insufficient to pay such amounts in full thereunder;

(18)

to pay, in the following order: (i)

any due and unpaid Trustee Fee, Trustee Expenses, and any due Income Note Paying Agent Fee and any other unpaid Administrative Expenses, including amounts payable to the Collateral Advisor under the Collateral Advisory Agreement but excluding the Collateral Advisory Fee, in each case, in the same order of priority as provided in Section 11.1(b)(1) above and to the extent not paid in full under clause (1) above and to the 151

Processed and formatted by SEC Watch - Visit SECWatch.com

extent that the amounts paid pursuant to Section 11.1(a)(1) and (23) are insufficient to pay such amounts in full thereunder; and (ii)

(c)

on a pro rata basis, any due and unpaid expenses and other liabilities of the Co-Issuers to the extent not paid under Section 11.1(b)(1) above and to the extent that the amounts paid pursuant to Section 11.1(a)(1) and (23) are insufficient to pay such amounts in full thereunder, whether as a result of an amount limitation imposed thereunder or otherwise;

(19)

to pay the Subordinate Collateral Advisory Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Advisory Fee with respect to a previous Payment Date that was not paid on a previous Payment Date, to the extent that the amounts paid pursuant to Section 11.1(a)(24) are insufficient to pay such amounts in full thereunder; and

(20)

all Income Note Excess Funds to the Income Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Income Note Paying Agency Agreement.

If an Event of Default has occurred and is continuing, on the date or dates determined by the Trustee, the Trustee will pay, from all collections from, and proceeds of the sale or liquidation of, the Collateral, in the following order: (1)

amounts corresponding to the amounts set forth in clauses Section 11.1(a)(1) through (3), and (to the extent not covered by Section 11.1(a)(1) through (3)) Section 11.1(b)(1);

(2)

the Periodic Interest on the Class A-1 Notes (including Defaulted Interest on such Class A-1 Notes, if any);

(3)

outstanding principal on the Class A-1 Notes until paid in full;

(4)

the Periodic Interest on the Class A-2 Notes (including Defaulted Interest on such Class A-2 Notes, if any);

(5)

outstanding principal on the Class A-2 Notes until paid in full;

(6)

the Periodic Interest on the Class B Notes (including Defaulted Interest on the Class B Notes, if any) and then outstanding principal on the Class B Notes until paid in full;

(7)

the Periodic Interest on the Class C Notes (including Defaulted Interest on the Class C Notes, if any) and then outstanding principal on the Class C Notes (including Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(8)

the Periodic Interest on the Class D Notes (including Defaulted Interest on the Class D Notes, if any) and then outstanding principal on the Class D Notes (including Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full; 152

Processed and formatted by SEC Watch - Visit SECWatch.com

(9)

the Periodic Interest on the Class E Notes (including Defaulted Interest on the Class E Notes, if any) and then outstanding principal on the Class E Notes (including Class E Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(10)

the Periodic Interest on the Class F Notes (including Defaulted Interest on the Class F Notes, if any) and then outstanding principal on the Class F Notes (including Class F Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(11)

amounts corresponding to the amounts set forth in Section 11.1(a)(22) through (24), and Section 11.1(b)(17) through (19); and

(12)

to the Income Note Paying Agent, any remaining amounts for distributions on the Income Notes as set forth in Section 11.1(a)(26) and Section 11.1(b)(20).

(d)

Not later than 12:00 p.m., New York time, on or before the Business Day preceding each Payment Date, the Issuer shall, pursuant to Section 10, remit or cause to be remitted to the Trustee for deposit in the Payment Account an amount of Cash sufficient to pay the amounts described in Section 11.1(a) and 11.1(b) required to be paid on such Payment Date.

(e)

If, on any Payment Date, the amount available in the Payment Account from amounts received in the related Due Period is insufficient to make the full amount of the disbursements required by the statements furnished by the Issuer pursuant to Section 10.11(b), the Trustee shall make the disbursements called for in the order and according to the priority set forth under Section 11.1(a) and 11.1(b), subject to Section 13.1, to the extent funds are available therefor.

(f)

Except as otherwise expressly provided in this Section 11.1, if on any Payment Date the amount of funds is insufficient to make the full amount of the disbursements required by any clause or subclause of Section 11.1(a) or 11.1(b) to different Persons, the Trustee shall make the disbursements called for by such clause or subclause ratably in accordance with the respective amounts of such disbursements then due and payable to the extent funds are available therefor.

(g)

With respect to principal payments of the Class C Notes in connection with a mandatory redemption pursuant to Section 11.1(a)(7), (11), (14), (17) or (20) and pursuant to Section 11.1(b)(2), (4), (7), (10) or (13), payment of principal not constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any.

(h)

Any amounts to be paid to the Income Note Paying Agent pursuant to Section 11.1(a)(26) or to Section 11.1(b)(20) will be released from the lien of this Indenture.

(i)

No Collateral Principal Collections will be paid to a Class of Rated Notes in accordance with the Priority of Payments on a Payment Date if, after giving effect to such payment, any Principal Coverage Test for a more Senior Class of Rated Notes would have failed. 153

ARTICLE XII PURCHASE AND SALE OF COLLATERAL DEBT SECURITIES 12.1.

SALE OF COLLATERAL DEBT SECURITIES (a)

Sale of Collateral Debt Securities. (1)

Subject to the satisfaction of the conditions specified in Section 10.11 as applicable, if the Collateral Advisor, on behalf of the Issuer, pursuant to this Article 12, shall direct the Trustee to sell any Temporary Ramp-Up Security, Defaulted Security, Equity Security, Credit Risk Security, Written Down Security or Withholding Tax Security, the Trustee shall sell in the manner directed by the Collateral Advisor, any Temporary Ramp-Up Security, Defaulted Security, Equity Security, Credit Risk Security, Written Down Security or Withholding Tax Security.

(2)

During the Ramp-Up Period, and in any event, no later than the Effective Date, the Collateral Advisor shall direct the Issuer to sell or otherwise dispose of all Temporary Ramp-Up Securities. Sale Proceeds received with respect to Temporary Ramp-Up Securities shall be reinvested only in Ramp-Up Collateral Debt Securities that are Fixed Rate Collateral Debt Securities, provided that any Sale Proceeds received with respect to Temporary Ramp-Up Securities that are not reinvested in Fixed Rate Collateral Debt Securities, other than not more than U.S.$500,000 of such Sale Proceeds that may be reinvested in Substitute Collateral Debt Securities that are not Fixed Rate Collateral Debt Securities, shall be treated as Collateral Principal Collections and shall be applied by the Issuer to the making of payments on the Notes, subject to and in accordance with the Priority of Payments, on the Payment Date immediately following the Effective Date.

Processed and formatted by SEC Watch - Visit SECWatch.com

(3)

The Collateral Advisor shall direct the Issuer to sell or otherwise dispose of any Collateral Debt Security that is an Equity Security as soon as practicable after such Collateral Debt Security becomes an Equity Security. The Collateral Advisor may direct the Issuer to sell or otherwise dispose of all or a portion of any Collateral Debt Security that is a Defaulted Security, a Written Down Security or a Withholding Tax Security; provided that the Collateral Advisor shall have (i) certified that such Collateral Debt Security is a Defaulted Security, a Written Down Security or a Withholding Tax Security and (ii) declared within five (5) Business Days following such Collateral Debt Security becoming a Defaulted Security, a Written Down Security or a Withholding Tax Security whether it has elected to direct the Issuer to sell or otherwise dispose of all or a specified portion of such Collateral Debt Security. No such sale or other disposition is permitted for the primary purpose of recognizing gains or decreasing losses resulting from market value changes, or if the Issuer or the Collateral Advisor believes that any such sale or other disposition would result, and no such sale or disposition does result, in the reduction or withdrawal of the then-current rating on any Class of Rated Notes by any Rating Agency. If the Collateral Advisor elects to direct the Issuer to sell or otherwise dispose of any Defaulted Security, Written Down Security or Withholding Tax Security as described above, such Collateral Debt Security (or specified portion thereof) is 154

Processed and formatted by SEC Watch - Visit SECWatch.com

required to be sold or otherwise disposed of within twelve (12) months following such election. If the Collateral Advisor does not elect within such five (5) Business Days to direct the Issuer to sell or otherwise dispose of any Defaulted Security, Written Down Security or Withholding Tax Security, such Collateral Debt Security shall not be sold or otherwise disposed of and shall remain part of the Collateral. Any decision by the Collateral Advisor to sell or not to sell any Collateral Debt Security within five (5) Business Days of such Collateral Debt Security first becoming either a Defaulted Security or a Written Down Security or a Withholding Tax Security shall not thereafter be changed by the Collateral Advisor or the Issuer for any reason.

(b)

(4)

The Collateral Advisor may direct the Issuer to sell or otherwise dispose of all or any portion of any Collateral Debt Security that is a Credit Risk Security; provided that the Collateral Advisor shall have (i) certified that a Credit Risk Event has occurred and (ii) declared within five (5) Business Days following the occurrence of any such Credit Risk Event that it has elected to direct the Issuer to sell or otherwise dispose of all or a portion of such Collateral Debt Security. No such sale or other disposition is permitted for the primary purpose of recognizing gains or decreasing losses resulting from market value changes, or if the Issuer or the Collateral Advisor believes that any such sale or other disposition would result, and no such sale or disposition does result, in the reduction or withdrawal of the then-current rating on any Class of Rated Notes by any Rating Agency. If the Collateral Advisor elects to direct the Issuer to sell or otherwise dispose of any Credit Risk Security as described above, such Collateral Debt Security is required to be sold or otherwise disposed of as soon as reasonably practicable and in any event within 30 days following such election. If the Collateral Advisor does not elect within such five (5) Business Days following any Credit Risk Event to direct the Issuer to sell or otherwise dispose of any Collateral Debt Security, such Credit Risk Security shall not be sold or otherwise disposed of and shall remain part of the Collateral, unless a subsequent Credit Risk Event occurs with respect to such Collateral Debt Security (or such Collateral Debt Security subsequently becomes a Defaulted Security, Written Down Security or Withholding Tax Security) and the Collateral Advisor shall have made the certifications and declarations described above.

(5)

In the event of a Redemption, the Collateral Advisor shall direct the Trustee to sell Collateral Debt Securities without regard to the foregoing limitations; provided that the Sale Proceeds therefrom and other amounts available therefor will be at least sufficient to pay certain expenses, including all amounts due under any Hedge Agreements, and redeem, in whole but not in part, the Notes at the applicable Redemption Prices; and provided, further, that such Sale Proceeds are used to make such a Redemption.

(6)

The Collateral Advisor shall sell any Collateral Debt Security pursuant to this Section 12 only at a price that, in its judgment, is not substantially less than the market value of such Collateral Debt Security at the time of such sale.

Reinvestment of Sale Proceeds and Replacement of Collateral Debt Securities. Following the Closing Date and during (i) the Ramp-Up Period, subject to the Ramp-Up Criteria, and (ii) the Three-Year Period, and subject to the satisfaction of the Eligibility Criteria and the Replacement Criteria in all cases during the periods set forth in (i) and 155

Processed and formatted by SEC Watch - Visit SECWatch.com

(ii) above, the Collateral Advisor, acting on behalf of the Issuer shall be required, on a best efforts basis, to instruct the Trustee, within the Sixty-Day Reinvestment Window, to reinvest Sale Proceeds received at any time from the sale of Collateral Debt Securities that are Defaulted Securities, Equity Securities, Credit Risk Securities, Written Down Securities or Withholding Tax Securities in Substitute Collateral Debt Securities with an aggregate purchase price up to the amount of the Sale Proceeds; provided, however, that prior to any such acquisition of Substitute Collateral Debt Securities by or on behalf of the Issuer in the manner described above, the following conditions are satisfied on the date of such acquisition: (1)

the cumulative amount reinvested in Substitute Collateral Debt Securities with Sale Proceeds received in the manner specified above does not exceed the Five Percent Limit;

(2)

any such acquisition is not for the primary purpose of recognizing gains or decreasing losses resulting from market value changes;

(3)

neither the Issuer nor the Collateral Advisor believes that any such acquisition will result, and no such acquisition does result, in a reduction or withdrawal of the then-current rating on any Class of Rated Notes by any Rating Agency;

(4)

the rating by any Rating Agency on (A) the Class A Notes is one or more notches below the rating assigned to the Class A Notes by such Rating Agency on the Closing Date; or (B) any other Class of Rated Notes is two or more notches below the rating assigned to such Class of Rated Notes by such Rating Agency on the Closing Date; and

(5)

the Replacement Criteria are satisfied;

In addition, on each date of purchase of a Substitute Collateral Debt Security, each of the Coverage Tests and the Collateral Quality Tests will be required to remain satisfied after giving effect to the purchase of such Substitute Collateral Debt Security (which date of purchase shall be deemed to be the date on which the Issuer enters into commitments to purchase such Substitute Collateral Debt Security), or, if immediately prior to giving effect to such purchase any of the foregoing tests was not satisfied, no such tests that were not satisfied shall be made worse after giving effect to such proposed purchase and no such Coverage Tests or Collateral Quality Tests that were satisfied shall fail to be satisfied after giving effect to such purchase. If all such Sale Proceeds related to the sale of any Defaulted Securities, Equity Securities, Credit Risk Securities, Written Down Securities or Withholding Tax Securities are not reinvested in Substitute Collateral Debt Securities as described above for any reason within the Sixty Day Reinvestment Window, the Issuer will be obligated to reinvest such Sale Proceeds in Eligible Investments until the next succeeding Payment Date, at which time the Trustee on behalf of the Issuer will distribute such Sale Proceeds in accordance with Section 11.1 of this Indenture. (c)

Collateral Debt Security Principal Payments and Reinvestment Criteria. Prior to the end of the Reinvestment Period, the Issuer will use its best efforts to reinvest the Collateral Principal Payments in the applicable CPP Sub-Account which were in such CPP Sub-Account at the time the Reinvestment Threshold Amount was satisfied for any 156

Processed and formatted by SEC Watch - Visit SECWatch.com

particular CPP Asset Type in accordance with the Reinvestment Criteria during the Sixty-Day Reinvestment Window following any date on which the amount of Collateral Principal Payments in such CPP Sub-Account becomes equal to or greater than the Reinvestment Threshold Amount. To the extent accumulated Collateral Principal Payments for any CPP Asset Type that are on deposit with the Trustee and as to which the Reinvestment Trigger Date has not occurred are below the Reinvestment Threshold Amount, within five (5) Business Days subsequent to receipt of any Collateral Principal Payment for such CPP Asset Type, in the event the Collateral Advisor on behalf of the Issuer determines that any reinvestment in Substitute Collateral Debt Securities of the same CPP Asset Type (i) would not at such time be practicable on commercially reasonably terms or (ii) would decrease compliance with any of the Coverage Tests or the Collateral Quality Tests of the portfolio of the Collateral Debt Securities ((i) and (ii) collectively, the Cash Release Conditions), the Issuer will have the right to elect that all (but not less than all) of such Collateral Principal Payments not be accumulated for reinvestment in Substitute Collateral Debt Securities and instead be reinvested in Eligible Investments until the next succeeding Payment Date, whereupon the Issuer will distribute such Collateral Principal Payments in accordance with the Priority of Payments. Where the Cash Release Conditions are not satisfied, such Collateral Principal Payments will be held in the applicable CPP Sub- Account corresponding to such CPP Asset Type until the Reinvestment Threshold Amount for the applicable CPP Asset Type is satisfied, and prior to such time will not be distributed. If accumulated Collateral Principal Payments exceed the Reinvestment Threshold Amount for a CPP Asset Type, the Collateral Advisor will be required to use its best efforts to direct the Issuer to reinvest, within 60 calendar days of the Reinvestment Trigger Date, such Collateral Principal Payments in Substitute Collateral Debt Securities (which shall in all cases satisfy the Eligibility Criteria) in accordance with the Reinvestment Criteria; provided, however, that Collateral Principal Payments comprised of Collateral Principal Collections from Substitute Collateral Debt Securities may not be invested further in Substitute Collateral Debt Securities and must instead be reinvested in Eligible Investments until the next succeeding Payment Date, whereupon the Issuer will distribute such Collateral Principal Payments as Collateral Principal Collections in accordance with Section 11.1 hereof; and provided, further, that (i) Collateral Principal Payments may not be reinvested in any Substitute Collateral Debt Securities to the extent that on any date the cumulative amount of proceeds from Collateral Principal Payments that have been reinvested through such date would exceed an amount equal to 35% of the CDS Principal Balance as of the Effective Date, in which case the Issuer will distribute such excess of Collateral Principal Payments (and any subsequent Collateral Principal Payments) in accordance with Section 11.1(b), and (ii) a reinvestment of any Collateral Principal Payment in any Substitute Collateral Debt Security is only permitted to occur on any date if (A) any such acquisition is not for the primary purpose of recognizing gains or decreasing losses resulting from market value changes and (B) neither the Issuer nor the Collateral Advisor believes that any such acquisition will result, and no such acquisition does result, in a reduction or withdrawal of the then-current rating on any Class of Rated Notes by any Rating Agency. Unless otherwise notified by the Collateral Advisor, the Trustee will be entitled to act on the basis that no such acquisition will result in a reduction or withdrawal of the then-current rating on any Class of Rated Note by any Rating Agency. 157

Processed and formatted by SEC Watch - Visit SECWatch.com

In addition, on each date of purchase of a Substitute Collateral Debt Security, each of the Coverage Tests and the Collateral Quality Tests will be required to remain satisfied after giving effect to the purchase of such Substitute Collateral Debt Security (which date of purchase shall be deemed to be the date on which the Issuer enters into commitments to purchase such Substitute Collateral Debt Security), or if immediately prior to giving effect to such purchase any of the foregoing tests was not satisfied, no such tests that were not satisfied shall be made worse after giving effect to such proposed purchase and no such Coverage Tests or Collateral Quality Tests that were satisfied shall fail to be satisfied after giving effect to such purchase. If all Collateral Principal Payments for which the Reinvestment Trigger Date has occurred are not reinvested in Substitute Collateral Debt Securities as described above for any reason within the Sixty-Day Reinvestment Window, then such Collateral Principal Payments will be required to be reinvested in Eligible Investments until the Business Day immediately preceding the next succeeding Payment Date, whereupon the Issuer will be required to transfer such amounts to the Payment Account (which amounts will at such time become fungible with all other amounts contained in the Payment Account) and distribute such amounts in accordance with Section 11.1(b). In the event of an Optional Redemption, Auction Call Redemption or Tax Redemption of the Notes in whole, but not in part, the Collateral Advisor will direct the Trustee to sell Collateral Debt Securities without regard to the foregoing limitations; provided that such sales are conducted in accordance with the Auction Procedures and Section 9.2. 12.2.

PORTFOLIO CHARACTERISTICS

Except as provided in Section 12.3(c), a security will be eligible for inclusion in the Collateral as a Pledged Collateral Debt Security only if, as evidenced by an Officer’s certificate from the Collateral Advisor to the Trustee, each of the following eligibility criteria is satisfied immediately after the Issuer Grants such Collateral Debt Security to the Trustee (collectively, the Eligibility Criteria): (a)

it is issued by an issuer incorporated or organized under the laws of the United States, the Bahamas, Bermuda, the Cayman Islands, the British Virgin Islands, the Netherlands Antilles, Jersey, Guernsey or Luxembourg or, it is issued by a Qualifying Foreign Obligor;

(b)

it is U.S. Dollar-denominated, and it is not convertible into, or payable in, any other currency;

(c)

it is one of the Specified Types of Collateral Debt Securities;

(d)

it has an S&P Rating (which rating does not include a “p”, “pi”, “q”, “t” or “r” subscript) and a Fitch Rating;

(e)

the acquisition, ownership, enforcement and disposition of such security will not cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or otherwise to be subject to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation (other than as attributable to property received in connection with a foreclosure, as permitted under the Transaction Documents); 158

Processed and formatted by SEC Watch - Visit SECWatch.com

(f)

the payments on such security are not subject to withholding tax unless the issuer thereof or the obligor thereon is required to make additional payments sufficient to cover any withholding tax imposed at any time on payments made to the Issuer with respect thereto;

(g)

its acquisition would not cause the Issuer or the pool of Collateral to be required to register as an investment company under the Investment Company Act;

(h)

it is not a security that is ineligible under its Underlying Instruments to be purchased by the Issuer and pledged to the Trustee;

(i)

it is not an insurance-linked debt instrument containing a provision pursuant to which the issuer’s obligation to pay interest or principal is deferred or forgiven in the event of loss due to certain natural catastrophes specified in the Underlying Instruments;

(j)

it provides for the payment of principal at not less than par upon maturity;

(k)

its Underlying Instruments do not obligate the Issuer to make any future advances or any other payment except the purchase price thereof;

(1)

it is not a security with respect to which, in the reasonable judgment of the Collateral Advisor, the timely repayment of principal and interest is subject to substantial non-credit related risks;

(m)

it is not an Interest Only Security;

(n)

it is not a security issued by an Emerging Market Issuer;

(o)

it is not a security that has an S&P Rating lower than “B-” or a Fitch Rating lower than “B-” at the time of purchase;

(p)

it is not a security that has, at the time of purchase, any deferred or capitalized interest;

(q)

it is not a security that, at the time it is purchased, is a Credit Risk Security, a Defaulted Security, a Written Down Security or a Deferred Interest PIK Bond;

(r)

it is not a Synthetic Security;

(s)

it is not a Real Estate Interest with a loan-to-value ratio of greater than 85% on the underlying collateral; provided that, if such Real Estate Interest is a Mezzanine Loan, it will have a Rating of at least “B-”(or its equivalent) from a Rating Agency; provided further that all such Mezzanine Loans with a Rating of less than “BB-” (or its equivalent) from a Rating Agency will not exceed 5% of the CDS Principal Balance;

(t)

it is not a REIT Debt Security that has an S&P Rating lower than “BB-” or a Fitch Rating lower than “BB-” at the time of purchase;

(u)

it is not a Real Estate CDO Security that has an S&P Rating lower than “BB-” or a Fitch Rating lower than “BB-” at the time of purchase;

(v)

it is not a CMBS Credit Tenant Lease Security that has an S&P Rating lower than “BB-” or a Fitch Rating lower than “BB-” at the time of purchase; 159

Processed and formatted by SEC Watch - Visit SECWatch.com

(w)

at the time the security is purchased by the Issuer: (1)

it is not a security issued by an issuer located in a country that imposes foreign exchange controls that effectively limit the availability or use of U.S. Dollars to make when due the scheduled payments of principal and interest on such security;

(2)

it is not, and does not provide for conversion or exchange into, Margin Stock at any time over its life;

(3)

it is not an obligation which (1) was incurred in connection with a merger, acquisition, consolidation or sale of all or substantially all of the assets of a person or entity or similar transaction and (2) by its terms is required to be repaid within one year of the incurrence thereof with proceeds from additional borrowings or other refinancing;

(4)

it is not the subject of (1) any offer by the issuer of such security or by any other person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related underlying instruments) or to convert or exchange such security into or for cash, securities or any other type of consideration or (2) any solicitation by an issuer of such security or any other person to amend, modify or waive any provision of such security or any related underlying instrument, and has not been called for redemption;

(5)

it is not an Equity Security;

(6)

it is not a security that by the terms of its underlying instruments provides for conversion or exchange (whether mandatory or at the option of the issuer or the holder thereof) into equity capital at any time prior to its maturity;

(7)

it is not a financing by a debtor-in-possession in any insolvency proceeding;

(8)

it is not a first loss tranche of any securitization that does not have an S&P Rating (as defined in clause (i) of the definition of S&P Rating) that addresses the obligation of the obligor (or guarantor, if applicable) to pay principal of and interest on the relevant Collateral Debt Security in full, which ratings are monitored on an ongoing basis by the relevant Rating Agency;

(9)

it is not a security that provides for the payment of interest in cash less frequently than semi-annually;

(10)

if it is a Mezzanine Loan, (a) the Mezzanine Loan is subject to servicing, custodial and/or similar arrangements customary for Mezzanine Loans as determined by the Collateral Advisor in its reasonable discretion, (b) the requirements set forth in the Indenture regarding the representations and warranties with respect to the underlying mortgaged property and the Mezzanine Loan have been met and the terms of the Underlying Instruments are consistent with the terms of similar Underlying Instruments with respect to Mezzanine Loans as determined by the Collateral Advisor in its reasonable discretion; and 160

Processed and formatted by SEC Watch - Visit SECWatch.com

(11)

(x)

if it is a Deemed Floating Rate Collateral Debt Security, the Deemed Floating Asset Hedge entered into with respect to such Deemed Floating Rate Collateral Debt Security conforms to all requirements set forth in the definition of “Deemed Floating Asset Hedge”; and

it is not a Prohibited Asset;

provided that notwithstanding anything to the contrary herein, the Issuer may, while attempting to dispose of property acquired in foreclosure or similar circumstances, make an election under Section 882(d) of the Code to treat the income related to real property located in the United States as income that is effectively connected with a U.S. trade or business; provided further that except for property acquired by the Issuer in foreclosure or similar circumstances and for property expressly permitted to be acquired by the Issuer, the Issuer may not purchase, acquire or hold (whether as part of a unit with a Collateral Debt Security, in exchange for a Collateral Debt Security or otherwise) any asset unless the underlying documents for such asset specify, or the Issuer has received advice of tax counsel of nationally recognized standing in the United States experienced in such matters to the effect that, under the relevant facts and circumstances with respect to such transaction, for U.S. federal income tax purposes, (i) the obligation or security is indebtedness, (ii) all obligors and issuers of asset are classified as corporations (and no elections have been made to the contrary), (iii) no obligor on or issuer of the asset is engaged in the conduct of a trade or business within the United States, or (iv) all obligors and issuers of the asset qualify as “grantor trusts”, and all of the assets of the obligors and issuers of the asset consist of obligations or securities that the Issuer could have directly acquired and held as assets (but for restrictions related to withholding taxes) and, notwithstanding anything to the contrary herein, the Issuer shall not purchase, acquire or hold any asset the gain from the disposition of which will be subject to U.S. federal income or withholding tax under Section 897 or Section 1445 of the Code and the Treasury regulations promulgated thereunder. 12.3.

CONDITIONS APPLICABLE TO ALL TRANSACTIONS INVOLVING SALE OR GRANT (a)

Any transaction effected under Section 5, Section 9, Section 10.2 or Section 12.1 shall be conducted on an arms’ length basis and if effected with the Issuer, the Trustee, the Collateral Advisor or any Affiliate of any of the foregoing, shall be effected in a secondary market transaction on terms at least as favorable to the Rated Noteholders as would be the case if such Person were not so Affiliated; provided that any disposition of a Collateral Debt Security in accordance with Section 12.1 shall be deemed to comply with this Section 12.3(a). The Trustee shall have no responsibility to oversee compliance with this clause by the other parties.

(b)

Upon any purchase or substitution pursuant to this Section 12, all of the Issuer’s right, title and interest to the Pledged Security or Securities shall be, and hereby is, Granted to the Trustee pursuant to this Indenture, such Pledged Security or Securities shall be registered in the name of the Trustee, and, if applicable, the Trustee shall receive such Pledged Security or Securities. The Trustee shall receive, not later than the date of delivery of any Pledged Security pursuant to a purchase under this Section 12, (a) an Officer’s Certificate of the Collateral Advisor certifying (1) compliance with the Reinvestment Criteria in accordance with Section 12.1(d), (2) that the Collateral Debt Security to be sold constitutes an Equity Security, a Defaulted Security, a Credit Risk Security, a Withholding Tax Security or a Written Down Security and (3) that any security to be purchased satisfies the definition of Collateral Debt Security and (b) an Officer’s Certificate of the Collateral Advisor on behalf of the Issuer containing the statements set forth in Section 3.2(b)(2) through (4), (6) and (7). 161

(c)

Notwithstanding anything contained in this Section 12 to the contrary, the Issuer shall, subject to Section 12.3(d), have the right to effect any transaction to which the Initial Hedge Counterparty and Holders of Rated Notes evidencing 100% of the Aggregate Outstanding Amount of each Class of Rated Notes, and each Income Noteholder has consented, and of which each Rating Agency has been notified in advance.

(d)

Except as specifically provided in this Indenture, in no event may the Issuer (i) engage in any business or activity that would cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or (ii) acquire or hold any asset that is an equity interest in an entity that is treated as a partnership engaged in a U.S. trade or business for U.S. federal income tax purposes or the acquisition or ownership of which otherwise would subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation. The foregoing shall not, however, preclude the Issuer from holding Equity Securities or securities received in an Offer pending their sale in accordance with Section 12.1(a)(1). ARTICLE XIII SECURED PARTIES’ RELATIONS

13.1.

SUBORDINATION (a)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Rated Notes agree for the benefit of the Initial Hedge Counterparty that the Rated Notes and the Issuer’s rights in and to the Collateral (solely with respect to all amounts payable to such Initial Hedge Counterparty pursuant to Section 11.1(a)(3)), the Subordinate Interests) shall be subordinate and junior to the rights of such Hedge Counterparty with respect to payments to be made to such Initial Hedge Counterparty pursuant to the initial Hedge Agreement to the extent and in the manner set

Processed and formatted by SEC Watch - Visit SECWatch.com

forth in Section 11.1(a)(3) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived all amounts payable to the Initial Hedge Counterparty pursuant to Section 11.1(a)(3) shall be paid in Cash or, to the extent the Initial Hedge Counterparty consents, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. (b)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes agree for the benefit of the Holders of the Class A-1 Notes that the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A-1 Notes, the Subordinate Interests) shall be subordinate and junior to the Class A-1 Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A-1 Notes shall be paid in full in Cash or, to the extent a Majority of the Class A-1 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A-1 Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer 162

Processed and formatted by SEC Watch - Visit SECWatch.com

for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A-1 Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (c)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes agree for the benefit of the Holders of the Class A Notes that the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(d)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes agree for the benefit of the Holders of the Class A Notes and the Class B Notes that the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes and the Class B Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes and the Class B Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A Notes and the Class B Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes and the Class B Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes and the Class B Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes and the Class B Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(e)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class D Notes, the Class E Notes and the Class F Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes and the Class C Notes 163

Processed and formatted by SEC Watch - Visit SECWatch.com

that the Class D Notes, the Class E Notes and the Class F Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes and the Class C Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes and the Class C Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes and the Class C Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, the Class B Notes and the Class C Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes and the Class C Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes and the Class C Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (f)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class E Notes and the Class F Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes that the Class E Notes and the Class F Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes shall be paid in full in Cash or, to the extent a Majority of each of Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(g)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class F Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes that the Class F Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes to the extent and in the manner set forth in this Indenture including as set forth in 164

Processed and formatted by SEC Watch - Visit SECWatch.com

Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes shall be paid in full in Cash or, to the extent a Majority of each of Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (h)

In the event that notwithstanding the provisions of this Indenture, any Holder of any Subordinate Interests shall have received any payment or distribution in respect of such Subordinate Interests contrary to the provisions of this Indenture, then, unless and until all amounts payable to the Initial Hedge Counterparty pursuant to Section 11.1(a)(3) or to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes or the Class F Notes as the case may be, shall have been paid in full in Cash or, to the extent the Initial Hedge Counterparty or a Majority of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes or the Class F Notes, as the case may be, consent, other than in Cash in accordance with this Indenture, such payment or distribution shall be received and held in trust for the benefit of, and shall forthwith be paid over and delivered to, the Trustee, which shall pay and deliver the same to such Initial Hedge Counterparty or the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes or the Class F Notes, as the case may be, in accordance with this Indenture; provided that, if any such payment or distribution is made other than in Cash, it shall be held by the Trustee as part of the Collateral and subject in all respects to the provisions of this Indenture, including this Section 13.1.

(i)

Each Holder of Subordinate Interests agrees with the Initial Hedge Counterparty and all Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes or the Class F Notes, as the case may be, that such Holder of Subordinate Interests shall not demand, accept, or receive any payment or distribution in respect of such Subordinate Interests in violation of the provisions of this Indenture including this Section 13.1; provided that after all amounts payable pursuant to Section 11.1(a)(3) and all amounts payable in respect of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes or the Class F Notes, as the case may be, have been paid in full, the Holders of Subordinate Interests shall be fully subrogated to the rights of the Initial Hedge Counterparty or the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes or the Class F Notes, as the case may be. Nothing in this Section 13.1 shall affect the obligation of the Issuer to pay Holders of Subordinate Interests. 165

Processed and formatted by SEC Watch - Visit SECWatch.com

13.2.

STANDARD OF CONDUCT

In exercising any of its or their voting rights, rights to direct and consent or any other rights as a Secured Party under this Indenture, subject to the terms and conditions of this Indenture, including Section 5.9, a Secured Party or Secured Parties shall not have any obligation or duty to any Person or to consider or take into account the interests of any Person and shall not be liable to any Person for any action taken by it or them or at its or their direction or any failure by it or them to act or to direct that an action be taken, without regard to whether such action or inaction benefits or adversely affects any Secured Party, the Issuer, or any other Person. ARTICLE XIV MISCELLANEOUS 14.1.

FORM OF DOCUMENTS DELIVERED TO TRUSTEE

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Advisor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Authorized Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Advisor or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer, the Co-Issuer, the Collateral Advisor or any other Person, stating that the information with respect to such factual matters is in the possession of the Issuer, the Co-Issuer, the Collateral Advisor or such other Person, unless such Authorized Officer of the Issuer, the Co-Issuer or the Collateral Advisor or such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Any Opinion of Counsel may also be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Advisor, stating that the information with respect to such matters is in the possession of the Issuer, the Co-Issuer or the Collateral Advisor, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture it is provided that the absence of the occurrence and continuation of a Default is a condition precedent to the taking of any action by the Trustee at the request or direction of the Issuer or the Co-Issuer, then notwithstanding that the satisfaction of such condition is a condition precedent to the Co-Issuers’ rights to make such request or direction, the Trustee shall be protected in acting in accordance with such request or direction if it does not have actual knowledge of the occurrence and continuation of such Default as provided in Section 6.1(d). 166

Processed and formatted by SEC Watch - Visit SECWatch.com

14.2.

14.3.

ACTS OF RATED NOTEHOLDERS (a)

Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Rated Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Rated Noteholders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action or actions embodied therein and evidenced thereby) are herein sometimes referred to as the Act of the Rated Noteholders, signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Co-Issuers, if made in the manner provided in this Section 14.2.

(b)

The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Trustee deems sufficient.

(c)

The principal amount and registered numbers of Rated Notes held by any Person, and the date of his holding the same, shall be proved by the Note Register.

(d)

Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Rated Notes shall bind the Holder (and any transferee thereof) of such Rated Note and of every Rated Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Co-Issuers in reliance thereon, whether or not notation of such action is made upon such Rated Note.

NOTICES, ETC., TO TRUSTEE, THE CO-ISSUERS AND THE RATING AGENCIES

Any request, demand, authorization, direction, notice, consent, waiver or Act of Rated Noteholders or other documents provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a)

the Trustee or the Income Note Paying Agent by any Rated Noteholder or by the Issuer or the Co-Issuer shall be sufficient for every purpose hereunder if in writing and sent by facsimile in legible form and confirmed by overnight courier service guaranteed next day delivery to the Trustee or the Income Note Paying Agent addressed to it at 135 South LaSalle Street, Suite 1511, Chicago, Illinois 60603, Attention: CDO Trust Services Group – N-Star Real Estate CDO V Ltd., telephone number 312-904-7815, fax number 312-904-0524 or at any other address previously furnished in writing to the Co-Issuers or Rated Noteholder by the Trustee or Income Note Paying Agent;

(b)

the Issuer by the Trustee or by any Rated Noteholder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, to the Issuer addressed to it at c/o Walkers SPV Limited, P.O. Box 908 GT, Walker House, Mary Street, George Town, Grand Cayman, Cayman Islands, Attention: The Directors, or at any other address previously furnished in writing to the Trustee by the Issuer; 167

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

the Co-Issuer by the Trustee or by any Rated Noteholder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, to the Co-Issuer addressed to it at c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19711, Attention: Donald Puglisi, Esq., facsimile no. 302-738-7210, or at any other address previously furnished in writing to the Trustee by the Co-Issuer;

(d)

the Rating Agencies by the Co-Issuers or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, (i) in the case of Fitch, addressed to Fitch Ratings, One State Street Plaza, New York, New York 10041, facsimile no. 212-558-2618, Attention: CDO Surveillance (e-mail: [email protected]); and (ii) in the case of S&P, addressed to S&P, 55 Water Street, 41st Floor, New York, New York, 10041, Attention: CDO Surveillance and all Note Valuation Reports shall be sent to S&P electronically at [email protected]; or

(e)

the Initial Hedge Counterparty by the Co-Issuers or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, hand delivered or sent by overnight courier service or by facsimile in legible form to the Initial Hedge Counterparty addressed to it at the address specified in the initial Hedge Agreement or at any other address previously furnished in writing to the Issuer or the Trustee by the Initial Hedge Counterparty;

(f)

the Collateral Advisor by the Co-Issuers or by the Trustee or a Majority of the Controlling Class, or by the Collateral Administrator shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and sent by facsimile in legible form and confirmed by overnight courier service guaranteed next day delivery, or by electronic mail (where expressly provided herein) to the Collateral Advisor addressed to it at the address specified in the Collateral Advisory Agreement or at any other address previously furnished in writing to the Co-Issuers or the Trustee by the Collateral Advisor;

(g)

the Income Note Paying Agent by the Trustee in writing sent by facsimile confirmed by overnight courier guaranteed next day delivery;

(h)

the Placement Agents by the Co-Issuers, the Collateral Advisor or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by telecopy in legible form, (i) to BAS addressed to Banc of America Securities LLC, 214 North Tryon Street, 14th Floor, Charlotte, North Carolina 28255, telecopy no. 704-386-0688, Attention: Global Structured Products and (ii) to Morgan Stanley addressed to Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036, telecopy no. 212-507-4011, Attention: Securitized Products Group; and

(i)

to the Repository by the Issuer pursuant to this Indenture shall be made available to the Repository by electronic mail as a pdf (portable document format) file to CDO Library, c/o The Bond Market Association, 360 Madison Avenue (18th Floor), New York, NY 10017; Electronic mail address: [email protected]. 168

Processed and formatted by SEC Watch - Visit SECWatch.com

Delivery of any request, demand, authorization, direction, notice, consent, waiver or Act of Rated Noteholders or other documents made as provided above will be deemed effective: (i) if in writing and delivered in person or by overnight courier service, on the date it is delivered; (ii) if sent by facsimile transmission, on the date that transmission is received by the recipient in legible form (as evidenced by the sender’s written record of a telephone call to the recipient in which the recipient acknowledged receipt of such facsimile transmission); and (iii) if sent by mail, on the date that mail is delivered or its delivery is attempted; in each case, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Business Day. 14.4.

NOTICES AND REPORTS TO RATED NOTEHOLDERS; WAIVER

Except as otherwise expressly provided herein, where this Indenture provides for a report to Holders or for a notice to Holders of Rated Notes of any event, such notice shall be sufficiently given to Holders of Rated Notes if in writing and mailed, first-class postage prepaid, to each Holder of a Rated Note affected by such event, at the address of such Holder as it appears in the Note Register, not earlier than the earliest date and not later than the latest date, prescribed for the giving of such report or notice and such report or notice shall be in the English language. Notwithstanding any provision to the contrary contained herein or in any agreement or document related hereto, any report, statement or other information to be provided by the Trustee may be provided by providing access to the Trustee’s website containing such information. Such reports and notices will be deemed to have been given on the date of such mailing. The Trustee will deliver to the Holder of any Rated Note shown on the Note Register any readily available information or notice requested to be so delivered, at the expense of the Issuer. In addition, for so long as any Class of Rated Notes is listed on the Irish Stock Exchange and so long as the rules of such exchange so require, notices to the Holders of such Rated Notes shall also be given by the Trustee to the Irish Paying Agent for delivery to the Company Announcements Office of the Irish Stock Exchange. Neither the failure to mail any notice, nor any defect in any notice so mailed, to any particular Holder of a Rated Note shall affect the sufficiency of such notice with respect to other Holders of Rated Notes. Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Rated Noteholders shall be filed with the Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In the event that, by reason of the suspension of the regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Rated Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. 14.5.

EFFECT OF HEADINGS AND TABLE OF CONTENTS The Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 169

Processed and formatted by SEC Watch - Visit SECWatch.com

14.6.

SUCCESSORS AND ASSIGNS

All covenants and agreements in this Indenture by the Co-Issuers shall bind their respective successors and assigns, whether so expressed or not. Written notice of any assignment shall be promptly provided by the Issuer to the Initial Hedge Counterparty, the Holders of Notes of the Controlling Class and each Rating Agency. 14.7.

SEVERABILITY

In case any provision in this Indenture or in the Rated Notes shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 14.8.

BENEFITS OF INDENTURE

The Rated Noteholders, the Initial Hedge Counterparty and each Income Noteholder is an express third-party beneficiary of this Indenture. Nothing in this Indenture or in the Rated Notes, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the Rated Noteholders, the Initial Hedge Counterparty and each Income Noteholder, any benefit or any legal or equitable right, remedy or claim under this Indenture. 14.9.

GOVERNING LAW This Indenture and each Rated Note shall be governed by, and construed in accordance with, the law of the State of New York.

14.10.

SUBMISSION TO JURISDICTION

The Co-Issuers hereby irrevocably submit to the non-exclusive jurisdiction of the Supreme Court of the State of New York sitting in Manhattan and the U.S. District Court for the Southern District of New York, and any court of appeal therefrom, in any action or proceeding arising out of or relating to the Rated Notes or this Indenture, and the Co-Issuers hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in such New York State or federal court. The Co-Issuers hereby irrevocably waive, to the fullest extent that they may legally do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The CoIssuers hereby irrevocably appoint and designate CT Corporation, 111 Eighth Avenue, 13th Floor, New York, New York 10011, or any other Person having and maintaining a place of business in the State of New York whom the Co-Issuers may from time to time hereafter designate as the true and lawful attorney and duly authorized agent for acceptance of service of legal process of the Co-Issuers. The Co-Issuers agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 14.11.

COUNTERPARTS

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 170

Processed and formatted by SEC Watch - Visit SECWatch.com

14.12.

WAIVER OF JURY TRIAL

EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING. Each party hereby (i) certifies that no representative, agent or attorney of the other has represented, expressly or otherwise, that the other would not, in the event of a Proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it has been induced to enter into this Indenture by, among other things, the mutual waivers and certifications in this paragraph. 14.13.

JUDGMENT CURRENCY

This is an international financing transaction in which the specification of Dollars (the Specified Currency), and the specification of the place of payment, as the case may be (the Specified Place), is of the essence, and the Specified Currency shall be the currency of account in all events relating to payments of or on the Rated Notes. The payment obligations of the Co-Issuers under this Indenture and the Rated Notes shall not be discharged by an amount paid in another currency or in another place, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on conversion to the Specified Currency and transfer to the Specified Place under normal banking procedures does not yield the amount of the Specified Currency at the Specified Place. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder or the Rated Notes in the Specified Currency into another currency (the Second Currency), the rate of exchange which shall be applied shall be that at which in accordance with normal banking procedures the Trustee could purchase the Specified Currency with the Second Currency on the Business Day next preceding that on which such judgment is rendered. The obligation of the Co-Issuers in respect of any such sum due from the Co-Issuers hereunder shall, notwithstanding the rate of exchange actually applied in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by the Trustee of any sum adjudged to be due hereunder or under the Rated Notes in the Second Currency the Trustee may in accordance with normal banking procedures purchase and transfer to the Specified Place the Specified Currency with the amount of the Second Currency so adjudged to be due; and the Co-Issuers hereby, as a separate obligation and notwithstanding any such judgment (but subject to the Priority of Payments as if such separate obligation in respect of each Class of Rated Notes constituted additional principal owing in respect of such Class of Rated Notes), agree to indemnify the Trustee and each Rated Noteholder against, and to pay the Trustee or such Rated Noteholder, as the case may be, on demand in the Specified Currency, any difference between the sum originally due to the Trustee or such Rated Noteholder, as the case may be, in the Specified Currency and the amount of the Specified Currency so purchased and transferred. 14.14.

CONFIDENTIAL TREATMENT OF DOCUMENTS

Except as otherwise provided in this Indenture or as required by law or as required to maintain the listing of the Class A Notes, Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes on the Irish Stock Exchange, this Indenture and the Hedge Agreement shall be treated by the Trustee and the Collateral Advisor as confidential. The Trustee shall provide a copy of this Indenture to the Income Note Paying Agent and to any Holder of a beneficial interest in any Rated Note upon written request therefor certifying that it is such a Holder. 171

ARTICLE XV ASSIGNMENT OF AGREEMENTS, ETC. 15.1.

ASSIGNMENT

The Issuer, in furtherance of the covenants of this Indenture and as security for the Rated Notes and amounts payable to the Rated Noteholders hereunder and the performance and observance of the provisions hereof, hereby assigns, transfers, conveys and sets over to the Trustee, for the benefit of the Secured Parties, all of the Issuer’s estate, right, title and interest in, to and under the Corporate Services Agreement, the Collateral Advisory Agreement and the Hedge Agreement, including (i) the right to give all notices, consents and releases thereunder, (ii) the right to give all notices of termination, including the commencement, conduct and consummation of proceedings at law or in equity, (iii) the right to receive all notices, accountings, consents, releases and statements thereunder and (iv) the right to do any and all other things whatsoever that the Issuer is or may be entitled to do thereunder; provided that nothing herein shall obligate the Trustee to determine independently whether “cause” exists for the removal of the Collateral Advisor pursuant to the Collateral Advisory Agreement. For the avoidance of doubt, in no event shall the Trustee be required to perform the obligations of the Collateral Advisor under the Collateral Advisory Agreement. 15.2.

No IMPAIRMENT

The assignment made hereby is executed as collateral security, and the execution and delivery hereby shall not in any way impair or diminish the obligations of the Issuer under the provisions of the Corporate Services Agreement, the Collateral Advisory Agreement or the Hedge Agreement. 15.3.

TERMINATION, ETC. Upon the redemption and cancellation of the Rated Notes and the payment of all other Secured Obligations and the release of the

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral from the lien of this Indenture, this assignment and all rights herein assigned to the Trustee for the benefit of the Secured Parties shall cease and terminate and all the estate, right, title and interest of the Trustee in, to and under the Corporate Services Agreement, the Collateral Advisory Agreement and the Hedge Agreement shall revert to the Issuer and no further instrument or act shall be necessary to evidence such termination and reversion. 15.4.

ISSUER AGREEMENTS, ETC

The Issuer represents that it has not executed any other assignment of the Collateral Administration Agreement, the Collateral Advisory Agreement or any Hedge Agreement. The Issuer agrees that this assignment is irrevocable, and that it will not take any action which is inconsistent with this assignment or make any other assignment inconsistent herewith. The Issuer will, from time to time upon the request of the Trustee, execute all instruments of further assurance and all such supplemental instruments with respect to this assignment as the Trustee may reasonably specify. 172

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE XVI HEDGE AGREEMENT 16.1.

HEDGE AGREEMENT On the Closing Date (or any date on which the Issuer enters into a replacement Hedge Agreement), (i) the Hedge Counterparty entering into such Hedge Agreement shall satisfy the Hedge Counterparty Ratings Requirement and (ii) the Issuer shall assign such Hedge Agreement to the Trustee pursuant to this Indenture and the Collateral Assignment of Hedge Agreement. (a)

The Trustee shall, on behalf of the Issuer and in accordance with the Note Valuation Report, pay amounts due to the Hedge Counterparty under the Hedge Agreement on any Payment Date in accordance with Section 11.1.

(b)

If a Collateralization Event occurs, the Hedge Counterparty shall within 30 days of the occurrence of such Collateralization Event either (i) enter into a Credit Support Annex and post collateral of such types, in such amounts and at such times as are sufficient to maintain the then-current rating of each Class of Rated Notes by each Rating Agency, (ii) find a replacement Hedge Counterparty as permitted under the Hedge Agreement that satisfies the Hedge Counterparty Ratings Requirement, (iii) obtain a guarantor with such form of guarantee meeting S&P’s then-current published criteria with respect to guarantees for the obligations of the Hedge Counterparty under the Hedge Agreement with a long-term issuer credit rating from S&P of at least “A+” or a short term issuer credit rating from S&P of at least “A-1” and with a long-term unsecured debt rating from Fitch of at least “A” and a short-term unsecured debt rating from Fitch of at least “Fl” or (iv) take such other steps as each Rating Agency that has downgraded the Hedge Counterparty may require (as confirmed to the Collateral Advisor in writing) to ensure that the then-current ratings on the Rated Notes by either Rating Agency are not reduced or withdrawn. If the Hedge Counterparty has not, within 30 days of the occurrence of such Collateralization Event, taken any of the actions required above, an additional termination event with respect to which the Hedge Counterparty shall be the sole “affected party” will be deemed to have occurred and the Issuer shall have the right to terminate the Hedge Agreement (with all costs and expenses in connection with any such termination to be paid by the Hedge Counterparty).

(c)

If at any time a Substitution Event has occurred and is continuing, then the Hedge Counterparty will, (x) in the case of a Substitution Event referred to in sub-clause (b) of the definition thereof, within thirty (30) days following such Substitution Event or (y) in the case of a Substitution Event referred to in sub-clause (a) of the definition thereof, within ten (10) Business Days following such Substitution Event, assign its rights and obligations under the Hedge Agreement, at no cost to the Issuer, to a party (the Substitute Party) selected by the Hedge Counterparty that (i) satisfies the Hedge Counterparty Ratings Requirement, (ii) with respect to which a Rating Agency Confirmation has been obtained and (iii) that assumes all of the Hedge Counterparty’s obligations under the Hedge Agreement pursuant to an agreement satisfactory to the Issuer. If the Hedge Counterparty fails to assign its rights and obligations under the Hedge Agreement to a Substitute Party within 30 days following such Substitution Event (in the case of a Substitution Event referred to in sub-clauses (b) of the definition thereof) or within ten (10) Business Days following such Substitution Event (in the case of a Substitution Event referred to in sub-clause (a) of the definition thereof), then (x) the Hedge Counterparty 173

Processed and formatted by SEC Watch - Visit SECWatch.com

shall, while it continues in good faith to search for an eligible Substitute Party, post and maintain, or continue to maintain, as the case may be, collateral in accordance with a Credit Support Annex of such types, in such amounts and at such times as are sufficient to maintain the then-current rating of each Class of Rated Notes by each Rating Agency, and (y) the Issuer shall have the right to terminate the Hedge Agreement with all costs of such termination to be paid by the Hedge Counterparty. (d)

The Issuer may, after the Closing Date, enter into additional Hedge Agreements (including one or more Deemed Floating Asset Hedges) with additional Hedge Counterparties as the Issuer may elect in its sole discretion, in each case (i) subject to Rating Agency Confirmation, (ii) in the event a proposed additional Hedge Agreement has an initial notional amount which exceeds U.S.$25,000,000, with the prior consent of Bank of America, N.A. (so long as it continues to act as the Initial Hedge Counterparty), and (iii) in the case of additional Hedge Counterparties, with the delivery to the Issuer of an Opinion of Counsel to the additional Hedge Counterparty; provided that the Issuer will not be required to obtain Rating Agency Confirmation in connection with entering into any Deemed Floating Asset Hedges which are Form-Approved Hedge Agreements with a Hedge Counterparty that satisfies the Hedge Counterparty Ratings Requirement.

(e)

The Trustee shall, prior to the Closing Date in respect of the initial Hedge Agreement, cause the Custodian to establish a segregated, non-interest bearing Securities Account which shall be designated as a “Hedge Counterparty Collateral Account” with respect to the Hedge Counterparty in respect of which the Trustee shall be the Entitlement Holder and which the Trustee shall hold in trust for the benefit of the Secured Parties. The Trustee shall deposit all collateral received from such Hedge Counterparty under the Hedge Agreement in such Hedge Counterparty Collateral Account. Any and all funds at any time on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be held in trust by the Trustee for the benefit of the Secured Parties. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be (i) for application to obligations of the Hedge Counterparty to the Issuer under the Hedge Agreement that are not paid when due (whether when scheduled or upon early termination) or (ii) to return collateral to the Hedge Counterparty when and as required by the Hedge Agreement in each case upon the direction of the Issuer pursuant to an Issuer Order. No assets credited to any Hedge Counterparty Collateral Account shall be considered an asset of the Issuer for purposes of any of the Coverage Tests unless and until the Issuer or the Trustee on its behalf is entitled to foreclose on such assets in accordance with the terms of the Hedge Agreement.

(f)

Upon its receipt of notice that the Hedge Counterparty has defaulted in the payment when due of its obligations to the Issuer under any Hedge Agreement (or, if earlier, when the Trustee becomes aware of such default) the Trustee shall make a demand on such Hedge Counterparty, or any guarantor, if applicable, demanding payment forthwith. The Trustee shall give notice to the Rated Noteholders and each Rating Agency upon the continuance of the failure by such Hedge Counterparty to perform its obligations for two Business Days following a demand made by the Trustee on such Hedge Counterparty.

(g)

If at any time the Hedge Agreement becomes subject to early termination due to the occurrence of an “event of default” or a “termination event” (each as defined in the Hedge Agreement) solely attributable to the Hedge Counterparty or other comparable event, the Issuer and the Trustee shall take such actions (following the expiration of any applicable 174

Processed and formatted by SEC Watch - Visit SECWatch.com

grace period) to enforce the rights of the Issuer and the Trustee thereunder and under the Collateral Assignment of Hedge Agreement as may be permitted by the terms of such Hedge Agreement and consistent with the terms hereof, and shall apply any proceeds of any such actions (including the proceeds of the liquidation of any collateral pledged by the Hedge Counterparty) to enter into a replacement Hedge Agreement on substantially identical terms or on such other terms as to which each Rating Agency shall have provided a Rating Agency Confirmation with a Substitute Party with respect to which the Hedge Counterparty Ratings Requirement is satisfied and each Rating Agency shall have provided a Rating Agency Confirmation. If the Issuer is the sole non-Affected Party or the sole non-Defaulting Party with respect to such “event of default” or “termination event”, the Issuer will (with the assistance of the Collateral Advisor) obtain quotations with respect to such replacement Hedge Agreement from five prospective counterparties Independent from the Issuer, the Collateral Advisor and each other that satisfy the Hedge Counterparty Ratings Requirement and with respect to which a Rating Agency Confirmation shall have been obtained and enter into a replacement Hedge Agreement with the prospective counterparty that provides the lowest quotation (if the Issuer is required to make a payment to such replacement counterparty) or the highest quotation (if such replacement counterparty is required to make a payment to the Issuer). (h)

The Issuer shall notify each Rating Agency if at any time the Hedge Counterparty is required to post collateral or assign its rights and obligations in and under the Hedge Agreement.

(i)

The Hedge Agreement may not be amended or modified at any time other than to effect the appointment of a substitute Hedge Counterparty or to effect a modification which is of a formal, minor or technical nature or is to correct a manifest error and which, in the opinion of the Trustee (based upon an Opinion of Counsel) would not have a material adverse effect on the interests of Holders of the Rated Notes or of Holders of any Class or Classes of Rated Notes or the Holders of the Income Notes; provided that the Issuer has obtained Rating Agency Confirmation with respect to any such modification. The Trustee shall provide the Collateral Advisor and the Rating Agencies with a copy of any such modification within 10 Business Days before effecting such modification.

(j)

The Issuer shall enter into a Hedge Agreement only if the payments from the Hedge Counterparty thereunder are not subject to withholding tax or if the Hedge Counterparty shall be required in accordance with the terms of the Hedge Agreement to pay additional amounts to the Issuer sufficient to cover any withholding tax due on payments made by the Hedge Counterparty to the Issuer under such Hedge Agreement, subject to the Issuer making customary payee tax representations and providing customary tax documentation. The Issuer shall not enter into any Hedge Agreement the acquisition (including the manner of acquisition), ownership, enforcement or disposition of which would subject the Issuer to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation.

(k)

The Issuer will not terminate or amend any Hedge Agreement without receiving Rating Agency Confirmation with respect to such termination or amendment. 175

Processed and formatted by SEC Watch - Visit SECWatch.com

IN WITNESS WHEREOF, we have set our hands as of the date first above written.

Executed as a Deed by N-STAR REAL ESTATE CDO V LTD., as Issuer

By: /s/ Derrie Boggess Name: Derrie Boggess Title: Director N-STAR REAL ESTATE CDO V CORP., as Co-Issuer By: /s/ Donald J. Puglisi Name: Donald J. Puglisi Title: President LASALLE BANK NATIONAL ASSOCIATION, as Trustee By: /s/ Koren Sumser Name: Koren Sumser Title: First Vice President

SIGNATURE PAGE – INDENTURE

Exhibit 10.16 EXECUTION COPY Dated as of March 17, 2006

N-STAR REL CDO VI LTD., as Issuer N-STAR REL CDO VI LLC, as Co-Issuer NS ADVISORS, LLC, as Advancing Agent and WELLS FARGO BANK, NATIONAL ASSOCIATION as Trustee

INDENTURE

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS S e ction

Page

PRELIMINARY STATEMENT

1

GRANTING CLAUSES

1

ARTICLE I Definitions and Interpretation 1.1. Definitions 1.2. Assumptions as to Collateral Interests, Fees, Etc. 1.3. Rules of Construction

3 3 60 62

ARTICLE II The Indenture Issued Notes 2.1. Forms Generally 2.2. Authorized Amount; Applicable Periodic Interest Rate; Stated Maturity Date; Denominations 2.3. Execution, Authentication, Delivery and Dating 2.4. Registration, Transfer and Exchange of Indenture Issued Notes 2.5. Mutilated, Defaced, Destroyed, Lost or Stolen Indenture Issued Notes 2.6. Payment of Principal and Interest; Rights Preserved

62 62 64 65 66 76 77

ARTICLE III Conditions Precedent 3.1. General Provisions 3.2. Security for the Indenture Issued Notes 3.3. Custodianship; Transfer of Collateral Interests and Eligible Investments

84 84 87 88

ARTICLE IV Satisfaction and Discharge 4.1. Satisfaction and Discharge of Indenture 4.2. Application of Trust Money 4.3. Repayment of Funds Held by Note Paying Agent

91 91 93 93

ARTICLE V Events of Default; Remedies 5.1. Events of Default 5.2. Acceleration of Maturity; Rescission and Annulment 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee 5.4. Remedies 5.5. Preservation of Collateral 5.6. Trustee May Enforce Claims Without Possession 5.7. Application of Funds Collected 5.8. Limitation on Suits 5.9. Unconditional Rights of Rated Noteholders (other than the Class K Noteholders) to Receive Principal and Interest 5.10. Restoration of Rights and Remedies 5.11. Rights and Remedies Cumulative 5.12. Delay or Omission Not Waiver 5.13. Control by Majority of Noteholders 5.14. Waiver of Past Defaults 5.15. Undertaking for Costs 5.16. Waiver of Stay or Extension Laws 5.17. Sale of Collateral i

93 93 95 96 98 100 102 102 102 103 103 104 104 104 104 105 105 106

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

5.18.

106

Action on the Rated Notes

ARTICLE VI The Trustee 6.1. Certain Duties and Responsibilities 6.2. Notice of Default 6.3. Certain Rights of Trustee 6.4. Authenticating Agents 6.5. Not Responsible for Recitals or Issuance of Rated Notes 6.6. May Hold Rated Notes 6.7. Funds Held in Trust 6.8. Compensation and Reimbursement 6.9. Corporate Trustee Required; Eligibility 6.10. Resignation and Removal; Appointment of Successor 6.11. Acceptance of Appointment by Successor 6.12. Merger, Conversion, Consolidation or Succession to Business of Trustee 6.13. Co-Trustees 6.14. Certain Duties Related to Delayed Payment of Proceeds; Other Notices 6.15. Representations and Warranties of the Bank 6.16. Exchange Offers, Proposed Amendments etc. 6.17. Fiduciary for Rated Noteholders Only; Agent For Other Secured Parties 6.18. Withholding

107 107 109 109 111 111 111 112 112 113 114 115 115 115 116 117 117 118 118

ARTICLE VII Covenants 7.1. Payment of Principal and Interest 7.2. Maintenance of Office or Agency 7.3. Funds for Rated Note Payments to be Held in Trust 7.4. Existence of Co-Issuers 7.5. Protection of Collateral 7.6. Opinions as to Collateral 7.7. Performance of Obligations 7.8. Negative Covenants 7.9. Statement as to Compliance 7.10. Co-Issuers May Consolidate, Etc., Only on Certain Terms 7.11. Successor Substituted 7.12. No Other Business 7.13. Change or Withdrawal of Rating 7.14. Reporting 7.15. Rated Note Calculation Agent 7.16. Listing 7.17. Amendment of Certain Documents 7.18. Purchase of Collateral; Information Regarding Collateral; Rating Confirmation

118 118 119 120 121 122 123 123 125 126 126 129 129 130 130 130 131 131 131

ARTICLE VIII Supplemental Indentures 8.1. Supplemental Indentures Without Consent of Rated Noteholders 8.2. Supplemental Indentures with Consent of Rated Noteholders 8.3. Execution of Supplemental Indentures

133 133 136 138

ii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

8.4. 8.5.

Effect of Supplemental Indentures Reference in Indenture Issued Notes to Supplemental Indentures

138 138

ARTICLE IX Redemption of Rated Notes 9.1. Redemption of Rated Notes 9.2. Redemption Procedures; Auction 9.3. Record Date; Notice to Trustee of Redemption 9.4. Notice of Redemption 9.5. Notice of Withdrawal 9.6. Rated Notes Payable on Redemption Date 9.7. Special Amortization

139 139 139 141 141 142 142 142

ARTICLE X Accounts, Accountings and Releases 10.1. Collection of Funds 10.2. General Provisions Applicable to Accounts 10.3. Collateral Account 10.4. Uninvested Proceeds Account 10.5. Collection Account 10.6. Expense Reserve Account 10.7. Interest Reserve Account 10.8. Earn-Out Asset Account 10.9. Payment Account 10.10. Reports by Trustee 10.11. Accountings 10.12. Release of Securities 10.13. Reports by Independent Accountants 10.14. Reports to Rating Agencies 10.15. Tax Matters 10.16. [Reserved] 10.17. Interest Advances

143 143 144 144 145 145 146 147 147 148 148 149 154 155 156 156 157 157

ARTICLE XI Application of Monies 11.1. Disbursements of Funds from Payment Account; Priority of Payments

160 160

ARTICLE XII Purchase and Sale of Collateral Interests 12.1. Sale of Collateral Interests 12.2. Portfolio Characteristics 12.3. Conditions Applicable to all Transactions Involving Sale or Grant

173 173 175 180

ARTICLE XIII Secured Parties’ Relations 13.1. Subordination 13.2. Standard of Conduct

181 181 186

ARTICLE XIV Miscellaneous 14.1. Form of Documents Delivered to Trustee 14.2. Acts of Rated Noteholders 14.3. Notices, Etc., to Trustee, the Co-Issuers and the Rating Agencies 14.4. Notices and Reports to Rated Noteholders; Waiver 14.5. Effect of Headings and Table of Contents

186 186 187 187 189 190

iii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

14.6. 14.7. 14.8. 14.9. 14.10. 14.11. 14.12. 14.13. 14.14. ARTICLE XV 15.1. 15.2. 15.3. 15.4.

Successors and Assigns Severability Benefits of Indenture Governing Law Submission to Jurisdiction Counterparts Waiver of Jury Trial Judgment Currency Confidential Treatment of Documents

190 190 190 190 190 191 191 191 191

Assignment No Impairment Termination, Etc. Issuer Agreements, Etc.

192 192 192 192 192 193

ARTICLE XVI Hedge Agreements 16.1.

193 193

Hedge Agreements

195

ARTICLE XVII Class A-R Notes 17.1. 17.2. 17.3. 17.4. 17.5. Schedules Schedule A Schedule B Schedule C Schedule D Schedule E Schedule F Schedule G Schedule H Schedule I Schedule J-1

Draws on the Class A-R Notes and Class A-R Commitment Class A-R Interest and Class A-R Commitment Fee Prepayments of Class A-R Notes Class A-R Rating Criteria Class A-R Holder Collateral Account

195 195 196 196 197 197

Schedule J-2 Schedule J-3

Schedule of Collateral Interests as of the Closing Date LIBOR Formula Moody’s Recovery Rate Matrix S&P’s Recovery Rate Matrix Auction Procedures S&P’s Notching Criteria S&P’s Types of Asset-Backed Securities ineligible for Notching S&P’s Industry Classification Groups S&P’s Shadow Rating Grid Form of S&P’s Representations, Warranties and Covenants for Commercial Mortgage Loans, Subordinate Mortgage Loan Interests And Mezzanine Loans Form of S&P’s Representations, Warranties and Covenants for Credit Lease Loans and Tenant Lease Loan Interests Form of S&P’s Representations, Warranties and Covenants for Preferred Equity Securities

Exhibits Exhibit A-1 Exhibit A-2 Exhibit B

Form of Regulation S Global Note Form of Rule 144A Global Note Form of Certificated Note iv

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Exhibit C-1 Exhibit C-2 Exhibit C-3 Exhibit C-4 Exhibit D Exhibit E-1 Exhibit E-2 Exhibit F Exhibit G Exhibit H Exhibit I

Page

Form of Rule 144A Transfer Certificate Form of Regulation S Transfer Certificate Form of Certificated Note Transfer Certificate Form of ERISA Restriction Certificate Form of Funding Certificate Form of Opinion of Thacher Proffitt & Wood LLP Form of Opinion of Walkers Form of Opinion of Kennedy Covington Lobdell & Hickman, L.L.P. Form of Opinion of Thacher Proffitt & Wood LLP Rated Noteholder’ s Certificate Form of Class H Note or Class J Note Tax Transfer Certificate v

THIS INDENTURE dated as of March 17, 2006 among: N-STAR REL CDO VI LTD., an exempted company incorporated and existing under the law of the Cayman Islands; N-STAR REL CDO VI LLC, a limited liability company organized and existing under the law of the State of Delaware; NS ADVISORS, LLC a limited liability company organized and existing under the law of the State of Delaware; and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, organized under the law of the United States, as trustee. PRELIMINARY STATEMENT The Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) and the Issuer (in the case of the Class H Notes and the Class J Notes) are duly authorized to execute and deliver this Indenture to provide for the issuance of the Indenture Issued Notes as provided in this Indenture. All covenants and agreements made by the Co-Issuers herein are for the benefit and security of the Secured Parties. The Co-Issuers are entering into this Indenture, and the Trustee is accepting the trusts created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. All things necessary to make this Indenture a valid agreement of the Co-Issuers in accordance with its terms have been done. GRANTING CLAUSES The Issuer hereby Grants to the Trustee, for the benefit and security of the Secured Parties, all of its right, title and interest in, to and under, in each case, whether now owned or existing, or hereafter acquired or arising, the following property (other than the Excepted Property): (a) the Collateral Interests listed on Schedule A, the Collateral Interests acquired after the Closing Date and any Equity Interests which, in each case, are delivered to the Trustee (directly or through a Securities Intermediary) after the Closing Date pursuant to the terms hereof and all payments thereon or with respect thereto, (b) the Collection Account (including each Sub-Account established therein), the Interest Reserve Account, the Payment Account, the Expense Reserve Account, the Collateral Account, the Uninvested Proceeds Account, the Earn-Out Asset Account, the Class A-R Holder Collateral Account, all amounts credited to such accounts, and Eligible Investments purchased with funds credited to such accounts and all income from the investment of funds therein, (c) the rights of the Issuer under each of the Transaction Documents to which the Issuer is a party and all payments to the Issuer thereunder or with respect thereto, (d) all Cash or other property delivered to the Trustee (directly or through a Securities Intermediary) and (e) all proceeds, whether voluntary or involuntary, of and to any of the property of the Issuer described in the preceding clauses (collectively, the Collateral); provided, that such security interest shall not extend to (i) any property, cash or other amounts specifically released from the lien of this Indenture or otherwise to be paid to the Issuer in accordance with the terms hereof or (ii) any Retained Rights. Such Grants are made to the Trustee to hold in trust, to secure the Indenture Issued Notes equally and ratably without prejudice, priority or distinction between any such Indenture Issued Note and any other such Indenture Issued Note by reason of difference in time of issuance or otherwise, except as expressly provided in this Indenture, and to secure (i) the payment of all amounts due on the Indenture Issued Notes and under any Hedge Agreement and the Collateral Management Agreement in accordance with their respective terms, (ii) the

Processed and formatted by SEC Watch - Visit SECWatch.com

payment of all other sums payable under this Indenture and (iii) compliance with the provisions of this Indenture, any Hedge Agreement, the Class A-R Note Purchase Agreement and the Collateral Management Agreement, all as provided in this Indenture (collectively, the Secured Obligations). Except to the extent otherwise provided in this Indenture, the Issuer does hereby constitute and irrevocably appoint the Trustee as the true and lawful attorney of the Issuer, with full power (in the name of the Issuer or otherwise), to exercise all rights of the Issuer with respect to the Collateral held for the benefit and security of the Secured Parties and to ask, require, demand, receive, settle, compromise, compound and give acquittance for any and all moneys and claims for moneys due and to become due under or arising out of any of the Collateral held for the benefit and security of the Secured Parties, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Trustee may deem to be necessary or advisable in the premises. The power of attorney granted pursuant to this Indenture and all authority hereby conferred are granted and conferred solely to protect the Trustee’s interest in the Collateral held for the benefit and security of the Secured Parties and shall not impose any duty upon the Trustee to exercise any power. This power of attorney shall be irrevocable as one coupled with an interest prior to the payment in full of all the obligations secured hereby. Except to the extent otherwise provided in this Indenture, this Indenture shall constitute a security agreement under the law of the State of New York. Upon the occurrence of any Event of Default and in addition to any other rights available under this Indenture or any other instruments included in the Collateral held for the benefit and security of the Secured Parties or otherwise available at law or in equity, the Trustee shall have all rights and remedies of a secured party on default under the law of the State of New York and other applicable law to enforce the assignments and security interests contained herein and, in addition, shall have the right, subject to compliance with any mandatory requirements of applicable law, to sell or apply any rights and other interests assigned or pledged hereby in accordance with the terms hereof at public or private sale. It is expressly agreed that anything therein contained to the contrary notwithstanding, the Issuer shall remain liable under any instruments included in the Collateral to perform all the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and except as otherwise expressly provided herein, the Trustee shall not have any obligations or liabilities under such instruments by reason of or arising out of this Indenture, nor shall the Trustee be required or obligated in any manner to perform or fulfill any obligations of the Issuer under or pursuant to such instruments or to make any payment, to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim, or to take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. The designation of the Trustee in any transfer document or record is intended and shall be deemed, first, to refer to the Trustee as custodian on behalf of the Issuer and second, to refer to the Trustee as secured party on behalf of the Secured Parties, provided that the Grant made by the Issuer to the Trustee pursuant to the granting clauses hereof shall apply to any Collateral bearing such designation. The Trustee acknowledges such Grants, accepts the trust hereunder in accordance with the provisions hereof, and agrees to perform the duties herein in accordance with the required standard of care set forth herein such that the interests of the Secured Parties may be protected. Each of the Secured Parties hereby agrees and acknowledges that it shall not have any claim on the funds and property from time to time deposited in or credited to the Income Note Distribution Account and the proceeds thereof. 2

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE I DEFINITIONS AND INTERPRETATION 1.1. DEFINITIONS Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Indenture. Whenever any reference is made to an amount the determination of which is governed by Section 1.2, the provisions of Section 1.2 shall be applicable to such determination or calculation, whether or not reference is specifically made to Section 1.2, unless some other method of calculation or determination is expressly specified in the particular provision. In the case of Preferred Equity Securities, whenever any reference is made to payments of interest with respect to a Collateral Interest, payments of dividends or other distributions not attributable to the return of capital by the related Underlying Instruments, shall be applicable to such determination or calculation. In the case of Preferred Equity Securities, whenever any reference is made to payments of principal with respect to a Collateral Interest, distributions attributable to the return of capital by their Underlying Instruments shall be applicable to such determination or calculation. In addition, terms defined in Article 9 of the UCC and used but not capitalized herein have the meanings assigned thereto in Article 9 of the UCC. Account means any of the Collection Account (including each Collateral Sub-Account established therein), the Collateral Account, the Uninvested Proceeds Account, the Payment Account, the Interest Reserve Account, the Earn-Out Asset Account, the Class A-R Holder Collateral Account and the Expense Reserve Account (including each Collateral Sub-Account established therein). Account Control Agreement means that certain Account Control Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, among the Issuer, the Trustee and the Custodian. Accountant’s Report means a report of a firm of Independent certified public accountants of recognized national reputation appointed by the Issuer (or the Collateral Manager on its behalf) on the Closing Date pursuant to Section 10.13(a), which may be the firm of Independent accountants that reviews or performs procedures with respect to the financial reports prepared by the Issuer. Act has the meanings specified in Section 14.2. Administrative Expenses means amounts (including any applicable indemnities) due from, or accrued for, the account of the Co-Issuers with respect to any Payment Date to (i) the Trustee for Trustee Expenses and the Trustee Interest Advance Fee and the Underlying Trustee for Underlying Trust Expenses; (ii) the PAA Issued Note Paying Agent pursuant to the Paying Agency Agreement; (iii) the Collateral Administrator pursuant to the Collateral Administration Agreement; (iv) the independent accountants, agents and counsel of the Co-Issuers for fees and expenses (including, without limitation, tax reports); (v) the Rating Agencies for fees and expenses in connection with any Class of Notes rated by each such Rating Agency (including, without limitation, expenses for credit estimates and ongoing surveillance of the ratings of the Notes); (vi) the Administrator pursuant to the Corporate Services Agreement; (vii) the Collateral Manager and its counsel for fees, expenses and indemnities under the Transaction Documents to the extent set forth therein (including, without limitation, amounts payable under the Collateral Management Agreement but excluding the Collateral Management Fee); (viii) any other Person in respect of any governmental fee, charge or tax (including all filing, registration and annual 3

Processed and formatted by SEC Watch - Visit SECWatch.com

return fees payable to the Cayman Islands’ government and registered office fees); (ix) any servicer of any Collateral Interest owned directly by the Issuer to the Servicers pursuant to the Servicing Agreements (to the extent payment of such amounts is not otherwise provided for in the Servicing Agreements); (x) to the Advancing Agent for the Advancing Agent Fee; (xi) the Class A-R Note Agent pursuant to the Class AR Note Purchase Agreement and (xii) any other Person in respect of any other fees or expenses permitted under this Indenture and the documents delivered pursuant to or in connection with this Indenture, the Paying Agency Agreement, the Collateral Management Agreement and the Notes; provided that Administrative Expenses may not include any amounts due or accrued with respect to the actions taken on, or prior to, the Closing Date and any Class A-R Commitment Fees, Class A-R Increased Costs or Class A-R Breakage Costs. Administrator means Walkers SPV Limited and any successor thereto appointed under the Corporate Services Agreement. Advancing Agent means NS Advisors, LLC and any successor or successors thereto. Advancing Agent Fee means, a per annum fee payable to the Advancing Agent on each Payment Date in accordance with the Priority of Payments equal to 0.00125% of the outstanding principal amount of the Class A Notes (assuming for the purposes of this calculation that the Class A-R Notes are fully drawn) and Class B Notes immediately prior to such Payment Date. Affected Party has the meaning given to such term in the standard form 1992 ISDA Master Agreement (Multicurrency-Cross Border). Affiliate means any person, directly or indirectly through one or more intermediaries, controlling, controlled by or under common control with the person; provided that (i) with respect to the Issuer, “Affiliate” shall be deemed not to include Walkers SPV Limited or any entity which Walkers SPV Limited controls and (ii) control of a person shall mean the power, direct or indirect, (a) to vote more than 50% of the securities having ordinary voting power for the election of directors of such person or (b) to direct or cause the direction of the management and policies of such person whether by contract or otherwise. Agency MBS Security means obligations of (A) the Federal National Mortgage Association, (B) the Federal Home Loan Mortgage Corporation or (C) the Government National Mortgage Association, in each case with a stated maturity that does not exceed the Stated Maturity Date and a long-term credit rating of “AAA” by S&P. Agent Members means members of, or participants in, the Clearing Agencies. Aggregate Class A-R Undrawn Amount means at any time, the excess, if any, of the aggregate amount of the Class A-R Commitments over the Aggregate Outstanding Amount of the Class A-R Notes. Aggregate Fees and Expenses means, on any Payment Date, the sum of (i) the Trustee Fee with respect to such Payment Date and any unpaid Trustee Fee accrued with respect to a previous Payment Date, (ii) the PAA Issued Note Paying Agent Fee with respect to such Payment Date and any unpaid PAA Issued Note Paying Agent Fee accrued with respect to a previous Payment Date, (iii) the Senior Collateral Management Fee and all expenses of the Collateral Manager payable by the Issuer pursuant to the Collateral Management Agreement with respect to such Payment Date and any unpaid Senior Collateral Management Fee and unpaid expenses of the Collateral Manager accrued with respect to a previous Payment Date, (iv) the Trustee Expenses and other expenses (including other Administrative Expenses) of the Co-Issuer (including the fees to be paid to the Cayman Islands Stock Exchange), (v) taxes payable by 4

Processed and formatted by SEC Watch - Visit SECWatch.com

the Co-Issuers, if any, (vi) the Underlying Trust Expenses and (vii) all other expenses of the Co-Issuers (including, without limitation, Administrative Expenses) payable on such Payment Date pursuant to Sections 11.1(a)(1) and 11.1(b)(1) (in each case to the extent not included in clauses (i) through (vi) above). Aggregate Outstanding Amount means, when used with respect to any of the Rated Notes (other than the Class A-R Notes) at any time, the aggregate principal amount of such Rated Notes Outstanding at such time and, with respect to the Class A-R Notes, the Average Drawn Class A-R Note Portion of the Class A-R Notes with respect to the related Interest Period; provided, that with respect to any action, consent, vote or waiver by any Class or Classes of Noteholders, the Aggregate Outstanding Amount of the Class A-R Notes shall include any unfunded Class A-R Commitments (except as provided in the foregoing sentence and as otherwise provided herein, the Aggregate Outstanding Amount of the Notes at any time shall not include any unfunded Class A-R Commitments). Except as otherwise provided herein, (i) the Aggregate Outstanding Amount of any Class C Notes at any time shall include the Class C Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class C Notes at such time, (ii) the Aggregate Outstanding Amount of any Class D Notes at any time shall include the Class D Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class D Notes at such time, (iii) the Aggregate Outstanding Amount of any Class E Notes at any time shall include the Class E Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class E Notes at such time, (iv) the Aggregate Outstanding Amount of any Class F Notes at any time shall include the Class F Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class F Notes at such time, (v) the Aggregate Outstanding Amount of any Class G Notes at any time shall include the Class G Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class G Notes at such time, (vi) the Aggregate Outstanding Amount of any Class H Notes at any time shall include the Class H Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class H Notes at such time, (vii) the Aggregate Outstanding Amount of any Class J Notes at any time shall include the Class J Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class J Notes at such time and (viii) the Aggregate Outstanding Amount of any Class K Notes at any time shall include the Class K Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class K Notes at such time. Applicable Periodic Interest Rate means, for any Interest Period, (i) with respect to the Class A-1 Notes, the applicable Class A-1 Note Interest Rate, (ii) with respect to the Class A-R Notes, the applicable Class A-R Note Interest Rate, (iii) with respect to the Class A-2 Notes, the applicable Class A-2 Note Interest Rate, (iv) with respect to the Class B Notes, the applicable Class B Note Interest Rate, (v) with respect to the Class C Notes, the applicable Class C Note Interest Rate, (vi) with respect to the Class D Notes, the applicable Class D Note Interest Rate, (vii) with respect to the Class E Notes, the applicable Class E Note Interest Rate, (viii) with respect to the Class F Notes, the applicable Class F Note Interest Rate, (ix) with respect to the Class G Notes, the applicable Class G Note Interest Rate, (x) with respect to the Class H Notes, the applicable Class H Note Interest Rate, (xi) with respect to the Class J Notes, the applicable Class J Note Interest Rate and (xii) with respect to the Class K Notes, the applicable Class K Note Interest Rate. Applicable Recovery Rate means, with respect to any Collateral Interest on any Measurement Date, the lesser of the Moody’s Recovery Rate, the Fitch Recovery Rate and the S&P’s Recovery Rate applicable to such Collateral Interest on such date. Articles means the Amended and Restated Memorandum and Articles of Association of the Issuer, filed under the Companies Law (2004 Revision) of the Cayman Islands, as modified and supplemented and in effect from time to time. 5

Processed and formatted by SEC Watch - Visit SECWatch.com

Asset-Backed Securities are debt securities that entitle the holders thereof to receive payments that depend primarily on the cash flow from (i) a specified pool of financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities (including, for the avoidance of doubt, leases) or (ii) real estate mortgages, either fixed or revolving, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to the holders of such securities. Asset Transfer Agreement means either Asset Transfer Agreement, dated as of March 17, 2006, as the same may be amended or supplemented from time to time, among the related Seller, the Depositor and NorthStar Realty Finance Corp. Assumed Reinvestment Rate means, with respect to any Account or fund securing the Indenture Issued Notes, the greater of (i) LIBOR minus 1.0% and (ii) zero. Auction has the meaning specified in Section 9.2. Auction Call Redemption has the meaning specified in Section 9.1(c). Auction Date has the meaning specified in Section 9.2; provided that, for the purposes of Section 5.5, “Auction Date” means the date upon which an Auction of the Collateral Interests is conducted in connection with an Event of Default. Auction Procedures has the meaning specified in Section 9.2. Auction Purchase Agreement has the meaning specified in Schedule E. Authenticating Agent means, with respect to the Indenture Issued Notes or any Class of the Indenture Issued Notes, the Person designated by the Trustee, if any, to authenticate such Indenture Issued Notes on behalf of the Trustee pursuant to Section 6.4. Authorized Officer means (i) with respect to the Issuer, any Officer of the Issuer who is authorized to act for the Issuer in matters relating to, and binding upon, the Issuer or any duly appointed attorney-in-fact of the Issuer, (ii) with respect to the Co-Issuer, any Officer who is authorized to act for the Co-Issuer in matters relating to, and binding upon, the Co-Issuer, (iii) with respect to the Collateral Manager, any officer of the Collateral Manager who is authorized to act for the Collateral Manager in matters relating to, and binding upon, the Collateral Manager, (iv) with respect to the Trustee or any other bank or trust company acting as trustee of an express trust or as custodian, a Trust Officer, (v) with respect to the PAA Issued Note Paying Agent, any officer who is authorized to act for the PAA Issued Note Paying Agent in matters relating to, and binding upon, the PAA Issued Note Paying Agent and (vi) with respect to the Advancing Agent, any Officer of the Advancing Agent who is authorized to act for the Advancing Agent in matters relating to, and binding upon, the Advancing Agent. 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. Available Aggregate Class A-R Undrawn Amount means, as of any date, the lesser of (i)(A) the Aggregate Class A-R Undrawn Amount, less (B) the Total Unfunded Future Advance Amount, plus (C) the amount on deposit in the Earn-Out Asset Account and (ii) the Aggregate Class A-R Undrawn Amount. 6

Processed and formatted by SEC Watch - Visit SECWatch.com

Available Funds means, with respect to any Payment Date, the amount of any positive balance of Cash or Eligible Investments in the Collection Account as of the Calculation Date relating to such Payment Date and, with respect to any other date, such amount as of that date. Average Drawn Class A-R Note Portion means, with respect to any Payment Date or Class A-R Prepayment Date, the average daily Aggregate Outstanding Amount of the Class A-R Notes during the related Interest Period. Average Life means, on any Calculation Date with respect to any Collateral Interest, the quotient obtained by the Collateral Manager by dividing (i) the sum of the products of (a) the number of years (rounded to the nearest one tenth thereof) from such Calculation Date to the respective dates of each successive distribution of principal of such Collateral Interest (assuming that (1) no Collateral Interests default or are sold and (2) any optional redemption of the Collateral Interests occurs in accordance with their respective terms) and (b) the respective amounts of principal of such scheduled distributions by (ii) the sum of all successive scheduled distributions of principal on such Collateral Interest. Balance means at any time, with respect to Cash or Eligible Investments in any Account at such time, the aggregate of the (i) current balance of Cash, demand deposits, time deposits, certificates of deposit and federal funds; (ii) principal amount of interest-bearing corporate and government securities, money market accounts and repurchase obligations; and (iii) purchase price (but not greater than the face amount) of non-interest-bearing government and corporate securities and commercial paper. Bank means Wells Fargo Bank, National Association, a national banking association organized under the laws of the United States, in its individual capacity and not as Trustee. Bankruptcy Code means the U.S. Bankruptcy Code, Title 11 of the United States Code, as amended or where the context requires, the applicable insolvency provisions of the laws of the Cayman Islands. Beneficial Owner means, with respect to any Global Note, each Person that appears on the records of a Clearing Agency (other than each such Clearing Agency to the extent that it is an accountholder with the other Clearing Agency for the purpose of operating the “bridge” between them) as entitled to a particular amount of Indenture Issued Notes by reason of an interest in a Global Note (for all purposes other than with respect to the payment of principal of and interest on the Indenture Issued Notes, the right to which will be vested, as against the Issuer and the Trustee, solely in the Person in whose name the Global Note is registered in the Note Register (in the case of the Rated Notes) or the PAA Issued Note Register (in the case of the Class Notes or the Income Notes)); provided that the Trustee and the PAA Issued Note Paying Agent may conclusively rely upon the certificate of a Clearing Agency as to the identity of such Persons holding an interest in a Global Note. Benefit Plan Investor means (i) an “employee benefit plan” (as defined in Section 3(3) of ERISA), whether or not subject to Title I of ERISA, including without limitation governmental plans, foreign plans and church plans, (ii) a “plan” (as defined in Section 4975(e)(1) of the Code), whether or not subject to Section 4975 of the Code, including, without limitation, individual retirement accounts and Keogh plans or (iii) an entity whose underlying assets include plan assets by reason of such an employee benefit plan’s or plan’s investment in such entity, including, without limitation, as applicable, an insurance company general account. Bill of Sale means that certain Bill of Sale, dated as of March 17, 2006, as the same may be amended or supplemented from time to time, between the Depositor and the Issuer. 7

Processed and formatted by SEC Watch - Visit SECWatch.com

Board of Directors means, with respect to the Issuer, the directors of the Issuer duly appointed in accordance with the Articles. Board Resolution means, with respect to the Issuer, a resolution of the Board of Directors of the Issuer. Business Day means any day that is not a Saturday, Sunday or other day on which commercial banking institutions in New York, New York, Minneapolis, Minnesota, Columbia, Maryland or any other cities in which the Corporate Trust Office of the Trustee or the Advancing Agent is located are authorized or obligated by law or executive order to be closed; provided that, if any action is required of the Issuer (or of the Administrator on its behalf), solely for purposes of determining when such action of the Issuer is required, days on which commercial banking institutions in the Cayman Islands are authorized or obligated by law or executive order to be closed will also be considered in determining whether such day is a “Business Day.” Buy/Sell Interest means a Collateral Interest for which one of the participants has exercised its right to purchase its corresponding participant’s interest, or sell its interest to such corresponding participant for the same price, in accordance with the related Underlying Instrument Calculation Date means, with respect to any Payment Date, the last day of the related Due Period. Call Period has the meaning specified in Section 9.1(a) hereof. Cash means such funds denominated with currency of the United States as at the time shall be legal tender for payment of all public and private debts, including funds credited to a deposit account or a Securities Account. Certificate of Authentication has the meaning specified in Section 2.3(f). Certificated Class A-G Note has the meaning specified in Section 2.1(c). Certificated Class H Note has the meaning specified in Section 2.1(d). Certificated Class H Note Transfer Certificate has the meaning specified in Section 2.4(c)(1). Certificated Class J Note has the meaning specified in Section 2.1(d). Certificated Class J Note Transfer Certificate has the meaning specified in Section 2.4(c)(1). Certificated Income Notes means Income Notes issued in the form of physical certificates in definitive, fully registered form. Certificated Note means any Rated Note or Income Note issued in the form of physical certificates in certificated, fully registered form. Certificated Security has the meaning specified in Section 8-102(a)(4) of the UCC. Class means any class of the Notes, consisting of the Class A-1 Notes, Class A-R Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes and Income Notes. Class A Notes means the Class A-1 Notes, Class A-R Notes and Class A-2 Notes. 8

Class A Senior Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class A Senior Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class A Senior Notes. Class A Senior Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class A Senior Note Scenario Default Rate from the Class A Senior Note Break-Even Default Rate. Class A Senior Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class A Senior Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class A Senior Notes means the Class A-1 Notes and the Class A-R Notes. Class A Senior Pro Rata Allocation means, with respect to any Payment Date, the allocation based on the Aggregate Outstanding Amount of the Class A-1 Notes and the aggregate principal amount of the Class A-R Commitments as of the related Measurement Date, and in the case of a Redemption of the Notes in full or the acceleration of the Notes following an Event of Default, the allocation based on the Aggregate Outstanding Amount of the Class A-1 Notes and the aggregate principal amount of the Class A-R Commitments as of the related Calculation

Processed and formatted by SEC Watch - Visit SECWatch.com

Date. Class A/B Coverage Tests means the Interest Coverage Test and the Principal Coverage Test applied with respect to the Class A Notes and Class B Notes, taken together. Class A-1 Note Interest Rate means LIBOR plus 0.330%. Class A-1 Notes means the U.S.$174,800,000 aggregate principal amount of Class A-1 Floating Rate Notes due 2041. Class A-2 Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class A-2 Notes in full by their Stated Maturity Date and the timely payment of interest on such Class A-2 Notes. Class A-2 Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class A-2 Note Scenario Default Rate from the Class A-2 Note Break-Even Default Rate. Class A-2 Note Interest Rate means LIBOR plus 0.380%. Class A-2 Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class A-2 Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class A-2 Notes means the U.S.$27,225,000 aggregate principal amount of Class A-2 Floating Rate Notes due 2041. Class A-R Breakage Costs means, with respect to any Due Period, the amount of “breakage costs” as set forth in a certificate of a Class A-R Noteholder delivered to the Issuer and the Trustee on or prior to the 9

Processed and formatted by SEC Watch - Visit SECWatch.com

related Calculation Date, if any, incurred by Class A-R Noteholders as a result of (a) a prepayment of amounts under the Class A-R Notes on a day other than a Payment Date and calculated as provided in the Class A-R Note Purchase Agreement or (b) a failure by the Issuer to effect a Class A-R Draw on the scheduled date therefor after having submitted a request for a Class A-R Draw to the Class A-R Note Agent in accordance with the provisions of the Class A-R Note Purchase Agreement. Class A-R Commitment means, the maximum aggregate outstanding principal amount of advances (whether at the time funded or unfunded) that the Holder of such Class A-R Note (or the related Liquidity Provider) is obligated to make to the Issuer from time to time under the Class A-R Note Purchase Agreement. Class A-R Commitment Fee means, in respect of the Class A-R Noteholders and an Interest Period, the fee payable to such Class A-R Noteholder in arrears, on each Payment Date, being the amount accrued in respect of that Interest Period at a rate per annum equal to 0.16% (calculated on the average daily Aggregate Class A-R Undrawn Amount during such Interest Period on the basis of a 360-day year and the actual number of days elapsed). Class A-R Defaulted Interest Amount means, with respect to the Class A-R Notes as of each Payment Date, the accrued and unpaid amount due to Holders of the Class A-R Notes on account of any shortfalls in the payment of the related Periodic Interest with respect to any preceding Payment Date or Payment Dates, together with interest accrued thereon (to the extent lawful). Class A-R Draw means an advance by a Holder of a Class A-R Note made in accordance with Section 17.1(a) hereof. Class A-R Draw Date has the meaning specified in Section 17.1(a) hereof. Class A-R Eligible Investments has the meaning specified in Section 17.5(f) hereof. Class A-R Holder Collateral Account means the Securities Account designated the “Class A-R Holder Collateral Account” and established in the name of the Trustee pursuant to Section 17.5. Class A-R Increased Costs means, with respect to any Payment Date, the amount as set forth in a certificate of a Class A-R Noteholder delivered to the Issuer and the Trustee on or prior to the Calculation Date of the related Payment Date, necessary to compensate such Noteholder or any Funding Entity for (a) any increase in cost to a Funding Entity of making or maintaining any loan or asset purchase under the Class A-R Note Purchase Agreement or such Liquidity Facility (or maintaining its obligation to make any such loan or asset purchase) resulting from a change in law applicable to such Funding Entity, (b) any reduction in any amount received or receivable by a Funding Entity under the Class A-R Note Purchase Agreement or such Liquidity Facility resulting from a change in law applicable to such Funding Entity or (c) any reduction in the rate of return on the capital of a Funding Entity or its parent/holding company resulting from a change in law applicable to such Funding Entity or parent/holding company to a level below that which such Funding Entity or parent/holding company could have achieved but for such change in law. The Class A-R Note Agent, the Issuer, the Trustee and the Collateral Manager shall in each instance be entitled to rely conclusively (in the absence of manifest error) on any such certificate and all calculations and data therein (and the Class A-R Note Agent, the Issuer, the Trustee and the Collateral Manager shall have no duty or obligation to investigate, verify or recalculate any information or conclusion set forth therein). Class A-R Interest Allocation Percentage means, for each Interest Period and with respect to each Holder of Class A-R Notes, a fraction, expressed as a percentage, (i) the numerator of which is the 10

Processed and formatted by SEC Watch - Visit SECWatch.com

Average Drawn Class A-R Note Portion of such Holder and (ii) the denominator of which is the Average Drawn Class A-R Note Portion of all of the Class A-R Noteholders. Class A-R Note Agent means Wells Fargo Bank, National Association, and any successors or assigns. Class A-R Note Agent Fee means $10,000 per annum. Class A-R Note Draw Date has the meaning specified in Section 17.1(a) hereof. Class A-R Note Interest Rate means LIBOR plus 0.340%. Class A-R Note Purchase Agreement means the agreement to be dated March 17, 2006, entered into among the Issuer, the Co-Issuer, the Class A-R Note Agent and the Holders from time to time of the Class A-R Notes, as amended, supplemented or otherwise modified from time to time in accordance with its terms. Class A-R Note Rating Criteria means the criteria set forth below, which if satisfied with respect to any Holder of Class A-R Notes (or prospective transferee) at the time such Class A-R Notes are purchased (or transferred), will make such Holder (or prospective transferee) eligible to purchase (or receive) such Class A-R Notes, will be satisfied on any date with respect to any Holder of Class A-R Notes (or prospective transferee) if: (i) either (x) the short-term debt, deposit or similar obligations of such Class A-R Noteholder (or prospective transferee) are rated “P-1” by Moody’s and at least “A-1” by S&P or (y) if such short-term debt, deposit or similar obligations of such Class A-R Noteholder (or prospective transferee) are not rated by Moody’s or S&P, the long-term debt, deposit or similar obligations of such Class A-R Noteholder (or prospective transferee) are rated “Aa3” by Moody’s and/or at least “A+” by S&P, as applicable; (ii) the obligations of such Class A-R Noteholder (or prospective transferee) under the Class A-R Note Purchase Agreement are guaranteed (pursuant to a guarantee which complies with the then-current S&P criteria regarding guarantees) by an entity meeting the Class A-R Rating Criteria set forth in (i) above; or (iii) such Class A-R Noteholder (or prospective transferee) is then entitled under a Liquidity Facility to borrow from, or sell an interest in assets to a Liquidity Provider so long as: (1) either (x) the short-term debt, deposit or similar obligations of each such Liquidity Provider are on such date rated “P-1” by Moody’s, at least “F1” by Fitch and at least “A-1” by S&P or (y) if such short-term debt, deposit or similar obligations of each such Liquidity Provider are not rated by Moody’s, Fitch or S&P, the long-term debt, deposit or similar obligations of each such Liquidity Provider are rated “Aa3” by Moody’s, at least “A+” by Fitch and/or at least “A+” by S&P, as applicable; and (2) the aggregate amount of commitments to make loans or purchase interests in assets under such Liquidity Facility are held by Liquidity Providers whose either (x) short-term debt, deposit or similar obligations are on such date rated “P-1” by Moody’s, at least “F1” by Fitch and at least “A-1” by S&P or (y) if such short-term debt, deposit or similar obligations are not rated by Moody’s, Fitch or S&P, the long-term debt, deposit or similar obligations are on such date rated “Aa3” by Moody’s, at least “A+” by Fitch and/or at least “A+” by S&P, as applicable, and such amounts are not less than the 11

Processed and formatted by SEC Watch - Visit SECWatch.com

Class A R Commitment in respect of the Class A R Notes held by such Class A R Noteholder (or prospective transferee). Class A-R Notes means the up to U.S.$70,000,000 aggregate principal amount of Class A-R Revolving Floating Rate Notes due 2041. Class A-R Prepayment means any payment of principal of the Class A-R Notes prior to the Stated Maturity Date of the Class A-R Notes. Class A-R Prepayment Date means the date of any Class A-R Prepayment. Class A-R Proportion is equal to the percentage based on the ratio of (x) the initial aggregate principal amount of the Class A-R Notes (assuming for purposes of this calculation that the Class A-R Commitments are fully drawn) to (y) the initial aggregate principal amount of the Class A-1 Notes. Class B Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class B Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class B Notes. Class B Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class B Note Scenario Default Rate from the Class B Note Break-Even Default Rate. Class B Note Interest Rate means LIBOR plus 0.440%. Class B Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class B Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class B Notes means the U.S.$21,825,000 aggregate principal amount of Class B Floating Rate Notes Due 2041. Class C Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class C Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes or Class B Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class C Notes. Class C Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class C Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments, to reduce such sum. Class C Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class C Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class C Notes. 12

Processed and formatted by SEC Watch - Visit SECWatch.com

Class C Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class C Note Scenario Default Rate from the Class C Note Break-Even Default Rate. Class C Note Interest Rate means LIBOR plus 0.740%. Class C Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class C Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class C Notes means the U.S.$12,825,000 aggregate principal amount of Class C Floating Rate Deferrable Interest Notes Due 2041. Class C/D Coverage Tests means the Interest Coverage Test and the Principal Coverage Test applied with respect to the Class C Notes and the Class D Notes taken together. Class D Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class D Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes or Class C Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class D Notes. Class D Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class D Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments to reduce such sum. Class D Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class D Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class D Notes. Class D Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class D Note Scenario Default Rate from the Class D Note Break-Even Default Rate. Class D Note Interest Rate means LIBOR plus 0.940%. Class D Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class D Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class D Notes means the U.S.$13,950,000 aggregate principal amount of Class D Floating Rate Deferrable Interest Notes Due 2041. Class E Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class E Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class E Notes. 13

Processed and formatted by SEC Watch - Visit SECWatch.com

Class E Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class E Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments, to reduce such sum. Class E Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class E Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class E Notes. Class E Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class E Note Scenario Default Rate from the Class E Note Break-Even Default Rate. Class E Note Interest Rate means LIBOR plus 1.650%. Class E Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class E Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class E Notes means the U.S.$10,125,000 aggregate principal amount of Class E Floating Rate Deferrable Interest Notes Due 2041. Class E/F/G Coverage Tests means the Interest Coverage Test and the Principal Coverage Test applied to the Class E Notes, Class F Notes and Class G Notes, taken together. Class F Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class F Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class F Notes. Class F Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class F Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments, to reduce such sum. Class F Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class F Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class F Notes. Class F Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class F Note Scenario Default Rate from the Class F Note Break-Even Default Rate. Class F Note Interest Rate means LIBOR plus 1.850%. 14

Processed and formatted by SEC Watch - Visit SECWatch.com

Class F Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class F Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class F Notes means the U.S.$7,650,000 aggregate principal amount of Class F Floating Rate Deferrable Interest Notes Due 2041. Class G Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class G Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class F Notes. Class G Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class G Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments, to reduce such sum. Class G Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class G Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class G Notes. Class G Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class G Note Scenario Default Rate from the Class G Note Break-Even Default Rate. Class G Note Interest Rate means LIBOR plus 3.000%. Class G Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class G Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class G Notes means the U.S.$9,900,000 aggregate principal amount of Class G Floating Rate Deferrable Interest Notes Due 2041. Class H Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class H Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes or Class G Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class H Notes. Class H Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class H Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class H Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after 15

Processed and formatted by SEC Watch - Visit SECWatch.com

giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class H Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class H Notes. Class H Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class H Note Scenario Default Rate from the Class H Note Break-Even Default Rate. Class H Note Interest Rate means LIBOR plus 4.250%. Class H Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class H Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class H Note Tax Transfer Certificate has the meaning specified in Section 2.4(c)(3). Class H Notes means the U.S.$6,075,000 aggregate principal amount of Class H Floating Rate Deferrable Interest Notes due 2041. Class J Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class J Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class J Notes. Class J Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class J Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class J Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class J Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class J Notes. Class J Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class J Note Scenario Default Rate from the Class J Note Break-Even Default Rate. Class J Note Interest Rate means LIBOR plus 5.500%. Class J Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class J Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class J Note Tax Transfer Certificate has the meaning specified in Section 2.4(c)(3). Class J Notes means the U.S.$18,000,000 aggregate principal amount of Class J Floating Rate Deferrable Interest Notes due 2041. 16

Processed and formatted by SEC Watch - Visit SECWatch.com

Class K Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class K Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes or Class J Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class K Notes. Class K Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class K Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class K Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Interests can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class K Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class K Notes. Class K Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class K Note Scenario Default Rate from the Class K Note Break-Even Default Rate. Class K Note Interest Rate means LIBOR plus 8.000%. Class K Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Interests consistent with S&P’s rating of the Class K Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class K Notes means the U.S.$13,950,000 aggregate principal amount of Class K Floating Rate Deferrable Interest Notes due 2041. Clearing Agency means DTC, Euroclear or Clearstream. Clearing Corporation has the meaning specified in Section 8-102(a)(5) of the UCC. Clearstream means Clearstream Banking, société anonyme. Closing Date means March 17, 2006. CMBS means commercial mortgage-backed securities issued pursuant to a transaction in which one or more classes of such securities have been (and are) rated “AAA” or its equivalent by one or more of S&P, Moody’s or Fitch (unless Rating Confirmation is received), which securities are backed by obligations (including certificates of participations in obligations) that are principally secured by mortgages on real property or interests therein having a multifamily or commercial use. Code means the Internal Revenue Code of 1986, as amended. Co-Issuer means N-Star REL CDO VI LLC, a limited liability company organized under the law of the State of Delaware, unless a successor Person shall have become the Co-Issuer pursuant to the applicable provisions of this Indenture, and thereafter Co-Issuer shall mean such successor Person. 17

Co-Issuers means the Issuer and Co-Issuer. Collateral has the meaning specified in the Granting Clauses. Collateral Administration Agreement means the Collateral Administration Agreement, dated as of March 17, 2006, by and among the Issuer, the Collateral Manager and the Collateral Administrator, as the same may be amended and modified from time to time in accordance with its terms. Collateral Administrator means Wells Fargo Bank, National Association, solely in its capacity as Collateral Administrator under the Collateral Administration Agreement, unless a successor Person shall have become the Collateral Administrator pursuant to the applicable provisions of Collateral Administration Agreement, in which case Collateral Administrator shall mean such successor Person. Collateral Interest means an item of Collateral which satisfies the Eligibility Criteria specified in Section 12.2. Collateral Interest Collections means, with respect to any Due Period and the related Payment Date, without duplication, the sum of (i) all cash payments of interest with respect to any Collateral Interests and Eligible Investments included in the Collateral ((A) including any Sale Proceeds of a Collateral Interest representing unpaid interest accrued thereon to the date of the sale thereof to the extent not treated as Collateral Principal Collections at the option of the Collateral Manager, but (B) excluding all funds received on an Impaired Interest (including

Processed and formatted by SEC Watch - Visit SECWatch.com

any unpaid interest) and any unpaid interest accrued on a Deferred Interest PIK Bond or a Written Down Interest to the date of sale) which are received during the related Due Period (excluding any Purchased Accrued Interest), (ii) all payments on Eligible Investments purchased with Collateral Interest Collections, (iii) payments received or scheduled to be received from a Hedge Counterparty under any Hedge Agreement on the related Payment Date, excluding any payments received from a Hedge Counterparty upon reduction of the notional amount and any termination payments (provided that so long as the Notes are Outstanding, any termination payments received from a Hedge Counterparty will be used to enter into a substitute Hedge Agreement to the extent required to maintain the then-current rating of the Notes by each Rating Agency), (iv) all amendment and waiver fees, all late payment fees and all other fees and commissions received during the related Due Period (other than fees and commissions received in connection with the sale, restructuring, workout or default of Collateral Interests or in connection with Impaired Interests or Written Down Interests) (provided, further, that Collateral Interest Collections shall not include any other proceeds related to any Retained Rights), (v) the Principal Balance of any Eligible Investments purchased with Collateral Interest Collections, (vi) all interest accrued on the Closing Date on Collateral Interests included in the Collateral, (vii) any amounts on deposit in the Interest Reserve Account, (viii) at the option of the Collateral Manager, any amount on deposit in the Expense Reserve Account in excess of U.S.$25,000, (ix) commitment fees on unfunded amounts and other similar fees (in each case, net of applicable withholding taxes) actually received by the Issuer during the related Due Period in respect of any Earn-Out Assets, (x) any Uninvested Proceeds remaining on deposit in the Uninvested Proceeds Account on the Effective Date, provided that a Rating Confirmation Failure has not occurred and (xi) all proceeds from the foregoing; provided, however, that Collateral Interest Collections shall not include the funds and other property (including, without limitation, the paid-up share capital of the Issuer) with respect to the Income Notes and the bank account in which such funds and the proceeds thereof are held); provided, further, that Collateral Interest Collections shall not include principal of any Collateral Interest representing capitalized interest after the date of purchase thereof by the Issuer. Collateral Interest Principal Balance means, prior to the Effective Date, U.S.$450,000,000, and thereafter, the aggregate Principal Balance of the sum of (i) Collateral Interests included in the Collateral (including any Collateral Interests that have become Impaired Interests or Written Down Interests), 18

Processed and formatted by SEC Watch - Visit SECWatch.com

(ii) Eligible Investments, in each case, purchased with the proceeds of the issuance of the Notes or thereafter with Collateral Principal Collections, (iii) Eligible Investments held in the Earn-Out Asset Account (without duplication) and (iv) the Aggregate Class A-R Undrawn Amount (without duplication). Collateral Management Agreement means the Collateral Management Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, between the Issuer and the Collateral Manager. Collateral Management Fee means the Senior Collateral Management Fee and the Subordinate Collateral Management Fee. Collateral Manager means NS Advisors, LLC, a Delaware limited liability company, unless a successor Person shall have become Collateral Manager pursuant to the applicable provisions of the Collateral Management Agreement, in which case Collateral Manager shall mean such successor Person. Collateral Principal Collections means, with respect to any Due Period and the related Payment Date, all amounts received by the Issuer during such Due Period that do not constitute Collateral Interest Collections (including all distributions on Preferred Equity Securities attributable to the return of capital by their governing documents) (provided, further, that Collateral Principal Collections shall not include any other proceeds related to any Retained Rights); provided, however, that Collateral Principal Collections shall include principal of any Collateral Interest representing capitalized interest after the date of purchase thereof by the Issuer. Collateral Principal Collections Sub-Account has the meaning specified in Section 10.5(a)(1) hereof. Collateral Principal Payments means, with respect to any Due Period and the related Payment Date, Collateral Principal Collections other than Sale Proceeds and any amounts received in respect of Eligible Investments. Collateral Quality Tests will be satisfied if, as of any Measurement Date, the Collateral Interests comply, in the aggregate, with all of the requirements set forth below (collectively, the Collateral Quality Tests): (1)

the aggregate Principal Balance of all Collateral Interests that are CMBS (other than Rake Bonds) does not exceed the greater of (A) 15% of the Collateral Interest Principal Balance and (B) $67,500,000;

(2)

the aggregate Principal Balance of all Collateral Interests that are Tenant Lease Loan Interests with an S&P Rating of below “BBB” does not exceed the greater of (A) 7.5% of the Collateral Interest Principal Balance and (B) $33,750,000;

(3)

the aggregate Principal Balance of all Collateral Interests that are REIT Debt Securities with an S&P Rating below “BBB” does not exceed the greater of (A) 7.5% of the Collateral Interest Principal Balance and (B) $33,750,000;

(4)

the aggregate Principal Balance of all Collateral Interests that are Real Estate CDO Securities does not exceed the greater of (A) 15% of the Collateral Interest Principal Balance and (B) $67,500,000;

(5)

the Moody’s Maximum Weighted Average Rating Factor Test is satisfied;

(6)

(i) the Weighted Average Fixed Rate Coupon as of such date equals or exceeds 6.00% and (ii) the Weighted Average Spread as of such date equals or exceeds 3.00%; 19

Processed and formatted by SEC Watch - Visit SECWatch.com

(7)

the Weighted Average Life Test is satisfied;

(8)

the maximum property concentration limits for Collateral Interests (on a look-through basis), other than Real Estate CDO Securities and REIT Debt Securities are as follows: (i)

the aggregate Principal Balance of such Collateral Interests which relate to Mortgaged Properties which are office properties may not exceed the greater of (A) 65% of the Collateral Interest Principal Balance and (B) $292,500,000;

(ii)

the aggregate Principal Balance of such Collateral Interests which relate to Mortgaged Properties which are each of retail, multifamily, industrial and hospitality properties may not exceed the greater of (A) 45% of the Collateral Interest Principal Balance and (B) $202,500,000;

(iii)

the aggregate Principal Balance of such Collateral Interests which relate to Mortgaged Properties which are condominium conversion properties may not exceed the greater of (A) 20% of the Collateral Interest Principal Balance and (B) $90,000,000;

(iv)

the aggregate Principal Balance of such Collateral Interests which relate to Mortgaged Properties which are self-storage properties may not exceed the greater of (A) 15% of the Collateral Interest Principal Balance and (B) $67,500,000;

(v)

the aggregate Principal Balance of such Collateral Interests which relate to Mortgaged Properties which are healthcare properties may not exceed the greater of (A) 5% of the Collateral Interest Principal Balance and (B) $22,500,000; and

(vi)

the aggregate Principal Balance of such Collateral Interests which relate to Mortgaged Properties which in the aggregate are any property type other than those specified in clauses (i) through (v) above may not exceed the greater of (A) 10% of the Collateral Interest Principal Balance and (B) $45,000,000;

(9)

the aggregate Principal Balance of all Collateral Interests (on a look-through basis), other than Real Estate CDO Securities and REIT Debt Securities, backed or otherwise invested in Mortgaged Properties located in any single U.S. state does not exceed the greater of (A) 25% of the Collateral Interest Principal Balance and (B) $112,500,000, except that (i) up to the greater of (A) 60% of the Collateral Interest Principal Balance and (B) $270,000,000 may consist of Collateral Interests backed or otherwise invested in Mortgaged Properties located in California, (ii) up to the greater of (A) 50% of the Collateral Interest Principal Balance and (B) $225,000,000 may consist of Collateral Interests backed or otherwise invested in Mortgaged Properties located in New York, (iii) up to the greater of (A) 40% of the Collateral Interest Principal Balance and (B) $180,000,000 may consist of Collateral Interests backed or otherwise invested in Mortgaged Properties located in each of Texas and Florida;

(10)

the Herfindahl Score of the Collateral Interests is at least 22;

(11)

the aggregate Principal Balance of all Collateral Interests that represent obligations of any single obligor or group of affiliated obligors does not exceed the greater of (A) 13% of the Collateral Interest Principal Balance and (B) $58,500,000;

(12)

the aggregate Principal Balance of all Collateral Interests that consist of CMBS issued in any single calendar year does not exceed the greater of (A) 75% of the Collateral Interest Principal Balance and (B) $337,500,000 20

Processed and formatted by SEC Watch - Visit SECWatch.com

(13)

the aggregate Principal Balance of all Fixed Rate Collateral Interests does not exceed the greater of (A) 5% of the Collateral Interest Principal Balance and (B) $22,500,000; provided that no more than the greater of (A) 40% of the Collateral Interests and (B) $180,000,000 shall consist of Fixed Rate Collateral Interests if (i) the Issuer enters into corresponding Deemed Floating Asset Hedges or (ii) Rating Confirmation is obtained with respect to an additional Fixed Rate Collateral Interest acquired without a corresponding Deemed Floating Asset Hedge;

(14)

the aggregate Principal Balance of all Collateral Interests that provide for the payment of interest less frequently than quarterly does not exceed the greater of (A) 15% of the Collateral Interest Principal Balance and (B) $67,500,000;

(15)

the aggregate Principal Balance of all Collateral Interests that are CMBS and Real Estate CDO Securities that have a stated maturity later than the Stated Maturity Date does not exceed the greater of (A) 5% of the Collateral Interest Principal Balance and (B) $22,500,000; provided that such 5% limitation may be increased after the Closing Date if Rating Confirmation has been obtained with respect thereto;

(16)

the aggregate Principal Balance of all Collateral Interests that are CMBS that have a stated maturity later than the Stated Maturity Date does not exceed the greater of 5% of the Collateral Interest Principal Balance (B) $22,500,000;

(17)

the aggregate Principal Balance of all Collateral Interests that are Real Estate CDO Securities that have a stated maturity later than the Stated Maturity Date does not exceed the greater of 3% of the Collateral Interest Principal Balance (B) $13,500,000;

(18)

the S&P CDO Monitor Test is satisfied;

(19)

the S&P Minimum Average Recovery Rate Test is satisfied;

(20)

the aggregate Principal Balance of all Collateral Interests that are Undeveloped Real Estate Collateral Interests does not exceed the greater of (A) 15% of the Collateral Interest Principal Balance and (B) $67,500,000;

(21)

the Moody’s Weighted Average Initial Maturity Test is satisfied;

(22)

the Moody’s Weighted Average Extended Maturity Test is satisfied;

(23)

the Fitch Loan Diversity Index Test is satisfied;

(24)

the Fitch Poolwide Expected Loss Test is satisfied; and

(25)

the Moody’s Minimum Average Recovery Rate Test is satisfied.

At all times, the dollar amount limitation set forth in any individual Collateral Quality Test will be disregarded for the purposes of the Reinvestment Criteria, but each such dollar amount limitation will be taken into account solely for purposes of any reports to be prepared pursuant to this Indenture. Collateral Sub-Account means any sub-account established within a Collection Account. 21

Processed and formatted by SEC Watch - Visit SECWatch.com

Collection Account means the Securities Account designated the “Collection Account” and established in the name of the Trustee pursuant to Section 10.5, including the Collateral Principal Collections Sub-Account. Collections means, with respect to any Payment Date, the sum of (i) the Collateral Interest Collections collected during the applicable Due Period and (ii) the Collateral Principal Collections collected during the applicable Due Period. Commercial Mortgage Loans means commercial mortgage loans whether such commercial mortgage loans are Collateral Interests or underlie or comprise the other types of Collateral Interests (as the context may require). Commission means the United States Securities and Exchange Commission. Commitment Termination Time means the date on which any of the following first occurs: (i) the date on which the Future Advance Amounts are reduced to zero and the Collateral Manager has notified the Trustee in writing that it will not cause the Issuer to acquire any further Earn-Out Assets; (ii) the date on which the aggregate principal amount of the Class A-1 Notes and the Class A-R Notes have been paid in full; (iii) the Mandatory Class A-R Draw Date; or (iv) the Redemption Date. Controlling Class means the Class A Senior Notes voting as a single Class, so long as any Class A Senior Notes are Outstanding, then the Class A-2 Notes, so long as any Class A-2 Notes are Outstanding, then the Class B Notes, so long as any Class B Notes are Outstanding, then the Class C Notes voting as a single Class, so long as any Class C Notes are Outstanding, then the Class D Notes, so long as any Class D Notes are Outstanding, then the Class E Notes, so long as any Class E Notes are Outstanding, then the Class F Notes, so long as any Class F Notes are Outstanding, then the Class G Notes, so long as any Class G Notes are Outstanding, then the Class H Notes, so long as any Class H Notes are Outstanding, then the Class J Notes, so long as any Class J Notes are Outstanding, and then the Class K Notes, so long as any Class K Notes are Outstanding, in each case, based on the aggregate principal amount thereof. Controlling Person any person (other than a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of the Issuer, a person who provides investment advice for a fee (direct or indirect) with respect to the assets of the Issuer, or any “affiliate” (within the meaning of 29 C.F.R. Section 2510.3-101(f)(3)) of any such person. Corporate Services Agreement means that certain Corporate Services Agreement, dated as of March 17, 2006, as the same may be amended or supplemented from time to time, between the Issuer and the Administrator. Corporate Trust Office means the designated corporate trust office of the Trustee, currently located at: (i) for note transfer purposes, Wells Fargo Center, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: CDO Trust Services — N-Star REL CDO VI and (ii) for all other purposes, 9062 Old Annapolis Road, Columbia, Maryland 21045. Attention: CDO Trust Services — N-Star REL CDO VI, telephone number 410-884-2000, fax number 410-715-3748, or such other address as the Trustee may designate from time to time by notice to the Rated Noteholders, the Income Noteholders, the Collateral Manager, each Hedge Counterparty and the Co-Issuers or the principal corporate trust office of any successor Trustee. Coverage Tests means the Class A/B Coverage Tests, the Class C/D Coverage Tests and the Class E/F/G Coverage Tests. 22

Processed and formatted by SEC Watch - Visit SECWatch.com

Credit Lease Loans means mortgage loans secured by mortgages on commercial real estate properties that are subject to a lease to a single tenant. Credit Risk Interest means any Collateral Interest which, in the Collateral Manager’s reasonable business judgment, has a significant risk of declining in credit quality or over time may become an Impaired Interest. Cumulative Applicable Periodic Interest Shortfall Amount means the Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Periodic Interest Shortfall Amount, Class F Cumulative Applicable Periodic Interest Shortfall Amount, Class G Cumulative Applicable Periodic Interest Shortfall Amount, Class H Cumulative Applicable Periodic Interest Shortfall Amount, Class J Cumulative Applicable Periodic Interest Shortfall Amount and Class K Cumulative Applicable Periodic Interest Shortfall Amount. Cure Advance means, amounts advanced by a Holder of Income Notes pursuant to the Paying Agency Agreement to permit the Issuer to exercise its right to cure payment defaults with respect to any Senior Loan related to a Collateral Interest in accordance with the applicable Underlying Instrument. Current Pay Future Advance Amount means as of any Calculation Date, an amount equal to the Total Unfunded Future Advance Amounts related to the Earn-Out Assets held by the Issuer that are currently due and payable, or which the applicable servicer has notified the Collateral Manager and the Trustee in writing that it believes will be payable within one month of the related Payment Date, and which the Collateral Manager has notified the Trustee in writing that the Issuer will fund such Future Advance Amounts. Current Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Interests and the proceeds of the disposition thereof held as Cash and (b) Eligible Investments purchased with proceeds of the disposition of Pledged Collateral Interests, existing immediately prior to the sale, maturity or other disposition of a Pledged Collateral Interest or immediately prior to the acquisition of a Pledged Collateral Interest, as the case may be. Custodian has the meaning specified in Section 3.3(a). Deemed Floating Asset Hedge means, with respect to a Fixed Rate Collateral Interest, an interest rate swap having (i) a notional schedule equal to the Principal Balance as it is reduced by expected amortization of such Fixed Rate Collateral Interest over time and (ii) payment dates, with respect to termination payments only, identical to the Payment Dates of the Issuer under this Indenture; provided that, (x) at the time of entry into the Deemed Floating Asset Hedge, (i) the expected principal payments on the Fixed Rate Collateral Interest comprising a Deemed Floating Rate Collateral Interest will not extend beyond 10 years after the effective date of such Deemed Floating Asset Hedge and (ii) the scheduled notional amount of such Deemed Floating Asset Hedge at any time is equal to the expected principal amount of the related Fixed Rate Collateral Interest (as calculated at such time), (y) the Rating Agencies and the Trustee are notified prior to the Issuer’s entry into a Deemed Floating Asset Hedge, and each will be provided with the identity of the proposed hedge counterparty and copies of the hedge documentation and notional schedule and (z) such Deemed Floating Asset Hedge is priced at then-current market rates; provided, however, with respect to Agency MBS Securities, Deemed Floating Asset Hedges may also include put agreements or other investments that require the related Agency MBS Securities to be purchased at par plus accrued interest, as provided therein. In the event any Deemed Floating Asset Hedge is not a Form-Approved Hedge Agreement, the Collateral Manager will provide prior written notice to S&P and Fitch of the Issuer’s entry into such Deemed Floating Asset Hedge and 23

Processed and formatted by SEC Watch - Visit SECWatch.com

will obtain Rating Confirmation from S&P with respect to the entry of the Issuer into such Deemed Floating Asset Hedge. Deemed Floating Rate Agency MBS Security means a fixed-rate Agency MBS Security, the interest rate of which is hedged into a floating rate Agency MBS Security using a Deemed Floating Asset Hedge; provided that, at the time of entry into the related Deemed Floating Asset Hedge, the Average Life of such Deemed Floating Rate Agency MBS Security would not increase or decrease by more than one year from its expected average life if it were to prepay at either 50% or 150% of its pricing speed. Deemed Floating Rate Collateral Interest means a Fixed Rate Collateral Interest the interest rate of which is hedged into a Floating Rate Collateral Interest using a Deemed Floating Asset Hedge; provided that, at the time of entry into the related Deemed Floating Asset Hedge, the Average Life of such Deemed Floating Rate Collateral Interest would not increase or decrease by more than one year from its expected average life if it were to prepay at either 50% or 150% of its pricing speed. Deemed Floating Spread means the difference between the stated rate at which interest accrues on each Fixed Rate Collateral Interest that comprises a Deemed Floating Rate Collateral Interest (excluding all Impaired Interests and Deferred Interest PIK Bonds) and the fixed rate that the Issuer agrees to pay to the Hedge Counterparty on the Deemed Floating Asset Hedge at the time such swap is executed. Default means any Event of Default or any occurrence that, with notice or the lapse of time or both, would become an Event of Default. Defaulting Party has the meaning given to such term in the standard form 1992 ISDA Master Agreement (Multicurrency —Cross Border). Defaulted Interest means any interest due and payable in respect of any Class A Note or any Class B Note or, if no Class A Notes or Class B Notes are Outstanding, in respect of any Class C Note or, if no Class C Notes are Outstanding, in respect of any Class D Note, or if no Class D Notes are Outstanding, in respect of any Class E Note, or if no Class E Notes are Outstanding, in respect of any Class F Note, or if no Class F Notes are Outstanding, in respect of any Class G Note, or if no Class G Notes are Outstanding, in respect of any Class H Note, or if no Class H Notes are Outstanding, in respect of any Class J Note, or if no Class J Notes are Outstanding, in respect of any Class K Note and any interest on such Defaulted Interest that (in each case) is not punctually paid or duly provided for on the applicable Payment Date (including the applicable Stated Maturity Date) of the applicable Rated Note. Deferred Interest PIK Bond means a PIK Bond with respect to which interest has been deferred or capitalized or does not pay interest when scheduled (other than an Impaired Interest) for each consecutive payment date occurring over a period of (a) the lesser of (i) six months or (ii) three consecutive payment dates (if such Deferred Interest PIK Bond is rated (or privately rated for purposes of the issuance of the Notes) below “Baa3” by Moody’s or “BBB-” by S&P or Fitch) or (b) the lesser of (i) one year or (ii) six consecutive payment dates (if such Deferred Interest PIK Bond is rated (or privately rated for purposes of the issuance of the Notes) “Baa3” or higher by Moody’s, and “BBB-” or higher by S&P and Fitch), but only until such time as payment of interest on such PIK Bond has resumed and all capitalized and deferred interest and any interest thereon has been paid in cash in accordance with the terms of the Underlying Instruments. Deferred Interest PIK Bond Amount means, with respect to each Deferred Interest PIK Bond in the Collateral, the lesser of (i) the product of the Principal Balance of such Deferred Interest PIK Bond and the Applicable Recovery Rate of such Deferred Interest PIK Bond and (ii) the product of the Principal Balance of such Deferred Interest PIK Bond and the Market Value of such Deferred Interest PIK Bond. 24

Processed and formatted by SEC Watch - Visit SECWatch.com

Depositary means, with respect to the Indenture Issued Notes issued in the form of one or more Global Notes, the Person designated as Depositary pursuant to Section 2.2(e), or any successor thereto, appointed pursuant to the applicable provisions of this Indenture. Depositary Participant means a broker, dealer, bank or other financial institution or other Person for whom from time to time the Depositary effects book-entry transfers and pledges of notes deposited with the Depositary. Depositor means N-Star REL CDO Depositor Corp. and any successors or assigns, in its capacity as depositor under the Master Trust Agreement. Discretionary Sale has the meaning specified in Section 12.1 (a)(7). Distribution means any payment of principal, interest or fee or any dividend or premium payment made on, or any other distribution in respect of, an obligation or security. Dollar or U.S.$ means currency of the United States as at the time shall be legal tender for all debts, public and private. DTC means The Depository Trust Company, a New York corporation, and its nominees and their respective successors. Due Date means each date on which a Distribution is due on a Pledged Security. Due Period means, with respect to each Payment Date, the period beginning on the day following the last day of the preceding Due Period relating to the preceding Payment Date (or, in the case of the Due Period that is applicable to the first Payment Date, beginning on the Closing Date) and ending at the close of business on the fourth (4th) Business Day preceding such Payment Date. Earn-Out Asset means, a Collateral Interest that (a) requires the Issuer to make one or more future advances to the obligor under the Underlying Instruments relating thereto, subject to satisfaction of conditions precedent therein, (b) specifies a maximum amount that can be borrowed on one or more fixed borrowing dates and (c) does not permit the re-borrowing of any amount previously repaid by the obligor thereof; provided, however, that any such Earn-Out Asset will be an Earn-Out Asset only until all commitments by the Issuer to make advances to the obligor thereof expire or are terminated or reduced to zero. Earn-Out Asset Account means the Securities Account designated the “Earn-Out Asset Account” and established in the name of the Trustee pursuant to Section 10.8. Effective Date means the date that is the earliest of (i) the 270th day following the Closing Date, (ii) the date on which the Issuer has purchased, with amounts on deposit in the Uninvested Proceeds Account, Collateral Interests having an aggregate Principal Balance (calculated on the respective purchase date for each such Collateral Interest) equal to U.S.$450,000,000 (which amount includes all Future Funding Obligations with respect to Earn-Out Assets) or (iii) such earlier date (if any) that is designated by the Collateral Manager by notice to the Trustee pursuant to this Indenture; provided that the Collateral Manager has received Rating Confirmation within 30 Business Days after the Effective Date; provided, further, that in the event that such day does not fall on a Business Day, the Effective Date shall be the next succeeding Business Day. Eligibility Criteria has the meaning specified in Section 12.2. 25

Processed and formatted by SEC Watch - Visit SECWatch.com

Eligible Investments means any U.S. Dollar-denominated investment that, at the time it is delivered to the Trustee, is one or more of the following obligations or securities, including, without limitation, those investments for which the Trustee or an Affiliate of the Trustee provides services: (i)

cash;

(ii)

direct Registered obligations of, and Registered obligations the timely payment of principal of and interest on which is fully and expressly guaranteed by, the United States of America, or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America;

(iii)

demand and time deposits in, interest bearing trust accounts and certificates of deposit of, bankers’ acceptances issued by, or federal funds sold by any depository institution or trust company (including the Trustee) incorporated under the laws of the United States of America or any state thereof and subject to the supervision and examination by federal and/or state banking authorities so long as the commercial paper and/or debt obligations of such depository institution or trust company (or, in the case of the principal depository institution in a holding company system, the commercial paper or debt obligations of such holding company) at the time of such investment or contractual commitment providing for such investment have a credit rating of: (a)

in the case of long-term debt obligations, not less than “Aa2” by Moody’s, “AA” by Fitch and “AAA” by S&P; or

(b)

in the case of commercial paper and short-term debt obligations including time deposits, P-1 by Moody’s, “F1+” by Fitch and “A-1” by S&P (provided that, in the case of commercial paper and short-term debt obligations with a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment a long-term credit rating of not less than “AA+” by S&P and a short- and long-term credit rating of not less than “F 1+” and “AA”, respectively, by Fitch);

(iv)

Registered securities other than mortgage-backed securities and interest-only securities bearing interest or sold at a discount issued by any corporation under the laws of the United States of America or any state thereof that have a credit rating of “Aa2” by Moody’s, “AA” by Fitch and “AA+” by S&P at the time of such investment or contractual commitment providing for such investment;

(v)

unleveraged repurchase obligations (if treated as debt for tax purposes by the issuer) with respect to any security described in clause (ii) above, entered into with a depository institution or trust company (acting as principal) described in clause (iii) or entered into with broker-dealers registered with the Commission (acting as principal) whose short-term debt has a credit rating of “P-1” by Moody’s, “F1+” by Fitch and “A-1+” by S&P at the time of such investment in the case of any repurchase obligation for a security having a maturity not more than 183 days from the date of its issuance or whose long-term debt has a credit rating of at least “Aa2” by Moody’s and “AA+” by S&P at the time of such investment in the case of any repurchase obligation for a security having a maturity more than 183 days from the date of its issuance;

(vi)

commercial paper or other short-term obligations having at the time of such investment a credit rating of “P-1” by Moody’s, “F1+” by Fitch and “A-1+” by S&P that are registered and are either bearing interest or are sold at a discount from the face amount thereof and that have a maturity of not more than 183 days from its date of issuance; provided that in the case of commercial paper with a maturity of longer than 91 days, the issuer of such commercial paper (or, in the case of a 26

Processed and formatted by SEC Watch - Visit SECWatch.com

principal depository institution in a holding company system, the holding company of such system), if rated by the Rating Agencies, must have at the time of such investment a long-term credit rating of at least “Aa2” by Moody’s and “AA+” by S&P; (vii)

money market funds with respect to any investments described in clauses (ii) through (vi) above having, at the time of such investment, a credit rating of not less than “AAA” by Moody’s, the highest rating possible by Fitch (if such funds are rated by Fitch) and “AAA/AAAm/AAAm-G” by S&P (if such funds are rated by S&P), respectively (including those for which the Trustee is investment manager or advisor), provided that such fund or vehicle is formed and has its principal office outside the United States;

(viii)

prior to the Effective Date, Agency MBS Securities, and on or after the Effective Date, Deemed Floating Rate Agency MBS Securities; and

(ix)

any other investments for which Rating Confirmation is received;

provided that (a) Eligible Investments purchased with funds in the Collection Account will be held until maturity except as otherwise specifically provided herein and will include only such obligations or securities as mature no later than the Business Day prior to the Payment Date next succeeding the date of investment in such obligations or securities, unless such Eligible Investments are investments of the type described in clause (i) or (iii) above, in which event such Eligible Investments may mature on such Payment Date and (b) none of the foregoing obligations or securities will constitute Eligible Investments if all, or substantially all, of the remaining amounts payable thereunder will consist of interest and not principal payments, if such security is purchased at a price in excess of 100% of par, if such security is subject to substantial non-credit related risk, as determined by the Collateral Manager in its judgment, if any income from or proceeds of disposition of the obligation or security is or will be subject to deduction or withholding for or on account of any withholding or similar tax or, from the time, if any, that the Issuer is no longer a Qualified REIT Subsidiary, the acquisition (including the manner of acquisition), ownership, enforcement or disposition of the obligation or security will subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation. Eligible SPV Jurisdiction means Bahamas, Bermuda, the Cayman Islands, the Channel Islands, the Netherlands Antilles, Luxembourg or any other similar jurisdiction (so long as Rating Confirmation is obtained in connection with the inclusion of such other jurisdiction) generally imposing either no or nominal taxes on the income of companies organized under the laws of such jurisdiction. Emerging Market Issuer means a sovereign or non-sovereign issuer located in a country that is in Latin America, Asia, Africa, Eastern Europe or the Caribbean or in a country the dollar-denominated sovereign debt obligations of which are rated lower than “Aa2” by Moody’s and lower than “AA” by S&P; provided that an issuer of Asset-Backed Securities located in any Eligible SPV Jurisdiction shall not be an Emerging Market Issuer for purposes hereof if the underlying collateral of such Asset-Backed Securities consists solely of obligations of obligors located in the United States and Qualifying Foreign Obligors. Entitlement Holder has the meaning specified in Section 8-102(a)(7) of the UCC. Entitlement Order has the meaning specified in Section 8-102(a)(8) of the UCC. Equity Interest means any security that does not entitle the holder thereof to receive periodic payments of interest and one or more installments of principal acquired by the Issuer as a result of the exercise or conversion of Collateral Interests, in conjunction with the purchase of Collateral Interests or in exchange 27

Processed and formatted by SEC Watch - Visit SECWatch.com

for a Collateral Interest; provided that the term “Equity Interest” will not include any Preferred Equity Security or any asset-backed security structured as a certificate or other form of beneficial interest. ERISA means the U.S. Employee Retirement Income Security Act of 1974, as amended. ERISA Restriction Certificate means the ERISA Restriction Certificate substantially in the form set forth in Exhibit C-4 hereto. Euroclear means Euroclear Bank S.A/N.V., as operator of the Euroclear system. Event of Default has the meaning specified in Section 5.1. Excepted Property means the U.S.$1,000 of capital contributed to the Issuer in respect of the Issuer’s Ordinary Shares in accordance with the Articles and U.S.$1,000 representing a profit fee to the Issuer. Exchange Act means the United States Securities Exchange Act of 1934, as amended. Expense Reserve Account means the Securities Account designated the “Expense Reserve Account” and established in the name of the Trustee pursuant to Section 10.6. Extended Maturity Date means, with respect to any Collateral Interest, the maturity date of such Collateral Interest, assuming the exercise of all extension options (if any) that are exercisable at the option of the related borrower under the terms of such Collateral Interest. Extended Weighted Average Maturity means, as of any Measurement Date with respect to the Collateral Interests (other than Impaired Interests), the number obtained by (i) summing the products obtained by multiplying (a) the remaining term to maturity (in years, rounded to the nearest one tenth thereof, and based on the Extended Maturity Date) of each Collateral Interest (other than Impaired Interests) by (b) the outstanding Principal Balance at such time of such Collateral Interest and (ii) dividing the sum by the aggregate Principal Balance at such time of all Collateral Interests (other than Impaired Interests). Fee Basis Amount means an amount equal, for any Payment Date, to the average of the aggregate Collateral Interest Principal Balance (including the aggregate Principal Balance of Impaired Interests) on the first day of the related Due Period and the aggregate Collateral Interest Principal Balance (including the aggregate Principal Balance of Impaired Interests) on the last day of such Due Period. Fitch means Fitch Ratings and any successor or successors thereto. Fitch Loan Diversity Index Score means the amount determined by the Collateral Manager on any Measurement Date, by the sum of the series of products obtained for each Collateral Interest, by squaring the quotient of (x) the Principal Balance on such Measurement Date of each such Collateral Interest and (y) the aggregate Principal Balance of all Collateral Interests on such Measurement Date, multiplied by 10,000. In the event that cash has been received in respect of principal proceeds since the immediately preceding Measurement Date but has not been reinvested in additional Collateral Interests as of the current Measurement Date, the aggregate amount then held in cash shall be divided into one or more “Cash Security Exposures.” Each Cash Security Exposure will be sized in an amount equal to the result obtained by averaging the Principal Balance of all Collateral Interests on such Measurement Date; provided that if the cash position as of such Measurement Date is less than such average, or if there is cash remaining in an amount less than such average, the Cash Security Exposure, or the additional Cash Security Exposure, as applicable, represented thereby will be sized in the actual amount of such cash position. The Fitch Loan Diversity Index Score will then mean the amount determined by the Collateral 28

Processed and formatted by SEC Watch - Visit SECWatch.com

Manager on any Measurement Date, by the sum of the series of products obtained for each Collateral Interest, by squaring the quotient of (x) the Principal Balance on such Measurement Date of each such Collateral Interest and each Cash Security Exposure and (y) the aggregate Principal Balance of all Collateral Interests and all Cash Security Exposures on such Measurement Date, multiplied by 10,000. Fitch Loan Diversity Index Test means a test that will be satisfied if on any Measurement Date the Fitch Loan Diversity Index Score for the Collateral Interests is less than 455. Fitch Poolwide Expected Loss means the output generated using Fitch’s modified CMBS multi-borrower model (as applied to all Collateral Interests that are Commercial Mortgage Loans, Subordinate Mortgage Loan Interests, Mezzanine Loans, Participation Interests and Preferred Equity Securities). Fitch Poolwide Expected Loss Test means a test that will be satisfied on any Calculation Date if the Fitch Poolwide Expected Loss of the Collateral Interests is equal to or less than 44.125%. Fitch Rating of any Collateral Interest will be determined as follows: (i)

if such Collateral Interest is rated by Fitch, the Fitch Rating shall be such rating;

(ii)

if such Collateral Interest is not rated by Fitch and a rating is published by both S&P and Moody’s, the Fitch Rating shall be the lower of such ratings; and if a rating is published by only one of S&P and Moody’s, the Fitch Rating shall be that published rating by S&P or Moody’s, as the case may be; and

(iii)

if the Fitch Rating cannot be assigned in accordance with clauses (i) and (ii) above, the Issuer (or the Collateral Manager on behalf of the Issuer) shall apply to Fitch for a credit assessment which thereafter will be the Fitch Rating.

provided that (x) if such Collateral Interest has been put on rating watch negative for possible downgrade by any Rating Agency, then the rating used to determine the Fitch Rating under either of clauses (i) or (ii) above shall be one rating subcategory below such rating by that Rating Agency, and (y) if such Collateral Interest has been put on rating watch positive for possible upgrade by any Rating Agency, then the rating used to determine the Fitch Rating under either of clauses (i) or (ii) above shall be one rating subcategory above such rating by that Rating Agency, and (z) notwithstanding the rating definition described above, Fitch reserves the right to issue a rating estimate for any Collateral Interest at any time which may differ from the one determined pursuant to this definition and such rating estimate shall be the Fitch Rating of such Collateral Interest. Fitch Recovery Rate means, (i) with respect to any Collateral Interest that is a Commercial Mortgage Loan on any Measurement Date, the Market Value thereof and (ii) with respect to any Collateral Interest that is a CMBS or a Real Estate CDO Security on any Measurement Date, an amount equal to the percentage corresponding to the domicile, original rating, seniority, and tranche thickness of such Collateral Interest, as applicable, as currently set forth in “Global Rating Criteria for Collateralised Debt Obligations” available at www.fitchratings.com. Fitch may, from time to time, modify or replace this criteria and Fitch may apply the current criteria which may have modified or replaced this report. Financial Asset has the meaning specified in Section 8-102(a)(9) of the UCC. Financing Statement means a financing statement relating to the Collateral naming the Issuer as debtor and the Trustee on behalf of the Secured Parties as secured party. 29

Fixed Rate Collateral Interest means any Collateral Interest which bears a fixed rate of interest. Floating Rate Collateral Interest means any Collateral Interest that bears interest based upon a floating rate index. Floating Rate Notes means, collectively, the Class A-1 Notes, Class A-R Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes. Form-Approved Hedge Agreement means a Hedge Agreement relating to a specific Hedge Counterparty with respect to which (a) the related Collateral Interest could be purchased by the Issuer without any required action by the Rating Agencies and (b) the documentation of which conforms in all material respects to a form for which Rating Confirmation was previously obtained (as certified to the Trustee by the Collateral Manager) for use of such form by the Issuer; provided that (i) such Form-Approved Hedge Agreement shall not provide for any upfront payments to be made to any Hedge Counterparty, (ii) any revised Form-Approved Hedge Agreement with respect to a particular Hedge Counterparty shall be approved by each of the Rating Agencies at least 10 days prior to the initial use thereof as evidenced by Rating Confirmation, (iii) any Rating Agency may withdraw its consent to the use of a particular Form-Approved Hedge Agreement by written notice to the Trustee, the Collateral Manager and the relevant Hedge Counterparty (provided that such withdrawal of consent shall not affect any existing Hedge Agreement entered into with such Hedge Counterparty) and (iv) the Issuer (or the Collateral Manager on its behalf) shall deliver to the Trustee and each Rating Agency a copy of each Form-Approved Hedge Agreement specifying the Hedge Counterparty to which it relates upon receipt of Rating Confirmation with respect thereto, and the Trustee’s records (when taken together with any

Processed and formatted by SEC Watch - Visit SECWatch.com

correspondence received from the Rating Agencies pursuant to clause (ii)) shall be conclusive evidence of such form. Funding Entity means, with respect to any Class A-R Noteholder, any Liquidity Provider party to a Liquidity Facility entered into by such Holder in connection with the Class A-R Note Purchase Agreement or a guarantor of such Liquidity Provider. Future Advance means, with respect to any Earn-Out Asset, the requirement of the Issuer to make one or more future advances to the obligor under the Underlying Instruments relating thereto, subject to satisfaction of conditions precedent specified therein. Future Advance Amount means, with respect to any Earn-Out Asset, the amount of money required to be funded to the borrower pursuant to the terms of the Earn-Out Asset after the initial funding of the Earn-Out Asset. Future Funding Obligation means, with respect to any Earn-Out Asset, the obligation to make one or more Future Advances retained by the Issuer. GAAP has the meaning specified in Section 6.3(k). Global Notes means the Rule 144A Global Notes and the Regulation S Global Notes. Grant means to grant, bargain, sell, warrant, alienate, remise, demise, release, convey, assign, transfer, mortgage, pledge, create and grant a security interest in and right of set-off against, deposit, set over and confirm. A Grant of the Pledged Securities, or of any other instrument, shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate continuing right to claim for, collect, receive and receipt for principal, interest and fee payments in 30

Processed and formatted by SEC Watch - Visit SECWatch.com

respect of the Pledged Securities or such other instruments, and all other amounts payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto. Hedge Agreement means the interest rate protection agreement, as amended from time to time, together with any replacement hedge agreement on substantially identical terms (or that otherwise satisfies the conditions of Section 16.1), entered into pursuant to Section 16.1 or a Deemed Floating Asset Hedge. The Hedge Agreement shall provide that any amount payable to the Hedge Counterparty thereunder shall be subject to the Priority of Payments and that any amount payable upon the early termination or liquidation thereof shall be payable only on a Payment Date in accordance with the Priority of Payments. Hedge Counterparty means (a) any hedge counterparty (or any permitted assignee or successor) under a Hedge Agreement that satisfies the Hedge Counterparty Ratings Requirement and (b) any substitute or additional parties therefore appointed in accordance with Section 16.1. Hedge Counterparty Collateral Account means each Securities Account designated the “Hedge Counterparty Collateral Account” and established in the name of the Trustee pursuant to Section 16.1(d). Hedge Counterparty Ratings Requirement means, with respect to any Hedge Ratings Determining Party: (a) either (x) the short-term rating of such Hedge Ratings Determining Party is not lower than “A-1” by Standard & Poor’s or (y) if such Hedge Ratings Determining Party does not have a short-term rating from Standard & Poor’s, the long-term rating of such Hedge Ratings Determining Party by Standard & Poor’s is not lower than “A+”, (b) (x) a rating on the short-term unsecured, unsubordinated debt obligations of the Hedge Ratings Determining Party of “P1” by Moody’s and a rating on the long-term unsecured, unsubordinated debt obligations of the Hedge Ratings Determining Party of at least “A1” by Moody’s or (y) if there is no short-term rating by Moody’s, a rating on the long-term unsecured, unsubordinated debt obligations of the Hedge Ratings Determining Party of at least “Aa3” by Moody’s; provided, that any rating shall be reduced by one subcategory to the extent it is on credit watch with negative implications by Moody’s and (c) the short-term credit rating of such Hedge Counterparty is at least “F1” by Fitch and the long-term credit rating of such Hedge Counterparty is at least “A” by Fitch, provided that, with respect to clause (c), if the credit rating falls below either such Fitch rating, then the Hedge Counterparty shall within 30 days, at its sole option and expense, either (x) cause an entity whose credit ratings equal or exceed the above criteria to issue in favor of the Issuer a guaranty acceptable in form and substance to the Issuer and Fitch; (y) cause an entity with a credit rating that equals or exceeds the above criteria to enter a replacement Hedge Agreement; or (z) shall post collateral to the Issuer, acceptable to Fitch, as confirmed in writing by Fitch. If the credit rating of the then current Hedge Counterparty should fall below “F2” (short-term) or “BBB+” (long-term) by Fitch, then the Hedge Counterparty shall within 30 days, at its sole expense cause an entity with a credit rating that equals or exceeds the above criteria (“F1” and “A”) to enter a replacement Hedge Agreement. Hedge Payment Amount means, with respect to any Hedge Agreement and any Payment Date, the amount, if any, then payable by the Issuer to such Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement. Hedge Ratings Determining Party means (a) unless clause (b) applies with respect to the Hedge Agreement, the Hedge Counterparty or any transferee thereof or (b) any Affiliate of the Hedge Counterparty or any transferee thereof that unconditionally and absolutely guarantees (with the form of such guarantee meeting S&P’s then-current published criteria with respect to guarantees) the obligations of the Hedge Counterparty or such transferee, as the case may be, under the Hedge Agreement. For the 31

Processed and formatted by SEC Watch - Visit SECWatch.com

purpose of this definition, no direct or indirect recourse against one or more shareholders of the Hedge Counterparty or any such transferee (or against any Person in control of, or controlled by, or under common control with, any such shareholder) shall be deemed to constitute a guarantee, security or support of the obligations of the Hedge Counterparty or any such transferee. Hedge Receipt Amount means, with respect to any Hedge Agreement and any Payment Date, the amount, if any, then payable to the Issuer by the related Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement. Herfindahl Index means an index calculated by the Collateral Manager by dividing (i) one by (ii) the sum of the series of products obtained for each Collateral Interest, by squaring the quotient of (x) the principal balance on such Calculation Date of each such Collateral Interest and (y) the aggregate Principal Balance of all Collateral Interests on such Calculation Date. For purposes of calculating the Herfindahl Index, all Collateral Interests from a single issue of CMBS shall be treated as a single Collateral Interest and each $12,000,000 increment of Cash in any Account shall be treated as a single Collateral Interest. Herfindahl Score means a measurement of the diversity of a pool of loans of unequal size calculated in accordance with the Herfindahl Index. Highest Auction Price means, in connection with a Redemption, the bid or bids for the Collateral Interests resulting in the highest auction price of one or more Subpools of Collateral Interests. Holder or Noteholder means (i) with respect to any Rated Note, any Rated Noteholder, (ii) with respect to any Income Note, any Income Noteholder and (iii) with respect to any Indenture Issued Note, any Indenture Issued Noteholder, as the context may require. Holder Sub-Account has the meaning specified in Section 17.5(a) hereof. Impaired Interest means any Collateral Interest or any other security included in the Collateral: (i)

with respect to a Preferred Equity Security, (1) with respect to which there has occurred and is continuing a payment default (after giving effect to any applicable grace period but without giving effect to any waiver); provided, however, that notwithstanding the foregoing, a Preferred Equity Security shall not be deemed to be an Impaired Interest as a result of (A) the related issuer’s failure to pay dividends or distributions on the initial due date therefor, if the Collateral Manager or the Issuer consents to extend the due date when such dividend or distribution is due and payable, and such dividend or distribution is paid on or before such extended due date (provided that such dividend or distribution is paid not more than 60 days (or if the due date for such dividend or distribution was previously so extended, not more than 30 days) after the initial date that it was due), or (B) the failure of the issuer or affiliate of the issuer of the Preferred Equity Security to redeem or purchase such Preferred Equity Security on the date when such redemption or purchase is required pursuant to the terms of the agreement setting forth the rights of the holder of that Preferred Equity Security (after giving effect to all extensions of such redemption or purchase date that the issuer or affiliate of the issuer of the Preferred Equity Security had the right to elect and did elect under the terms of the agreement setting forth the rights of the holder of that Preferred Equity Security), if the Collateral Manager or the Issuer consents to extend such redemption or purchase date, provided that such consent does not extend the redemption or purchase date by more than two years after the redemption or purchase date required under such agreement (that is, the original redemption or purchase date under such agreement as extended by all extensions of such date that the issuer or affiliate of the issuer of the Preferred Equity Security had the right to elect and did elect under the terms of such agreement) 32

Processed and formatted by SEC Watch - Visit SECWatch.com

and the amount required to be paid in connection with such redemption or purchase is paid on or before such ext ended redemption or purchase date, or (2) with respect to which there is known to the Issuer or the Collateral Manager a default (other than any payment default) which default entitles the holders thereof to accelerate the maturity of all or a portion of the principal amount of such obligation and such holders have actually accelerated such obligation; provided, however, in each case, if such default is cured or waived then such asset shall no longer be an Impaired Interest or (3) with respect to which there is known to the Collateral Manager (A) any bankruptcy, insolvency or receivership proceeding has been initiated in connection with the issuer of such Collateral Interest, or (B) there has been proposed or effected any distressed exchange or other debt restructuring where the issuer of such Collateral Interest has offered the debt holders a new security or package of securities that either (x) amounts to a diminished financial obligation or (y) has the purpose of helping the issuer to avoid default, or (4) that has been rated “CC”, “D” or “SD” or below by S&P or “CC” or below from Fitch or (5) there is known to the Collateral Manager that the issuer thereof is in default (after giving effect to any applicable grace period or waiver) as to payment of principal and/or interest on another obligation (and such default has not been cured or waived) which is senior or pari passu in right of payment to such Collateral Interest, except that a Collateral Interest will not constitute an “Impaired Interest” under this clause (5) if each of the Rating Agencies has confirmed in writing that such event shall not result in the reduction, qualification or withdrawal of any rating of the Notes; (ii)

with respect to a Commercial Mortgage Loan, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan, if a foreclosure or default (whether or not declared) with respect such Commercial Mortgage Loan (in the case of a Commercial Mortgage Loan) or otherwise in the case of the related Commercial Mortgage Loan has occurred and is continuing for sixty days; provided, however, that notwithstanding the foregoing, a Commercial Mortgage Loan, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan shall not be deemed to be an Impaired Interest as a result of (1) the related borrower’s failure to pay interest on such Commercial Mortgage Loan, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or on the related commercial mortgage loan on the initial due date therefor, if the related lender or holder of such Commercial Mortgage Loan, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan consents to extend the due date when such interest is due and payable, and such interest is paid on or before such extended due date (provided that such interest is paid not more than 60 days (or if the due date for such interest was previously so extended, not more than 30 days) after the initial date that it was due), or (2) the related borrower’s failure to pay principal on such Commercial Mortgage Loan, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan on the original maturity date thereof (as defined below), if the related lender or holder of such Commercial Mortgage Loan, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan consents to extend such maturity date (so long as the Maturity Extension Requirements are met) and such principal is paid on or before such extended maturity date, or (3) the occurrence of any default other than a payment default with respect to such Commercial Mortgage Loan, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan, unless and until the earlier of (A) declaration of default and acceleration of the maturity of the Commercial Mortgage Loan, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan by the lender or holder thereof and (B) the continuance of such default uncured for 60 days after such default became known to the Issuer or the Collateral Manager or, upon receipt of Rating 33

Processed and formatted by SEC Watch - Visit SECWatch.com

Confirmation, such longer period as the Collateral Manager determines. As used herein, the term “original maturity date” means the maturity date of a Commercial Mortgage Loan, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan as extended by all extensions thereof which the related borrower had the right to elect and did elect under the terms of the instruments and agreements relating to such Commercial Mortgage Loan, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan, but before taking into account any additional extensions thereof that are consented to by the lender or holder of such Commercial Mortgage Loan, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan; and (iii)

with respect to a CMBS, Real Estate CDO Security or REIT Debt Security (1) as to which there has occurred and is continuing a principal payment default (after giving effect to any applicable grace period or waiver) or (2) as to which there is known to the Issuer or the Collateral Manager a default (other than any payment default) which default entitles the holders thereof to accelerate the maturity of all or a portion of the principal amount of such obligation and such holders have actually accelerated such obligation; provided, however, in the case of clause (1) or (2), if such default is cured or waived then such asset shall no longer be an Impaired Interest or (3) as to which there is known to the Collateral Manager (A) any bankruptcy, insolvency or receivership proceeding has been initiated in connection with the issuer of such CMBS, Real Estate CDO Security or REIT Debt Security, or (B) there has been proposed or effected any distressed exchange or other debt re-structuring where the issuer of such CMBS, Real Estate CDO Security or REIT Debt Security has offered the debt holders a new security or package of securities that either (x) amounts to a diminished financial obligation or (y) has the purpose of helping the issuer to avoid default, or (4) that has been rated “CC”, “D” or “SD” or below by S&P, “Ca” or “C” by Moody’s or “CC” or below from Fitch, or with respect to REIT Debt Securities, the issuer of which has a credit rating of “D” or “SD” or as to which S&P has withdrawn its rating after being rated “CC”, “D” or “SD”; or (5) as to which there is known to the Collateral Manager that the issuer thereof is in default (after giving effect to any applicable grace period or waiver) as to payment of principal and/or interest on another obligation (and such default has not been cured or waived) which is senior or pari passu in right of payment to such CMBS, Real Estate CDO Security or REIT Debt Security; provided, however, upon receipt of Rating Confirmation for such CMBS, Real Estate CDO Security or REIT Debt Security, the Collateral Manager may choose not to treat such a CMBS, Real Estate CDO Security or REIT Debt Security as an “Impaired Interest” under this clause (iii) or (B) as to which there has been a failure to pay interest in whole or in part for the lesser of (x) one year or (y) six consecutive payment periods (if such CMBS, Real Estate CDO Security or REIT Debt Security is rated (or privately rated for purposes of the issuance of the Notes) “BBB-” or higher by S&P or Fitch, or “Baa3” or higher by Moody’s) even if by its terms it provides for the deferral and capitalization of interest thereon;

provided that, for the avoidance of doubt, any Collateral Interest which has sustained a write down of principal balance in accordance with its terms will not necessarily be considered an Impaired Interest solely due to such write-down. For purposes of calculating the Interest Coverage Ratio and Principal Coverage Ratio, an appraisal reduction of a Collateral Interest will be assumed to result in an implied reduction of principal balance for such Collateral Interest only if such appraisal reduction is intended to reduce the interest payable on such Collateral Interest and only in proportion to such interest reduction. For purposes of the Interest Coverage Ratio and Principal Coverage Ratio, any Collateral Interest that has sustained an implied reduction of principal balance due to an appraisal reduction will not be considered an Impaired Interest 34

Processed and formatted by SEC Watch - Visit SECWatch.com

solely due to such implied reduction. The Collateral Manager will notify the Trustee of any appraisal reductions of Collateral Interests if the Collateral Manager has actual knowledge thereof. For purposes of this definition of “Impaired Interest,” the Maturity Extension Requirements will be satisfied with respect to any extension if the maturity date is extended in the case of Commercial Mortgage Loans, Subordinate Mortgage Loan Interests, Mezzanine Loans, Participation Interests, Credit Lease Loans and Tenant Lease Loans, to a new maturity date that is (A) not more than two years after the original maturity date and (B) not less than 10 years prior to the Stated Maturity Date; provided, however, that notwithstanding the foregoing requirements, “Maturity Extension Requirements” will be deemed satisfied with respect to any extensions as to which Rating Confirmation has been received. Impaired Interests Amount means the sum, with respect to each Impaired Interest in the Collateral, of the lesser of (i) the product of (A) the Principal Balance of such Impaired Interest and (B) the Applicable Recovery Rate of such Impaired Interest and (ii) the product of (A) the Principal Balance of such Impaired Interest and (B) the Market Value of such Impaired Interest. Income Note Distribution Account means the account designated the “Income Note Distribution Account” and established by the PAA Issued Note Paying Agent in the name of the PAA Issued Note Paying Agent for the benefit of the Issuer pursuant to the Paying Agency Agreement. Income Note Excess Funds means all remaining Collateral Interest Collections and Collateral Principal Collections as set forth in Section 11.1 (a)(33) and 11.1 (b)(28). Income Noteholder means, with respect to any Income Note, the Person in whose name such Income Note is registered in the Income Note Register. Income Notes means the U.S.$63,675,000 Income Notes Due 2041. Income Notes Stated Amount means U.S.$63,675,000 Indenture means this instrument and, if from time to time supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, as so supplemented or amended. Indenture Issued Notes means, collectively, the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes. Indenture Issued Noteholder means, with respect to any Indenture Issued Note, the Person in whose name such Note is registered; provided that Beneficial Owners or Agent Members will have no rights under this Indenture with respect to Global Notes, and the Indenture Issued Noteholder may be treated by the Issuer and the Trustee (and any agent of any of the foregoing) as the owner of such Global Notes for all purposes whatsoever. Independent means, as to any Person, any other Person (including, in the case of an accountant, or lawyer, a firm of accountants or lawyers and any member thereof) who (i) does not have and is not committed to acquire any material direct or any material indirect financial interest in such Person or in any Affiliate of such Person, (ii) is not connected with such Person as an Officer, employee, promoter, underwriter, voting trustee, partner, director or Person performing similar functions and (iii) if required to deliver an opinion or certificate to the Trustee pursuant to this Indenture, states in such opinion or certificate that the signer has read this definition and that the signer is Independent within the meaning hereof. “Independent” when used with respect to any accountant may include an accountant who audits 35

Processed and formatted by SEC Watch - Visit SECWatch.com

the books of such Person if in addition to satisfying the criteria set forth above the accountant is independent with respect to such Person within the meaning of Rule 101 of the Code of Ethics of the American Institute of Certified Public Accountants. Initial Hedge Counterparty means Wachovia Bank, National Association. Initial Maturity Date means, with respect to any Collateral Interest, the maturity date of such Collateral Interest without giving effect to any extension options available under the terms of such Collateral Interest. Initial Payment Date means the Payment Date occurring in June 2006. Initial Purchaser means Wachovia Capital Markets, LLC as initial purchaser of the Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes. Initial Weighted Average Maturity means, as of any Measurement Date with respect to the Collateral Interests (other than Impaired Interests), the number obtained by (i) summing the products obtained by multiplying (a) the remaining term to maturity (in years, rounded to the nearest one tenth thereof, and based on the Initial Maturity Date) of each Collateral Interest (other than Impaired Interests) by (b) the outstanding Principal Balance of such Collateral Interest and (ii) dividing the sum by the aggregate Principal Balance at such time of all Collateral Interests (other than Impaired Interests). Instrument has the meaning specified in Section 9-102(a)(47) of the UCC. Interest Advance has the meaning specified in Section 10.17. Interest Coverage Amount means, as of any Measurement Date, an amount equal to (i) the amount received or scheduled to be received as Collateral Interest Collections during the related Due Period, less (ii) the amounts scheduled to be paid on the related Payment Date pursuant to Section 11.1 (a)(1) through (3) and, for purposes of calculating the Interest Coverage Ratios, any amounts scheduled to be paid to the Interest Reserve Account on the related Payment Date pursuant to Section 11.1(a)(7); provided that (a) following the date on which a Collateral Interest becomes an Impaired Interest, scheduled Collateral Interest Collections shall not include any amount scheduled to be received on Impaired Interests or any amount scheduled to be received on securities that are currently deferring interest until (1) such amounts are actually received in Cash or (2) the cumulative aggregate amounts actually received on an Impaired Interest exceed the Principal Balance of such Impaired Interest, (b) the expected interest income on Floating Rate Collateral Interests and Eligible Investments shall be calculated using the then-current interest rate applicable thereto and (c) with respect to any Written Down Interest, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount. Interest Coverage Ratio means, on any Measurement Date for any Class of Notes, the ratio (expressed as a percentage) of (x) to (y), where (x) is equal to the Interest Coverage Amount as of such Measurement Date and where (y) is (1) in the case of the Class A/B Coverage Test, the sum of the Class A-R Commitment Fee and the Periodic Interest for the Class A Notes and Class B Notes for the Payment Date immediately following such Measurement Date (plus any Defaulted Interest and interest thereon), (2) in the case of the Class C/D Coverage Test, the amount determined by the foregoing clause (1) plus the sum of the Periodic Interest for the Class C Notes and Class D Notes for the Payment Date immediately following such Measurement Date (plus any Defaulted Interest and interest thereon) or (3) in the case of the Class E/F/G Coverage Test, the amount determined by the foregoing clause (2) plus the sum of the Periodic Interest for the Class E Notes, Class F Notes and Class G Notes for the Payment Date 36

Processed and formatted by SEC Watch - Visit SECWatch.com

immediately following such Measurement Date (plus any Defaulted Interest and interest thereon); provided, however, that the Interest Coverage Amount above shall be calculated after giving effect to any scheduled payment to the Interest Reserve Account for the Payment Date immediately following such Measurement Date. Interest Coverage Test means, for any Class of Notes Outstanding, a test that is satisfied as of any Measurement Date when the applicable Interest Coverage Ratio is equal to or greater than the applicable Required Coverage Rates. Interest Only Security means any security that by its terms provides for periodic payments of interest and does not provide for the repayment of a stated principal amount. Interest Period means (i) with respect to the Notes other than the Class A-R Notes, (a) with respect to the Initial Payment Date, the period from and including the Closing Date to but excluding the Initial Payment Date and (b) thereafter with respect to each Payment Date, the period beginning on the first day following the end of the preceding Interest Period and ending on (and including) the day before the next Payment Date and (ii) with respect to the Class A-R Notes and any Class A-R Draw, (a) initially the period from and including the date of any Class A-R Draw to but excluding the earlier of (1) the first Payment Date immediately following such Class A-R Draw and (2) the Class A-R Prepayment Date in respect of such Class A-R Draw and (b) thereafter, each period from and including the immediately preceding Payment Date to but excluding the earlier of (1) the immediately succeeding Payment Date and (2) the Class A-R Prepayment Date Interest Reserve Account means the account established by the Trustee, held in the name of the Trustee for the benefit and on behalf of the Secured Parties and into which the Trustee will deposit, on each Payment Date, the Interest Reserve Amount, if any, in accordance with the Priority of Payments. Interest Reserve Amount means, as of any Calculation Date, the aggregate amount of Semi-Annual Pay Security Interest Reserve Amounts. Interim Payment Date means a Business Day which is not a Payment Date on which the Class A-R Notes may be prepaid (in whole or in part) in accordance with Section 17.3 hereof. Investment Advisers Act means the United States Investment Advisers Act of 1940, as amended. Investment Company Act means the U.S. Investment Company Act of 1940, as amended, and the rules thereunder. Investment Guidelines Event means the earlier of (i) the date the Issuer or the Collateral Manager has actual knowledge of (A) the Owner REIT’s intent to no longer qualify as a REIT or (B) other event that would cause the circumstances described in the following clause (ii) of this definition and (ii) the date on which the Collateral Manager has actual knowledge that the Issuer has ceased to be disregarded as an entity separate from the Owner REIT for U.S. federal income tax purposes. Issue means Collateral Interests issued by the same issuer secured by the same collateral pool. Issuer means N-Star REL CDO VI Ltd., an exempted company incorporated and existing under the law of the Cayman Islands, unless a successor Person shall have become the Issuer pursuant to the applicable provisions of this Indenture, and thereafter “Issuer” shall mean such successor Person. 37

Processed and formatted by SEC Watch - Visit SECWatch.com

Issuer Order and Issuer Request mean, respectively, a written order or a written request, which may be in the form of a standing order or request in each case dated and signed in the name of the Issuer (or, as expressly provided herein, the Collateral Manager on its behalf) by an Authorized Officer of the Issuer (or, as expressly provided herein, the Collateral Manager) and (if appropriate) the Co-Issuer, as the context may require or permit. LIBOR means, with respect to each Interest Period (other than the first Interest Period), a floating rate equal to the London interbank offered rate for three-month U.S. Dollar deposits determined in the manner described in Schedule B. LIBOR for the first Interest Period is 4.91182%. LIBOR Calculation Date has the meaning specified in Schedule B. Liquidity Facility means a liquidity loan agreement, credit facility and/or purchase agreement providing for the several commitments of the Liquidity Providers party thereto in the aggregate to make loans to, or acquire interests in the assets of, a Holder of Class A-R Notes in an aggregate principal amount at any one time outstanding at least equal to the Class A-R Commitments of such Holder. Liquidity Provider means a bank or other institution or entity that a Holder of a Class A-R Note (or prospective transferee) is entitled under a Liquidity Facility to borrow from, or sell an interest in assets to. Listed Bidders has the meaning specified in Schedule E. London Banking Day has the meaning specified in Schedule B. Majority means (a) with respect to any Class or Classes of Rated Notes, the Holders of more than 50% of the Aggregate Outstanding Amount of the Rated Notes of such Class or Classes of Rated Notes, as the case may be and (b) with respect to Income Notes, the Holders of more than 50% Income Notes Stated Amount. Mandatory Class A-R Draw Date means the earliest to occur of (i) the last day of the Reinvestment Period, (ii) the date of an acceleration of the Notes following the occurrence and continuance of an Event of Default and (iii) the occurrence and continuance of an Event of Default specified in Section 5.1(d), (f) or (g). Margin Stock means “margin stock” as defined under Regulation U issued by the Board of Governors of the Federal Reserve System. Market Value means, on any date of determination, the average of three or more bid-side prices expressed as a percentage of the par amount, obtained from independent, nationally recognized financial institutions in the relevant market for one or more Collateral Interests, each unaffiliated with each other and the Collateral Manager, as certified by the Collateral Manager (to the extent that such bid-side prices may be obtained by the Collateral Manager using its commercially reasonable efforts and commercially reasonable business judgment). If three or more bid-side prices cannot be so obtained, then the Market Value on such date of determination will be the lower of two bid-side prices, if two bid-side prices are obtained in the manner described above, and the sole bid-side price if only one bid-side price is obtained in the manner described above. If no bids can be obtained in the manner described above, the Market Value will be the price, expressed as a percentage of the par amount, determined by the Collateral Manager in its commercially reasonable judgment. 38

Processed and formatted by SEC Watch - Visit SECWatch.com

Master Trust Agreement means that certain Master Trust Agreement, dated as of March 17, 2006, as the same may be amended or supplemented from time to time, between the Depositor and the Underlying Trustee. Maximum Class A-R Commitment means U.S.$70,000,000. Measurement Date means any of the following: (a) the Effective Date; (b) any date after the Effective Date upon which the Issuer disposes or acquires (which date of acquisition shall be deemed to be the date on which the Issuer enters into commitments to acquire such Collateral Interest) any Collateral Interest; (c) each Calculation Date; (d) the last Business Day of each March, June, September and December; and (e) with reasonable notice to the Issuer, the Collateral Manager and the Trustee, any other Business Day that any Rating Agency or Holders of more than 50% of the aggregate principal amount of any Class of Rated Notes requests to be a “Measurement Date”; 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 day that is a Business Day. Mezzanine Loans means mezzanine loans secured by ownership interests in entities owning commercial properties. Moneyline Telerate Page 3750 means the display page so designated on Moneyline Telerate Service (or such other page as may replace that page on that service, or such other service as may be nominated as the information vendor, for the purposes of displaying rates comparable to LIBOR). Monitoring Fee means, with respect to each Payment Date, an amount equal to 0.10% per annum of the Fee Basis Amount payable to the Collateral Manager pursuant to the Collateral Management Agreement. Moody’s means Moody’s Investors Service, Inc. and any successor or successors thereto. Moody’s Estimated Rating has the meanings specified in Section 12.2(c). Moody’s Maximum Weighted Average Rating Factor Test means a test that will be satisfied on any Measurement Date if the Moody’s Tranched Weighted Average Rating Factor of the Collateral Interests is equal to or less than 5600. Moody’s Minimum Average Recovery Rate means, as of any date or determination, a rate expressed as a percentage equal to the number obtained by (i) summing the products obtained by multiplying the Principal Balance of each Collateral Interest by its Moody’s Recovery Rate and (ii) dividing such sum by the Collateral Interest Principal Balance less cash and Eligible Investments representing Collateral Principal Collections and (iii) rounding up to the first decimal place. Moody’s Minimum Average Recovery Rate Test means a test that will be satisfied as of any Measurement Date if the Moody’s Minimum Average Recovery Rate is greater than or equal to 20%. Moody’s Post-Acquisition Compliance Test means the test that is satisfied if the Moody’s Maximum Weighted Average Rating Factor Test, calculated incorporating any provided Moody’s Estimated Rating, is satisfied, or, if the Moody’s Maximum Weighted Average Rating Factor Test was not satisfied prior to the purchase of the related Substitute Collateral Interest, the Moody’s Maximum Weighted Average Rating Factor Test will be maintained or improved immediately following such purchase. Moody’s Post-Acquisition Compliance Test Failure has the meanings specified in Section 12.2(c). 39

Moody’s Rating means, with respect to any Collateral Interest: (i)

if such Collateral Interest is rated by Moody’s, such rating;

(ii)

if such Collateral Interest is not rated by Moody’s, then the Moody’s Rating of such Collateral Interest shall be deemed to be the rating thereof as may be assigned by Moody’s upon the request of the Issuer or the Collateral Administrator, provided that the Collateral Administrator may, consistent with Moody’s published criteria for underwriting and tranching of commercial real estate loans, use its estimated tranched ratings for Collateral Interests representing up to 20% of the Collateral Interest Principal Balance represented by Commercial Mortgage Loans, Subordinate Mortgage Loan Interests, Preferred Equity Securities, and Mezzanine Loans; provided that the Collateral Manager shall submit such Collateral Interests to the Collateral Administrator for a Moody’s estimated rating within 30 days of acquisition;

(iii)

with respect to the CMBS that are CMBS conduit securities (i.e., CMBS representing interests in a pool of commercial mortgage loans), if such Collateral Interest is not rated by Moody’s, and no other security or obligation of the issuer or the obligor is rated by Moody’s and neither the Issuer nor the Collateral Administrator obtains a Moody’s Rating for such Collateral Interest pursuant to clause (ii) above, then the Moody’s Rating of such Collateral Interest may be determined using any one of the following methods:

Processed and formatted by SEC Watch - Visit SECWatch.com

(a) if such Collateral Interest is rated by both S&P and Fitch or if such Collateral Interest is only rated by either S&P or Fitch but Moody’s has rated other classes in the same transaction then the Moody’s Rating will be 2 subcategories lower than the lowest Moody’s equivalent rating then outstanding on the Collateral Interest; or (b) if such Collateral Interest is only rated by one other Rating Agency, then the Issuer or the Collateral Administrator on behalf of the Issuer may request that Moody’s assign a rating for such Collateral Interest, which shall be such Collateral Interest’s Moody’s Rating. (iv)

with respect to the Collateral Interests that are REIT Debt Securities or other corporate debt securities, if such Collateral Interest is not rated by Moody’s, and no other security or obligation of the issuer or the obligor is rated by Moody’s and neither the Issuer nor the Collateral Administrator obtains a Moody’s Rating for such Collateral Interest pursuant to clause (ii) above, then the Moody’s Rating of such Collateral Interest may be determined using any one of the following methods: (a) if such Collateral Interest is rated at least “BBB” by S&P, then the Moody’s Rating of such Collateral Interest will be one subcategory below the Moody’s equivalent of the rating assigned by S&P; or (b) if such Collateral Interest is rated “BB+” or below by S&P, then the Moody’s Rating of such Collateral Interest will be two subcategories below the Moody’s equivalent of the rating assigned by S&P.

Notwithstanding the foregoing, Collateral Interests representing no more that 20% of the Collateral Interest Principal Balance may be rated pursuant to clauses (iii) and (iv) above and no single Collateral Interest Principal Balance that represents more than 5% of the Collateral Interest Principal Balance can be rated pursuant to clause (iii) or (iv) above. 40

Processed and formatted by SEC Watch - Visit SECWatch.com

Moody’s Rating Factor means with respect to any Collateral Interest, the number set forth in the table below opposite the Moody’s Rating of such Collateral Interest. Moody’s Rating

Moody’s Rating Factor

Moody’s Rating

Moody’s Rating Factor

Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3

1 10 20 40 70 120 180 260 360 610

Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca or lower

940 1,350 1,766 2,220 2,720 3,490 4,770 6,500 8,070 10,000

Moody’s Recovery Rate means, with respect to a Collateral Interest on any Measurement Date, an amount equal to the percentage for such Collateral Interest set forth in the Moody’s Recovery Rate Matrix attached as Schedule C hereto) in (x) the applicable table and (y) the row in such table opposite the Moody’s Rating (determined in accordance with procedures prescribed by Moody’s for such Collateral Interest on the date of its purchase by the Issuer or, in the case of an Impaired Interest, the Moody’s Rating immediately prior to default). Moody’s Special Amortization Pro Rata Condition means a condition that will be satisfied with respect to any Payment Date if either (i) (A) the Collateral Quality Tests (other than the Moody’s Weighted Average Initial Maturity Test, the Moody’s Weighted Average Extended Maturity Test, the Weighted Average Fixed Rate Coupon, the Weighted Average Spread Test, the Weighted Average Life Test, the Fitch Poolwide Expected Loss Test, the Fitch Loan Diversity Index Test and the S&P CDO Monitor Test) and each of the Coverage Tests are satisfied as of the related Calculation Date and (B) the aggregate balance of the Collateral Interests as of the related Calculation Date is greater than an amount equal to 50% of the aggregate Principal Balance of the Collateral Interests on the Effective Date or (ii) Rating Confirmation has been provided by Moody’s. Moody’s Tranched Weighted Average Rating Factor means, on any Measurement Date the number obtained by dividing (i) the sum of the series of products obtained for any Collateral Interest that by multiplying (a) the tranched principal balance on such Measurement Date of each such Collateral Interest by (b) its respective Moody’s Rating Factor on such Measurement Date by (ii) the aggregate tranched principal balance on such Measurement Date of all Collateral Interests and rounding the result up to the nearest whole number. Moody’s Weighted Average Extended Maturity Test means a test that will be satisfied on any Measurement Date if the Extended Weighted Average Maturity of the Collateral Interests as of such Measurement Date is five years or less. Moody’s Weighted Average Initial Maturity Test means a test that will be satisfied on any Measurement Date if the Initial Weighted Average Maturity of the Collateral Interest as of such Measurement Date is four years or less. Mortgaged Property means the multifamily or commercial property or properties securing the Commercial Mortgage Loans. 41

Processed and formatted by SEC Watch - Visit SECWatch.com

Nonrecoverable Advance means any Interest Advance previously made or proposed to be made which, in the judgment of the Advancing Agent or the Trustee, as applicable, will not be ultimately recoverable from subsequent payments or collections with respect to the Collateral Interests. Any determination of recoverability by the Advancing Agent or the Trustee, as applicable, shall be subject to the standard set forth in Section 10.17. NorthStar Subsidiary shall have the meaning ascribed to such term in the S&P Letter. Note Paying Agent means any Person authorized by the Issuer to pay the principal of or interest on any Indenture Issued Notes on behalf of the Issuer as specified in Section 7.2. Note Payment Sequence means the application of Collections to pay principal of the Rated Notes in the following order, in each case until paid in full: (i) Class A Senior Notes, pro rata, (ii) Class A-2 Notes, (iii) Class B Notes, (iv) Class C Notes, (v) Class D Notes, (vi) Class E Notes, (vii) Class F Notes, (viii) Class G Notes, (ix) Class H Notes, (x) Class J Notes and (xi) Class K Notes. Note Register and Note Registrar have the respective meanings specified in Section 2.4(a). Note Transfer Agent has the meaning specified in Section 2.4(a). Note Valuation Report has the meaning specified in Section 10.11(a). Notes means, collectively, the Rated Notes and the Income Notes. Offer means, with respect to any security, (a) any offer by the issuer of such security or by any other Person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related Underlying Instruments) or to convert or exchange such security into or for Cash, securities or any other type of consideration or (b) any solicitation by the issuer of such security or any other Person to amend, modify or waive any provision of such security or any related Underlying Instrument. Offered Notes means, collectively, the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes. Offering means the offering of the Rated Notes (other than the Class H Notes, Class J Notes and Class K Notes) under the Offering Circular. Offering Circular means the Offering Circular, prepared and delivered on or prior to the Closing Date in connection with the offer and sale of the Offered Notes, as amended or supplemented from time to time. Officer means, (a) with respect to the Issuer and any corporation, the Chairman of the Board of Directors (or, with respect to the Issuer, any director), the President, any Vice President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of such entity; (b) with respect to any bank or trust company acting as trustee of an express trust or as custodian, any Trust Officer; and (c) with respect to the Co-Issuer, a manager of such entity. Opinion of Counsel means a written opinion addressed to the Trustee, each Hedge Counterparty and each Rating Agency (each, a Recipient), in form and substance reasonably satisfactory to each Recipient, of an attorney at law admitted to practice before the highest court of any state of the United States or the District of Columbia (or the Cayman Islands, in the case of an opinion relating to the laws of the Cayman Islands), which attorney may, except as otherwise expressly provided in this Indenture, be inside or 42

Processed and formatted by SEC Watch - Visit SECWatch.com

outside counsel for the Issuer or the Co-Issuer, as the case may be, and which attorney shall be reasonably satisfactory to the Trustee. Whenever an Opinion of Counsel is required hereunder, such Opinion of Counsel may rely on opinions of other counsel who are so admitted and so satisfactory which opinions of other counsel shall accompany such Opinion of Counsel and shall either be addressed to each Recipient or shall state that each Recipient shall be entitled to rely thereon. Optional Redemption has the meaning specified in Section 9.1(a). Ordinary Shares means the 1,000 ordinary shares, par value U.S.$1.00 per share issued by the Issuer. Outstanding means with respect to the Notes as of any Measurement Date, any and all Notes theretofore authenticated and delivered under this Indenture and the Paying Agency Agreement other than Notes cancelled, redeemed, exchanged or replaced in accordance with the terms of this Indenture or the Paying Agency Agreement, as applicable; provided that in determining whether the Holders of the requisite percentage of Notes have given any direction, notice, consent, approval or objection, (A) any Notes held or beneficially owned by the Collateral Manager or any of its Affiliates or by an account or fund for which the Collateral Manager or any of its Affiliates acts as the investment advisor with discretionary authority will be disregarded with respect to any vote or consent relating to the removal, termination, substitution or replacement of the Collateral Manager or the assignment by the Collateral Manager of its rights and obligations under the Collateral Management Agreement, except for any assignments or transfers by the Collateral Manager of its rights and obligations to Affiliates of the Collateral Manager, subject to any applicable requirements under the Investment Advisers Act and (B) the Class A-R Notes will be assumed to be fully drawn. Owner REIT means an entity which qualifies as a REIT for U.S. federal income tax purposes and which owns, directly or indirectly, through one or more Qualified REIT Subsidiaries thereof or one or more entities disregarded as entities separate from such REIT or its Qualified REIT Subsidiaries, 100% of the Class H Notes, the Class J Notes, the Class K Notes, the Income Notes and the Ordinary Shares (other than any Class H Notes, Class J Notes or Class K Notes with respect to which the Issuer has received an Opinion of Counsel rendered by nationally recognized U.S. tax counsel experienced in such matters to the effect that the Class H Notes, Class J Notes or Class K Notes, as applicable, will be treated as indebtedness for U.S. federal income tax purposes). PAA Issued Note Paying Agent means Wells Fargo Bank, National Association, and any successors or assigns in its capacity as PAA Issued Note Paying Agent under the Paying Agency Agreement. PAA Issued Note Paying Agent Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by, or otherwise owing to, the PAA Issued Note Paying Agent during the preceding Due Period in accordance with the Paying Agency Agreement. PAA Issued Note Paying Agent Fee means, with respect to any Payment Date, for so long as any Class K Notes or Income Notes remain Outstanding, the fee payable to the PAA Issued Note Paying Agent in an aggregate amount equal to U.S.$10,000 per annum. PAA Issued Note Register means, with respect to the Income Notes and Class K Notes, the note register maintained by the PAA Issued Note Registrar. PAA Issued Note Registrar means Wells Fargo Bank, National Association, and any successors or assigns in its capacity as PAA Issued Note Registrar under the Paying Agency Agreement. PAA Issued Notes means, together, the Class K Notes and Income Notes. 43

Processed and formatted by SEC Watch - Visit SECWatch.com

Participation Interests means pari passu participation interests in commercial mortgage loans, Subordinate Mortgage Loan Interests and Mezzanine Loans. Paying Agency Agreement means that certain Paying Agency Agreement, dated as of March 17, 2006, as the same may be amended or supplemented from time to time, between the Issuer and the PAA Issued Note Paying Agent. Paying Agents means, together, the Note Paying Agent and the PAA Issued Note Paying Agent. Payment Account means the Securities Account designated the “Payment Account” and established in the name of the Trustee pursuant to Section 10.9. Payment Date means June 16, 2006, and, thereafter, quarterly on each September 16, December 16, March 16 and June 16, or if such day is not a Business Day, the next succeeding Business Day, commencing in June 2006 and ending on the applicable Stated Maturity Date (or in the case of the Class A-R Notes, the related repayment date, if sooner). Periodic Interest means the amount of interest payable in respect of each Class of Floating Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of business on the day immediately preceding the relevant Payment Date (and in the case of the Class A-R Notes, each Class A-R Prepayment Date), multiplying the resulting figure by the actual number of days in such Interest Period, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards). Permitted NS Purchaser means (i) NorthStar OS VI, LLC or (ii) NS Advisors, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act. Person means any individual, corporation, partnership, limited liability partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof or any similar entity. PIK Bond means any security that, pursuant to the terms of the related Underlying Instruments, permits the payment of interest thereon to be deferred or capitalized as additional principal thereof or not pay interest when scheduled (but without being an Impaired Interest) or that issues identical securities in lieu of payments of interest in Cash. Plan Asset Regulation means the U.S. Department of Labor regulation at 29 C.F.R. Section 2510.3-101. Placement Agent means Wachovia Capital Markets, LLC in its capacity as placement agent of the Class A-R Notes. Pledged Collateral Interest means as of any date of determination, any Collateral Interest that has been Granted to the Trustee and has not been released from the lien of this Indenture pursuant to Section 10.12. Pledged Securities means on any date of determination, (a) the Collateral Interests, Equity Interests and the Eligible Investments that have been Granted to the Trustee and (b) all non-Cash proceeds thereof, in each case, to the extent not released from the lien of this Indenture pursuant hereto. 44

Processed and formatted by SEC Watch - Visit SECWatch.com

Preferred Equity Security means a security, providing for regular payments of dividends or other distributions, representing an equity interest in an entity (including, without limitation, a partnership or a limited liability company) that is a borrower under a mortgage loan secured by commercial properties (or in an entity operating or controlling, directly or through affiliates, such commercial properties), which is generally senior with respect to the payments of dividends and other distributions, redemption rights and rights upon liquidation to such entity’s common equity. Principal Balance means, with respect to any Collateral Interest or Eligible Investment, as of any date of determination, the outstanding principal amount of such Collateral Interest or Eligible Investment; provided that the Principal Balance of (i) any Collateral Interest which permits the deferral or capitalization of interest will not include any outstanding balance of the deferred and/or capitalized interest except in the case of Earn-Out Assets that provide for a Future Advance Amount with respect to debt service, if the amount has been capitalized prior to the acquisition by the Issuer and provided the amount did not exceed the amount available for debt service or other Future Advance Amounts, (ii) any Equity Interest will be zero, (iii) any putable Collateral Interest which matures after the Stated Maturity Date will be the lower of the put price and the outstanding principal amount, (iv) any Collateral Interest or Eligible Investment in which the Trustee does not have a first priority perfected security interest shall be deemed to be zero, (v) the Principal Balance of an Earn-Out Asset will be the outstanding principal balance of such Earn-Out Asset, plus any Future Funding Obligations that have not been irrevocably reduced with respect to such Earn-Out Asset and (vi) any Preferred Equity Security will be equal to the component of the liquidation price that is not attributable to the return of capital by its governing documents; provided, further, that for purposes of calculating the Principal Coverage Amount, an appraisal reduction of a Collateral Interest will be assumed to result in an implied reduction of Principal Balance for such Collateral Interest only if such appraisal reduction is intended to reduce the interest payable on such Collateral Interest and only in proportion to such interest reduction. Principal Coverage Amount means, on any Measurement Date, an amount equal to (i) the aggregate Principal Balance of all Collateral Interests (other than Impaired Interests, Written Down Interests and Deferred Interest PIK Bonds) included in the Collateral on such date, plus (ii) the aggregate Principal Balance of the Eligible Investments in the Collateral Account on such date that represent Collateral Principal Collections, plus (iii) the Impaired Interests Amount, plus (iv) with respect to Written Down Interests, the Reduced Principal Balance, plus (v) the Deferred Interest PIK Bond Amount, plus (vi) the Aggregate Class A-R Undrawn Amount (without duplication). For purposes of calculating the Principal Coverage Amount, any Collateral Interest that has sustained an implied reduction of Principal Balance due to an appraisal reduction will not be considered an Impaired Interest solely due to such implied reduction. Principal Coverage Ratio means, on any Measurement Date for any Class of Notes, the ratio (expressed as a percentage) based on the ratio of (x) to (y), where (x) is the Principal Coverage Amount as of such Measurement Date and (y) is (1) in the case of the Class A/B Coverage Test, the sum of the aggregate principal amount of the then Outstanding Class A Notes and Class B Notes (assuming for purposes of the calculation that the Class A-R Commitments are fully drawn) as of such Measurement Date, (2) in the case of the Class C/D Coverage Test, the amount determined by the foregoing clause (1) plus the sum of the aggregate principal amount (including any Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) then Outstanding of the Class C Notes and Class D Notes as of such Measurement Date or (3) in the case of the Class E/F/G Coverage Test, the amount determined by the foregoing clause (2) plus the sum of the aggregate principal amount (including any Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) then Outstanding of the Class E Notes, Class F Notes and Class G Notes as of such Measurement Date. 45

Processed and formatted by SEC Watch - Visit SECWatch.com

Principal Coverage Test means, for any Class of Notes Outstanding, a test satisfied on any Measurement Date if the applicable Principal Coverage Ratio as of such Measurement Date is equal to or greater than the applicable Required Coverage Ratio. Priority of Payments means, collectively, the priority of payments specified in Section 11.1(a), (b) and (c) or upon an Event of Default, the priority of payments in connection therewith. Pro Rata Principal Coverage Ratio means, as of any Measurement Date, the ratio (expressed as a percentage) based on the ratio of (x) to (y), where (x) is the Principal Coverage Amount as of such Measurement Date and (y) is the sum of the aggregate principal amount then Outstanding of the Class A Notes and Class B Notes (assuming for purposes of the calculation that the Class A-R Commitments are fully drawn) as of such Measurement Date. Pro Rata Principal Coverage Test will be met as of any Measurement Date if the Pro Rata Principal Coverage Ratio as of such Measurement Date is equal to or greater than or equal to 139.35%. Proceeding means any suit in equity, action at law or other judicial or administrative proceeding. Proposed Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Interests and the proceeds of disposition thereof held as Cash, (b) Uninvested Proceeds held as Cash and (c) Eligible Investments purchased with Uninvested Proceeds or the proceeds of disposition of Pledged Collateral Interests resulting from the sale, maturity or other disposition of a Pledged Collateral Interest or a proposed purchase of a Collateral Interest, as the case may be. Purchase and Placement Agreement means the agreement, dated as of the Closing Date, among the Co-Issuers, the Initial Purchaser and the Placement Agent relating to the purchase and placement of the Offered Notes. Purchased Accrued Interest means all payments of interest received, or amounts collected that are attributable to interest received on Collateral Interests and Eligible Investments, to the extent such payments or amounts constitute accrued interest purchased with Collateral Principal Collections except for interest accrued on Collateral Interests prior to the Closing Date. Qualified Bidder List means a list of not less than three Persons that are Independent from one another and the Issuer prepared by the Collateral Manager and delivered to the Trustee prior to an Auction, as may be amended and supplemented by the Collateral Manager from time to time upon written notice to the Trustee; provided that (i) the Qualified Bidder List may include the Collateral Manager as a Qualified Bidder if it is Independent from the other Persons on such list and (ii) any such notice referred to above shall only be effective on any Auction Date if it was received by the Trustee at least two Business Days prior to such Auction Date. Qualified Bidders means the Persons whose names appear from time to time on the Qualified Bidder List. Qualified Institutional Buyer has the meaning given in Rule 144A under the Securities Act. Qualified Institutional Lender means a qualified institutional lender of the type typically permitted to acquire subordinate interests in commercial mortgage loans (all or a portion of which will be included in a CMBS transaction) pursuant to the documents creating such interests. Qualified Purchaser means (i) a “qualified purchaser” as defined in Section 2(a)(51) of the Investment Company Act and the rules thereunder, (ii) a “knowledgeable employee” with respect to the Issuer as 46

Processed and formatted by SEC Watch - Visit SECWatch.com

defined in rule 3c-5 under the Investment Company Act or (iii) a company beneficially owned exclusively by one or more “qualified purchasers” and/or “knowledgeable employees” with respect to the Issuer. Qualified REIT Subsidiary means a “Qualified REIT Subsidiary” within the meaning of Section 856(i)(2) of the Code. Qualifying Foreign Obligor means a corporation, partnership or other entity organized or incorporated under the law of any of Australia, Canada, France, Germany, Ireland, Italy, New Zealand, Sweden, Switzerland or the United Kingdom, so long as the unguaranteed, unsecured and otherwise unsupported long-term Dollar sovereign debt obligations of such country are rated “Aa2” or better by Moody’s and “AA” or better by S&P. Rake Bond means a CMBS backed solely by a single promissory note secured by a mortgaged property, which promissory note is subordinate in right of payment to one or more separate promissory notes secured by the same mortgaged property. Ramp-Up Period means the period commencing on the Closing Date and ending on the Effective Date. Rated Note Calculation Agent has the meaning specified in Section 7.15. Rated Notes means, collectively, the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes. Rated Noteholder means, with respect to any Rated Note, the Person in whose name such Note is registered; provided that Beneficial Owners or Agent Members will have no rights under this Indenture with respect to Global Notes, and the Rated Noteholder may be treated by the Issuer and the Trustee (and any agent of any of the foregoing) as the owner of such Global Notes for all purposes whatsoever. Rating means, as the context requires, an S&P Rating, Fitch Rating or a Moody’s Rating. Rating Agency means each of (i) Moody’s, for so long as any of the Outstanding Rated Notes are rated by Moody’s (including any private or confidential rating), (ii) Fitch, for so long as any of the Outstanding Rated Notes are rated by Fitch (including any private or confidential rating), and (iii) S&P, for so long as any of the Outstanding Rated Notes are rated by S&P (including any private or confidential rating) or, with respect to Pledged Securities generally, if at any time Moody’s, Fitch or S&P ceases to provide rating services, any other nationally recognized investment rating agency selected by the Issuer (upon consultation with the Collateral Manager) and reasonably satisfactory to a Majority of each Class of Rated Notes. In the event that at any time Moody’s ceases to be a Rating Agency, references to rating categories of Moody’s in this Indenture shall be deemed instead to be references to the equivalent categories of such other rating agency as of the most recent date on which such other rating agency and Moody’s published ratings for the type of security in respect of which such alternative rating agency is used. In the event that at any time S&P ceases to be a Rating Agency, references to rating categories of S&P in this Indenture shall be deemed instead to be references to the equivalent categories of such other rating agency as of the most recent date on which such other rating agency and S&P published ratings for the type of security in respect of which such alternative rating agency is used. Rating Confirmation means, with respect to any specified action or determination, for so long as any of the Rated Notes are Outstanding and rated by Moody’s, Fitch or S&P, the receipt of written confirmation by each Rating Agency rating any Rated Notes, that such specified action or determination will not result in the reduction or withdrawal or other adverse action with respect to their then-current ratings on the Rated Notes (including any private or confidential rating) unless Rating Confirmation is specified herein 47

Processed and formatted by SEC Watch - Visit SECWatch.com

to be required by only Moody’s, Fitch or S&P, in which case such Rating Confirmation will be sufficient. For the purposes of this definition, “Rating Agencies” will be deemed to not include Fitch unless the proposed action or matter relates to the issuance of additional notes, or any amendment or modification, or any proposed amendment or modification, to any Transaction Document, and in any such case notification will be made to Fitch within 30 days following such amendment or modification. Rating Confirmation Failure has the meaning specified in Section 7.18(e). Real Estate CDO Securities means securities that entitle the holders thereof to receive payments that depend on the cash flow from or the credit exposure to a portfolio consisting primarily of (i) REIT Debt Securities, (ii) commercial mortgage backed securities, (iii) commercial mortgage loans or interests therein or (iv) a combination of the foregoing; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the Real Estate CDO Securities such as a financial guaranty insurance policy. Record Date means the date on which the Holders of Rated Notes entitled to (i) vote with respect to any matters under this Indenture are determined, such date being the 15th day (whether or not a Business Day) prior to the date the Trustee delivers notice with respect to such vote and (ii) receive a payment in respect of principal or interest on the succeeding Payment Date or Redemption Date are determined, such date as to any Payment Date or Redemption Date with respect to any Global Note being the first day (whether or not a Business Day) prior to such Payment Date or Redemption Date and with respect to any Certificated Note being the fifteenth day (whether or not a Business Day) prior to such Payment Date or Redemption Date. Redemption means an Optional Redemption, an Auction Call Redemption or a Tax Redemption. Redemption Date means the Payment Date upon which the Rated Notes are redeemed pursuant to an Optional Redemption, an Auction Call Redemption or a Tax Redemption. Redemption Date Statement has the meaning specified in Section 10.11(b). Redemption Price means, (i) with respect to each Class of Rated Notes, (a) their then-outstanding aggregate principal amount plus (b) accrued interest thereon to the date of redemption to the extent not already paid (including, without limitation, any Cumulative Applicable Periodic Interest Shortfall Amount together with interest thereon) plus (c) unreimbursed Interest Advances plus (d) with respect to the Class A-R Notes, any accrued and unpaid Class A-R Increased Costs and Class A-R Commitment Fee and (ii) if the Income Notes are redeemed, the “Redemption Price” for the Income Notes, means an amount equal to the aggregate of any residual amounts distributable on the Income Notes in respect of such redemption pursuant to Section 11.1(a) and (b). Reduced Principal Balance means, with respect to each Written Down Interest, the original Principal Balance of such Written Down Interest minus the Written Down Amount as notified by or on behalf of the related issuer or trustee to the holders of such Written Down Interest (including appraisal reductions on CMBS). Reference Banks has the meaning specified in Schedule B. Registered means in registered form for U.S. federal income tax purposes and issued after July 18, 1984; provided that a certificate of interest in a trust that is treated as a grantor trust for U.S. federal income tax purposes will not be treated as Registered unless each of the obligations or securities held by the trust was issued after that date. 48

Processed and formatted by SEC Watch - Visit SECWatch.com

Registered Form has the meaning specified in Section 8-102(a)(13) of the UCC. Regulation S means Regulation S under the Securities Act. Regulation S Certificated Note has the meaning specified in Section 2.4(b)(1)(vi). Regulation S Global Note has the meaning specified in Section 2.1(a). Regulation S Note has the meaning specified in Section 2.1(a). Regulation S Transfer Certificate has the meaning specified in Section 2.4(b)(1)(iii). Regulation U means Regulation U of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 221, or any successor regulation. Reimbursement Rate means a per annum rate equal to the “prime rate” as published in the “Money Rates” section of the Wall Street Journal, as such “prime rate” may change from time to time. Reinvestment Asset Information has the meaning specific in Section 12.2(c). Reinvestment Criteria means, with respect to any reinvestment of Collateral Principal Payments, Sale Proceeds, Class A-R Draws and amounts on deposit in the Earn-Out Asset Account, the following criteria: (i) the Collateral Quality Tests are satisfied, or, if any Collateral Quality Test was not satisfied immediately prior to such investments, the extent of compliance with such Collateral Quality Test will be maintained or improved immediately following such reinvestment; (ii) after the Effective Date, the Coverage Tests are satisfied, or, if any Coverage Test was not satisfied immediately prior to such investments, such Coverage Test will be maintained or improved following such reinvestment; and (iii)

no Event of Default has occurred and is continuing.

Reinvestment Period means the period beginning on the Closing Date and ending on and including the Payment Date in June 2011. REIT means a “real estate investment trust” as defined in Section 856 of the Code. REIT Debt Securities means securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities) of a portfolio of real property interests. Relevant Jurisdiction means, as to any obligor on any Collateral Interest, any jurisdiction (a) in which the obligor is incorporated, organized, managed and controlled or considered to have its seat, (b) where an office through which the obligor is acting for purposes of the relevant Collateral Interest is located, (c) in which the obligor executes Underlying Instruments or (d) in relation to any payment, from or through which such payment is made. 49

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 and maintained by the Bond Market Association. Required Coverage Ratio means, with respect to the specified Classes of Notes and the related Interest Coverage Test or Principal Coverage Test, as the case may be, as of any Calculation Date, the applicable percentage indicated below opposite such specified Classes: C lass

Prin cipal C ove rage Te st

Class A/B Class C/D Class E/F/G

140.10% 132.40% 124.20%

Inte re st C ove rage Te st

189.20% 179.50% 164.20%

Requisite Noteholders means the Holders of 662/3% or more of the then Aggregate Outstanding Amount of the Controlling Class. Reserved Matters has the meaning specified in Section 8.2. Retained Rights means with respect to each initial Collateral Interest (i) that is a Subordinate Mortgage Loan Interest, Mezzanine Loan or Preferred Equity Security, any right of the holder thereof to cure payment or other mortgage loan defaults by the borrower of the related Commercial Mortgage Loan or to exercise any purchase option with respect to the related Senior Loan, each in accordance with the applicable Underlying Instrument and (ii) that is a Subordinate Mortgage Loan Interest, Mezzanine Loan, Commercial Mortgage Loan, Participation

Processed and formatted by SEC Watch - Visit SECWatch.com

Interest, Credit Lease Loan, Tenant Lease Loan Interest or Preferred Equity Security, any right of the holder thereof to receive any exit fees, extension fees or prepayment premiums. Rule 144A means Rule 144A under the Securities Act. Rule 144A Certificated Note has the meaning specified in Section 2.4(b)(1)(vi). Rule 144A Global Note has the meaning specified in Section 2.1(b). Rule 144A Information means such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto). Rule 144A Note has the meaning specified in Section 2.1(b). Rule 144A Transfer Certificate has the meaning specified in Section 2.4(b)(1)(ii). S&P or Standard & Poor’s means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor or successors thereto. S&P CDO Monitor means the dynamic, analytical computer model provided by S&P to the Collateral Manager and the Trustee (together with such instructions and assumptions as are necessary to run such model) on or prior to the Effective Date used to determine the credit risk of a portfolio of Collateral Interests, as may be modified by S&P from time to time. S&P CDO Monitor Test means the test which is satisfied, as of any Calculation Date, if each of the Class A Senior Note Default Differential, the Class A-2 Note Default Differential, the Class B Note Default Differential, the Class C Note Default Differential, the Class D Note Default Differential, the 50

Processed and formatted by SEC Watch - Visit SECWatch.com

Class E Note Default Differential, the Class F Note Default Differential, the Class G Note Default Differential, the Class H Note Default Differential, the Class J Note Default Differential and the Class K Note Default Differential of the Current Portfolio or the Proposed Portfolio, as applicable, is positive. The S&P CDO Monitor Test will be considered to be improved if the Class A Senior Note Default Differential of the Proposed Portfolio is greater than the Class A Senior Note Default Differential of the Current Portfolio, the Class A-2 Note Default Differential of the Proposed Portfolio is greater than the Class A-2 Note Default Differential of the Current Portfolio, the Class B Note Default Differential of the Proposed Portfolio is greater than the Class B Note Default Differential of the Current Portfolio, the Class C Note Default Differential of the Proposed Portfolio is greater than the Class C Note Default Differential of the Current Portfolio, the Class D Note Default Differential of the Proposed Portfolio is greater than the Class D Note Default Differential of the Current Portfolio, the Class E Note Default Differential of the Proposed Portfolio is greater than the Class E Note Default Differential of the Current Portfolio, the Class F Note Default Differential of the Proposed Portfolio is greater than the Class F Note Default Differential of the Current Portfolio, the Class G Note Default Differential of the Proposed Portfolio is greater than the Class G Note Default Differential of the Current Portfolio, the Class H Note Default Differential of the Proposed Portfolio is greater than the Class H Note Default Differential of the Current Portfolio, the Class J Note Default Differential of the Proposed Portfolio is greater than the Class J Note Default Differential of the Current Portfolio, and the Class K Note Default Differential of the Proposed Portfolio is greater than the Class K Note Default Differential of the Current Portfolio. S&P Industry Classification Group means any of the S&P industrial classification groups as set forth on Schedule H and any additional classification groups established by S&P with respect to the Collateral Interests and provided, in each case, by the Collateral Manager or S&P to the Trustee. S&P Letter means that certain letter dated as of March 17, 2006, from S&P to NorthStar Realty Finance Corp. S&P Minimum Average Recovery Rate means, as of any date or determination, a rate expressed as a percentage equal to the number obtained by (i) summing the products obtained by multiplying the Principal Balance of each Collateral Interest by its S&P Recovery Rate and (ii) dividing such sum by the Collateral Interest Principal Balance less cash and Eligible Investments representing Collateral Principal Collections and (iii) rounding up to the first decimal place. S&P Minimum Average Recovery Rate Test means a test that will be satisfied as of any Measurement Date if the S&P Minimum Average Recovery Rate is greater than or equal to (i) 35.48% with respect to the Class A Senior Notes, (ii) 35.48% with respect to the Class A-2 Notes, (iii) 35.48% with respect to the Class B Notes, (iv) 35.48% with respect to the Class C Notes, (v) 35.48% with respect to the Class D Notes, (vi) 36.57% with respect to the Class E Notes, (vii) 36.57% with respect to the Class F Notes, (viii) 36.57% with respect to the Class G Notes, (ix) 35.30% with respect to the Class H Notes, (x) 35.30% with respect to the Class J Notes and (xi) 35.66% with respect to the Class K Notes. S&P’s Preferred Format means an electronic spreadsheet file to be provided to S&P, which file shall include the following information, if available (to the extent such information is not confidential) with respect to each Collateral Interest: (a) the name and country of domicile of the issuer thereof and the particular issue held by the Issuer, (b) the CUSIP or other applicable identification number associated with such Collateral Interest, (c) the par value of such Collateral Interest, (d) the type of issue (including, by way of example, whether such Collateral Interest is a bond, loan or asset-backed security), using such abbreviations as may be selected by the Trustee, (e) a description of the index or other applicable benchmark upon which the interest payable on such Collateral Interest is based (including, by way of example, fixed rate, stepup rate, zero coupon and LIBOR), (f) the coupon (in the case of a Collateral Interest which bears interest at a fixed rate) or the spread over the applicable index (in the case of a 51

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Interest which bears interest at a floating rate), (g) the S&P Industry Classification Group for such Collateral Interest, (h) the Stated Maturity Date of such Collateral Interest, (i) the S&P Rating of such Collateral Interest or the issuer thereof, as applicable, (j) the priority category assigned by S&P to such Collateral Interest, if available and (k) such other information as the Trustee may determine to include in such file. S&P Rating means a rating of any Collateral Interest determined as follows: (a)

if S&P has assigned a rating to such Collateral Interest either publicly or privately (in the case of a private rating, with the written consent of the issuer of such Collateral Interest for use of such private rating and delivery of a copy of such consent to S&P), the S&P Rating shall be the rating assigned thereto by S&P; provided that, solely for purposes of determining compliance with the S&P CDO Monitor Test, if such Collateral Interest is placed on a watch list for possible upgrade or downgrade by S&P, the S&P Rating applicable to such Collateral Interest shall be one rating subcategory above or below, respectively, the S&P Rating applicable to such Collateral Interest immediately prior to such Collateral Interest being placed on such watch list;

(b)

if such Collateral Interest is not rated by S&P but the Issuer or the Collateral Manager on behalf of the Issuer has requested that S&P assign a rating to such Collateral Interest, the S&P Rating shall be the rating so assigned by S&P; provided that pending receipt from S&P of such rating, if such Collateral Interest is not eligible for notching in accordance with a Schedule G hereto, such Collateral Interest shall have a S&P Rating of “CCC-”, otherwise such S&P Rating shall be the rating assigned according to Schedule F hereto until such time as S&P shall have assigned a rating thereto; or

(c)

if any Collateral Interest is a Collateral Interest that has not been assigned a rating by S&P and is not a Collateral Interest listed in Schedule G hereto, as identified by the Collateral Manager, refer to Schedule F hereto to determine the S&P Rating; provided that (i) if any Collateral Interest shall, at the time of its purchase by the Issuer, be listed for a possible upgrade or downgrade on either Moody’s or S&P’s then current credit rating watch list, then the S&P Rating of such Collateral Interest shall be one subcategory above or below, respectively, the rating then assigned to such item in accordance with Schedule F hereto; (ii) for purposes of determining compliance with S&P CDO Monitor Test, if the rating assigned to such Collateral Interest pursuant to this subparagraph (c) is placed on a watch list for possible upgrade or downgrade by any Rating Agency, the S&P Rating applicable to such Collateral Interest shall be one rating subcategory above or below, respectively, the S&P Rating applicable to such Collateral Interest immediately prior to such Collateral Interest being placed on such watch list and (iii) the aggregate Principal Balance that may be given a rating based on this subparagraph (iii) may not exceed 20% of the aggregate Principal Balance of all Collateral Interests; provided that if any Collateral Interest has not been assigned a rating by S&P and is a type of Collateral Interest not listed on Schedule G hereto, subsequent to the Closing Date, (A) the acquisition of any such Collateral Interest will require an estimate or shadow rating from S&P prior to the acquisition by the Issuer of such Collateral Interest or (B) the Collateral Administrator may use the tranched ratings determined in accordance with Schedule I for Collateral Interests represented by Commercial Mortgage Loans, Subordinate Mortgage Loan Interests, Preferred Equity Securities and Mezzanine Loans representing up to 20% of the Collateral Interests Principal Balance; 52

Processed and formatted by SEC Watch - Visit SECWatch.com

notwithstanding the foregoing, if any Collateral Interest shall, at the time of its purchase by the Issuer, be listed for a possible upgrade or downgrade on the then current S&P credit rating watch list, then the S&P Rating of such Collateral Interest shall be one subcategory above or below, respectively, the rating then assigned to such item by S&P, as applicable; provided that if such Collateral Interest is removed from such list at any time, it shall be deemed to have its then-current actual rating by S&P. S&P Recovery Rate means, with respect to a Collateral Interest on any Calculation Date, an amount equal to the percentage for such Collateral Interest set forth in the S&P Recovery Rate Matrix attached as a Schedule D (determined in accordance with procedures prescribed by S&P for such Collateral Interest on such Calculation Date or, in the case of Impaired Interests, the S&P Rating immediately prior to default). S&P Special Amortization Pro Rata Condition means a condition that will be satisfied with respect to any Payment Date if either (i) (A) the aggregate Principal Balance of the Collateral Interests as of the related Calculation Date is greater than an amount equal to 50% of the aggregate Principal Balance of the Collateral Interests on the Effective Date and each of the Coverage Tests was satisfied as of the related Calculation Date and (B) (1) the Pro Rata Principal Coverage Test has been satisfied on the related and each prior Calculation Date, or (2) if the Pro Rata Principal Coverage Test has failed to be satisfied on any previous Calculation Date, subsequent to such failure, (x) the Pro Rata Principal Coverage Ratio as of the related Calculation Date equals or exceeds the Pro Rata Principal Coverage Ratio in existence on the Effective Date or (y) the Pro Rata Principal Coverage Test is satisfied as of the related Calculation Date without applying Collateral Principal Collections on any previous Payment Date or (ii) the Rating Confirmation has been provided by S&P. Sale has the meaning specified in Section 5.17(a). Sale Proceeds means all proceeds (including accrued interest) received with respect to Collateral Interests and Equity Interests as a result of sales of such Collateral Interests and Equity Interests pursuant to this Indenture, net of any reasonable amounts expended by the Collateral Manager or the Trustee in their good faith determination in connection with such sale or disposition. Schedule of Collateral Interests means the list of Collateral Interests securing the Indenture Issued Notes that is attached as Schedule A. Scheduled Distribution means, with respect to any Pledged Security, for each Due Date, the scheduled payment in Cash of principal and/or interest and/or fees due on such Due Date with respect to such Pledged Security, determined in accordance with the assumptions specified in Section 1.2. Second Currency has the meaning specified in Section 14.13. Secured Parties means the Trustee, for the benefit of the Rated Noteholders (other than the Class K Noteholders), each Hedge Counterparty and the Collateral Manager. Securities Account has the meaning specified in Section 8-501(a) of the UCC. Securities Act means the U.S. Securities Act of 1933, as amended. Securities Intermediary has the meaning specified in Section 8-102(a)(14) of the UCC. Security has the meaning specified in Section 8-102(a)(15) of the UCC. 53

Processed and formatted by SEC Watch - Visit SECWatch.com

Seller or Sellers means individually or together, NRFC WA Holdings, LLC and NRFC WA Holdings II, LLC and their successors or assigns, in their capacity as sellers under the Asset Transfer Agreements or any other seller of Collateral Interests acquired by the Issuer or the Underlying Trustee after the Closing Date. Semi-Annual Pay Security means a security that provides for periodic payments of interest in Cash semi-annually. Semi-Annual Pay Security Interest Reserve Amount means, with respect to each Collateral Interest that is a Semi-Annual Pay Security, as of any Calculation Date, the amount equal to (i) the amount of interest paid by the obligor on the most recent payment date (or if no payment date has occurred, the estimated interest payment due on the first payment date) with respect to such Semi-Annual Pay Security multiplied by (ii) (A) the number of months until the next payment date with respect to such Semi-Annual Pay Security minus one (rounded up to the nearest whole number) divided by (B) two; provided that for any Semi-Annual Pay Security with respect to which no scheduled interest payments remain, the Semi-Annual Pay Security Interest Reserve Amount shall be zero. Senior Collateral Management Fee means with respect to each Payment Date, a senior fee equal to the sum of (a) the Monitoring Fee and (b) the Senior Structuring Fee payable to the Collateral Manager pursuant to the Collateral Management Agreement; provided that the Senior Collateral Management Fee will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Senior Collateral Management Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Senior Collateral Management Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Senior Collateral Management Fee accrued but not paid prior to the resignation or removal of the Collateral Manager shall continue to be payable to the Collateral Manager on the Payment Date immediately following the effectiveness of such resignation or removal. Senior Interests means the interests in a Commercial Mortgage Loan which rank senior in priority to the Subordinate Mortgage Loan Interests in the same Commercial Mortgage Loan. Senior Loans means the debt in a Commercial Mortgage Loan which rank senior in priority to the Subordinate Mortgage Loan Interests in the same Commercial Mortgage Loan. Senior Notes means, with respect any Class of Notes (other than the Class A Senior Notes), the Class or Classes of Notes with a prior alphabetical designation. Senior Structuring Fee means, with respect to each Payment Date, an amount equal to 0.04875% per annum of the Fee Basis Amount payable to the Collateral Manager pursuant to the Collateral Management Agreement. Servicers means, Wachovia Bank and/or one or more additional servicers, each servicing as a servicer pursuant to the Servicing Agreement. Servicing Agreement means a certain Servicing Agreement, dated as of March 17, 2006, as the same may be amended or supplemented from time to time, among the Issuer, and the Servicers, each as a servicer. Specified Currency has the meaning specified in Section 14.13. Specified Person has the meaning specified in Section 2.5(a). 54

Processed and formatted by SEC Watch - Visit SECWatch.com

Specified Place has the meaning specified in Section 14.13. Specified Types means any Trust Certificate, CMBS, Real Estate CDO Security, REIT Debt Security or Collateral Interest related to (x) developed or undeveloped commercial real estate or (y) undeveloped real estate intended to be developed into residential property; provided that no loan shall be secured by an individual residential property. Stated Maturity Date means the Payment Date occurring in June 2041. Subordinate Collateral Management Fee means the fee payable to the Collateral Manager at a per annum rate in arrears on each Payment Date pursuant to the Collateral Management Agreement, in an amount (as certified by the Collateral Manager to the Trustee) equal to 0.25% of the Fee Basis Amount for such Payment Date; provided that the Subordinate Collateral Management Fee will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Subordinate Collateral Management Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Subordinate Collateral Management Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Subordinate Collateral Management Fee accrued but not paid prior to the resignation or removal of the Collateral Manager shall continue to be payable to the Collateral Manager on the Payment Date immediately following the effectiveness of such resignation or removal. Subordinate Mortgage Loan Interests means subordinate interests in commercial mortgage loans (including subordinate participation interests in commercial mortgage loans) and subordinate commercial mortgage loans. Subpool means each of the groups of the Collateral Interests designated by the Collateral Manager in accordance with the Auction Procedures on which the Listed Bidders may provide a separate bid in an Auction. Substitute Collateral Interest means a debt obligation meeting the Eligibility Criteria acquired by or on behalf of the Issuer with Collateral Principal Proceeds, Sale Proceeds or Class A-R Draws that are reinvested in accordance with the provisions of this Indenture. Synthetic Security means any swap transaction, debt security, security issued by a trust or similar vehicle or other investment, the returns on which (as determined by the Collateral Manager) are linked to the credit performance of a reference obligation, but which may provide for a different maturity, payment date, interest rate, credit exposure or other credit or non-credit related characteristics from such reference obligation. Taxes means any present or future taxes, duties, assessments or governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by any governmental authority having power to tax. Tax Event means an event that will occur if (x)(1)(i) any obligor or withholding agent is, or on the next scheduled payment date under any Collateral Interest, will be, required to deduct or withhold from any payment under any Collateral Interest to the Issuer (other than any commitment fee with respect to the unfunded portion of any Earn-Out Assets) for or on account of any tax for whatever reason and such obligor or withholding agent is not required to pay to the Issuer such additional amount as is necessary to 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, (ii) any jurisdiction imposes net income, profits, or similar 55

Processed and formatted by SEC Watch - Visit SECWatch.com

tax on the Issuer, (iii) the Issuer is required to deduct or withhold from any payment under any Hedge Agreement for or on account of any tax and the Issuer is obligated to make a gross up payment (or otherwise pay additional amounts) to any Hedge Counterparty or (iv) any Hedge Counterparty is required to deduct or withhold from any payment under any Hedge Agreement for or on account of any tax for whatever reason and such Hedge Counterparty is not required to pay to the Issuer such additional amount as is necessary to 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 (2) the sum of the amount of (i) such a tax or taxes imposed on the Issuer or withheld from payments to the Issuer to the extent the Issuer receives less than the full amount that the Issuer would have received had no such deduction occurred and (ii) such gross up payments required to be made by the Issuer to the extent they exceed the amounts that the Issuer would have been required to pay had no deduction or withholding been required, in the aggregate, equals ten percent (10%) or more of the amount of aggregate interest payments on all of the related Collateral Interests during the related Due Period or (y) the Issuer fails to maintain its status as a Qualified REIT Subsidiary. Tax Redemption has the meaning specified in Section 9.1(b). Tax Subsidiary has the meaning specified in Section 7.7(e). Taxed Collateral Interest means any Collateral Interest (including, without limitation, a Preferred Equity Security) the ownership of which could result in the Issuer being or becoming subject to U.S. tax on a net income basis or being or becoming subject to the U.S. branch profits tax Taxed Property means any property other than a Collateral Interest but including, without limitation, property acquired or to be acquired in respect of a Collateral Interest, the ownership of which could result in the Issuer being or becoming subject to U.S. tax on a net income basis or being or becoming subject to the U.S. branch profits tax. Tenant Lease Loan Interests means commercial mortgage-backed securities that entitle the holders thereof to receive payments that depend on the cash flow from a pool of commercial mortgage loans made to finance the acquisition, construction and improvement of properties primarily leased to tenants engaged in a business (or on the cash flow from such leases), the underwriting of which is dependent primarily on the creditworthiness of the related tenants; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the commercial mortgage-backed securities such as a financial guaranty insurance policy. Total Net Unfunded Future Advance Amount means, as of any date, the excess, if any, of (i) the then outstanding Total Unfunded Future Advance Amount over (ii) the amount then on deposit in the Earn-Out Asset Account. Total Unfunded Future Advance Amount means for all Earn-Out Assets, the aggregate amount of the Unfunded Future Advance Amounts. Transaction Documents means this Indenture, the Collateral Management Agreement, the Account Control Agreement, the Corporate Services Agreement, the Collateral Administration Agreement, any Hedge Agreement, the Paying Agency Agreement and the Purchase and Placement Agreement. Trust Certificate means one or more trust certificates each of which represents an ownership interest in the Underlying Trust created pursuant to the Master Trust Agreement, which are secured by Subordinate 56

Processed and formatted by SEC Watch - Visit SECWatch.com

Mortgage Loan Interests, Mezzanine Loans, Participation Interests, Commercial Mortgage Loans, Credit Lease Loans, Preferred Equity Securities and/or Tenant Lease Loan Interests. Trust Officer means, when used with respect to the Trustee, any Officer within the Corporate Trust Office working on the transaction described in this Indenture and (or any successor group of the Trustee) authorized to act for and on behalf of the Trustee, including any vice president, assistant vice president or other Officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such Officers, respectively, or to whom any corporate trust matter is referred at the Corporate Trust Office because of such person’s knowledge of and familiarity with the particular subject. Trustee means Wells Fargo Bank, National Association, and any successors or assigns, in its capacity as trustee under this Indenture. Trustee Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by or otherwise owing to the Trustee during the preceding Due Period in accordance with this Indenture, other than the Trustee Fee, including, without limitation, any expenses or indemnities incurred by the Trustee (and the Bank) in any of its capacities (including in its capacity as Collateral Administrator, Calculation Agent, Note Paying Agent, Class A-R Note Agent, PAA Issued Note Paying Agent and Registrar). Trustee Fee means, with respect to any Payment Date, the fee payable to the Trustee in an aggregate amount equal to 0.0178% per annum of the Collateral Interest Principal Balance as of the first day of the related Due Period; provided that in no event shall, so long as any Class of Rated Notes remains Outstanding, such fee be an annual amount less than U.S.$25,000. Trustee Interest Advance Fee means, a per annum fee payable to the Trustee in accordance with the Priority of Payments on each Payment Date equal to 0.00125% of the outstanding principal amount of the Class A Notes (assuming for the purposes of this calculation that the Class A-R Notes are fully drawn) and Class B Notes immediately prior to such Payment Date. UCC means the Uniform Commercial Code as in effect in the State of New York. Underlying Instrument means the agreement pursuant to which a Pledged Security has been issued or created and each other agreement that governs the terms of or secures the obligations represented by such Pledged Security or of which the holders of such Pledged Security are the beneficiaries. Underlying Trust means the newly formed trust established pursuant to the Master Trust Agreement. Underlying Trust Expenses means, all reasonable expenses, disbursements and advances incurred or made by the Underlying Trustee in accordance with any provision of the Master Trust Agreement or in the administration or the enforcement of any provision thereof (including the reasonable compensation, expenses and disbursements of its agents and counsel) including, without limitation, any amounts in respect of indemnification owed to the Underlying Trustee pursuant to Section 6.04 of the Master Trust Agreement, but excluding any overhead or employee expenses of the Underlying Trustee. Underlying Trustee means Wells Fargo Bank, National Association, in its capacity as underlying trustee pursuant to the Master Trust Agreement, and any successor or successors thereto. Undeveloped Real Estate Collateral Interest means a Collateral Interest related to undeveloped real estate intended to be developed into residential or commercial property. 57

Processed and formatted by SEC Watch - Visit SECWatch.com

Unfunded Future Advance Amount means, with respect to any Earn-Out Asset and any Calculation Date, any Future Advance Amount not yet funded (by the Issuer or any other entity) pursuant to the terms of the Earn-Out Asset. Uninvested Proceeds means, at any time, the net proceeds received by the Issuer on the Closing Date from the initial issuance of the Rated Notes and Income Notes, to the extent such proceeds have not theretofore been invested in Collateral Interests. Uninvested Proceeds Account has the meaning specified in Section 10.4. United States or U.S. means the United States of America, including the States thereof and the District of Columbia. Unregistered Securities has the meaning specified in Section 5.17(c). U.S. Person has the meaning given in Regulation S under the Securities Act. USA PATRIOT Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56 (2001). Wachovia Bank means Wachovia Bank, National Association and/or its affiliates. Weighted Average Fixed Rate Coupon means, as of any Measurement Date, the sum (rounded up to the next 0.001%) obtained by (i) multiplying the Principal Balance of each Fixed Rate Collateral Interest (except Collateral Interests that are currently deferring interest) held in the portfolio as of such date by the then-current interest rate, (ii) summing the amounts determined pursuant to clause (i) for all Fixed Rate Collateral Interests held in the portfolio as of such date and (iii) dividing such sum by the aggregate Principal Balance of all Fixed Rate Collateral Interests held in the portfolio as of such date; provided that for purposes of calculating the Weighted Average Fixed Rate Coupon of Collateral Interests that are Impaired Interests, the Written Down Amount with respect to Written Down Interests and Equity Interests will be excluded, except for those Impaired Interests that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument. Weighted Average Life means, on any Calculation Date with respect to all Collateral Interests (excluding any Impaired Interests), the number obtained by the Collateral Manager by (i) summing the products obtained by multiplying (a) the Average Life at such time of each Collateral Interest by (b) the outstanding Principal Balance of such Collateral Interest and (ii) dividing such sum by the aggregate Principal Balance at such time of all Collateral Interests. Weighted Average Life Test means a test that shall be satisfied as of any Measurement Date during any period set forth below if the Weighted Average Life of all Collateral Interests as of such Measurement Date is less than or equal to 7 years. Weighted Average Spread means, as of any Measurement Date, the sum (rounded up to the next 0.001%) of the number obtained by (i) summing the products obtained by multiplying (A) for each Floating Rate Collateral Interest (other than any Impaired Interest, Written Down Amount with respect to a Written Down Interest or Deferred Interest PIK Bond), the stated spread above LIBOR at which interest accrues on such Collateral Interest as of such date and, for each Deemed Floating Rate Collateral Interest (other than any Impaired Interest, Written Down Amount with respect to a Written Down Interest or Deferred Interest PIK Bond), the Deemed Floating Spread by (B) the Principal Balance of such Collateral Interest 58

Processed and formatted by SEC Watch - Visit SECWatch.com

as of such date and (ii) dividing such sum by the aggregate Principal Balance of all Floating Rate Collateral Interests and all Deemed Floating Rate Collateral Interests (excluding, in each case, all Impaired Interests, Written Down Amounts with respect to Written Down Interests and Deferred Interest PIK Bonds, except for those Impaired Interests that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument); provided, that for purposes of calculating the Weighted Average Spread, each Earn-Out Asset will be deemed to be two separate Floating Rate Collateral Interests: (I) one with an outstanding principal balance equal to the funded portion thereof and a stated interest rate spread equal to the funded spread on such Earn-Out Asset and (II) the other with an outstanding principal balance equal to the unfunded portion thereof and an assumed stated interest rate spread equal to the commitment fee of such Earn-Out Asset, less any withholding tax on such commitment fee. Withholding Tax Interest means a Collateral Interest if: (i)

any payments thereon to the Issuer (other than any commitment fee with respect to the unfunded portion of any Earn-Out Assets) are subject to withholding tax imposed by any jurisdiction (other than U.S. backup withholding tax or other similar withholding tax); and

(ii)

under the underlying documentation with respect to such Collateral Interest, the issuer of or counterparty with respect to such Collateral Interest is not required to make “gross-up” payments to the Issuer that cover the full amount of such withholding tax on an after-tax basis.

Written Down Amount means, with respect to each Written Down Interest, the amount by which the original Principal Balance of such Written Down Interest is reduced as notified by or on behalf of the related issuer or trustee to the holders of such Written Down Interest (including appraisal reductions on CMBS). Written Down Interest means any Collateral Interest as to which the aggregate par amount of such Collateral Interest and all other securities secured by the same pool of collateral that rank pari passu with or senior in priority of payment to such Collateral Interest exceeds the aggregate par amount (including reserved interest or other amounts available for overcollateralization) of all collateral securing such securities (excluding defaulted collateral); provided that the Issuer shall immediately send notice to S&P and Fitch by facsimile and electronic mail upon any Collateral Interest becoming a Written Down Interest. 59

1.2. ASSUMPTIONS AS TO COLLATERAL INTERESTS, FEES, ETC. The provisions set forth in this Section 1.2 shall be applied in connection with all calculations required to be made pursuant to this Indenture with respect to Scheduled Distributions on any Pledged Security, or any payments on any other assets included in the Collateral, and with respect to the income that can be earned on Scheduled Distributions on such Pledged Securities and on any other amounts that may be received for deposit in the Collection Account. (a)

All calculations with respect to Scheduled Distributions on the Pledged Securities securing the Indenture Issued Notes shall be made by the Issuer or the Collateral Administrator on behalf of the Issuer using (in the case of the Collateral Interests) the assumptions that (i) no Pledged Security defaults or is sold, (ii) prepayment of any Pledged Security during any month occurs at a rate equal to the average rate of prepayment during the period of six consecutive months immediately preceding the current month (or, with respect to any Pledged Security that has not been outstanding for at least six consecutive calendar months, at the rate of prepayment assumed at the time of issuance of such Pledged Security), (iii) any clean-up call with respect to a Pledged Security will be exercised when economic to the Person or Persons entitled to exercise such call and (iv) no other optional redemption of any Pledged Security will occur except for those that have actually occurred or as to which irrevocable notice thereof shall have been given.

(b)

For purposes of determining compliance with the Interest Coverage Tests, except as otherwise specified in the Interest Coverage Tests, there shall be excluded all payments in respect of Impaired Interests and Deferred Interest PIK Bonds unless the Trustee or Collateral Manager has actual knowledge such payments will be made in Cash and will be received on or before the Due Date therefor and all other scheduled payments (whether of principal, interest, fees or other amounts) including payments to the Issuer under any Hedge Agreement, as to which the Trustee or Collateral Manager has actual knowledge will not be made in Cash or will not be received when due. For purposes of calculating the applicable Interest Coverage Ratio: (1)

the expected interest income on Collateral Interests and Eligible Investments and the expected interest payable on the Rated Notes and amounts, if any, payable under a Hedge Agreement will be calculated using the interest rates applicable thereto on the applicable date of determination;

(2)

accrued original issue discount on Eligible Investments will be deemed to be a scheduled interest payment thereon due on the date such original issue discount is scheduled to be paid; and

(3)

it will be assumed that no principal payments are made on the Rated Notes during the applicable periods.

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

For each Due Period, the Scheduled Distribution on any Pledged Security (other than (i) an Impaired Interest, (ii) a Deferred Interest PIK Bond or (iii) an Equity Interest, which, in each case except as otherwise provided herein, shall be assumed to have a Scheduled Distribution of zero and with respect to any Written Down Interest, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount) shall be the sum of (x) the total amount of payments and collections in respect of such Pledged Security (including the proceeds of the sale of such Pledged Security received during the 60

Processed and formatted by SEC Watch - Visit SECWatch.com

Due Period) that, if paid as scheduled, will be available in the Collection Account at the end of the Due Period for payment on the Rated Notes or other amounts payable pursuant to this Indenture and of certain expenses of the Issuer and the CoIssuer plus (y) any such amounts received in prior Due Periods that were not disbursed on a previous Payment Date (provided that such sum shall be computed without regard to any amounts excluded from the determination of compliance with the Coverage Tests pursuant to Section 1.2(b)). (d)

Subject to Section 1.2(b), each Scheduled Distribution receivable with respect to a Pledged Security shall be assumed to be received on the applicable Due Date, and each such Scheduled Distribution shall be assumed to be immediately deposited in the Collection Account and, except as otherwise specified, to earn interest at the Assumed Reinvestment Rate. All such funds shall be assumed to continue to earn interest until the date on which they are required to be available in the Collection Account for transfer to the Payment Account and application, in accordance with the terms hereof, to payments of principal of or interest on the Rated Notes or other amounts payable pursuant to this Indenture.

(e)

With respect to any Collateral Interest as to which any interest or other payment thereon is subject to withholding tax of any Relevant Jurisdiction, each Distribution thereon shall, for purposes of the Coverage Tests and each Collateral Quality Test, be deemed to be payable net of such withholding tax unless the issuer thereof or obligor thereon is required to make additional payments sufficient on an after tax basis to cover any withholding tax imposed on payments to the Issuer with respect thereto (including in respect of any such additional payment). On any date of determination, the amount of any Scheduled Distribution due on any future date shall be assumed to be made net of any such uncompensated withholding tax based upon withholding tax rates in effect on such date of determination.

(f)

For purpose of determining compliance with the Interest Coverage Tests, it will be assumed that any amount required to be paid for taxes, filing and registration fees on the Payment Date immediately following the relevant Due Period shall be equal to the aggregate amount for which the Trustee has received an invoice or demand for payment on or prior to the relevant Measurement Date.

(g)

Any reference in the definition of “Trustee Fee,” “Senior Collateral Management Fee” or “Subordinate Collateral Management Fee” in Section 1.1(a) to an amount calculated with respect to a period at a per annum rate shall be computed on the basis of a 360 day year of four 90-day periods.

(h)

Unless otherwise specified, test calculations that evaluate to a percentage will be rounded to the nearest one-hundredth, and test calculations that evaluate to a number or decimal will be rounded to the nearest one hundredth.

(i)

Unless otherwise specified, all calculations required to be made and all reports which are to be prepared pursuant to this Indenture with respect to the Collateral Interests, shall be made on the basis of the date on which the Issuer makes a commitment to acquire or to sell an asset, as applicable (the trade date), not the settlement date for such sale. 61

Processed and formatted by SEC Watch - Visit SECWatch.com

(j)

For the purpose of determining fees constituting Administrative Expenses payable under the Priority of Payments hereunder, periods longer or shorter than a 90 day period shall be prorated based on the number of days in such period.

(k)

With respect to any Collateral Interest that is a Preferred Equity Security, (i) payments of interest shall mean payments of dividends or other distributions not attributable to the return of capital by the related Underlying Instruments and (ii) payments of principal shall mean distributions attributable to the return of capital by the Underlying Instruments.

1.3. RULES OF CONSTRUCTION Unless the context otherwise clearly requires: (a)

the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined;

(b)

whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms;

(c)

the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”;

(d)

the word “will” shall be construed to have the same meaning and effect as the word “shall”;

(e)

any definition of or reference to any agreement, statute, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein);

(f)

any reference herein to any Person, or to any Person in a specified capacity, shall be construed to include such Person’s successors and assigns or such Person’s successors in such capacity, as the case may be; and

(g)

all references in this instrument to designated “Sections,” “clauses” and other subdivisions are to the designated Sections, clauses and other subdivisions of this instrument as originally executed, and the words “herein,” “hereof,” hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Section, clause or other subdivision. ARTICLE II THE INDENTURE ISSUED NOTES

2.1. FORMS GENERALLY (a)

The Class A Notes (other than the Class A-R Notes), Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes offered and sold in reliance on Regulation S (each, a Regulation S Note) shall be issued in fully Registered form without interest coupons substantially in the form of the note attached as Exhibit A-1 (each, a 62

Processed and formatted by SEC Watch - Visit SECWatch.com

Regulation S Global Note) with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office in Minneapolis, Minnesota, as custodian for DTC and registered in the name of DTC or a nominee of DTC, duly executed by the Co-Issuers and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be. (b)

The Class A Notes (other than the Class A-R Notes), Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes and sold in the United States pursuant to an exemption from the registration requirements of the Securities Act (Rule 144A Notes) shall be issued in fully Registered form without interest coupons substantially in the form of the note attached as Exhibit A-2 (each, a Rule 144A Global Note), with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for DTC and registered in the name of DTC or a nominee of DTC, duly executed by the Co-Issuers and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be.

(c)

Regulation S Global Notes and Rule 144A Global Notes may also be exchanged under the limited circumstances set forth in Section 2.4 for notes in definitive fully Registered form without interest coupons (each, a Certificated Class A-G Note), which may be either a Regulation S Certificated Class A-G Note or a Rule 144A Certificated Class A-G Note, with such legends as may be applicable thereto, which shall be duly executed by the Issuer and the Co-Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided.

(d)

The Class A-R Notes, the Class H Notes and the Class J Notes offered or sold in the United States or to U.S. Persons pursuant to Rule 144A or another applicable exemption from registration under the Securities Act shall be issued in the form of physical certificates in definitive fully Registered form without interest coupons substantially in the form of the certificated note attached as Exhibit B (each, a Certificated Class A-R Note, or a Certificated Class H Note, or a Certificated Class J Note, and together, the Certificated Notes) with such legends as may be applicable thereto, which shall be duly executed by the Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided.

(e)

The Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) and the Issuer (in the case of the Class H Notes and the Class J Notes) in issuing the Indenture Issued Notes may use “CUSIP” or “private placement” numbers (if then generally in use), and, if so, the Trustee will indicate the “CUSIP” or “private placement” numbers of the Indenture Issued Notes in notices of redemption and related materials as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Indenture Issued Notes or as contained in any notice of redemption and related materials. 63

Processed and formatted by SEC Watch - Visit SECWatch.com

2.2. AUTHORIZED AMOUNT; APPLICABLE PERIODIC INTEREST RATE; STATED MATURITY DATE; DENOMINATIONS (a)

The aggregate principal amount of Indenture Issued Notes which may be issued under this Indenture may not exceed U.S.$450,000,000, excluding Indenture Issued Notes issued upon registration of, transfer of, or in exchange for, or in lieu of, other Indenture Issued Notes pursuant to Section 2.4, 2.5 or 8.5.

(b)

The Rated Notes shall be divided into twelve Classes having designations, original principal amounts, original Applicable Periodic Interest Rates and Stated Maturity Dates as follows: O rigin al Prin cipal Am ou n t

Applicable Pe riodic Inte re st Rate

Inde n ture Issu e d Note S tate d Maturity Date

Class A-1 Notes

U.S.$174,800,000

LIBOR + 0.330%

June 2041

Class A-R Notes

U.S.$70,000,000

LIBOR + 0.340%

June 2041

Class A-2 Notes

U.S.$27,225,000

LIBOR + 0.380%

June 2041

Class B Notes

U.S.$21,825,000

LIBOR + 0.440%

June 2041

Class C Notes

U.S.$12,825,000

LIBOR + 0.740%

June 2041

Class D Notes

U.S.$13,950,000

LIBOR + 0.940%

June 2041

Class E Notes

U.S.$10,125,000

LIBOR + 1.650%

June 2041

Class F Notes

U.S.$7,650,000

LIBOR + 1.850%

June 2041

Class G Notes

U.S.$9,900,000

LIBOR + 3.000%

June 2041

Class H Notes

U.S.$6,075,000

LIBOR + 4.250%

June 2041

Class J Notes

U.S.$18,000,000

LIBOR + 5.500%

June 2041

Class K Notes

U.S.$13,950,000

LIBOR + 8.000%

June 2041

De signation

The Indenture Issued Notes will be issuable in minimum denominations of U.S.$500,000 and, in each case, only in integral multiples of U.S.$1,000 in excess of such minimum denominations. After issuance, (x) an Indenture Issued Note may fail to be in compliance with the minimum denomination requirement as a result of the repayment of principal thereon in accordance with the Priority of Payments and (y) the Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes or Class K Notes may fail to be in an amount which is an integral multiple of U.S.$1,000 due to the addition to the principal amount thereof of deferred interest. (c)

Interest shall accrue on the Aggregate Outstanding Amount of each Class of Indenture Issued Notes (determined as of the first day of each Interest Period and after giving effect to any payment of principal occurring on such day) from the Closing Date (or in the case of the Class A-R Notes, from the relevant funding date) and will be payable in arrears on each Payment Date. In addition, interest with respect to any Class A-R Notes may also be paid on any Interim Payment Date in connection with a Class A-R Prepayment. 64

Processed and formatted by SEC Watch - Visit SECWatch.com

Interest on each Class of Indenture Issued Notes and interest on Defaulted Interest will be calculated in accordance with the definition of Periodic Interest. (d)

The Indenture Issued Notes shall be redeemable as provided in Section 9.

(e)

The Depositary for the Global Notes shall initially be DTC.

(f)

The Indenture Issued Notes shall be numbered, lettered or otherwise distinguished in such manner as may be consistent herewith, determined by the Authorized Officers of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) and the Issuer (in the case of the Class H Notes and the Class J Notes) executing such Indenture Issued Notes as evidenced by their execution of such Indenture Issued Notes.

2.3. EXECUTION, AUTHENTICATION, DELIVERY AND DATING (a)

The Indenture Issued Notes (other than the Class H Notes and the Class J Notes) shall be executed on behalf of the CoIssuers by an Authorized Officer of each of the Co-Issuers. The Class H Notes and the Class J Notes shall be executed on behalf of the Issuer by an Authorized Officer of the Issuer. The signatures of such Authorized Officers on the Indenture Issued Notes may be manual or facsimile (including in counterparts).

(b)

Indenture Issued Notes bearing the manual or facsimile signatures of individuals who were at any time the Authorized Officers of either of the Co-Issuers shall bind such Person, notwithstanding the fact that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Indenture Issued Notes or did not hold such offices at the date of issuance of such Indenture Issued Notes.

(c)

At any time and from time to time after the execution and delivery of this Indenture, the Co-Issuers may deliver Indenture Issued Notes (other than the Class H Notes and the Class J Notes) executed by the Co-Issuers and the Issuer may deliver the Class H Notes and the Class J Notes executed by the Issuer, to the Trustee or the Authenticating Agent for authentication, and the Trustee or the Authenticating Agent, upon Issuer Order, shall authenticate and deliver such Indenture Issued Notes as provided in this Indenture and not otherwise.

(d)

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

(e)

Indenture Issued Notes issued upon transfer, exchange or replacement of other Indenture Issued Notes shall be issued in authorized denominations reflecting the original aggregate principal amount of the Indenture Issued Notes so transferred, exchanged or replaced, but shall represent only the current Aggregate Outstanding Amount of the Indenture Issued Notes so transferred, exchanged or replaced. In the event that any Indenture Issued Note is divided into more than one Indenture Issued Note in accordance with this Section 2, the original principal amount of such Indenture Issued Note shall be proportionately divided among the Indenture Issued Notes delivered in exchange therefor and shall be deemed to 65

Processed and formatted by SEC Watch - Visit SECWatch.com

be the original aggregate principal amount of such subsequently issued Indenture Issued Notes. (f)

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

2.4. REGISTRATION, TRANSFER AND EXCHANGE OF INDENTURE ISSUED NOTES (a)

Registration of Indenture Issued Notes. The Trustee is hereby appointed as the registrar hereunder (the Note Registrar). The Trustee is hereby appointed as a transfer agent with respect to the Indenture Issued Notes, other than the Class A-R Note, (the Note Transfer Agent), and with respect to the Class A-R Notes, the Class A-R Note Agent (the Class A-R Note Agent). The Note Registrar shall (acting solely for this purpose as agent for the Issuer) keep a register (the Note Register) at the Corporate Trust Office in which, subject to such reasonable regulations as it may prescribe, the Note Registrar shall provide for the registration of Indenture Issued Notes and the registration of transfers of Indenture Issued Notes. Upon any resignation or removal of the Note Registrar, the Issuer (after consultation with the Collateral Manager) shall propose a replacement for approval by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes. The CoIssuers may not terminate the appointment of the Note Registrar or any Note Transfer Agent without the consent of each Holder of Indenture Issued Notes. Subject to this Section 2.4, upon surrender for registration of transfer of any Indenture Issued Notes (other than the Class H Notes and the Class J Notes) at the office or agency of the Co-Issuers (or in the case of the Class H Notes and the Class J Notes, the Issuer) to be maintained as provided in Section 7.2, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) or the Issuer (in the case of the Class H Notes and the Class J Notes) shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Indenture Issued Notes of any authorized denomination and of a like aggregate principal amount. At the option of the Holder, Indenture Issued Notes may be exchanged for Indenture Issued Notes of like terms, in any authorized denominations and of like aggregate principal amount, upon surrender of the Indenture Issued Notes to be exchanged at such office or agency. Whenever any Indenture Issued Note is surrendered for exchange, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) or the Issuer (in the case of the Class H Notes and the Class J Notes) shall execute and the Trustee shall authenticate and deliver the Indenture Issued Notes that the Indenture Issued Noteholder making the exchange is entitled to receive. All Indenture Issued Notes issued and authenticated upon any registration of transfer or exchange of Indenture Issued Notes shall be the valid obligations of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) or the Issuer (in the case of the Class H Notes and the Class J Notes), evidencing the same 66

Processed and formatted by SEC Watch - Visit SECWatch.com

debt, and entitled to the same benefits under this Indenture, as the Indenture Issued Notes surrendered upon such registration of transfer or exchange. Every Indenture Issued Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) or the Issuer (in the case of the Class H Notes and the Class J Notes) and the Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to a Holder for any registration of transfer or exchange of Indenture Issued Notes, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith and delivery charges, if any, not made by regular mail. (b)

Transfers of Class A Notes (other than the Class A-R Notes), Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes (1)

Subject to Section 2.4(b)(4), exchanges or transfers of beneficial interests in a Global Note may be made only in accordance with the rules and regulations of the Depositary and the transfer restrictions contained in the legend on such Global Note and exchanges or transfers of interests in a Global Note may be made only in accordance with the following: (i)

Subject to Section 2.4(b)(1)(ii) through (vi), transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor’s nominee.

(ii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Regulation S Global Note for a beneficial interest in a Rule 144A Global Note upon provision to the Trustee and the Co-Issuers of a written certification in the form of Exhibit C-1 (a Rule 144A Transfer Certificate).

(iii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Rule 144A Global Note for a beneficial interest in a Regulation S Global Note upon provision to the Trustee and the Co-Issuers of a written certification substantially in the form of Exhibit C-2 (a Regulation S Transfer Certificate).

(iv)

An owner of a beneficial interest in a Regulation S Global Note may transfer such interest in the form of a beneficial interest in such Regulation S Global Note without the provision of written certification; provided that (1) such transfer is made to a Person who is not a U.S. Person in an offshore transaction in reliance on an exemption from the registration requirements of the Securities Act under Regulation S and (2) the transferee, by purchase of such interest in such Regulation S Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Regulation S Transfer Certificate. 67

Processed and formatted by SEC Watch - Visit SECWatch.com

(v)

An owner of a beneficial interest in a Rule 144A Global Note may transfer such interest in the form of a beneficial interest in such Rule 144A Global Note without the provision of written certification; provided that the transferee, by purchase of such interest in such Rule 144A Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Rule 144A Transfer Certificate.

(vi)

In the event Certificated Class A-G Notes are issued pursuant to Section 2.4(b)(5), the Trustee shall cause the transfer of (i) any beneficial interest in a Global Note for a Certificated A-G Note that is a Regulation S Note (a Regulation S Certificated Note), upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any beneficial interest in a Global Note for a Certificated A-G Note that is a Rule 144A Note (a Rule 144A Certificated Note), upon provision to the Trustee, the Co-Issuers and the Note Registrar of a Rule 144A Transfer Certificate.

(2)

Subject to Section 2.4(b)(4), in the event Certificated Class A-G Notes are issued pursuant to Section 2.4(b)(5), the Trustee shall cause the transfer of (i) any Certificated A-G Note for a beneficial interest in a Regulation S Global Note, upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any Certificated A-G Note for a beneficial interest in a Rule 144A Global Note, upon provision to the Trustee and the Co-Issuers of a Rule 144A Transfer Certificate.

(3)

Upon acceptance for exchange or transfer of a beneficial interest in a Global Note for a Certificated A-G Note, or upon acceptance for exchange or transfer of a Certificated A-G Note for a beneficial interest in a Global Note, each as provided herein, the Trustee shall approve the instruction at the Depositary to adjust the principal amount of such Global Note on its records to evidence the date of such exchange or transfer and the change in the principal amount of such Global Note.

(4)

Subject to the restrictions on transfer and exchange set forth in this Section 2.4 and to any additional restrictions on transfer or exchange specified in the Certificated Class A-G Notes, the Holder of any Certificated A-G Note may transfer or exchange the same in whole or in part (in a principal amount equal to the minimum authorized denomination or any larger authorized amount) by surrendering such Certificated A-G Note at the Corporate Trust Office or at the office of any Note Transfer Agent, together with (x) in the case of any transfer, an executed instrument of assignment and (y) in the case of any exchange, a written request for exchange. Following a proper request for transfer or exchange, the Trustee shall (provided it has available in its possession an inventory of Certificated Class A-G Notes), within five Business Days of such request if made at such Corporate Trust Office, or within ten Business Days if made at the office of a Note Transfer Agent (other than the Trustee), authenticate and make available at such Corporate Trust Office or at the office of such Note Transfer Agent, as the case may be, to the transferee (in the case of transfer) or Indenture Issued Noteholder (in the case of exchange) or send by first class mail (at the risk of the transferee in the case of transfer or Indenture Issued Noteholder in the case of exchange) to such address as the transferee or Indenture Issued 68

Processed and formatted by SEC Watch - Visit SECWatch.com

Noteholder, as applicable, may request, a Certificated A-G Note or Notes, as the case may require, for a like aggregate principal amount and in such authorized denomination or denominations as may be requested. The presentation for transfer or exchange of any Certificated Note shall not be valid unless made at the Corporate Trust Office or at the office of a Note Transfer Agent or by a duly authorized attorney-in-fact. Beneficial interests in Global Notes shall be exchangeable for Certificated Class A-G Notes only under the limited circumstances described in Section 2.4(b)(5). (5)

Interests in a Global Note deposited with or on behalf of the Depositary pursuant to Section 2.1 hereunder shall be transferred (A) to the Beneficial Owners thereof in the form of Certificated Class A-G Notes only if such transfer otherwise complies with this Section 2.4 (including Section 2.4(b)(1) and (2) and (1) the Depositary notifies the Issuer that it is unwilling or unable to continue as Depositary for the Indenture Issued Notes, (2) the Depositary ceases to be a “clearing agency” registered under the Exchange Act and a successor Depositary is not appointed by the Issuer within 90 days of such notice or (3) as a result of any amendment to or change in the laws or regulations of the Cayman Islands, or of any authority therein or thereof having power to tax, or in the interpretation or administration of such laws or regulations which become effective on or after the Closing Date, the Issuer, the Trustee or any Note Paying Agent becomes aware that it is or will be required to make any deduction or withholding from any payment in respect of the Global Notes which would not be required if the Global Notes were not represented by a global certificate or (B) to the purchaser thereof in the form of one or more Certificated Notes in accordance with the provisions of Section 2.4(b)(1).

(6)

If interests in any Global Note are to be transferred to the Beneficial Owners thereof in the form of Certificated Class A-G Notes pursuant to Section 2.4(b)(5), such Global Note shall be surrendered by the Depositary, or its custodian on its behalf, to the Corporate Trust Office or to the Note Transfer Agent located in Minneapolis, Minnesota and the Trustee shall authenticate and deliver without charge, upon such transfer of interests in such Global Note, an equal aggregate principal amount of Certificated Notes of authorized denominations. The Certificated Class A-G Notes transferred pursuant to this Section 2.4 shall be executed, authenticated and delivered only in the denominations specified in Section 2.2(b) and registered in such names as the Depositary shall direct in writing.

(7)

For so long as one or more Global Notes are Outstanding: (i)

the Trustee and its directors, officers, employees and agents may deal with the Depositary for all purposes (including the making of distributions on, and the giving of notices with respect to, the Global Notes);

(ii)

unless otherwise provided herein and subject to Section 2.4(b)(7)(i) above, the rights of Beneficial Owners shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such Beneficial Owners and the Depositary; 69

(8)

(iii)

for purposes of determining the identity of and principal amount of Indenture Issued Notes beneficially owned by a Beneficial Owner, the records of the Depositary shall be conclusive evidence of such identity and principal amount and the Trustee may conclusively rely on such records when acting hereunder;

(iv)

the Depositary will make book-entry transfers among the Depositary Participants of the Depositary and will receive and transmit distributions of principal of and interest on the Global Notes to such Depositary Participants; and

(v)

the Depositary Participants of the Depositary shall have no rights under this Indenture under or with respect to any of the Global Notes held on their behalf by the Depositary, and the Depositary may be treated by the Trustee and its agents, employees, officers and directors as the absolute owner of the Global Notes for all purposes whatsoever.

Each holder of a Class A Note, Class B Note, Class C Note, Class D Note, Class E Note, Class F Note and Class G Note (in each case, or an interest therein) shall represent or shall be deemed to represent that either (A) it is not, and it is not acquiring such Note or interest therein on behalf of or with “plan assets” (within the meaning of Plan Asset Regulation) of, any employee benefit plan (within the meaning of Section 3(3) of the ERISA) or plan (within the meaning of Section 4975 of the Code) subject to ERISA or Section 4975 of the Code (or any materially similar applicable law (a Similar Law)), including certain insurance company general accounts (each, a Plan), or (B)(I) such Note is rated investment grade or better as of the date of acquisition, (II) the holder believes that the Note is properly treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulation and agrees to so treat such Note and (III) the holder’s acquisition, holding and disposition of such Note will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code (or Similar Law).

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

Transfers of Class A-R Notes, Class H Notes and Class J Notes. (1)

If a holder of a beneficial interest in a Certificated Class A-R Note, Certificated Class H Note or Certificated Class J Note wishes at any time to transfer its interest in such Certificated Note such holder may transfer or cause the transfer of such interest for an equivalent beneficial interest in one or more such Certificated Notes, as provided below. Upon receipt by the Issuer and the Note Registrar of (A) such holder’s Certificated Class A-R Note, Certificated Class H Note or Certificated Class J Note, as applicable, properly endorsed for assignment to the transferee and (B) a certificate in the form of Exhibit C-3 (a Certificated Class A-R Note Transfer Certificate, Certificated Class H Note Transfer Certificate or Certificated Class J Note Transfer Certificate, as applicable) given by the transferee of such beneficial interest, the Note Registrar shall cancel such Certificated Note, record the transfer in the Note Register and authenticate and deliver one or more Certificated Class A-R Notes, Certificated Class H Notes or Certificated Class J Notes, as applicable, bearing the same designation as the related Certificated Notes endorsed for transfer, registered in the names specified in the assignment described in clause (A) above, in principal 70

Processed and formatted by SEC Watch - Visit SECWatch.com

amounts designated by the transferee (the aggregate of such amounts being the same as the beneficial interest in the related Certificated Notes surrendered by the transferor) and in the minimum denominations and integral multiples in excess thereof. In addition, the Note Registrar shall not register any transfer of any Certificated Class H Notes or Certificated Class J Notes to a proposed transferee that has represented that it is a Benefit Plan Investor or a Controlling Person if the transfer would result in Benefit Plan Investors owning 25% or more of the value of the related Certificated Notes outstanding (as determined without regard to interests held by Controlling Persons, and otherwise contemplated by the applicable regulations under ERISA) immediately after such transfer, based on assurances received from investors. Without limiting the generality of the forgoing, the Note Registrar shall not register any transfer of Certificated Class H Notes or Certificated Class J Notes represented by Regulation S Notes to a proposed transferee of such Certificated Notes that has represented that it is or may become a Benefit Plan Investor or a Controlling Person. Without limiting the generality of the foregoing, a transfer of beneficial interests in a Certificated Class H Note or Certificated Class J Note will not be permitted unless an ERISA Restriction Certificate substantially in the form set forth in Exhibit C-4 is obtained from each transferee of the related Certificated Note, for the benefit of the Issuer, the Trustee and the Initial Purchaser, (i) in the case of a Certificated Class H Note or Certificated Class J Note not represented by a Regulation S Note, regarding whether it is, or is not and will not be, a Benefit Plan Investor or Controlling Person, or (ii) in the case of a Certificated Class H Note or Certificated Class J Note or represented by a Regulation S Note, to the effect that it is not and will not be a Benefit Plan Investor or Controlling Person. Any purported transfer in violation of the foregoing requirements shall be null and void ab initio, and the Note Registrar shall not register any such purported transfer and shall not authenticate and deliver such Certificated Class A-R Notes, Certificated Class H Notes or Certificated Class J Notes, as applicable. (2)

If a holder of a beneficial interest in one or more Certificated Class A-R Notes, Certificated Class H Notes or Certificated Class J Notes wishes at any time to exchange its interest in such related Certificated Notes for an interest in one or more such Certificated Notes of different principal amounts, such holder may exchange or cause the exchange of such interest for an equivalent beneficial interest in the Certificated Class A-R Notes, Certificated Class H Notes or Certificated Class J Notes, as applicable, bearing the same designation as the related Certificated Notes endorsed for exchange as provided below. Upon receipt by the Note Registrar of (A) such holder’s Certificated Class A-R Notes, Certificated Class H Notes or Certificated Class J Notes, as applicable, properly endorsed for such exchange and (B) written instructions from such holder designating the number and principal amounts of the applicable Certificated Notes to be issued (the aggregate principal amounts of such Certificated Notes being the same as the Certificated Notes surrendered for exchange), then the Note Registrar shall cancel such Certificated Notes, record the exchange in the Note Register and authenticate and deliver one or more Certificated Notes bearing the same designation endorsed for exchange, registered in the same names as the related Certificated Notes surrendered by such holder or such different names as are specified in the endorsement described in clause (A) above, in different principal amounts designated by such holder (the Class and the aggregate principal amounts being the same as the beneficial interest in the 71

Processed and formatted by SEC Watch - Visit SECWatch.com

Certificated Class A-R Notes, Certificated Class H Notes or Certificated Class J Notes, as applicable, surrendered by such holder), and the minimum denominations and integral multiples in excess. (3)

Notwithstanding anything to the contrary herein, for so long as any Indenture Issued Notes other than the Class H Notes or the Class J Notes remain outstanding, the Note Registrar shall not register transfer of any Class H Notes or Class J Notes, as applicable, unless (i) the proposed transferee shall have delivered to the Trustee and the Note Registrar an Opinion of Counsel rendered by nationally recognized U.S. tax counsel experienced in such matters to the effect that the Class H Notes or the Class J Notes, as applicable, will be treated as indebtedness for U.S. federal income tax purposes, (ii) the proposed transferee shall have delivered to the Trustee and the Note Registrar a certificate in the form of Exhibit I (a Class H Note Tax Transfer Certificate or a Class J Note Tax Transfer Certificate, as applicable), or (iii) the proposed transferee shall have delivered to the Collateral Manager and the Trustee an Opinion of Counsel described in Section 7(e) of the Collateral Management Agreement; provided, however, that the Class H Notes and Class J Notes may be pledged to secure indebtedness and may be the subject of repurchase agreements treated by the Issuer as secured indebtedness for U.S. federal income tax purposes, and may be transferred following a default under such indebtedness or repurchase transaction without regard to the foregoing limitations (provided that the Issuer gives notice to the Trustee of the occurrence of such event).

(4)

Upon the transfer, exchange or replacement of a Class A-R Certificated Note bearing a legend, or upon specific request for removal of the legend on such Class A-R Certificated Note, the Issuer and the Co-Issuer will deliver only Class A-R Certificated Notes that bear the legend, or will refuse to remove the legend, as the case may be, unless there is delivered to the Issuer and Co- Issuer satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Issuer and the Co-Issuer that neither the legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act or the Investment Company Act.

(5)

Each person who becomes a beneficial owner of the Certificated Class A-R Notes will be required to represent and agree, among other things, as follows: (i)

the owner is one of the following: (A)

(I) a Qualified Purchaser, (II) a Qualified Institutional Buyer, (III) is aware that the sale of the Certificated Class A-R Notes to it is being made in reliance on the exemption from registration provided by Rule 144A under the Securities Act, (IV) is acquiring the Certificated Class A-R Notes for its own account or for one or more accounts, each of which is a Qualified Institutional Buyer who is a Qualified Purchaser, and as to each of which the owner exercises sole investment discretion, and (V) is acquiring the Certificated Class A-R Notes in a minimum principal amount of not less than $500,000 for each such account; or 72

Processed and formatted by SEC Watch - Visit SECWatch.com

(B)

(ii)

(d)

(I) is not a U.S. Person, (II) is aware that the sale of the Certificated Class A-R Notes to it is being made in reliance on the exemption from registration provided by Regulation S and (III) understands that the Certificated Class A-R Notes offered in reliance on Regulation S under the Securities Act will bear the legend set forth above;

and in each case the owner has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Certificated Class A-R Notes and the owner and any accounts for which it is acting are each able to bear the economic risk of the investment.

Denominations; Qualified Purchaser Status. No Person may hold a beneficial interest in any Indenture Issued Note (other than the Class-A-R Notes) except in a denomination authorized for the Indenture Issued Notes of such Class under Section 2.2(b). In addition, no transfer of an Indenture Issued Note (other than the Class-A-R Notes) or any interest therein, may be made to any Person that is a U.S. Person unless such Person is (A) a Qualified Institutional Buyer and (B) a Qualified Purchaser. In addition, no transfer of an Indenture Issued Note (other than the Class-A-R Notes) or any interest therein may be made to any Person that is a U.S. Person unless such Person (A) was not formed for the purpose of investing in either of the Co-Issuers (except when each beneficial owner of the purchaser is a Qualified Purchaser, (B) has received the necessary consent from its beneficial owners if it is a private investment company formed before April 30, 1996, (C) is not a brokerdealer that owns and invests on a discretionary basis less than U.S.$25,000,000 in securities of unaffiliated issuers, (D) is not a pension, profit, sharing or other retirement trust fund or plan in which the partners, beneficiaries or participants, as applicable, may designate the particular investments to be made, and in a transaction that may be effected without loss of any applicable Investment Company Act exemption, (E) will provide notice to any subsequent transferee of the transfer restrictions provided in the legend, (F) will hold and transfer in a principal amount of not less than U.S.$500,000, for it or for each account for which it is acting and (G) will provide the Issuer from time to time such information as it may reasonably request in order to ascertain compliance with the foregoing. Any purported transfer that is not in compliance with this Section 2.4 or the legends on the Indenture Issued Notes 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 (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) or the Issuer (in the case of the Class H Notes and the Class J Notes), the Trustee or any intermediary. If any purported transfer of Indenture Issued Notes (other than the Class-A-R Notes) or any beneficial interest therein to a purported transferee does not comply with the requirements set forth in this Section 2.4 or the legends on the Indenture Issued Notes, then the purported transferor of such Indenture Issued Notes (other than the Class-A-R Notes) or beneficial interest therein shall be required to cause the purported transferee to surrender the Indenture Issued Notes (other than the Class-A-R Notes) or any beneficial interest therein in return for a refund of the consideration paid therefor by such transferee (together with interest thereon) or to cause the purported transferee to dispose of such Indenture Issued Notes (other than the Class-A-R Notes) or beneficial interest promptly in one or more open market sales to one or more persons each of whom satisfies the requirements of this Section 2.4 and the legends on the Indenture Issued Notes (other than the Class-A-R Notes) and such purported transferor shall take, and shall cause such 73

Processed and formatted by SEC Watch - Visit SECWatch.com

transferee to take, all further action necessary or desirable, in the judgment of the Trustee, to ensure that such Indenture Issued Notes (other than the Class-A-R Notes) or any beneficial interest therein are held by persons in compliance therewith. (e)

Requirement to Sell. (1)

If, notwithstanding the restrictions set forth in this Section 2.4, either of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) or the Issuer (in the case of the Class H Notes and the Class J Notes) determines that any beneficial owner of a Rule 144A Note (A) is a U.S. Person and (B) is not a Qualified Institutional Buyer and also a Qualified Purchaser, either of the Co-Issuers or the Issuer, as applicable, may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Indenture Issued Note (or interest therein) to a Person that is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser, with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (x) upon written direction from the Issuer, the Trustee shall, and is hereby irrevocably authorized by such beneficial owner to cause its interest in such Indenture Issued Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9-611 of the UCC as applied to securities that are customarily sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser and (y) pending such transfer, no further payments will be made in respect of such Indenture Issued Note (or beneficial interest therein) held by such beneficial owner.

(2)

If, notwithstanding the restrictions set forth in this Section 2.4, either of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) or the Issuer (in the case of the Class H Notes and the Class J Notes) determines that any beneficial owner of a Regulation S Note is (A) a U.S. Person or (B) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), either of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) or the Issuer (in the case of the Class H Notes and the Class J Notes) may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Indenture Issued Note (or interest therein) to a Person that is not (1) a U.S. Person or (2) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (x) upon written direction from the Issuer, the Trustee shall, and is hereby irrevocably authorized by such beneficial owner to cause its interest in such Indenture Issued Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9611 of the UCC as applied to securities that are customarily sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is neither (1) a U.S. Person nor (2) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA) and (y) pending such transfer, no further payments 74

Processed and formatted by SEC Watch - Visit SECWatch.com

will be made in respect of such Indenture Issued Note (or beneficial interest therein) held by such beneficial owner. (f)

Legends. Any Indenture Issued Note issued upon the transfer, exchange or replacement of Indenture Issued Notes shall bear such applicable legend set forth in the relevant Exhibit hereto unless there is delivered to the Trustee, the Note Registrar and the Co Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) or the Issuer (in the case of the Class H Notes and the Class J Notes) such satisfactory evidence, which may include an Opinion of Counsel, as may be reasonably required by any of the Trustee, the Note Registrar and the Co Issuers (in the case of the Indenture Issued Notes other than the Class K Notes) or the Issuer (in the case of the Class K Notes) to the effect that neither such applicable legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A and to ensure that neither of the Co Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) or the Issuer (in the case of the Class H Notes and the Class J Notes) nor the pool of Collateral becomes an investment company required to be registered under the Investment Company Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Co Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) or the Issuer (in the case of the Class H Notes and the Class J Notes), shall authenticate and deliver Indenture Issued Notes that do not bear such applicable legend

(g)

Expenses; Acknowledgment of Transfer. Transfer, registration and exchange shall be permitted as provided in this Section 2.4 without any charge to the Indenture Issued Noteholder except for a sum sufficient to cover any tax or other governmental charge payable in connection therewith or the expenses of delivery (if any) not made by regular mail and payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith pursuant to Section 2.4(a). Registration of the transfer of a Indenture Issued Note by the Trustee shall be deemed to be the acknowledgment of such transfer on behalf of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) and the Issuer (in the case of the Class H Notes and the Class J Notes).

(h)

Surrender upon Final Payment. Upon final payment due on the date on which all outstanding unpaid principal of a Indenture Issued Note becomes due and payable as therein or herein provided, whether at the Stated Maturity Date or by declaration of acceleration, call for redemption or otherwise, the Holder thereof shall present and surrender such Indenture Issued Note at the Corporate Trust Office of the Trustee in Minneapolis, Minnesota.

(i)

Repurchase and Cancellation of Indenture Issued Notes. The Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) and the Issuer (in the case of the Class H Notes and the Class J Notes) will not purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the Outstanding Indenture Issued Notes except upon the redemption of the Indenture Issued Notes in accordance with the terms of this Indenture and the Indenture Issued Notes. The Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) and the Issuer (in the case of the Class H Notes and the Class J Notes) will promptly cancel all Indenture Issued Notes acquired by them pursuant to any payment, purchase, redemption, prepayment or other acquisition of Indenture Issued Notes pursuant to any 75

Processed and formatted by SEC Watch - Visit SECWatch.com

provision of this Indenture and no Indenture Issued Notes may be issued in substitution or exchange for any such Indenture Issued Notes. (j)

Compliance with Transfer Restrictions. Notwithstanding anything contained herein to the contrary, neither the Trustee nor the Note Registrar shall be responsible for ascertaining whether any transfer complies with the registration provisions of or exemptions from the Securities Act, applicable state securities laws, the rules of any Depositary, ERISA, the Code or the Investment Company Act; provided that if a certificate is specifically required by the express terms of this Section 2.4 to be delivered to the Trustee or the Note Registrar by a purchaser or transferee of a Indenture Issued Note, the Trustee or the Note Registrar, as the case may be, shall be under a duty to receive and examine the same to determine whether the transfer contemplated thereby substantially complies with the express terms of this Indenture and shall promptly notify the party delivering the same if such transfer does not comply with such terms. To the extent applicable to the Issuer, the Issuer shall impose additional restrictions to comply with the USA PATRIOT Act, and any such transfer restrictions shall be binding on each Holder or Beneficial Owner of a Indenture Issued Note. The Issuer shall notify the Trustee and the Note Registrar of the imposition of any such transfer restrictions.

(k)

Physical Indenture Issued Notes. The Issuer will promptly make available to the Trustee without charge a reasonable supply of Certificated Notes in definitive, fully Registered Form, without interest coupons.

2.5. MUTILATED, DEFACED, DESTROYED, LOST OR STOLEN INDENTURE ISSUED NOTES If (a) any mutilated or defaced Indenture Issued Note is surrendered to a Note Transfer Agent, or if there shall be delivered to either of the Co-Issuers (in the case of Indenture Issued Notes other than Class H Notes and the Class J Notes) or the Issuer (in the case of Class H Notes and the Class J Notes), the Trustee and the Note Transfer Agent (each, a Specified Person) evidence to their reasonable satisfaction of the destruction, loss or theft of any Indenture Issued Note, and (b) there is delivered to the Specified Persons such security or indemnity as may reasonably be required by them to save each of them harmless then, in the absence of notice to the Specified Persons that such Indenture Issued Note has been acquired by a bona fide purchaser, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) and the Issuer (in the case of the Class H Notes and the Class J Notes) shall execute and shall direct the Trustee to authenticate, and upon Issuer Request the Trustee shall authenticate and deliver, in lieu of any such mutilated, defaced, destroyed, lost or stolen Indenture Issued Note, a new Indenture Issued Note of the same Class as such mutilated, defaced, destroyed, lost or stolen Indenture Issued Note, of like tenor (including the same date of issuance) and equal principal amount, registered in the same manner, dated the date of its authentication, bearing interest from the date to which interest has been paid on the mutilated, defaced, destroyed, lost or stolen Indenture Issued Note and bearing a number not contemporaneously outstanding. If, after delivery of such new Indenture Issued Note, a bona fide purchaser of the predecessor Indenture Issued Note presents for payment, transfer or exchange such predecessor Indenture Issued Note, the Specified Persons shall be entitled to recover such new Indenture Issued Note from the Person to whom it was delivered or any Person taking therefrom, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Specified Persons in connection therewith. In case any such mutilated, defaced, destroyed, lost or stolen Indenture Issued Note has become due and payable, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes 76

Processed and formatted by SEC Watch - Visit SECWatch.com

and the Class J Notes) and the Issuer (in the case of the Class H Notes and the Class J Notes) in their or its (as applicable) discretion may, instead of issuing a new Indenture Issued Note, pay such Indenture Issued Note without requiring surrender thereof except that any mutilated Indenture Issued Note shall be surrendered. Upon the issuance of any new Indenture Issued Note under this Section 2.5, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) and the Issuer (in the case of the Class H Notes and the Class J Notes), the Trustee or any Note Transfer Agent may require the payment by the registered Holder thereof of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Indenture Issued Note issued pursuant to this Section 2.5 in lieu of any mutilated, defaced, destroyed, lost or stolen Indenture Issued Note, shall constitute an original additional contractual obligation of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) and the Issuer (in the case of the Class H Notes and the Class J Notes) and such new Indenture Issued Note shall be entitled, subject to the second paragraph of this Section 2.5, to all the benefits of this Indenture equally and proportionately with any and all other Indenture Issued Notes duly issued hereunder. The provisions of this Section 2.5 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, defaced, destroyed, lost or stolen Indenture Issued Notes. 2.6. PAYMENT OF PRINCIPAL AND INTEREST; RIGHTS PRESERVED (a)

Each Class of Rated Notes shall accrue interest during each Interest Period applicable to such Class in the manner and at the Applicable Periodic Interest Rate specified in Section 2.2. Interest on each Class of Rated Notes shall be due and payable on each Payment Date; provided that (i) interest on the Class A-2 Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Senior Notes (together with any Defaulted Interest thereon) (ii) interest on the Class B Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), (iii) interest on the Class C Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon) and on the Class B Notes (together with any Defaulted Interest thereon), (iv) interest on the Class D Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon) and on the Class C Notes (together with any Defaulted Interest thereon), (v) interest on the Class E Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon) and on the Class D Notes (together with any Defaulted Interest thereon), (vi) interest on the Class F Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest 77

Processed and formatted by SEC Watch - Visit SECWatch.com

thereon), on the Class D Notes (together with any Defaulted Interest thereon) and on the Class E Notes (together with any Defaulted Interest thereon), (vii) interest on the Class G Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon) and on the Class F Notes (together with any Defaulted Interest thereon), (viii) interest on the Class H Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon), on the Class F Notes (together with any Defaulted Interest thereon) and on the Class G Notes (together with any Defaulted Interest thereon), (ix) interest on the Class J Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon), on the Class F Notes (together with any Defaulted Interest thereon), on the Class G Notes (together with any Defaulted Interest thereon) and on the Class H Notes (together with any Defaulted Interest thereon), (x) interest on the Class K Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon), on the Class F Notes (together with any Defaulted Interest thereon), on the Class G Notes (together with any Defaulted Interest thereon), on the Class H Notes (together with any Defaulted Interest thereon) and on the Class J Notes (together with any Defaulted Interest thereon) and (xi) interest on all Rated Notes is subordinated in right of payment to the prior payment in full on each Payment Date of other amounts in accordance with Section 11.1. Payments of interest on the Class A Senior Notes (including any Defaulted Interest) and Class A-R Commitment Fee will be paid on a pro rata basis between the Class A-1 Notes and the Class A-R Notes based on amount due. Except as provided in Section 5.5, no payment shall be made by the Co-Issuers hereunder other than on a Payment Date. So long as any Class A Notes or Class B Notes are Outstanding, any Class C Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class C Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class C Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, any Class D Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class D Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which 78

Processed and formatted by SEC Watch - Visit SECWatch.com

funds are available to pay such Class D Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding, any Class E Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class E Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class E Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding, any Class F Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class F Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class F Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes are Outstanding, any Class G Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class G Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class G Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes or Class G Notes are Outstanding, any Class H Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class H Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class H Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes are Outstanding, any Class J Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class J Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class J Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes or Class J Notes are Outstanding, any Class K Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class K Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class K Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. (b)

The principal of each Rated Note shall be payable no later than the Stated Maturity Date thereof unless the unpaid principal of such Rated Note becomes due and payable at an 79

earlier date by declaration of acceleration, call for redemption or otherwise; provided that: (1)

so long as any Class A Senior Notes are Outstanding, except as provided in Section 9 and Section 11.1(b)(22), the payment of principal of the Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes (to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Senior Notes have been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Senior Notes and other amounts payable in accordance with Section 11.1;

(2)

so long as any Class A Notes are Outstanding, except as provided in Section 9 and Section 11.1(b)(22), the payment of principal of the Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes (to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and other amounts payable in accordance with Section 11.1;

(3)

so long as any Class A Notes or Class B Notes are Outstanding, except as provided in Section 9 and Section 11.1(b)(22), the payment of principal of the Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes (to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes and Class B Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and Class B Notes and other amounts payable

Processed and formatted by SEC Watch - Visit SECWatch.com

in accordance with Section 11.1; (4)

so long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, except as provided in Section 11.1(b)(22), the payment of principal of the Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes (to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes and Class C Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes and Class C Notes and other amounts payable in accordance with Section 11.1;

(5)

so long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding, except as provided in Section 11.1(b)(22), the payment of principal of the Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes (to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes and 80

Processed and formatted by SEC Watch - Visit SECWatch.com

Class D Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes and Class D Notes and other amounts payable in accordance with Section 11.1; (6)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding, except as provided in Section 11.1(b)(22), the payment of principal of the Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes (to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes and other amounts payable in accordance with Section 11.1;

(6)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes are Outstanding, except as provided in Section 11.1(b)(22), the payment of principal of the Class G Notes, Class H Notes, Class J Notes and Class K Notes (to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes and other amounts payable in accordance with Section 11.1;

(7)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes or Class G Notes are Outstanding, except as provided in Section 11.1(b)(22), the payment of principal of the Class H Notes, Class J Notes and Class K Notes (to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes and other amounts payable in accordance with Section 11.1; and

(8)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes are Outstanding, except as provided in Section 11.1(b)(22), the payment of principal of the Class J Notes and Class K Notes (to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, 81

Processed and formatted by SEC Watch - Visit SECWatch.com

Class G Notes and Class H Notes and other amounts payable in accordance with Section 11.1. (9)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes or Class J Notes are Outstanding, except as provided in Section 11.1(b)(22), the payment of principal of the Class K Notes (to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes and other amounts payable in accordance with Section 11.1.

Provided that, payments of principal of the Class A Senior Notes will be made pro rata based on their respective outstanding principal amounts; however, during the Reinvestment Period, the draws under Class A-R Notes may be prepaid prior to any payments of principal of the Class A-1 Notes. No payments of principal will be distributable in respect of any Class of Notes junior to the Class A-R Notes so long as any Class A-R Commitments remain outstanding, except to the extent described herein in connection with a Special Amortization as provided in Section 11.1(b)(22). (c)

So long as the Coverage Tests are satisfied, principal will not be payable on any Class of Rated Notes except (i) upon the occurrence of a Redemption, (ii) if a Rating Confirmation Failure occurs, (iii) in the case of any Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes or Class K Notes, to pay amounts in respect of the Class C Cumulative Applicable Periodic Interest Shortfall Amount, the Class D Cumulative Applicable Periodic Interest Shortfall Amount, the Class E Cumulative Applicable Periodic Interest Shortfall Amount, the Class F Cumulative Applicable Periodic Interest Shortfall Amount, the Class G Cumulative Applicable Periodic Interest Shortfall Amount, the Class H Cumulative Applicable Periodic Interest Shortfall Amount, the Class J Cumulative Applicable Periodic Interest Shortfall Amount or the Class K Cumulative Applicable Periodic Interest Shortfall Amount, as the case may be, in accordance with Section 11.1 and (iv) on each Payment Date, in accordance with Section 11.1.

(d)

As a condition to the payment of any principal of or interest on any Rated Note without the imposition of withholding tax, any Note Paying Agent shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor 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 the applicable Internal Revenue Service Form W-8 (or applicable successor 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) or other certification acceptable to it to enable the Co-Issuers (in the case of the Indenture Issued Notes other than the Class H Notes and the Class J Notes) or the Issuer (in the case of the Class H Notes and the Class J Notes), the Trustee and any Note Paying Agent to determine their duties and liabilities with respect to any taxes or other charges that they may be required to pay, deduct or withhold in respect of such Rated Note or the Holder of such Rated Note under 82

Processed and formatted by SEC Watch - Visit SECWatch.com

any present or future law or regulation of the Cayman Islands or the United States or any present or future law or regulation of any political subdivision thereof or taxing authority therein or to comply with any reporting or other requirements under any such law or regulation. (e)

All payments made by the Issuer under the Rated Notes will be made without any deduction or withholding for or on the account of any tax unless such deduction or withholding is required by applicable law, as modified by the practice of any relevant governmental authority, then in effect. If the Issuer is so required to deduct or withhold, then neither the Issuer nor the Co-Issuer will be obligated to pay any additional amounts in respect of such withholding or deduction.

(f)

Payments in respect of principal of and interest on the Rated Notes shall be payable by wire transfer in immediately Available Funds to a Dollar account maintained or specified by the Rated Noteholders in accordance with wire transfer instructions received by any Note Paying Agent on or before the Record Date or, if no wire transfer instructions are received by a Note Paying Agent, by a Dollar check drawn on a bank in the United States mailed to the address of such Rated Noteholder as it appears on the Note Register at the close of business on the Record Date for such payment. Such wire instructions may direct that any such payments may be paid to a Dollar account of an assignee or designee of any Rated Noteholder and may be irrevocable to the effect set forth therein.

(g)

The principal of and interest on any Rated Note which is payable on a Redemption Date or in accordance with Section 11.1 on a Payment Date and is punctually paid or duly provided for on such Redemption Date or Payment Date shall be paid to the Person in whose name that Rated Note (or one or more predecessor Rated Notes) is registered at the close of business on the Record Date for such payment. All such payments that are mailed or wired and returned to the Note Paying Agent shall be held for payment as herein provided at the office or agency of the Co-Issuers (in the case of the Rated Notes other than the Class H Notes, Class J Notes and Class K Notes) or the Issuer (in the case of the Class H Notes, Class J Notes and Class K Notes) to be maintained as provided in Section 7.2. Payments to Holders of the Rated Notes of each Class shall be made in the proportion that the Aggregate Outstanding Amount of the Rated Notes of such Class registered in the name of each such Holder on the Record Date for such payment bears to the Aggregate Outstanding Amount of all Rated Notes of such Class on such Record Date.

(h)

Payment of any Defaulted Interest may be made in any other lawful manner in accordance with Section 11.1 if notice of such payment is given by the Trustee to the Co-Issuers and the Rated Noteholders, and such manner of payment shall be deemed practicable by the Trustee.

(i)

All reductions in the principal amount of a Rated Note (or one or more predecessor Rated Notes) effected by payments of installments of principal made on any Payment Date or Redemption Date shall be binding upon all future Holders of such Rated Note and of any Rated Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Rated Note.

(j)

Notwithstanding anything to the contrary herein, the obligations of the Co-Issuers under the Rated Notes (other than the Class H Notes, Class J Notes and Class K Notes), the 83

Processed and formatted by SEC Watch - Visit SECWatch.com

Issuer under the Class H Notes, Class J Notes and Class K Notes or the Co-Issuers under this Indenture or arising in connection herewith are limited recourse obligations of the Co-Issuers or the Issuer, as the case may be, payable solely from the Collateral and following realization of the Collateral, all obligations of and all claims against the Co-Issuers or the Issuer, as the case may be, hereunder or arising in connection herewith shall be extinguished and shall not thereafter revive. No recourse shall be had against any Officer, member, director, employee, security holder or incorporator of the Co-Issuers (in the case of the Rated Notes other than the Class H Notes, Class J Notes and Class K Notes) or the Issuer (in the case of the Class H Notes, Class J Notes and Class K Notes) or their respective successors or assigns for the payment of any amounts payable under the Rated Notes or this Indenture. It is understood that the foregoing provisions of this Section 2.6(j) shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or agreement which is part of the Collateral or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Rated Notes or secured by this Indenture until such Collateral has been realized, whereupon any outstanding indebtedness or obligation shall be extinguished. It is further understood that the foregoing provisions of this Section 2.6(j) shall not limit the right of any Person to name either of the Co-Issuers (in the case of the Rated Notes other than the Class H Notes, Class J Notes and Class K Notes) or the Issuer (in the case of the Class H Notes, Class J Notes and Class K Notes) as a party defendant in any action or suit or in the exercise of any other remedy under the Rated Notes or this Indenture, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity. (k)

Subject to the foregoing provisions of this Section 2.6 and the provisions of Sections 2.4 and 2.5, each Rated Note delivered under this Indenture and upon registration of transfer of or in exchange for or in lieu of any other Rated Note shall carry the rights of unpaid interest and principal that were carried by such other Rated Note. ARTICLE III CONDITIONS PRECEDENT

3.1. GENERAL PROVISIONS The Indenture Issued Notes (other than the Class H Notes and the Class J Notes) may be executed by the Co-Issuers, or the Issuer in the case of the Class H Notes and the Class J Notes, and delivered to the Trustee for authentication and thereupon the same shall be authenticated and delivered by the Trustee (or an Authenticating Agent on its behalf) upon Issuer Request, upon receipt by the Trustee of the following: (a)

(1)

an Officer’s certificate of the Issuer, (A) evidencing the authorization by Board Resolution of the execution and delivery of, and the performance of the Issuer’s obligations under, each Transaction Document, in each case as may be amended on or prior to, and as in effect on, the Closing Date, and the execution, authentication and delivery of the Indenture Issued Notes and specifying the Stated Maturity Date, the principal amount and the Applicable Periodic Interest Rate with respect to each Class of Indenture Issued Notes to be authenticated and delivered, and (B) certifying that (1) the attached copy of such Board Resolution is a true and complete copy thereof, (2) such resolutions have not been rescinded 84

Processed and formatted by SEC Watch - Visit SECWatch.com

and are in full force and effect on and as of the Closing Date and (3) the Officers authorized to execute and deliver such documents hold the offices and have the signatures indicated thereon; and

(b)

(c)

(2)

a certificate of the Co-Issuer (A) evidencing the authorization by the Co-Issuer by action by written consent of the limited liability company manager of the execution and delivery of, and the performance of the Co-Issuer’s obligations under, this Indenture, as may be amended on or prior to, and as in effect on, the Closing Date, and the execution, authentication and delivery of the Indenture Issued Notes (other than the Class H Notes and the Class J Notes) and specifying the Stated Maturity Date, the principal amount and the Applicable Periodic Interest Rate of each Class of Indenture Issued Notes (other than the Class H Notes and the Class J Notes) to be authenticated and delivered, and (B) certifying that (1) the attached copy of such consent of the limited liability company manager is a true and complete copy thereof, (2) such resolutions have not been rescinded and are in full force and effect on and as of the Closing Date and (3) the Officers authorized to execute and deliver such documents hold the offices and have the signatures indicated thereon;

(1)

either (A) a certificate of the Issuer, or other official document evidencing the due authorization, approval or consent of any governmental body or bodies, at the time having jurisdiction in the premises, together with an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee on which the Trustee is entitled to rely to the effect that no other authorization, approval or consent of any governmental body is required for the valid issuance of the Indenture Issued Notes, or (B) an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee to the effect that no such authorization, approval or consent of any governmental body is required for the valid issuance of the Indenture Issued Notes except as may have been given; and

(2)

either (A) a certificate of the Co-Issuer or other official document evidencing the due authorization, approval or consent of any governmental body or bodies, at the time having jurisdiction in the premises, together with an Opinion of Counsel to the Co-Issuer satisfactory in form and substance to the Trustee on which the Trustee is entitled to rely to the effect that no other authorization, approval or consent of any governmental body is required for the valid issuance of the Indenture Issued Notes (other than the Class H Notes and the Class J Notes), or (B) an Opinion of Counsel to the Co-Issuer satisfactory in form and substance to the Trustee that no such authorization, approval or consent of any governmental body is required for the valid issuance of the Indenture Issued Notes (other than the Class H Notes and the Class J Notes) except as may have been given;

(1)

an opinion of Thacher Proffitt & Wood LLP, special New York counsel to the Co-Issuers, dated the Closing Date, substantially in the form of Exhibit E-1;

(2)

an opinion of Walkers, special Cayman Islands counsel to the Issuer, dated the Closing Date, substantially in the form of Exhibit E-2;

(3)

an opinion of Kennedy Covington Lobdell & Hickman, L.L.P., counsel to the Trustee, dated the Closing Date, substantially in the form of Exhibit F; and 85

Processed and formatted by SEC Watch - Visit SECWatch.com

(4)

an opinion of Thacher Proffitt & Wood LLP, counsel to the Collateral Manager, dated the Closing Date, substantially in the form of Exhibit G;

(d)

an Officer’s certificate of the Issuer, stating that the Issuer is not in Default under this Indenture and that the issuance of the Indenture Issued Notes will not result in a breach of any of the terms, conditions or provisions of, or constitute a Default under, the Articles, any indenture or other agreement or instrument to which the Issuer is a party or by which it is bound, or any order of any court or administrative agency entered in any Proceeding to which the Issuer is a party or by which it may be bound or to which it may be subject; that no Event of Default shall have occurred and be continuing; that all of the representations and warranties contained herein are true and correct as of the Closing Date; that all conditions precedent provided in this Indenture relating to the authentication and delivery of the Indenture Issued Notes applied for (including in Section 3.2) have been complied with; and that all expenses due or accrued with respect to the Offering or relating to actions taken on or in connection with the Closing Date have been paid;

(e)

an Officer’s certificate of the Co-Issuer stating that the Co-Issuer is not in Default under this Indenture and that the issuance of the Indenture Issued Notes will not result in a breach of any of the terms, conditions or provisions of, or constitute a Default under, the Certificate of Formation or Limited Liability Company Operating Agreement of the Co-Issuer, any indenture or other agreement or instrument to which the Co-Issuer is a party or by which it is bound, or any order of any court or administrative agency entered in any Proceeding to which the Co-Issuer is a party or by which it may be bound or to which it may be subject; that no Event of Default shall have occurred and be continuing; that all of the representations and warranties contained herein are true and correct as of the Closing Date; that all conditions precedent provided in this Indenture relating to the authentication and delivery of the Indenture Issued Notes applied for have been complied with; and that all expenses due or accrued with respect to the Offering or relating to actions taken on or in connection with the Closing Date have been paid;

(f)

an Accountant’s Report (A) confirming the information with respect to each Collateral Interest (other than its price) set forth on a schedule setting forth each Collateral Interest and the information provided by the Issuer with respect to every other asset forming part of the Collateral, by reference to such sources as shall be specified therein, (B) confirming that, on the Closing Date, the Collateral Interests set forth on Schedule A meet the Collateral Quality Tests (with the exception of the S&P CDO Monitor Test), (C) calculating each of the Coverage Tests as of the Closing Date and (D) specifying the procedures undertaken by them to review data and computations relating to the foregoing statement;

(g)

executed counterparts of this Indenture, the Account Control Agreement, the Collateral Administration Agreement, the Collateral Management Agreement and the other Transaction Documents;

(h)

execution and delivery of the Financing Statement for filing against the Issuer with the Recorder of Deeds in the District of Columbia; and

(i)

evidence of an entry having been made in the Issuer’s Register of Mortgages and Charges in respect of the charge. 86

3.2. SECURITY FOR THE INDENTURE ISSUED NOTES Prior to the issuance of the Indenture Issued Notes on the Closing Date, the Issuer shall cause the following conditions to be satisfied: (a)

Grant of Security Interest; Delivery of Collateral Interests. The Grant pursuant to the Granting clauses of this Indenture of all of the Issuer’s right, title and interest in and to the Collateral and the transfer of all Collateral Interests purchased by the Issuer on the Closing Date (as set forth in Schedule A) to the Trustee in the manner provided in Section 3.3(b).

(b)

Certificate of the Issuer. The delivery to the Trustee of a certificate of an Authorized Officer of the Issuer or the Collateral Manager, for and on behalf of the Issuer, dated as of the Closing Date, to the effect that (x) the Issuer has no assets other than the Collateral, (y) the Issuer has no investments that do not qualify as Collateral Interests or Eligible Investments and (z) in the case of each Collateral Interest identified on Schedule A and pledged to the Trustee for inclusion in the Collateral on the Closing Date: (1)

the Issuer is the owner of such Collateral Interest free and clear of any liens, claims or encumbrances of any nature whatsoever except for those which are being released on the Closing Date and except for those Granted pursuant to this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on such Collateral Interest prior to the first Payment Date and owed by the Issuer to the seller of such Collateral Interest;

(2)

the Issuer has acquired its ownership in such Collateral Interest in good faith without notice of any adverse claim (within the meaning given to such term by Section 8-102(a)(1) of the UCC), except as described in clause (1) above;

Processed and formatted by SEC Watch - Visit SECWatch.com

(3)

the Issuer has not assigned, pledged or otherwise encumbered any interest in such Collateral Interest (or, if any such interest has been assigned, pledged or otherwise encumbered, it has been released) other than interests Granted pursuant to this Indenture;

(4)

the Issuer has full right to Grant a security interest in and assign and pledge all of its right, title and interest in such Collateral Interest to the Trustee;

(5)

the information set forth with respect to such Collateral Interest on Schedule A is correct and each such Collateral Interest is transferred to the Trustee as required by Section 3.2(a) (or, if any such Collateral Interest is not so transferred to the Trustee on the Closing Date, the Issuer has entered into a binding agreement to purchase such Collateral Interest for settlement within 10 days after the Closing Date);

(6)

each such Collateral Interest satisfies the requirements of the definition of “Collateral Interest” and is not an Impaired Interest; and

(7)

upon Grant by the Issuer, the Trustee has a first priority perfected security interest in the Collateral (assuming that any Clearing Corporation, Securities Intermediary or other entity not within the control of the Issuer involved in the Grant of Collateral takes the actions required of it under Section 3.3(b) for 87

Processed and formatted by SEC Watch - Visit SECWatch.com

perfection of that interest) and a “security entitlement” (as defined in the UCC) with respect to Financial Assets. (c)

Rating Letters. The delivery to the Trustee of an Officer’s certificate of the Issuer, to the effect that (i) attached thereto are true and correct copies of (A) a letter signed by S&P confirming that the Class A-1 Notes have been rated “AAA”, Class A-R Notes have been rated “AAA”, Class A-2 Notes have been rated “AAA”, the Class B Notes have been rated at least “AA”, the Class C Notes have been rated at least “A+”, the Class D Notes have been rated at least “A-”, the Class E Notes have been rated at least “BBB+”, the Class F Notes have been rated at least “BBB”, the Class G Notes have been rated at least “BBB-”, each of the Class H Notes and Class J Notes have been rated at least “BB” and the Class K Notes have been rated at least “B” by S&P, (B) a letter signed by Moody’s confirming that the Class A-1 Notes have been rated “Aaa”, Class A-R Notes have been rated “Aaa”, Class A-2 Notes have been rated “Aaa”, the Class B Notes have been rated at least “Aa2”, the Class C Notes have been rated at least “A1”, the Class D Notes have been rated at least “A3”, the Class E Notes have been rated at least “Baa1”, the Class F Notes have been rated at least “Baa2”, the Class G Notes have been rated at least “Baa3”, the Class H Notes have been rated at least “Ba2”, the Class J Notes have been rated at least “Ba3” and the Class K Notes have been rated at least “B2” by Moody’s and (C) a letter signed by Fitch confirming that the Class A-1 Notes have been rated “AAA”, Class A-R Notes have been rated “AAA”, Class A-2 Notes have been rated “AAA”, the Class B Notes have been rated at least “AA”, the Class C Notes have been rated at least “A+”, the Class D Notes have been rated at least “A-”, the Class E Notes have been rated at least “BBB+”, the Class F Notes have been rated at least “BBB”, the Class G Notes have been rated at least “BBB-”, each of the Class H Notes and the Class J Notes have been rated at least “BB” and the Class K Notes have been rated at least “B” by Fitch and (ii) each such rating is in full force and effect on the Closing Date.

(d)

Accounts. The delivery by the Trustee of evidence of the establishment of the Payment Account, the Collection Account (including each Collateral Sub-Account established therein), the Expense Reserve Account, the Interest Reserve Account, the Collateral Account, the Earn-Out Asset Account, the Class A-R Holder Collateral Account and the Uninvested Proceeds Account and, to be established on the Closing Date.

(e)

Funding Certificate. The delivery to the Trustee of a funding certificate (the Funding Certificate), duly executed by an Authorized Officer of the Issuer, relating to, among other things, the disposition of the proceeds of the issuance of the Indenture Issued Notes, dated the Closing Date, in substantially the form of Exhibit D hereto.

(f)

Purchases. The delivery to the Trustee of a certification of the Issuer that it shall have purchased Collateral Interests having an aggregate Principal Balance as of the related Reference Dates of not less than U.S.$398,422,758.

3.3. CUSTODIANSHIP; TRANSFER OF COLLATERAL INTERESTS AND ELIGIBLE INVESTMENTS (a)

The Trustee shall hold all Certificated Securities and Instruments in physical form at the office of a custodian appointed by it in Minnesota (together with any successor, the Custodian). Initially, such Custodian shall be Wells Fargo Bank, National Association with its address at Wells Fargo Center, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: CDO Trust Services—N-Star REL CDO VI. Any successor custodian shall be a state or national bank or trust company that is not an 88

Processed and formatted by SEC Watch - Visit SECWatch.com

Affiliate of the Issuer or the Co-Issuer, has a long-term debt rating of at least “BBB+” by S&P and has a combined capital and surplus of at least U.S.$250,000,000. (b)

Each Collateral Interest, Equity Interest and Eligible Investment shall be credited to the appropriate Account. Each time that the Issuer shall direct or cause the acquisition of any Collateral Interest, Equity Interest or Eligible Investment, the Trustee (on behalf of the Issuer) shall, if such Collateral Interest, Equity Interest or Eligible Investment has not already been transferred to the Collateral Account and credited thereto, cause the transfer of such Collateral Interest, Equity Interest or Eligible Investment to the Custodian to be held in and credited to the Collateral Account for the benefit of the Trustee in accordance with the terms of this Indenture. The security interest of the Trustee in the funds or other property utilized in connection with such acquisition shall, immediately and without further action on the part of the Trustee, be released. The security interest of the Trustee shall nevertheless come into existence and continue in the Collateral Interest, Equity Interest or Eligible Investment so acquired, including all rights of the Issuer in and to any contracts related to and proceeds of such Collateral Interest, Equity Interest or Eligible Investment.

(c)

On the Closing Date, on each day thereafter, if any, that any Collateral is acquired or otherwise becomes subject to the lien of this Indenture and on the Effective Date, the Issuer represents and warrants to the Trustee as follows: (1)

This Indenture creates a valid and continuing security interest (as defined in the applicable Uniform Commercial Code) in the Collateral in favor of the Trustee on behalf and for the benefit of the Secured Parties, which security interest is prior to all other liens and security interests, and is enforceable as such as against creditors of and purchasers from the Issuer and, upon delivery of the Collateral Interests and filing of the appropriate financing statements in the appropriate filing offices, the lien and security interest created by this Indenture shall be a perfected first priority security interest in favor of the Trustee for the benefit of the Secured Parties.

(2)

The Issuer owns and has good and marketable title to the Collateral free and clear of any liens, claims, encumbrances or defects of any nature whatsoever except for those which are being released on the Closing Date or on the date of purchase by the Issuer or those created pursuant to or contemplated under this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on any Collateral Interest prior to the first payment date and owed by the Issuer to the seller of such Collateral Interest.

(3)

The Issuer has acquired its ownership in each such Collateral Interest, or will acquire in the case of any Collateral Interests which the Issuer has on or before the Closing Date committed to purchase, but which will not have settled on or before the Closing Date or any additional Collateral Interests or Substitute Collateral Interests acquired by the Issuer after the Closing Date, in good faith without notice of any adverse claim, except as described in clause (2) above.

(4)

The Issuer (a) has delivered each such Collateral Interest, or will deliver any Collateral Interests which the Issuer has on or before the Closing Date committed to purchase, but which will not have settled on or before the Closing Date or any additional Collateral Interests or Substitute Collateral Interests acquired by the 89

Processed and formatted by SEC Watch - Visit SECWatch.com

Issuer after the Closing Date, to the Trustee and (b) has not assigned, pledged, sold, granted a security interest in or otherwise encumbered any interest in such Collateral Interest other than interests granted pursuant to this Indenture. (5)

The Issuer has full right to grant all security interests granted herein.

(6)

All Collateral is comprised of either “securities,” “instruments,” “tangible chattel paper,” “accounts,” “security entitlements” or “general intangibles,” in each case as defined in the applicable Uniform Commercial Code.

(7)

Each of the Accounts, and all sub-accounts thereof, constitute securities accounts as defined in the applicable Uniform Commercial Code.

(8)

All items of the Collateral that constitute security entitlements have been and will have been credited to one of the securities accounts. The securities intermediary for each of the Accounts has agreed to treat all assets credited to the securities accounts as financial assets under the applicable Uniform Commercial Code.

(9)

Other than the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Collateral. The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer that include a description of collateral covering the Collateral other than any financing statement relating to the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder or that has been terminated. The Issuer is not aware of any judgment, Pension Benefit Guarantee Corporation lien or tax lien filings against it.

(10)

The Issuer has caused or will have caused, within ten (10) days of the Closing Date, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Collateral granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder that constitutes chattel paper, instruments, accounts, securities entitlements or general intangibles under the applicable Uniform Commercial Code, if any.

(11)

The Trustee or the Custodian has in its possession all original copies of the instruments that constitute or evidence the Collateral, if any. The instruments, loan agreements and leases that constitute or evidence the Collateral do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties. All financing statements filed or to be filed against the Issuer in favor of the Trustee on behalf and for the benefit of the Secured Parties in connection herewith describing the Collateral contain a statement to the following effect: “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Trustee on behalf and for the benefit of (A) itself and for the benefit of the Noteholders, (B) the Collateral Manager and (C) each Hedge Counterparty.”

(12)

The authoritative copy of any chattel paper that constitutes or evidences the Collateral, if any, has been communicated to the Trustee and has no marks or 90

Processed and formatted by SEC Watch - Visit SECWatch.com

notations indicating that it has been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties. (13)

The Issuer has received or will receive all consents and approvals required by the terms of the underlying loan agreement, indenture or other underlying documentation, if any, relating to the Collateral to the transfer to the Trustee on behalf and for the benefit of the Secured Parties of its interest and rights in the Collateral hereunder.

(14)

The Issuer, the Custodian and the Trustee have entered into the Account Control Agreement pursuant to which the Custodian has agreed to comply with all instructions originated by the Trustee relating to the Accounts without further consent by the Issuer.

(15)

None of the Accounts is in the name of any person other than the Trustee, held on behalf and for the benefit of the Secured Parties. The Issuer has not consented to the Trustee or the Custodian maintaining any of the Accounts to comply with entitlement orders or instructions of any Person other than the Trustee.

(16)

Notwithstanding any other provision of this Indenture or any other related Transaction Document, the representations in this Section 3.3(c) shall be continuing and deemed to be updated on any day a new item of Collateral is acquired, and remain in full force and effect until such time as all obligations under this Indenture and the Notes have been finally and fully paid and performed and shall survive the termination of this Indenture for any other reason.

(17)

The parties to this Indenture (i) shall not, without obtaining a Rating Confirmation, waive any of the representations in this Section 3.3(c); (ii) shall provide each of the Rating Agencies with prompt written notice of any breach of the representations contained in this Section 3.3(c) upon becoming aware thereof; and (iii) shall not, without obtaining a Rating Confirmation (as determined after any adjustment or withdrawal of the ratings following notice of such breach), waive a breach of any of the representations in this Section 3.3(c). ARTICLE IV SATISFACTION AND DISCHARGE

4.1. SATISFACTION AND DISCHARGE OF INDENTURE This Indenture shall be discharged and shall cease to be of further effect with respect to the Collateral securing the Indenture Issued Notes and the Indenture Issued Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Indenture Issued Notes, (iii) rights of Rated Noteholders to receive payments of principal thereof and interest thereon, (iv) the rights, obligations and immunities of the Trustee hereunder, (v) the rights, obligations and immunities of the Collateral Manager hereunder and under the Collateral Management Agreement and (vi) the rights of the Secured Parties as beneficiaries hereof with respect to the property deposited with the Trustee and payable to all or any of them; and the Trustee, on demand of and at the 91

Processed and formatted by SEC Watch - Visit SECWatch.com

expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when: (a)

either: (1)

all Indenture Issued Notes theretofore authenticated and delivered (other than (A) Indenture Issued Notes which have been mutilated, defaced, destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.5 and (B) Indenture Issued Notes for whose payment funds have theretofore irrevocably been deposited in trust and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 7.3) have been delivered to the Trustee for cancellation; or

(2)

all Rated Notes not theretofore delivered to the Trustee or the PAA Issued Note Paying Agent, as applicable, for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity Date within one year, or (C) are to be called for redemption pursuant to Section 9.1 under an arrangement satisfactory to the Trustee for the giving of notice of redemption by the Co-Issuers pursuant to Section 9.3 and the Issuer has irrevocably deposited or caused to be deposited with the Trustee, in trust for such purpose, Cash or non-callable direct obligations of the United States in an amount sufficient, according to the Priority of Payments as verified by a firm of nationally recognized Independent certified public accountants, to pay and discharge the entire indebtedness on all Rated Notes not theretofore delivered to the Trustee or the PAA Issued Note Paying Agent, as applicable, for cancellation, including all principal and interest (including Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Periodic Interest Shortfall Amount, Class F Cumulative Applicable Periodic Interest Shortfall Amount, Class G Cumulative Applicable Periodic Interest Shortfall Amount, Class H Cumulative Applicable Periodic Interest Shortfall Amount, Class J Cumulative Applicable Periodic Interest Shortfall Amount and Class K Cumulative Applicable Periodic Interest Shortfall Amount accrued to the date of such deposit (in the case of Rated Notes which have become due and payable) or to the Stated Maturity Date or the Redemption Date, as the case may be; provided that (x) such obligations are entitled to the full faith and credit of the United States and (y) this subclause (2) shall not apply if an election to act in accordance with the provisions of Section 5.5(a) shall have been made and not rescinded;

(b)

the Issuer has paid or caused to be paid all other sums payable hereunder (including amounts payable pursuant to the Paying Agency Agreement, the Corporate Services Agreement, the Collateral Management Agreement, any Hedge Agreement and the Collateral Administration Agreement) and no other amounts will become due and payable by the Issuer; and

(c)

the Co-Issuers have delivered to the Trustee Officer’s certificates and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. 92

Processed and formatted by SEC Watch - Visit SECWatch.com

Notwithstanding the satisfaction and discharge of this Indenture, the rights and obligations of the Co-Issuers, the Trustee and any Hedge Counterparty and, if applicable, the Rated Noteholders, as the case may be, under Sections 2.6, 4.1, 4.2, 5.9, 5.18, 6.7, 6.8, 7.1 and 7.3 shall survive. 4.2. APPLICATION OF TRUST MONEY All funds deposited with the Trustee pursuant to Section 4.1 for the payment of principal of and interest on the Rated Notes and amounts payable pursuant to any Hedge Agreement, the Collateral Management Agreement, the Paying Agency Agreement, the Corporate Services Agreement and the Collateral Administration Agreement shall be held in trust and applied by it in accordance with the provisions of the Rated Notes and this Indenture, including the Priority of Payments, for the payment either directly or through any Note Paying Agent, as the Trustee may determine, to the Person entitled thereto of the respective amounts in respect of which such funds has been deposited with the Trustee; but such funds need not be segregated from other funds except to the extent required herein or required by law. 4.3. REPAYMENT OF FUNDS HELD BY NOTE PAYING AGENT In connection with the satisfaction and discharge of this Indenture with respect to the Rated Notes, all funds then held by any Note Paying Agent other than the Trustee under the provisions of this Indenture shall, upon demand of the Co-Issuers, be paid to the Trustee to be held and applied pursuant to Section 7.3 and in accordance with the Priority of Payments and thereupon such Note Paying Agent shall be released from all further liability with respect to such funds. ARTICLE V EVENTS OF DEFAULT; REMEDIES 5.1. EVENTS OF DEFAULT Event of Default, is defined as any one of the following wherever used herein, means any one of the following events as set forth in Section 5.1(a) through (g) (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a)

a default for five Business Days in the payment, when due and payable, of any interest on any Class A Note or any Class B Note or any Class A-R Commitment Fee, or if there are no Class A Notes or Class B Notes Outstanding, of any interest on any Class C Note, or if there are no Class A Notes, Class B Notes or Class C Notes Outstanding, of any interest on any Class D Note, or if there are no Class A Notes, Class B Notes, Class C Notes or Class D Notes Outstanding, of any interest on any Class E Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes Outstanding, of any interest on any Class F Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes Outstanding, of any interest on any Class G Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes or Class G Notes Outstanding, of any interest on any Class H Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes Outstanding, of any interest on any Class J Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F 93

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes, Class G Notes, Class H Notes or Class J Notes Outstanding, of any interest on any Class K Note; (b)

a default in the payment of any principal, when due and payable of any Rated Note other than a Class K Note (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent, the Note Registrar or the PAA Issued Note Registrar, such default continues for a period of five Business Days);

(c)

the failure on any Payment Date to disburse amounts available in accordance with Section 11.1 (except as provided in Section 5.1(a) and (b) above) and a continuation of such failure for three Business Days (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent, the Note Registrar or the PAA Issued Note Registrar, such default continues for a period of five Business Days);

(d)

the event that either of the Co-Issuers or the pool of Collateral becomes an investment company required to be registered under the Investment Company Act;

(e)

a default in the performance, or breach, of any other covenant (it being understood that non-compliance with any of the Coverage Tests or the Collateral Quality Tests will not constitute a default or breach) or of a representation or warranty of either of the Co-Issuers under this Indenture, or if any certificate or writing delivered pursuant thereto proves to be incorrect when made, which default or breach has a material adverse effect on the Rated Noteholders and continues for a period of thirty (30) days (or, in the case of a default, breach or failure of a representation or warranty regarding the Collateral, fifteen days) of the earlier of knowledge by the Co-Issuers or the Collateral Manager or notice to the Co-Issuers and the Collateral Manager by the Trustee or to the Co-Issuers and the Collateral Manager by the Holders of at least 25%, of the then Aggregate Outstanding Amount of the Rated Notes of any Class, specifying such default, breach or failure and requiring it to be remedied and stating that such notice is a “Notice of Default” under this Indenture;

(f)

the entry of a decree or order by a court having competent jurisdiction adjudging the Issuer or the Co-Issuer as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer or the Co-Issuer under the Bankruptcy Code or any other applicable law, or appointing a receiver, liquidator, assignee, or sequestrator (or other similar official) of the Issuer or the Co-Issuer or of any substantial part of its property; 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 ninety (90) consecutive days; or

(g)

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, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of the Issuer or the Co-Issuer or of any substantial part of its property, respectively, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the passing of a special resolution for the 94

Processed and formatted by SEC Watch - Visit SECWatch.com

voluntary winding up of the Issuer by its shareholders, the taking of any action by the Issuer or the Co-Issuer in furtherance of any such action. If either of the Co-Issuers shall obtain actual knowledge that an Event of Default shall have occurred and be continuing, such CoIssuer shall (unless the Trustee shall have provided notice of such Event of Default pursuant to Section 6.2) promptly notify the Trustee, the Rated Noteholders, any Hedge Counterparty, the Collateral Manager and each Rating Agency in writing of such Event of Default. 5.2. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT (a)

If an Event of Default occurs and is continuing, the Trustee may or, if so directed by the Holders of a Majority in aggregate principal amount of the Outstanding Rated Notes, will declare the principal of and accrued interest on all Notes to be immediately due and payable (except that in the case of an Event of Default described in Section 5.1(f) or 5.1(g) above, such an acceleration will occur automatically).

(b)

Any Hedge Agreement existing on or after such acceleration may not be terminated by the Issuer unless and until liquidation of the Collateral has commenced and annulment of such acceleration may no longer be affected.

(c)

At any time after such acceleration of maturity has been made and before a judgment or decree for payment of the amount due has been obtained by the Trustee as hereinafter provided in this Section 5, the Trustee may reverse such acceleration and its consequences if the Trustee determines that: (1)

(2)

the Issuer has paid or deposited with the Trustee funds sufficient to pay: (i)

all overdue installments of principal of and interest on the Notes (including interest upon the Class C Cumulative Applicable Periodic Interest Shortfall Amount, the Class D Cumulative Applicable Periodic Interest Shortfall Amount, the Class E Cumulative Applicable Periodic Interest Shortfall Amount, the Class F Cumulative Applicable Periodic Interest Shortfall Amount, the Class G Cumulative Applicable Periodic Interest Shortfall Amount, the Class H Cumulative Applicable Periodic Interest Shortfall Amount, the Class J Cumulative Applicable Periodic Interest Shortfall Amount and the Class K Cumulative Applicable Periodic Interest Shortfall Amount, respectively, at the Applicable Periodic Interest Rate and, to the extent that payment of such interest is lawful, upon Defaulted Interest at the Applicable Periodic Interest Rate);

(ii)

any accrued and unpaid amounts (including termination payments, if any) payable by the Issuer pursuant to any Hedge Agreement;

(iii)

all unpaid taxes and Administrative Expenses, any accrued and unpaid Senior Collateral Management Fee, and other sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel;

the Trustee has determined that all Events of Default of which it has actual knowledge, other than the nonpayment of the principal of or interest on the Rated Notes that have become due solely by such acceleration, have been cured; and 95

Processed and formatted by SEC Watch - Visit SECWatch.com

(3)

any Hedge Agreement in effect immediately prior to such acceleration shall remain in effect.

provided that the Trustee shall have obtained (and shall be entitled to rely upon) a certification of an Independent accounting firm of national reputation as to the sufficiency of the amounts in Section 5.2(c)(1) above, which certification shall be conclusive evidence as to such sufficiency. In addition, the Trustee may, but is not required to, obtain, at the Issuer’s expense (and may rely upon), an Opinion of Counsel as to the matters in Sections 5.2(c)(2) and (3) above. At any such time as the Trustee shall reverse such acceleration and its consequences, the Trustee shall preserve the Collateral in accordance with the provisions of Section 5.5; provided that, if the conditions for liquidation of the Collateral are satisfied pursuant to Section 5.5, the Rated Notes may be accelerated pursuant to Section 5.2(a). No such reversal of acceleration shall affect any subsequent Default or impair any right consequent thereon. 5.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE The Co-Issuers (or, with respect to the Class H Notes, Class J Notes and Class K Notes, the Issuer only) covenant that if a Default shall occur in respect of the payment of any principal of or interest on any Class A Senior Note, the payment of principal of or interest on any Class A-2 Note (but with respect to interest, only after the Class A Senior Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class B Note (but with respect to interest, only after the Class A Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class C Note (but with respect to interest, only after the Class A Notes and Class B Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class D Note (but with respect to interest, only after the Class A Notes, Class B Notes and Class C Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class E Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes and Class D Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class F Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class G Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class H Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class J Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes and all interest accrued thereon have been paid in full) or the payment of principal of or interest on any Class K Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes and all interest accrued thereon have been paid in full), the Co-Issuers (or, with respect to the Class H Notes and Class J Notes, the Issuer only) will, upon demand of the Trustee or any affected Rated Noteholder, pay to the Trustee, for the benefit of the Holder of such Rated Note, the whole amount, if any, then due and payable on such Rated Note for principal and interest, with interest upon the overdue principal and, to the extent that payments of such interest shall be legally enforceable, upon overdue installments of interest, at the Applicable Periodic Interest Rate and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable 96

Processed and formatted by SEC Watch - Visit SECWatch.com

compensation, expenses, disbursements and advances of the Trustee and such Rated Noteholder and their respective agents and counsel. If either of the Co-Issuers (or, in the case of the Class H Notes, Class J Notes and Class K Notes, the Issuer only), fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may, and shall, upon the direction by the Holders of Majority of the then Aggregate Outstanding Amount of the Notes (and, if the action of the Issuer or the Co-Issuer pursuant to such direction would have a material adverse effect on the Initial Hedge Counterparty, the Initial Hedge Counterparty), prosecute such Proceeding to judgment or final decree, and may enforce the same against the Issuer or the Co-Issuers, as applicable, or any other obligor upon the Rated Notes and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the Collateral; provided that a Holder of a Rated Note may institute any proceeding if (i) such Holder previously has given to the Trustee written notice of an Event of Default, (ii) except in the case of a default in the payment of principal or interest, the Holders of at least 25% of the then Aggregate Outstanding Amount of the Notes have made a written request upon the Trustee to institute such proceedings in its own name as Trustee and such Holders have offered the Trustee reasonable indemnity, (iii) the Trustee has, for thirty (30) days after receipt of notice, request and offer of such indemnity, failed to institute any such proceeding and (iv) no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of then Aggregate Outstanding Amount of the Notes. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Secured Parties by such appropriate Proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law. The Holders of a Majority of the then Aggregate Outstanding Amount of the Notes may (with the consent of the Initial Hedge Counterparty), in certain cases, waive any default with respect to such Notes, except (i) a default for more than five (5) Business Days in the payment, when due and payable, of any interest on any Note, (ii) a default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date, (iii) the failure on any Payment Date to disburse amounts available in the Collection Account in accordance with Section 11.1 and continuation of such failure for a period of three (3) Business Days, (iv) certain events of bankruptcy or insolvency with respect to the Co-Issuers (or, in the case of the Class H Notes, Class J Notes and Class K Notes, the Issuer only) or (v) a default in respect of any provision of this Indenture that cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby. In case there shall be pending Proceedings relative to the Issuer or the Co-Issuer or any other obligor upon the Rated Notes or any Hedge Agreement under the Bankruptcy Code or any other applicable bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer, the Co-Issuer or their respective property or such other obligor or its property, or in case of any other comparable Proceedings relative to the Issuer, the Co-Issuer or other obligor upon the Rated Notes or Hedge Agreement, or the creditors or property of the Issuer, the Co-Issuer or such other obligor, the Trustee, regardless of whether the principal of any Rated Notes or Hedge Agreement shall then be due and payable as therein expressed or by declaration or otherwise and regardless of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.3, shall be entitled and empowered, by intervention in such Proceedings or otherwise: 97

(a)

to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Rated Notes or any Hedge Agreement upon direction by a Majority of the then Aggregate Outstanding Amount of the Notes, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee) and of the Rated Noteholders allowed in any Proceedings relative to the Issuer, the Co-Issuer or other obligor upon the Rated Notes or to the creditors or property of the Issuer, the Co-Issuer or such other obligor;

(b)

unless prohibited by applicable law and regulations, to vote on behalf of the Holders of the Rated Notes, upon the direction of such Holders, in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency Proceedings or person performing similar functions in comparable Proceedings; and

(c)

to collect and receive any amounts or other property payable to or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Rated Noteholders and of the Trustee on behalf of the Rated Noteholders and the Trustee; and any trustee, receiver or liquidator, custodian or other similar official is hereby authorized by each of the Rated Noteholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Rated Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other reasonable expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Rated Noteholder or the Initial Hedge Counterparty, any plan of reorganization, arrangement, adjustment or composition

Processed and formatted by SEC Watch - Visit SECWatch.com

affecting the Rated Notes or the rights of any Holder thereof or the Initial Hedge Counterparty, or to authorize the Trustee to vote in respect of the claim of any Rated Noteholder or the Initial Hedge Counterparty in any such Proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. In any Proceedings brought by the Trustee on behalf of the Holders, the Trustee shall be held to represent, subject to Section 6.17, all the Secured Parties if applicable, pursuant to Section 6.17. Notwithstanding anything in this Section 5.3 to the contrary, the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to this Section 5.3 except in accordance with Section 5.5(a). 5.4. REMEDIES (a)

If an Event of Default shall have occurred and be continuing, and the Notes have been declared due and payable and such declaration and its consequences have not been rescinded and annulled, the Co-Issuers agree that, in addition to the requirements of Section 5.5(a), the Trustee may, after giving notice to the Noteholders, the Collateral Manager, each Hedge Counterparty and each Rating Agency, and with the consent of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class, and shall, upon written direction by the Holders of a Majority of the 98

Processed and formatted by SEC Watch - Visit SECWatch.com

then Aggregate Outstanding Amount of the Notes of the Controlling Class, to the extent permitted by applicable law, exercise one or more of the following rights, privileges and remedies: (1)

institute Proceedings for the collection of all amounts then payable on the Notes or otherwise payable under this Indenture, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Collateral any amounts adjudged due;

(2)

institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Collateral;

(3)

exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Secured Parties hereunder; and

(4)

subject to Section 5.4(d) below, exercise any other rights and remedies that may be available at law or in equity;

provided that the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to this Section 5.4 except in accordance with Section 5.5(a). The Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking firm of national reputation as to the feasibility of any action proposed to be taken in accordance with this Section 5.4 and as to the sufficiency of the proceeds and other amounts receivable with respect to the Collateral to make the required payments of principal of and interest on the Notes, which opinion shall be conclusive evidence as to such feasibility or sufficiency. (b)

If an Event of Default as described in Section 5.1(e) shall have occurred and be continuing, the Trustee may, and at the request of at least 25% of the Holders of the then Aggregate Outstanding Amount of the Notes shall, institute a Proceeding solely to compel performance of the covenant or agreement or to cure the representation or warranty, the breach of which gave rise to the Event of Default under such Section, and enforce any equitable decree or order arising from such proceeding; provided that (i) such request does not conflict with any provision in this Indenture, (ii) the Trustee determines that such action will not involve the Trustee incurring any liability (unless the Trustee is indemnified to its satisfaction against any such liability) and (iii) the Trustee may take other action deemed proper by the Trustee, that is not inconsistent with such direction.

(c)

Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the Initial Purchaser, any Hedge Counterparty, any Noteholder or Noteholders may bid for and purchase the Collateral or any part thereof and, upon compliance with the terms of sale, may hold, retain, possess or dispose of such property in its or their own absolute right without accountability. Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the receipt of the Trustee, or of the Officer making a sale under judicial proceedings, shall be a sufficient discharge to the purchaser or 99

Processed and formatted by SEC Watch - Visit SECWatch.com

purchasers at any sale for its or their purchase price, and such purchaser or purchasers shall not be obliged to see to the application thereof. Any such sale, whether under any power of sale hereby given or by virtue of judicial proceedings, shall bind the CoIssuers, the Trustee and the Noteholders, shall operate to divest all right, title and interest whatsoever, either at law or in equity, of each of them in and to the property sold, and shall be a perpetual bar, both at law and in equity, against each of them and their successors and assigns, and against any and all Persons claiming through or under them. (d)

Notwithstanding any other provision of this Indenture, the Trustee may not, prior to the date which is one year and one day, or if longer the applicable preference period then in effect, after the payment in full of all Notes, institute against, or join any other Person in instituting against, the Issuer or the Co-Issuer any bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceedings, or other proceedings under federal or state bankruptcy or similar laws (of any jurisdiction). Nothing in this Section 5.4 shall preclude, or be deemed to stop, the Trustee (i) from taking any action prior to the expiration of the aforementioned one year and one day period, or if longer the applicable preference period then in effect, in (A) any case or proceeding voluntarily filed or commenced by the Issuer or the Co-Issuer or (B) any involuntary insolvency proceeding filed or commenced by a Person other than the Trustee, or (ii) from commencing against the Issuer or the Co-Issuer or any of its properties any legal action which is not a bankruptcy, reorganization, arrangement, insolvency, moratorium, liquidation or similar proceeding.

5.5. PRESERVATION OF COLLATERAL (a)

If an Event of Default shall have occurred and be continuing when any Class of Rated Notes is Outstanding, the Trustee shall retain the Collateral securing the Indenture Issued Notes and any Hedge Agreement intact, collect and cause the collection of the proceeds thereof and make all payments and deposits and maintain all accounts in respect of the Collateral, the Rated Notes and any Hedge Agreement in accordance with Section 11.1 and the provisions of Sections 10, 12 and 13 unless: (1)

the Trustee, pursuant to Section 5.5(c), determines (such determinations may be based upon a certificate from the Collateral Manager) that the anticipated proceeds of a sale or liquidation of the Collateral (after deducting reasonable expenses relating to such sale or liquidation) would be sufficient to discharge in full the Redemption Prices then due on the Rated Notes (including the Class A-R Commitment Fees and Class A-R Breakage Costs), any amounts required to be paid under any Hedge Agreement, all unreimbursed Interest Advances together with interest thereon, all unpaid Administrative Expenses and any accrued and unpaid Senior Collateral Management Fee (to the extent not waived by the Collateral Manager) and the Holders of a Majority of the then Aggregate Outstanding Amount of Rated Notes agrees with such determination; or

(2)

the Holders of at least 662/3% of the Aggregate Outstanding Amount of the Rated Notes (and, unless it will be paid in full all amounts owing to it by the Issuer, the Initial Hedge Counterparty), subject to the provisions hereof, and subject to the Trustee determining that such action will not involve the Trustee incurring any 100

Processed and formatted by SEC Watch - Visit SECWatch.com

liability, (unless the Trustee is indemnified to its satisfaction against any such liability) direct the sale and liquidation of the Collateral. For purposes of Section 5.5(a)(2), if the Initial Hedge Counterparty shall fail to vote to direct the sale and liquidation of the Collateral within three Business Days after written notice from the Issuer or the Trustee requesting a vote pursuant to such Section 5.5(a)(2), the Initial Hedge Counterparty shall not be entitled to participate in the vote requested by such notice. The Trustee shall give written notice of the retention of the Collateral to the Issuer with a copy to the Co-Issuer, each Holder of the Rated Notes and the Initial Hedge Counterparty. So long as such Event of Default is continuing, any such retention pursuant to this Section 5.5(a) may be rescinded at any time when the conditions specified in clause Section 5.5(a)(1) or (2) exist. (b)

Nothing contained in Section 5.5(a) shall be construed to require the Trustee to preserve the Collateral securing the Indenture Issued Notes if prohibited by applicable law.

(c)

In determining whether the condition specified in Section 5.5(a)(1) exists, the Trustee shall obtain bid prices with respect to each security contained in the Collateral from two nationally recognized dealers (or if it is unable in good faith to obtain such bid prices from two nationally recognized dealers, one nationally recognized dealer), as specified by the Collateral Manager in writing, which are Independent from each other and the Collateral Manager, at the time making a market in such securities and shall compute the anticipated proceeds of sale or liquidation on the basis of the lower of such bid prices for each such security. In addition, for the purposes of determining issues relating to the execution of a sale or liquidation of the Pledged Securities and the execution of a sale or other liquidation thereof in connection with a determination whether the condition specified in Section 5.5(a)(1) exists, the Trustee may retain and rely on an opinion of an Independent investment banking firm of national reputation. The Trustee shall deliver to the Noteholders, each Hedge Counterparty, the Rating Agencies and the Co-Issuers a report stating the results of any determination required pursuant to Section 5.5(a)(1) no later than ten (10) days after making such determination but in any event prior to the sale or liquidation of the Collateral. The Trustee shall make the determinations required by Section 5.5(a)(1) within thirty (30) days after an Event of Default and at the request of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class at any time during which the Trustee retains the Collateral pursuant to Section 5.5(a)(1). In the case of each calculation made by the Trustee pursuant to Section 5.5(a)(1), the Trustee shall obtain a letter of an Independent certified public accountant confirming the accuracy of the computations of the Trustee and certifying their conformity to the requirements of this Indenture. In determining whether the Holders of the requisite percentage of any Class of Rated Notes or the requisite percentage of Income Noteholders have given any direction or notice or have agreed pursuant to Section 5.5(a), any Holder of a Rated Note of a Class or Income Notes who is also a Holder of Rated Notes of another Class or of Income Notes or any Affiliate of any such Holder shall be counted as a Holder of each such Rated Note and/or Income Note for all purposes.

(d)

If an Event of Default shall have occurred and be continuing at a time when no Rated Note is Outstanding, the Trustee shall retain the Collateral securing the Indenture Issued Notes and any Hedge Agreement intact, collect and cause the collection of the proceeds thereof and make and apply all payments and deposits and maintain all accounts in 101

Processed and formatted by SEC Watch - Visit SECWatch.com

respect of the Collateral and the Rated Notes in accordance with Section 11.1 and the provisions of Section 10 and Section 12 unless a Majority of the Income Noteholders direct the sale and liquidation of the Collateral. (e)

If an Event of Default occurs and is continuing and prior to the Mandatory Class A-R Draw Date, no Class A-R Draw may be made except with respect to Class A-R Draws to be applied to fund Future Advance Amounts related to Earn-Out Assets; provided, however, if an Event of Default specified in clauses Sections 5.1(d), (f) or (g) above occurs, the undrawn Class A-R Commitments will terminate automatically without need for further action after the Class A-R Draw on the related Mandatory Class A-R Draw Date.

(f)

On the Mandatory Class A-R Draw Date, which will occur if the Notes are accelerated following an Event of Default, the Issuer (or the Collateral Manager on behalf of the Issuer) will draw on the Class A-R Notes, in an amount equal to the Aggregate Class A-R Undrawn Amount, and will deposit such amount into the Earn-Out Asset Account and/or Collection Account in accordance with Section 17.1(c). Immediately following such draw, the Class A-R Commitments will terminate. The amounts on deposit in the Earn-Out Asset Account may only be applied to fund Future Advance Amounts or on the date on which the Notes are redeemed in full, shall be transferred to the Collateral Principal Collection sub-account of the Collection Account and distributed pursuant to the Priority of Payments; provided, that to the extent that the amounts then on deposit in the Earn-Out Asset Account exceed the Total Unfunded Future Advance Amount, the Collateral Manager may direct the Trustee to transfer such excess to the Collection Account as Collateral Principal Collections in accordance with the Priority of Payments.

5.6. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION All rights of action and of asserting claims under this Indenture, or under any of the Rated Notes, may be enforced by the Trustee without the possession of any of the Hedge Agreements or the Rated Notes or the production thereof in any trial or other Proceedings relative thereto, and any action or Proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the reasonable expenses, disbursements and compensation of the Trustee, each predecessor trustee and their respective agents and attorneys and counsel, shall be for the benefit of the Secured Parties and shall be applied as set forth in Section 5.7. 5.7. APPLICATION OF FUNDS COLLECTED Any funds collected by the Trustee with respect to any Hedge Agreement or the Rated Notes pursuant to this Section 5 and any funds that may then be held or thereafter received by the Trustee with respect to any Hedge Agreements or the Rated Notes hereunder shall be applied subject to Section 13.1 and in accordance with the provisions of Section 11.1(c), at the date or dates fixed by the Trustee. 5.8. LIMITATION ON SUITS Only the Trustee may pursue remedies available hereunder and no Holder of any Note shall have any right to institute any Proceedings, judicial or otherwise, with respect to this Indenture, or its Note or otherwise, for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a)

such Holder has previously given to the Trustee written notice of a continuing Event of Default; 102

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

except in the case of a default in the payment of principal or interest, the Holders or Holders of at least 25% of the then Aggregate Outstanding Amount of the Rated Notes shall have made a written request to the Trustee to institute Proceedings in respect of such Event of Default in its own name as Trustee hereunder and such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

(c)

the Trustee for thirty (30) days after its receipt of such notice, request and offer of indemnity has failed to institute any such Proceeding; and

(d)

no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of a Majority of the then Aggregate Outstanding Amount of the Rated Notes;

it being understood and intended that no one or more Holders of Rated Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders of the Notes of the same Class or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders of Notes of the same Class. In addition, any action taken by any one or more of the Holders of Notes shall be subject to and in accordance with Sections 13.1 and 11.1(d). Notwithstanding any other provisions of this Indenture but subject to Section 5.8(d), if the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of the Rated Notes, each representing less than a Majority of the then Aggregate Outstanding Amount of Rated Notes, the Trustee shall follow the instructions of the group representing the higher percentage of aggregate principal amount of Outstanding Rated Notes. 5.9. UNCONDITIONAL RIGHTS OF RATED NOTEHOLDERS (OTHER THAN THE CLASS K NOTEHOLDERS) TO RECEIVE PRINCIPAL AND INTEREST Notwithstanding any other provision in this Indenture (other than Section 2.6(i)), the Holder of any Indenture Issued Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest (if any) on such Indenture Issued Note as such principal and/or interest become due and payable in accordance with Sections 13.1 and 11.1(c) and, subject to the provisions of Section 5.8, to institute proceedings for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. Holders of the Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes shall have no right to institute proceedings for the enforcement of any payment until such time as no Class of Rated Note that is senior to such Class of them remains Outstanding, which right shall be subject to the provisions of Section 5.8, and shall not be impaired without the consent of any such Holder. 5.10.

RESTORATION OF RIGHTS AND REMEDIES

If the Trustee or any Rated Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Rated Noteholder, then and in every such case the Co-Issuers, the Trustee and the Rated Noteholder shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Secured Parties shall continue as though no such Proceeding had been instituted. 103

Processed and formatted by SEC Watch - Visit SECWatch.com

5.11.

RIGHTS AND REMEDIES CUMULATIVE

No right or remedy herein conferred upon or reserved to the Trustee or to the Rated Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing by law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 5.12.

DELAY OR OMISSION NOT WAIVER

No delay or omission of the Trustee, any Rated Noteholder or the Initial Hedge Counterparty to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Section 5 or by law to the Trustee, the Rated Noteholders or the Initial Hedge Counterparty may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Rated Noteholders or the Initial Hedge Counterparty, as the case may be. 5.13.

CONTROL BY MAJORITY OF NOTEHOLDERS

Notwithstanding any other provision of this Indenture (but subject to the proviso in the definition of “Outstanding” in Section 1.1(a)), the Holders of a Majority of the then Aggregate Outstanding Amount of the Rated Notes shall have the right to cause the institution of and direct the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or of any sale of the Collateral, in whole or in part, provided that:

5.14.

(a)

such direction shall not conflict with any rule of law or with this Indenture;

(b)

the Trustee may take any other action deemed proper by it that is not inconsistent with such direction; provided that, subject to Section 6.1, the Trustee need not take any action that it determines might involve it in liability (unless the Trustee has received an indemnity reasonably satisfactory to it against such liability as set forth below);

(c)

the Trustee shall have been provided with an indemnity reasonably satisfactory to it; and

(d)

any direction to the Trustee to undertake a Sale of the Collateral shall be made only pursuant to, and in accordance with, Sections 5.4 and 5.5.

WAIVER OF PAST DEFAULTS

The Holders of a Majority of the then Aggregate Outstanding Amount of the Notes may (with the consent of the Initial Hedge Counterparty), in certain cases waive any past Default and its consequences, except: (a)

a Default for more than five (5) Business Days in the payment, when due and payable, of any interest on any Rated Note; or

(b)

a Default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date; or 104

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

the failure on any Payment Date to disburse amounts available in the Collection Account in accordance with Section 11.1 and the continuation of such failure for a period of three (3) Business Days; or

(d)

a Default arising under Section 5.1(f) or 5.1(g); or

(e)

a Default in respect of any provision of this Indenture that under Section 8.2 cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby.

In the case of any such waiver, (i) the Co-Issuers, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto, and (ii) the Trustee shall promptly give written notice of any such waiver to the Collateral Manager, each Hedge Counterparty and each Holder of Rated Notes. The Rating Agencies shall be notified by the Issuer of any such waiver. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. 5.15.

UNDERTAKING FOR COSTS

All parties to this Indenture agree, and each Holder of any Rated Note by its acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.15 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Rated Noteholder, or group of Rated Noteholders, holding in the aggregate more than 10% in Aggregate Outstanding Amount of the Rated Notes, or to any suit instituted by any Rated Noteholder for the enforcement of the payment of the principal of or interest on any Rated Note on or after the Stated Maturity Date expressed in such Rated Note (or, in the case of redemption, on or after the applicable Redemption Date). 5.16.

WAIVER OF STAY OR EXTENSION LAWS

The Co-Issuers covenant (to the extent that they may lawfully do so) that they will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force (including but not limited to filing a voluntary petition under Chapter 11 of the Bankruptcy Code and by the voluntary commencement of a proceeding or the filing of a petition seeking winding up, liquidation, reorganization or other relief under any bankruptcy, insolvency, receivership or similar law now or hereafter in effect), which may affect the covenants, the performance of or any remedies under this Indenture; and the Co-Issuers (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 105

Processed and formatted by SEC Watch - Visit SECWatch.com

5.17.

5.18.

SALE OF COLLATERAL (a)

The power to effect any sale (a Sale) of any portion of the Collateral pursuant to Sections 5.4 and 5.5 shall not be exhausted by any one or more Sales as to any portion of such Collateral remaining unsold, but shall continue unimpaired until the entire Collateral shall have been sold or all amounts secured by the Collateral shall have been paid. The Trustee hereby expressly waives its rights to any amount fixed by law as compensation for any Sale; provided that the Trustee shall be authorized to deduct the reasonable costs, charges and expenses incurred by it in connection with such Sale from the proceeds thereof notwithstanding the provisions of Section 6.7.

(b)

The Trustee may bid for and acquire any portion of the Collateral in connection with a public Sale thereof, by crediting all or part of the net proceeds of such Sale after deducting the reasonable costs, charges and expenses incurred by the Trustee in connection with such Sale notwithstanding the provisions of Section 6.7. The Rated Notes and any Hedge Agreement need not be produced in order to complete any such Sale, or in order for the net proceeds of such Sale to be credited against amounts owing on the Rated Notes. The Trustee may hold, lease, operate, manage or otherwise deal with any property so acquired in any manner permitted by law in accordance with this Indenture.

(c)

If any portion of the Collateral consists of securities not registered under the Securities Act (Unregistered Securities), the Trustee may, but shall not be required to, seek an Opinion of Counsel, or, if no such Opinion of Counsel can be obtained, with the consent of a Majority of the then Aggregate Outstanding Amount of Rated Notes seek, a no-action position from the Commission or any other relevant federal or state regulatory authorities, regarding the legality of a public or private sale of such Unregistered Securities. In no event will the Trustee be required to register Unregistered Securities under the Securities Act.

(d)

The Trustee shall execute and deliver an appropriate instrument of conveyance transferring its interest in any portion of the Collateral in connection with a sale thereof. In addition, the Trustee is hereby irrevocably appointed the agent and attorneyin-fact of the Issuer to transfer and convey its interest in any portion of the Collateral in connection with a sale thereof, and to take all action necessary to effect such sale. No purchaser or transferee at such a sale shall be bound to ascertain the Trustee’s authority, to inquire into the satisfaction of any conditions precedent or see to the application of any funds.

ACTION ON THE RATED NOTES

The Trustee’s right to seek and recover judgment on the Rated Notes or under this Indenture shall not be affected by the seeking or obtaining of or application for any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Secured Parties shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer or the Co-Issuer. 106

ARTICLE VI THE TRUSTEE 6.1. CERTAIN DUTIES AND RESPONSIBILITIES (a)

Except during the continuance of an Event of Default: (1)

the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2)

in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided that, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they substantially conform to the requirements of this Indenture and shall promptly, but in any event within three Business Days in the case of an Officer’s certificate furnished by the Issuer, notify the party delivering the same if such certificate or opinion does not conform. If a corrected form shall not have been delivered to the Trustee within 15 days after such notice from the Trustee, the Trustee shall promptly notify the Rated Noteholders and the Hedge Counterparties.

(b)

In case an Event of Default actually known to the Trustee has occurred and is continuing, the Trustee shall, prior to the receipt of directions, if any, from a Majority of the Aggregate Outstanding Amount of the Controlling Class, exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(c)

No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own

Processed and formatted by SEC Watch - Visit SECWatch.com

negligent failure to act, or its own willful misconduct, except that: (1)

This Section 6.1(c) shall not be construed to limit the effect of Section 6.1(a);

(2)

the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it shall be proven that the Trustee was negligent in ascertaining the pertinent facts;

(3)

the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Issuer or the Co-Issuer in accordance with this Indenture and/or a Majority (or such other percentage as may be required by the terms hereof) of the Aggregate Outstanding Amount of the Controlling Class (or other Class if required or permitted by the terms hereof) relating to the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; 107

Processed and formatted by SEC Watch - Visit SECWatch.com

(4)

no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers contemplated hereunder, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it (if the amount of such funds or risk or liability does not exceed the amount payable to the Trustee pursuant to Section 11.1(a)(1) net of the amounts specified in Section 6.8(a)(1), the Trustee shall be deemed to be reasonably assured of such repayment) unless such risk or liability relates to performance of its ordinary services, including under Section 5, under this Indenture; and

(5)

the Trustee shall not be liable to the Rated Noteholders for any action taken or omitted by it at the direction of the CoIssuers (in the case of the Rated Notes other than the Class H Notes, Class J Notes and Class K Notes), the Issuer (in the case of the Class H Notes, Class J Notes and Class K Notes), the Collateral Manager and/or the Holders of the Rated Notes under the circumstances in which such direction is required or permitted by the terms of this Indenture.

(d)

For all purposes under this Indenture, the Trustee shall not be deemed to have notice or knowledge of any Event of Default described in Section 5.1(d), 5.1(e), 5.1(f) or 5.1(g) unless a Trust Officer assigned to and working in the Corporate Trust Office has actual knowledge thereof or unless written notice of any event which is in fact such an Event of Default or such a Default, as the case may be, is received by the Trustee at the Corporate Trust Office. For purposes of determining the Trustee’s responsibility and liability hereunder, whenever reference is made in this Indenture to such an Event of Default or such a Default, as the case may be, such reference shall be construed to refer only to such an Event of Default or such a Default, as the case may be, of which the Trustee is deemed to have notice as described in this Section 6.1(d).

(e)

Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.

(f)

The Trustee shall, upon receipt of reasonable (but no less than three Business Days’) prior written notice, permit any representative of a Holder of a Rated Note or a Hedge Counterparty, during the Trustee’s normal business hours, to examine all books of account, records, reports and other papers of the Trustee relating to the Rated Notes, to make copies and extracts therefrom (the reasonable out-of-pocket expenses incurred in making any such copies or extracts to be reimbursed to the Trustee by such Holder) and to discuss the Trustee’s actions, as such actions relate to the Trustee’s duties with respect to the Rated Notes, with the Trustee’s officers and employees responsible for carrying out the Trustee’s duties with respect to the Rated Notes; provided that under no circumstances shall a Hedge Counterparty be permitted to review any documentation containing the names or other indicia of identity of any of the Noteholders unless any such information (including the number of shares held by such Noteholder) has been redacted from such documentation.

(g)

With respect to the security interests created hereunder, the Trustee acts as a fiduciary for the Rated Noteholders only, and serves as a collateral agent for the other Secured Parties. 108

Processed and formatted by SEC Watch - Visit SECWatch.com

6.2. NOTICE OF DEFAULT Promptly (and in no event later than three Business Days) after the occurrence of any Default actually known to a Trust Officer of the Trustee or after acceleration has been made pursuant to Section 5.2, the Trustee shall send to the Issuer, the PAA Issued Note Paying Agent, each Rating Agency, (for so long as any Class of Rated Notes is Outstanding), the Collateral Manager, each Hedge Counterparty and to all Holders of Rated Notes, as their names and addresses appear on the Note Register, notice of all Defaults hereunder known to the Trustee, unless such Default shall have been cured or waived. 6.3. CERTAIN RIGHTS OF TRUSTEE Except as otherwise provided in Sections 6.1 and 8: (a)

the Trustee may rely and shall be protected in acting or refraining from acting in good faith and in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b)

any request or direction of the Issuer or the Co-Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or Issuer Order, as the case may be;

(c)

whenever in the administration of this Indenture the Trustee shall (i) deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer’s certificate or (ii) be required to determine the value of any Collateral or funds hereunder or the cashflows projected to be received therefrom, the Trustee may, in the absence of bad faith on its part, rely on reports of nationally recognized accountants, investment bankers or other Persons qualified to provide the information required to make such determination, including nationally recognized dealers in securities of the type being valued and securities quotation services;

(d)

as a condition to the taking or omitting of any action by it hereunder, the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in reliance thereon;

(e)

the Trustee shall be under no obligation to exercise or to honor any of the rights or powers vested in it by this Indenture at the request or direction of any of the Rated Noteholders pursuant to this Indenture, unless such Rated Noteholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might reasonably be incurred by it in compliance with such request or direction;

(f)

the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper documents, but the Trustee, in its discretion, may and, upon the written direction of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of any Class, the Initial Hedge Counterparty or any Rating Agency shall make such further inquiry or investigation into such facts or 109

Processed and formatted by SEC Watch - Visit SECWatch.com

matters as it may see fit or as it shall be directed, and, the Trustee shall be entitled, on reasonable prior notice to the Co-Issuers, to examine the books and records of the Co-Issuers or the Collateral Manager relating to the Rated Notes and the Collateral, personally or by agent or attorney at a time acceptable to the Co-Issuers or the Collateral Manager in their reasonable judgment during normal business hours; provided that the Trustee shall, and shall cause its agents, to hold in confidence all such information, except (i) to the extent disclosure may be required by law by any regulatory authority and (ii) to the extent that the Trustee, in its sole judgment, may determine that such disclosure is consistent with its obligations hereunder; (g)

the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys; provided that the Trustee shall not be responsible for any misconduct or negligence on the part of any agent (other than any Affiliate of the Trustee) appointed and supervised, or attorney appointed, with due care by it hereunder;

(h)

the Trustee shall not be liable for any action it takes or omits to take in good faith that it reasonably and, after the occurrence and during the continuance of an Event of Default, prudently believes to be authorized or within its rights or powers hereunder;

(i)

nothing herein shall be construed to impose an obligation on the part of the Trustee to recalculate, evaluate or verify any report, certificate or information received from the Issuer or Collateral Manager (unless and except to the extent otherwise expressly set forth herein or upon the request of the Initial Hedge Counterparty, a Rating Agency or a Majority of the then Aggregate Outstanding Amount of the Rated Notes);

(j)

the Trustee shall not be responsible or liable for the actions or omissions of, or any inaccuracies in the records of, any non-Affiliated custodian, clearing agency, common depository, Euroclear or Clearstream or for the acts or omissions of the Collateral Manager or either Co-Issuer;

(k)

to the extent any defined term hereunder, or any calculation required to be made or determined by the Trustee hereunder, is dependent upon or defined by reference to generally accepted accounting principles in the United States (GAAP), the Trustee shall be entitled to request and receive (and rely upon) instruction from the Issuer or the accountants appointed pursuant to 10.14 as to the application of GAAP in such connection, in any instance;

(l)

to the extent permitted by law, the Trustee shall not be required to give any bond or surety in respect of the execution of this Indenture or otherwise; and

(m)

the permissive right of the Trustee to take or refrain from taking any actions enumerated in this Indenture shall not be construed as a duty.

(n)

The Trustee shall be entitled to conclusively rely upon the Collateral Manager’s determination that the representations and warranties provided in connection with the acquisition of a Mezzanine Loan, a Subordinate Mortgage Loan Interest, a Credit Lease Loan, a Tenant Lease Loan Interest, a Participation Interest or a Commercial Mortgage Loan comply with the requirements of Sections 12.2(u) and (v). 110

Processed and formatted by SEC Watch - Visit SECWatch.com

6.4. AUTHENTICATING AGENTS If the Trustee so chooses the Trustee may appoint one or more Authenticating Agents with power to act on its behalf and subject to its direction in the authentication of Indenture Issued Notes in connection with issuance, transfers and exchanges under Sections 2.4, 2.5 and 8.5, as fully to all intents and purposes as though each such Authenticating Agent had been expressly authorized by those Sections to authenticate such Indenture Issued Notes. For all purposes of this Indenture, the authentication of Indenture Issued Notes by an Authenticating Agent pursuant to this Section 6.4 shall be deemed to be the authentication of Indenture Issued Notes “by the Trustee.” Any entity into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any entity succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, without the execution or filing of any further act on the part of the parties hereto or such Authenticating Agent or such successor entity. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and the Issuer. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Co-Issuers. Upon receiving such notice of resignation or upon such a termination, the Trustee shall promptly appoint a successor Authenticating Agent and shall give written notice of such appointment to the Co-Issuers. The Issuer agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services (provided, however, that, so long as an Authenticating Agent is the Trustee, or an Affiliate thereof, such compensation shall be payable by the Trustee, rather than by the Issuer), and reimbursement for its reasonable expenses relating thereto and the Trustee shall be entitled to be reimbursed for such payments, subject to Section 6.8. The provisions of Sections 2.8, 6.5 and 6.6 shall be applicable to any Authenticating Agent. 6.5. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF RATED NOTES The recitals contained herein and in the Rated Notes, other than the Certificate of Authentication thereon, shall be taken as the statements of the Co-Issuers (with respect to the Rated Notes other than the Class H Notes, Class J Notes and Class K Notes) and the Issuer (with respect to the Class H Notes, Class J Notes and Class K Notes), and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or sufficiency of this Indenture (except as may be made with respect to the validity of the Trustee’s obligations hereunder), of the Collateral or of the Rated Notes. The Trustee shall not be accountable for the use or application by the Co-Issuers of the Rated Notes (other than the Class H Notes, Class J Notes or the Class K Notes), by the Issuer of the Class H Notes, Class J Notes or the Class K Notes or the proceeds thereof or any amounts paid to either of the Co-Issuers pursuant to the provisions hereof. 6.6. MAY HOLD RATED NOTES The Trustee, any Note Paying Agent, the Note Registrar or any other agent of the Co-Issuers, in its individual or any other capacity, may become the owner or pledgee of Rated Notes and, may otherwise deal with the Co-Issuers or any of their Affiliates, with the same rights it would have if it were not Trustee, Note Paying Agent, Note Registrar or such other agent. 111

Processed and formatted by SEC Watch - Visit SECWatch.com

6.7. FUNDS HELD IN TRUST Funds held by the Trustee hereunder shall be held in trust to the extent required herein. The Trustee shall be under no liability for interest on any funds received by it hereunder except as otherwise agreed upon with the Issuer and except to the extent of income or other gain on investments which are deposits in or certificates of deposit of the Trustee in its commercial capacity and income or other gain actually received by the Trustee on Eligible Investments. 6.8. COMPENSATION AND REIMBURSEMENT (a)

(b)

The Issuer agrees: (1)

to pay the Trustee on each Payment Date the Trustee Fee, the PAA Issued Note Paying Agent Fee and reasonable compensation for all other services, including custodial services, rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

(2)

except as otherwise expressly provided herein, to reimburse the Trustee (subject to any written agreement between the Issuer and the Trustee) in a timely manner upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture or in the enforcement of any provision hereof and expenses related to the maintenance and administration of the Collateral (including securities transaction charges and the reasonable compensation and expenses and disbursements of its agents and legal counsel and of any accounting firm or investment banking firm employed by the Trustee pursuant to Section 5.2, 5.4, 5.5, 6.3(c), 6.3(k), 10.12 or 10.14, except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith but only to the extent any such securities transaction charges have not been waived during a Due Period due to the Trustee’s receipt of a payment from a financial institution with respect to certain Eligible Investments);

(3)

to indemnify the Trustee and its Officers, directors, employees and agents for, and to hold them harmless against, any loss, liability or expense incurred by it without negligence, willful misconduct or bad faith on their part, arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs and expenses (including reasonable counsel fees) of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties hereunder; and

(4)

to pay the Trustee reasonable additional compensation together with its expenses (including reasonable counsel fees) for any collection action taken pursuant to Section 6.14.

The Issuer may remit payment for such fees and expenses to the Trustee or, in the absence thereof, the Trustee may from time to time deduct payment of its fees and expenses hereunder from funds on deposit in the Expense Account pursuant to Section 11.1. 112

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

The Trustee hereby agrees not to cause the filing of a petition in bankruptcy against the Issuer for the non-payment to the Trustee of any amounts provided by this Section 6.8 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 Rated Notes.

(d)

The amounts payable to the Trustee pursuant to Sections 6.8(a)(2) through (4) (other than amounts received by the Trustee from financial institutions under Section 6.8(a)(2) above) shall not, except as provided by Section 11.1(a)(30) or Section 11.1(b)(25), exceed on any Payment Date the limitation described in Section 11.1(a)(1) for such Payment Date; provided that (A) the Trustee shall not institute any proceeding for enforcement of such lien except in connection with an action pursuant to Section 5.3 or 5.4 for the enforcement of the lien of this Indenture for the benefit of the Secured Parties and (B) the Trustee may only enforce such a lien in conjunction with the enforcement of the rights of the Secured Parties in the manner set forth in Section 5.4.

The Trustee shall, subject to the Priority of Payments, receive amounts pursuant to this Section 6.8 and Section 11.1 only to the extent that the payment thereof will not result in an Event of Default and the failure to pay such amounts to the Trustee will not, by itself, constitute an Event of Default. Subject to Section 6.10, the Trustee shall continue to serve as Trustee under this Indenture notwithstanding the fact that the Trustee shall not have received amounts due it hereunder and hereby agrees not to cause the filing of a petition in bankruptcy against the Co-Issuers for the nonpayment to the Trustee of any amounts provided by this Section 6.8 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 Rated Notes. No direction by the Holders of a Majority of the then Aggregate Outstanding Amount of the Rated Notes shall affect the right of the Trustee to collect amounts owed to it under this Indenture. The indemnifications in favor of the Trustee in this Section 6.8 shall (i) survive any resignation or removal of any Person acting as Trustee (to the extent of any indemnified liabilities, costs, expenses and other amounts arising or incurred prior to, or arising out of actions or omissions occurring prior to, such resignation or removal) and (ii) apply to the Trustee in its capacities as Custodian, Note Paying Agent, Rated Note Calculation Agent and Authenticating Agent. 6.9. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY There shall at all times be a Trustee hereunder which shall be a bank, corporation or trust company 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.$100,000,000, subject to supervision or examination by federal or state banking authorities, and insured by the Federal Deposit Insurance Corporation, whose long-term senior unsecured debt is rated “AA-” by S&P (or “A+” by S&P, if the Trustee’s short-term unsecured debt rating is at least “A-1” by S&P), or an entity with respect to which Rating Confirmation has been received. If such entity publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.9, the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.9, it shall resign immediately in the manner and with the effect hereinafter specified in this Section 6. 113

Processed and formatted by SEC Watch - Visit SECWatch.com

6.10.

RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR (a)

No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Section 6 shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11.

(b)

The Trustee may resign at any time by giving 90 days prior written notice thereof to the Co-Issuers, the Rated Noteholders, the Collateral Manager, each Hedge Counterparty and each Rating Agency. Upon receiving such notice of resignation, or if the Trustee is removed or becomes incapable of acting, or if a vacancy shall occur in the office of the Trustee for any reason, the Issuer shall (after consultation with the Collateral Manager) promptly propose a successor trustee for approval by the Holders of 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes. A proposed successor trustee approved in accordance with the preceding sentence shall be appointed by the Co-Issuers as successor trustee by written instrument, in duplicate, executed by an Authorized Officer of the Issuer and an Authorized Officer of the Co-Issuer, one copy of which shall be delivered to the Trustee so resigning and one copy to the successor trustee or trustees, together with a copy to each Rated Noteholder. If no successor trustee shall have been appointed and an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee or any Holder of a Rated Note or any Hedge Counterparty on behalf of itself and all others similarly situated, subject to Section 5.15, may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c)

The Trustee may be removed at any time by an Act of the Holders of at least 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes delivered to the Trustee and to the Co-Issuers.

(d)

If at any time: (1)

the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by any Holder; or

(2)

the Trustee shall become incapable of acting or shall be adjudged as bankrupt or insolvent or a receiver or liquidator of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case (subject to Section 6.10(a)), (A) the Co-Issuers, by Issuer Order shall remove the Trustee, or (B) subject to Section 5.15, any Holder or any Hedge Counterparty may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e)

The Co-Issuers shall give prompt notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first class mail, postage prepaid, to each Rating Agency, each Hedge Counterparty, the Collateral Manager and the Holders as their names and addresses appear in the Note Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. If the Co-Issuers fail to mail such notice 114

Processed and formatted by SEC Watch - Visit SECWatch.com

within ten days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Co-Issuers. 6.11.

ACCEPTANCE OF APPOINTMENT BY SUCCESSOR

Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Co-Issuers and the retiring Trustee (with copies to the Collateral Manager) an instrument accepting such appointment. Upon delivery of the required instruments, the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any other act, deed or conveyance, shall become vested with all the rights, powers, trusts, duties and obligations of the retiring Trustee; but, on request of the Co-Issuers or a Majority of the then Aggregate Outstanding Amount of the Notes of any Class of Notes or the successor Trustee, such retiring Trustee shall, upon payment of its charges, fees, indemnities and expenses then unpaid, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and funds held by such retiring Trustee hereunder, subject nevertheless to its lien, if any, provided for in Section 6.8(d). Upon request of any such successor Trustee, the Co-Issuers shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless (a) at the time of such acceptance such successor shall be qualified and eligible under Section 6.9 and the other provisions of this Section 6 and (b) a Rating Confirmation shall have been obtained with respect to the appointment of such successor Trustee shall have been satisfied. No appointment of a successor Trustee shall become effective unless approved by the Holders of not less than 66 2/3% of the Aggregate Outstanding Amount of the Notes; and no appointment of a successor Trustee shall become effective until the date ten days after notice of such appointment has been given to each Rated Noteholder and each Rating Agency. 6.12.

MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF TRUSTEE

Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided such Person shall be otherwise qualified and eligible under this Section 6, without the execution or filing of any paper or any further act on the part of any of the parties hereto. The successor Trustee will notify each Rating Agency of any such merger, conversion or consolidation. In case any of the Indenture Issued Notes have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Indenture Issued Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Indenture Issued Notes. 6.13.

CO-TRUSTEES

At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any part of the Collateral may at the time be located, the Trustee shall have power to appoint one or more Persons to act as Co-trustee, jointly with the Trustee of all or any part of the Collateral, with the power to file such proofs of claim and take such other actions pursuant to Section 5.6 and to make such claims and enforce such rights of action on behalf of the Holders of the Rated Notes subject to the other provisions of this Section 6.13. 115

The Co-Issuers shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint a Co-trustee. If the Co-Issuers do not join in such appointment within 15 days after the receipt by them of a request to do so, the Trustee shall have power to make such appointment. Should any written instrument from the Co-Issuers be required by any Co-trustee so appointed for more fully confirming to such Cotrustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the CoIssuers. The Co-Issuers agree to pay (subject to the Priority of Payments) for any reasonable fees and expenses in connection with such appointment. Every Co-trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms: (a)

the Indenture Issued Notes shall be authenticated and delivered and all rights, powers, duties and obligations hereunder in respect of the custody of securities, funds and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely by the Trustee;

(b)

the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by the appointment of a Co-trustee shall be conferred or imposed upon and exercised or performed by the Trustee or by the Trustee and such Co-trustee jointly, as shall be provided in the instrument appointing such Co-trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by a Co-trustee;

Processed and formatted by SEC Watch - Visit SECWatch.com

6.14.

(c)

the Trustee at any time, by an instrument in writing executed by it, may accept the resignation of or remove any Co-trustee appointed under this Section 6.13. A successor to any Co-trustee so resigned or removed may be appointed in the manner provided in this Section 6.13;

(d)

no Co-trustee hereunder shall be personally liable by reason of any act or omission of the Trustee or any other Co-trustee hereunder;

(e)

the Trustee shall not be liable by reason of any act or omission of a Co-trustee;

(f)

any Act of Rated Noteholders delivered to the Trustee shall be deemed to have been delivered to each Co-trustee; and

(g)

each Co-trustee hereunder shall at the time of such acceptance satisfy the qualification required of a Trustee under Section 6.9 and the other provisions of this Section 6.

CERTAIN DUTIES RELATED TO DELAYED PAYMENT OF PROCEEDS; OTHER NOTICES

In the event that the Trustee shall not have received a payment with respect to any Pledged Security within two Business Days after its Due Date, the Trustee shall (i) notify the Issuer and Collateral Manager in writing and (ii) promptly request the issuer of such Pledged Security, the trustee under the related Underlying Instrument or paying agent designated by either of them, as the case may be, to make such payment as soon as practicable after such request but in no event later than three Business Days after 116

Processed and formatted by SEC Watch - Visit SECWatch.com

the date of such request. In the event that such payment is not made within such time period, the Trustee, subject to the provisions of Section 6.1(c)(4), shall, subject to the restrictions on the sale of Collateral Interests set forth in Section 12.1, take such action as the Collateral Manager shall direct in writing. Any such action shall be without prejudice to any right to claim a Default under this Indenture. The Trustee will promptly notify the Issuer if the Collateral Manager has determined that (i) any Collateral Interest has become an Impaired Interest, a Deferred Interest PIK Bond, a Credit Risk Interest or a Written Down Interest or (ii) the Trustee has received an Equity Interest in connection with any Collateral Interest. 6.15.

6.16.

REPRESENTATIONS AND WARRANTIES OF THE BANK (a)

Organization. The Bank has been duly organized and is validly existing as a national banking association under the laws of the United States and has the power to conduct its business and affairs as a trustee.

(b)

Authorization; Binding Obligations. The Bank has the power and authority to perform the duties and obligations of Trustee, Note Registrar and Note Transfer Agent or any other capacity to which it is appointed under this Indenture. The Bank has taken all necessary action to authorize the execution, delivery and performance of this Indenture, and all of the documents required to be executed by the Bank pursuant hereto. This Indenture has been duly executed and delivered by the Bank. Upon execution and delivery by the Co-Issuers, this Indenture will constitute the legal, valid and binding obligation of the Bank enforceable in accordance with its terms.

(c)

Eligibility. The Bank is eligible under Section 6.9 to serve as Trustee hereunder.

(d)

No Conflict. Neither the execution, delivery and performance of this Indenture, nor the consummation of the transactions contemplated by this Indenture, (i) is prohibited by, or requires the Bank to obtain any consent, authorization, approval or registration under, any law, statute, rule, regulation, judgment, order, writ, injunction or decree that is binding upon the Bank or any of its properties or assets, or (ii) will violate any provision of, result in any default or acceleration of any obligations under, result in the creation or imposition of any lien pursuant to, or require any consent under, any agreement to which the Bank is a party or by which it or any of its property is bound.

(e)

No Proceedings. There are no proceedings pending, or to the best knowledge of the Bank, threatened against the Bank before any federal, state or other governmental agency, authority, administrator or regulatory body, arbitrator, court or other tribunal, foreign or domestic, that could have a material adverse effect on the Collateral or any action taken or to be taken by the Bank under this Indenture.

EXCHANGE OFFERS, PROPOSED AMENDMENTS ETC.

The Collateral Manager may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, take any of the following actions with respect to a Collateral Interest or Equity Interest as to which an Offer has been made or as to which any consent, waiver, vote or exercise has been requested: (i) exchange such instrument for other securities or a mixture of securities and other consideration pursuant to such Offer (and in making a determination whether or not to exchange any security, none of the restrictions set forth in Section 12 shall be applicable); and (ii) give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Interest or Equity Interest. In the event that the Trustee does not receive instruction from the Collateral Manager, the Trustee shall have no obligation to take action with respect to such exchange or such request for consent, 117

Processed and formatted by SEC Watch - Visit SECWatch.com

waiver, vote or exercise. In the event that the Trustee receives written notice of any proposed amendment, consent or waiver under the Underlying Instruments of any Collateral Interests (before or after any default), the Trustee shall promptly deliver copies of such notice to the Issuer and the Collateral Manager. The Collateral Manager may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, with respect to a Collateral Interest as to which a consent or waiver under the Underlying Instruments of such Collateral Interest (before or after any default) has been proposed, give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Interest only in accordance with such Issuer Order. In the absence of any instruction from the Collateral Manager, the Trustee shall not engage in any vote with respect to such Collateral Interest. 6.17.

FIDUCIARY FOR RATED NOTEHOLDERS ONLY; AGENT FOR OTHER SECURED PARTIES

With respect to the security interests created hereunder, the pledge of any portion of the Collateral to the Trustee is to the Trustee as representative of the Rated Noteholders and agent for other Secured Parties. In furtherance of the foregoing, the possession by the Trustee of any portion of the Collateral and the endorsement to or registration in the name of the Trustee of any portion of the Collateral (including without limitation as entitlement holder of the Collateral Account) are all undertaken by the Trustee in its capacity as representative of the Rated Noteholders and as agent for the other Secured Parties. The Trustee shall not by reason of this Indenture be deemed to be acting as fiduciary for any Hedge Counterparty or the Collateral Manager, provided that the foregoing shall not limit any of the express obligations of the Trustee under this Indenture. 6.18.

WITHHOLDING

If any withholding tax is imposed on the Issuer’s payment (or allocations of income) under the Rated Notes to any Rated Noteholder, such tax shall reduce the amount otherwise distributable to such Rated Noteholder. The Trustee is hereby authorized and directed to retain from amounts otherwise distributable to any Rated Noteholder sufficient funds for the payment of any tax that is required to be withheld or deducted by the Issuer (but such authorization shall not prevent the Trustee from contesting any such tax in appropriate proceedings and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding tax imposed with respect to any Rated Noteholder shall be treated as Cash distributed to such Rated Noteholder at the time it is withheld by the Trustee and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution, the Trustee may in its sole discretion withhold such amounts in accordance with this Section 6.18. If any Rated Noteholder wishes to apply for a refund of any such withholding tax, the Trustee shall reasonably cooperate with such Rated Noteholder in making such claim so long as such Rated Noteholder agrees to reimburse the Trustee for any out-of-pocket expenses incurred. Nothing herein shall impose an obligation on the part of the Trustee to determine the amount of any tax or withholding obligation on the part of the Issuer or in respect of the Income Notes. ARTICLE VII COVENANTS 7.1. PAYMENT OF PRINCIPAL AND INTEREST The Co-Issuers will duly and punctually pay all principal (including the Class C Cumulative Periodic Interest Shortfall Amount, the Class D Cumulative Periodic Interest Shortfall Amount, the Class E Cumulative Periodic Interest Shortfall Amount, the Class F Cumulative Periodic Interest Shortfall Amount and the Class G Cumulative Periodic Interest Shortfall Amount), interest (including Defaulted 118

Processed and formatted by SEC Watch - Visit SECWatch.com

Interest and interest thereon, if any) in accordance with the terms of the Rated Notes (other than the Class H Notes, Class J Notes and Class K Notes) and this Indenture and amounts due under any Hedge Agreement in accordance with this Indenture. The Issuer will duly and punctually pay all principal (including the Class H Cumulative Periodic Interest Shortfall Amount, the Class J Cumulative Periodic Interest Shortfall Amount and the Class K Cumulative Periodic Interest Shortfall Amount), interest (including Defaulted Interest and interest thereon, if any) in accordance with the terms of the Class H Notes, Class J Notes and Class K Notes and this Indenture and amounts due under any Hedge Agreement in accordance with this Indenture. Amounts properly withheld under the Code or other applicable law by any Person from a payment to any Rated Noteholder of principal and/or interest shall be considered as having been paid by the Co-Issuers (in the case of Rated Notes other than the Class H Notes, Class J Notes and Class K Notes) or the Issuer (in the case of the Class H Notes, the Class J Notes or the Class K Notes) to such Rated Noteholder for all purposes of this Indenture. The Trustee shall, unless prevented from doing so for reasons beyond its reasonable control, give notice to each Rated Noteholder and each Rating Agency of any such withholding requirement no later than ten days prior to the date of the payment from which amounts are required to be withheld; provided that despite the failure of the Trustee to give such notice, amounts withheld pursuant to applicable tax laws shall be considered as having been paid by the Co-Issuers or the Issuer as provided above. 7.2. MAINTENANCE OF OFFICE OR AGENCY The Co-Issuers hereby appoint the Trustee as Note Paying Agent for the payment of principal of and interest on the Rated Notes. The Co-Issuers hereby appoint Wells Fargo Bank, National Association with an address at 9062 Old Annapolis Road, Columbia, Maryland 21045, Attn: CDO Trust Services—N-Star REL CDO VI, as the Co-Issuers’ agent where notices and demands to or upon the Co-Issuers in respect of the Rated Notes or this Indenture (except service of any and all process in any action or proceeding) may be served. Rated Notes may be surrendered for registration of transfer or exchange at the Corporate Trust Office of the Trustee in Minnesota. The Co-Issuers may at any time and from time to time, terminate the appointment of any such agent or appoint any additional agents for any or all of such purposes; provided that (A) the Co-Issuers will maintain in the Borough of Manhattan, The City of New York, an office or agency where notices and demands to or upon the Co-Issuers in respect of the Rated Notes and this Indenture may be served, (B) no Note Paying Agent shall be appointed in a jurisdiction which subjects payments on the Rated Notes to withholding tax and (C) the Co-Issuers may not terminate the appointment of any Note Paying Agent without the consent of each Income Noteholder. The Co-Issuers shall give prompt written notice to the Trustee, each Hedge Counterparty and each Rating Agency and the Rated Noteholders of the appointment or termination of any such agent and of the location and any change in the location of any such office or agency. If at any time the Co-Issuers shall fail to maintain any such required office or agency in the Borough of Manhattan, The City of New York or shall fail to furnish the Trustee with the address thereof, presentations and surrenders may be made at and notices and demands may be served on the Co-Issuers and Rated Notes may be presented and surrendered for payment to the Note Paying Agent at its office in Minnesota (and the Co-Issuers hereby appoint the same as their agent to receive such respective presentations, surrenders, notices and demands). 119

Processed and formatted by SEC Watch - Visit SECWatch.com

7.3. FUNDS FOR RATED NOTE PAYMENTS TO BE HELD IN TRUST All payments of amounts due and payable with respect to any Rated Notes that are to be made from amounts withdrawn from the Payment Account shall be made on behalf of the Co-Issuers or the Issuer, as applicable, by the Trustee or a Note Paying Agent with respect to payments on the Rated Notes. When the Co-Issuers shall have a Note Paying Agent that is not also the Note Registrar, they shall direct the Note Registrar to furnish, no later than the fifth calendar day after each Record Date a list, if necessary, in such form as such Note Paying Agent may reasonably request, of the names and addresses of the Holders and of the certificate numbers of individual Rated Notes held by each such Holder. The initial Note Paying Agent shall be as set forth in Section 7.2. Any additional or successor Paying Agents shall be appointed by Issuer Order with written notice thereof to the Trustee and the Rating Agencies; provided that so long as any Class of Rated Notes is rated by the Rating Agencies and with respect to any additional or successor Note Paying Agent for the Rated Notes, (a) the Note Paying Agent for the Rated Notes has a rating of not less than “AA-” and not less than “A-1+” by S&P or (b) a Rating Confirmation from S&P shall have been obtained with respect to the appointment of such Note Paying Agent. In the event that (i) the Co-Issuers have actual knowledge that such successor Note Paying Agent ceases to have a rating of at least “AA-” and of “A- 1+” by S&P or (ii) a Rating Confirmation from S&P shall not have been obtained with respect to the appointment of such Note Paying Agent, the Co-Issuers shall promptly remove such Note Paying Agent and appoint a successor Note Paying Agent. The Co-Issuers shall not appoint any Note Paying Agent (other than an initial Note Paying Agent) that is not, at the time of such appointment, a depository institution or trust company subject to supervision and examination by federal and/or state and/or national banking authorities. The Co-Issuers shall cause each Note Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Note Paying Agent shall agree with the Trustee (and if the Trustee acts as Note Paying Agent, it hereby so agrees), subject to the provisions of this Section 7.3, that such Note Paying Agent will: (a)

allocate all sums received for payment to the Holders of Rated Notes for which it acts as Note Paying Agent on each Payment Date and Redemption Date among such Holders in the proportion specified in the instructions set forth in the applicable Note Valuation Report or Redemption Date Statement or as otherwise provided herein, in each case to the extent permitted by applicable law;

(b)

hold all amounts held by it for the payment of amounts due with respect to the Rated Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided;

(c)

if such Note Paying Agent is not the Trustee, immediately resign as a Note Paying Agent and forthwith pay to the Trustee all amounts held by it in trust for the payment of Rated Notes if at any time it ceases to meet the standards set forth above required to be met by a Note Paying Agent at the time of its appointment;

(d)

if such Note Paying Agent is not the Trustee, immediately give the Trustee notice of any Default by the Issuer or the CoIssuer (or any other obligor upon the Rated Notes) in the making of any payment required to be made; and

(e)

if such Note Paying Agent is not the Trustee at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all amounts so held in trust by such Note Paying Agent. 120

Processed and formatted by SEC Watch - Visit SECWatch.com

If the Co-Issuers shall have appointed a Note Paying Agent other than the Trustee, the Trustee shall deposit on or prior to the Business Day next preceding each Payment Date or Redemption Date, as the case may be, with such Note Paying Agent, if necessary, an aggregate amount sufficient to pay the amounts then becoming due (to the extent funds are then available for such purpose in the Collection Account, as the case may be), such amount to be held in trust for the benefit of the Persons entitled thereto. Any funds deposited with a Note Paying Agent (other than the Trustee) in excess of an amount sufficient to pay the amounts then becoming due on the Rated Notes with respect to which such deposit was made shall be paid over by such Note Paying Agent to the Trustee for application in accordance with Section 11. The Co-Issuers may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, direct any Note Paying Agent to pay, to the Trustee all amounts held in trust by such Note Paying Agent, such amounts to be held by the Trustee upon the same trusts as those upon which such amounts were held by such Note Paying Agent; and, upon such payment by any Note Paying Agent to the Trustee, such Note Paying Agent shall be released from all further liability with respect to such amounts. Except as otherwise required by applicable law, any funds deposited with the Trustee or any Note Paying Agent in trust for the payment of the principal of or interest on any Rated Note and remaining unclaimed for two years after the same has become due and payable shall be paid to the Co-Issuers on Issuer Request; and the Holder of such Rated Note shall thereafter, as an unsecured general creditor, look only to the Co-Issuers (in the case of the Rated Notes other than the Class H Notes, Class J Notes and Class K Notes) or the Issuer (in the case of the Class H Notes, the Class J Notes or the Class K Notes) for payment of such amounts and all liability of the Trustee or such Note Paying Agent with respect to such trust funds (but only to the extent of the amounts so paid to the Co-Issuers) shall thereupon cease. The Trustee or such Note Paying Agent, before being required to make any such release of payment, may, but shall not be required to, adopt and employ, at the expense of the Co-Issuers, any reasonable means of notification of such release of payment, including mailing notice of such release to Holders whose Rated Notes have been called but have not been surrendered for redemption or whose right to or interest in amounts due and payable but not claimed is determinable from the records of any Note Paying Agent, at the last address of record of each such Holder. 7.4. EXISTENCE OF CO-ISSUERS The Issuer and the Co-Issuer shall (to the extent they are able) maintain in full force and effect their existence and rights as an exempted company incorporated and registered under the laws of the Cayman Islands and as a limited liability company formed under the laws of the State of Delaware, respectively, and shall obtain and preserve their qualification to do business in each jurisdiction in which such qualifications are or shall be necessary to protect the validity and enforceability of this Indenture, the Rated Notes (in the case of the Issuer), the Rated Notes other than the Class H Notes, Class J Notes and Class K Notes (in the case of the Co-Issuer) or any of the Collateral. The Issuer and the Co-Issuer shall ensure that all corporate or other formalities regarding their respective existences (including holding regular board of directors’, members’ and shareholders’, or other similar, meetings) or registrations are followed. Neither the Issuer nor the Co-Issuer shall take any action, or conduct its affairs in a manner, that is likely to result in its separate existence being ignored or in its assets and liabilities being substantively consolidated with any other Person in a bankruptcy, reorganization or other insolvency proceeding. At least one director of the Issuer and at least one member of the Co-Issuer shall be Independent of other parties to the Transaction Documents. Without limiting the foregoing, (a) the Issuer shall not have any subsidiaries (other than the Co-Issuer and any Tax Subsidiary), (b) the Co-Issuer shall not have any subsidiaries and (c) the Issuer and the Co-Issuer shall not 121

Processed and formatted by SEC Watch - Visit SECWatch.com

(i) have any employees, (ii) engage in any transaction with any shareholder that would constitute a conflict of interest or (iii) pay dividends, provided that the foregoing shall not prohibit the Issuer from entering into the transactions contemplated by the Corporate Services Agreement with the Administrator. 7.5. PROTECTION OF COLLATERAL (a)

The Issuer shall from time to time, execute and deliver all such supplements and amendments hereto and all such Financing Statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action as may be necessary or advisable or desirable to secure the rights and remedies of the Secured Parties hereunder and to: (1)

Grant more effectively all or any portion of the Collateral;

(2)

maintain, preserve and perfect the lien (and the first priority nature thereof) of this Indenture or to carry out more effectively the purposes hereof;

(3)

perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations);

(4)

enforce any of the Pledged Securities or other instruments or property included in the Collateral;

(5)

preserve and defend title to the Collateral and the rights therein of the Trustee and the Holders of the Rated Notes against the claims of all Persons and parties; or

(6)

pay or cause to be paid any and all taxes levied or assessed upon all or any part of the Collateral.

The Issuer hereby designates the Trustee its agent and attorney-in-fact to file any Financing Statement, continuation statement or other instrument delivered to it pursuant to this Section 7.5, and the Trustee, as agent of the Issuer, agrees to file such continuation statements as are necessary to maintain perfection of the Collateral perfected by the filing of Financing Statements, provided that the Issuer retains ultimate responsibility to maintain the perfection of the Collateral perfected by the filing of Financing Statements and any failure of the Trustee to file continuation statements pursuant to this undertaking shall not result in any liability of the Trustee and the Trustee shall be entitled to indemnification pursuant to Section 6.8(a) with respect to any claim, loss, liability or expense incurred by the Trustee with respect to the filing of such continuation statements. The Trustee agrees that it will from time to time, at the direction of any Secured Party, cause to be filed Financing Statements and continuation statements. The Issuer shall otherwise cause the perfection and priority of the security interest in the Collateral and the maintenance of such security interest at all times. Notwithstanding anything to the contrary herein, the right of a Secured Party to provide direction to the Trustee shall not impose upon the Trustee, as Secured Party, any obligation to provide any such direction. The Issuer agrees that a carbon, photographic, photostatic or other reproduction of this Indenture or of a Financing Statement is sufficient as an Indenture or a Financing Statement as the case may be. 122

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

The Trustee shall not (i) except in accordance with Section 10.12(a) or (b), as applicable, remove any portion of the Collateral that consists of Cash or is evidenced by an Instrument, certificate or other writing (A) from the jurisdiction in which it was held at the date the most recent Opinion of Counsel was delivered pursuant to Section 7.6 (or from the jurisdiction in which it was held as described in the Opinion of Counsel delivered at the Closing Date pursuant to Section 3.1(c), if no Opinion of Counsel has yet been delivered pursuant to Section 7.6) or (B) from the possession of the Person who held it on such date or (ii) cause or permit ownership or the pledge of any portion of the Collateral that consists of book-entry securities to be recorded on the books of a Person (A) located in a different jurisdiction from the jurisdiction in which such ownership or pledge was recorded at such date or (B) other than the Person on whose books such ownership or pledge was recorded at such date, unless the Trustee shall have first received an Opinion of Counsel to the effect that the lien and security interest created by this Indenture with respect to such property will continue to be maintained after giving effect to such action or actions.

(c)

The Issuer shall pay or cause to be paid taxes, if any, levied on account of the beneficial ownership by the Issuer of any Pledged Securities that secure the Rated Notes; provided that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which disputed amounts or adequate reserves have been made or the failure of which to pay or discharge could not reasonably be expected to have a material adverse effect upon the ability of the Issuer to timely and fully perform any of its payment or other material obligations under this Indenture or upon the interests of the Rated Noteholders in the Collateral.

(d)

The Issuer shall enforce all of its material rights and remedies under the Transaction Documents to which it is a party.

(e)

Without at least thirty (30) days’ prior written notice to the Trustee, the Issuer shall not change its name, or the name under which it does business, from the name shown on the signature pages hereto, reincorporate or reorganize under the laws of another jurisdiction, or establish an office in the United States.

7.6. OPINIONS AS TO COLLATERAL On or before May 31 in each calendar year, commencing in 2007, the Issuer shall furnish to the Trustee, each Hedge Counterparty and each Rating Agency an Opinion of Counsel (which shall include assumptions and qualifications substantially similar to those set forth in Exhibit E-1) stating that, in the opinion of such counsel, as of the date of such opinion, the lien and security interest created by this Indenture with respect to the Collateral remains a valid and perfected first priority lien and describing the manner in which such security interest shall remain perfected. 7.7. PERFORMANCE OF OBLIGATIONS (a)

The Trustee shall notify the Issuer, each Hedge Counterparty and each Rated Noteholder of any request for an amendment, waiver or supplement to any Underlying Instrument included in the Collateral or of any other notice of a vote in respect of any Collateral Interest included in the Collateral. The Issuer may only enter into any such amendment, waiver or supplement to any such Underlying Instrument if such amendment, supplement or waiver: 123

Processed and formatted by SEC Watch - Visit SECWatch.com

(1)

is required by the provisions of any Underlying Instrument or by applicable law (other than pursuant to an Underlying Instrument);

(2)

is necessary to cure any ambiguity, inconsistency or formal defect or omission in such Underlying Instrument; or

(3)

(x) is deemed necessary by the Issuer or the Collateral Manager and does not materially and adversely affect the Secured Parties or (y) is effected pursuant to Section 6.16.

The Issuer shall be entitled to rely on an Opinion of Counsel or Officer’s certificate of the Collateral Manager as to material adverse effect and as to whether the entry into an amendment, supplement or waiver is permitted pursuant to this Indenture. (b)

The Issuer or the Co-Issuer may, with the prior written consent of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes and the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes and the Initial Hedge Counterparty, contract with other Persons, including the Collateral Administrator, the Collateral Manager and the Bank, for the performance of actions and obligations to be performed by the Issuer or the Co-Issuer hereunder by such Persons. Notwithstanding any such arrangement, the Issuer or the Co-Issuer, as the case may be, shall remain liable for all such actions and obligations. In the event of such contract, the performance of such actions and obligations by such Persons shall be deemed to be performance of such actions and obligations by the Issuer or the Co-Issuer, as the case may be; and the Issuer or Co-Issuer, as the case may be, will punctually perform, and use its best efforts to cause such other Person to perform, all of their obligations and agreements contained in related agreement.

(c)

The Co-Issuers shall treat all acquisitions of Collateral Interests as a “purchase” for tax, accounting and reporting purposes.

(d)

Each of the Co-Issuers shall file, or cause to be filed, any tax returns, including information tax returns, required by any governmental authority.

(e)

If the Issuer ceases to be disregarded as an entity separate from the Owner REIT, in the event that (i) a Collateral Interest would become a Taxed Collateral Interest or property acquired in respect of a Collateral Interest would become Taxed Property (in either case excluding, for the avoidance of doubt, any Taxed Collateral Interests or Taxed Property required to be disposed of as described in Section 12.1(a)(2)), and (ii) the Issuer does not sell or otherwise dispose of all or a portion of such Taxed Collateral Interest or Taxed Property in accordance with the provisions of Section 12.1(a)(3), the Collateral Manager on behalf of the Issuer shall, prior to such Collateral Interest becoming a Taxed Collateral Interest or such property becoming a Taxed Property, (a) set up a special purpose subsidiary meeting S&P’s then current published criteria for bankruptcy-remote special purpose entities (a Tax Subsidiary) to receive and hold any such Taxed Collateral Interest or Taxed Property and transfer such Taxed Collateral Interest or Taxed Property to the Tax Subsidiary or (b) contribute such Taxed Collateral Interest or Taxed Property to a REMIC or other pass-through entity, unless the Issuer has received an Opinion of Counsel rendered by nationally recognized tax counsel that the Issuer can hold such Taxed Collateral Interest or Taxed Property directly without causing the Issuer to be treated as engaged in a trade or business in the United States for U.S. federal income tax 124

Processed and formatted by SEC Watch - Visit SECWatch.com

purposes. The Issuer shall cause the purposes and permitted activities of any such Tax Subsidiary to be restricted solely to the acquisition, holding and disposition of such Taxed Collateral Interest or Taxed Property and shall require such subsidiary to distribute 100% of any payments or distributions received with respect to such taxed Collateral Interest, together with the proceeds of any sale of such Taxed Collateral Interest or Taxed Property, net of any tax liabilities, to the Issuer. 7.8. NEGATIVE COVENANTS (a)

The Issuer will not and, with respect to Section 7.8(a)(3), (4), (5) and (9), the Co-Issuer will not: (1)

intentionally operate so as to be subject to U.S. federal income taxes on its net income;

(2)

sell, assign, participate, transfer, exchange or otherwise dispose of, or pledge, mortgage, hypothecate or otherwise encumber (or permit such to occur or suffer such to exist), any part of the Collateral, except as expressly permitted by this Indenture;

(3)

claim any credit on, make any deduction from, or dispute the enforceability of, the payment of the principal or interest (or any other amount) payable in respect of the Rated Notes (other than amounts required to be paid, deducted or withheld in accordance with any applicable law or regulation of any governmental authority) or assert any claim against any present or future Rated Noteholder by reason of the payment of any taxes levied or assessed upon any part of the Collateral;

(4)

(A) incur or assume or guarantee any indebtedness, other than the Rated Notes and this Indenture and the transactions contemplated hereby; (B) issue any additional class of securities other than the Income Notes; or (C) issue any additional shares of stock;

(5)

(A) take any action that would impair the validity or effectiveness of this Indenture or any Grant hereunder or the lien of this Indenture, amend hypothecate, subordinate, terminate, discharge or release any Person from any covenants or obligations with respect to this Indenture or the Rated Notes, except as may be permitted hereby, (B) create or extend any lien, charge, adverse claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) on or to the Collateral or any part thereof, any interest therein or the proceeds thereof, or (C) take any action that would cause the lien of this Indenture not to constitute a valid first priority security interest in the Collateral;

(6)

use any of the proceeds of the Rated Notes issued hereunder (A) to extend “purpose credit” within the meaning given to such term in Regulation U or (B) to purchase or otherwise acquire any Margin Stock;

(7)

permit the aggregate book value of all Margin Stock held by the Issuer on any date to exceed the net worth of the Issuer on such date (excluding any unrealized gains and losses) on such date; 125

(b)

(8)

dissolve or liquidate in whole or in part, except as permitted hereunder; or

(9)

except for any agreements involving the purchase and sale of Collateral Interests having customary purchase or sale terms and documents with customary loan trading documentation (but not excepting any Hedge Agreement), enter into any agreements unless such agreements contain “non-petition” and “limited recourse” provisions with respect to the Issuer.

Except as permitted by this Indenture, the Issuer will not do business under any other name other than the name set forth in the Articles and neither the Issuer nor the Trustee shall acquire any Collateral after the Closing Date, sell, transfer, exchange or otherwise dispose of Collateral, or enter into or engage in any business with respect to any part of the Collateral.

7.9. STATEMENT AS TO COMPLIANCE On or before May 31 in each calendar year commencing in 2007, or immediately if there has been a Default in the fulfillment of an obligation under this Indenture, the Issuer shall deliver to the Trustee, the PAA Issued Note Paying Agent, each Rated Noteholder making a written request therefor, the Initial Hedge Counterparty, the Collateral Manager and each Rating Agency a certificate of the Issuer stating, as to each signer thereof, that: (a)

the Officer executing such certificate has conducted a review of the activities of the Issuer and of the Issuer’s performance under this Indenture during the 12-month period ending on December 31 of such year (or from the Closing Date until December 31, 2006, in the case of the first such certificate) based on reports and other information delivered to such Officer by the Trustee, the Collateral Manager and the Collateral Administrator and a review of the Accountant’s Reports prepared pursuant to Section 10.11 and such other materials as such Officer deems appropriate; and

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

7.10.

to the best of knowledge of the Issuer, based on such review, the Issuer has fulfilled all of its material obligations under this Indenture throughout the period, or, if there has been a Default in the fulfillment of any such obligation, specifying each such Default known to such Officer and the nature and status thereof, including actions undertaken to remedy the same.

CO-ISSUERS MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS (a)

The Issuer shall not consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any Person, unless permitted by Cayman Islands law and unless: (1)

the Issuer shall be the surviving entity, or the Person (if other than the Issuer) formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall be an exempted limited liability company organized and existing under the laws of the Cayman Islands or such other jurisdiction outside the United States as may be approved by a Majority of each Class and each Hedge Counterparty, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, each Hedge Counterparty and each Rated Noteholder, the due and punctual payment of the principal of and interest on all Rated Notes and the 126

Processed and formatted by SEC Watch - Visit SECWatch.com

performance of every covenant of this Indenture and any Hedge Agreement on the part of the Issuer to be performed or observed, all as provided herein; (2)

each Rating Agency and each Hedge Counterparty shall have received written notification from the Issuer of such consolidation, merger, transfer or conveyance and the identity of the surviving entity and a Rating Confirmation shall have been obtained with respect to the consummation of such transaction;

(3)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have agreed with the Trustee (A) to observe the same legal requirements for the recognition of such formed or surviving entity as a legal entity separate and apart from any of its Affiliates as are applicable to the Issuer with respect to its Affiliates and (B) not to consolidate or merge with or into any other Person or transfer or convey the Collateral or all or substantially all of its assets to any other Person except in accordance with the provisions of this Section 7.10;

(4)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have delivered to the Trustee, each Hedge Counterparty and each Rating Agency an Officer’s certificate and an Opinion of Counsel each stating that such Person shall be duly organized, validly existing and (if applicable) in good standing in the jurisdiction in which such Person is organized; that such Person has sufficient power and authority to assume the obligations set forth in Section 7.10(a)(1) above and to execute and deliver an indenture supplemental hereto for the purpose of assuming such obligations; that such Person has duly authorized the execution, delivery and performance of an indenture supplemental hereto for the purpose of assuming such obligations and that such supplemental indenture is a valid, legal and binding obligation of such Person, enforceable in accordance with its terms, subject only to bankruptcy, reorganization, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); that, immediately following the event which causes such Person to become the successor to the Issuer, (A) such Person has good and marketable title, free and clear of any lien, security interest or charge, other than the lien and security interest of this Indenture, to the Collateral; (B) the Trustee continues to have a valid perfected first priority security interest in the Collateral securing all of the Rated Notes; (C) such Person has received an Opinion of Counsel to the effect that (i) (x) such Person has been organized in conformity with the requirements for qualification as a real estate investment trust under the Code, and such Person’s actual method of operation has (for the time period specified in such Opinion of Counsel) enabled, and its proposed method of operation will enable, such Person to satisfy the requirements for qualification and taxation as a real estate investment trust under the Code or (y) such Person will not be subject to net income tax or be treated as engaged in a trade or business within the United States for U.S. federal income tax purposes and (ii) such other matters as the Trustee, the Initial Hedge Counterparty or any Rated Noteholder may reasonably require; 127

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

(5)

immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(6)

the Issuer shall have delivered to the Trustee, each Hedge Counterparty and each Rated Noteholder an Officer’s certificate and an Opinion of Counsel each stating that such consolidation, merger, transfer or conveyance and such supplemental indenture comply with this Section 7, that all conditions precedent in this Section 7 provided for relating to such transaction have been complied with and that no adverse tax consequences will result therefrom to any Rated Noteholder or any Hedge Counterparty; and

(7)

the Issuer shall have delivered to the Trustee an Opinion of Counsel stating that after giving effect to such transaction, neither of the Co-Issuers will be required to register as an investment company under the Investment Company Act.

The Co-Issuer shall not consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any Person, unless: (1)

the Co-Issuer shall be the surviving entity, or the Person (if other than the Co-Issuer) formed by such consolidation or into which the Co-Issuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, the due and punctual payment of the principal of and interest on all Rated Notes and the performance of every covenant of this Indenture on the part of the Co-Issuer to be performed or observed, all as provided herein;

(2)

each Rating Agency shall have received written notification from the Co-Issuer of such consolidation, merger, transfer or conveyance and the identity of the surviving entity and a Rating Confirmation shall have been obtained with respect to the consummation of such transaction;

(3)

if the Co-Issuer is not the surviving entity, the Person formed by such consolidation or into which the Co-Issuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall have agreed with the Trustee (A) to observe the same legal requirements for the recognition of such formed or surviving corporation as a legal entity separate and apart from any of its Affiliates as are applicable to the Co-Issuer with respect to its Affiliates and (B) not to consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any other Person except in accordance with the provisions of this Section 7.10;

(4)

if the Co-Issuer is not the surviving entity, the Person formed by such consolidation or into which the Co-Issuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall have delivered to the Trustee and each Rating Agency an Officer’s certificate and an Opinion of Counsel each stating that such Person shall be duly organized, validly existing and (if applicable) in good standing in the jurisdiction in which such Person is organized; that such Person has sufficient power and authority to assume the obligations set forth in Section 7.10(b)(1) above and to execute and deliver an indenture supplemental hereto for the purpose of assuming such 128

Processed and formatted by SEC Watch - Visit SECWatch.com

obligations; that such Person has duly authorized the execution, delivery and performance of an indenture supplemental hereto for the purpose of assuming such obligations and that such supplemental indenture is a valid, legal and binding obligation of such Person, enforceable in accordance with its terms, subject only to bankruptcy, reorganization, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and such other matters as the Trustee or any Rated Noteholder may reasonably require;

7.11.

(5)

immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(6)

the Co-Issuer shall have delivered to the Trustee and each Rated Noteholder an Officer’s certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance or transfer and such supplemental indenture comply with this Section 7 and that all conditions precedent in this Section 7 provided for relating to such transaction have been complied with and that no adverse tax consequences will result therefrom to any Rated Noteholder;

(7)

after giving effect to such transaction, neither of the Co-Issuers will be required to register as an investment company under the Investment Company Act; and

(8)

after giving effect to such transaction, the outstanding membership interest in the Co-Issuer will not be beneficially owned by any Person other than the Issuer.

SUCCESSOR SUBSTITUTED

Upon any consolidation or merger, or transfer or conveyance of all or substantially all of the assets of the Issuer or the Co-Issuer, in accordance with Section 7.10, the Person formed by or surviving such consolidation or merger (if other than the Issuer or the Co-Issuer), or, the Person to which such transfer or conveyance is made, shall succeed to, and be substituted for, and may exercise every right and power of, and shall be bound by each obligation or covenant of, the Issuer or the Co-Issuer, as the case may be, under this Indenture with the same effect as if such Person had been named as the Issuer or the Co-Issuer, as the case may be, herein. In the event of any such consolidation, merger, transfer or conveyance, the Person named as the “Issuer” or the “Co-Issuer” in the first paragraph of this Indenture or any successor which shall theretofore have become such in the manner prescribed in this Section 7 may be dissolved, wound-up and liquidated at any time thereafter, and such Person thereafter shall be released from its liabilities as obligor and maker on all the Rated Notes and from its obligations under this Indenture. 7.12.

NO OTHER BUSINESS

The Issuer shall not engage in any business or activity other than (i) issuing and selling the Indenture Issued Notes pursuant to this Indenture, (ii) issuing and selling the PAA Issued Notes in accordance with the Paying Agency Agreement (iii) issuing the Ordinary Shares pursuant to the Issuer Charter, (iv) acquiring, pledging, holding and disposing of, solely for its own account, Collateral Interests, Eligible Investments and other Collateral described in clauses (a) to (e) of the granting clauses hereof, (v) holding the membership interest in the CoIssuer and (vi) such other activities that are incidental thereto and connected therewith. The Co-Issuer shall not engage in any business or activity other than issuing and selling the Indenture Issued Notes (other than the Class K Notes) pursuant to this 129

Processed and formatted by SEC Watch - Visit SECWatch.com

Indenture and such other activities incidental thereto or connected therewith. The Issuer shall not hold itself out as a derivatives dealer willing to enter into either side of, or to offer to enter into, assume, offset, assign or otherwise terminate positions in (i) interest rate, currency, equity or commodity swaps or caps or (ii) derivative financial instruments (including options, forward contracts, short positions and similar instruments) in any commodity, currency, share of stock, partnership or trust, note, bond, debenture or other evidence of indebtedness, swap or cap; provided, however, that the foregoing shall not limit the ability of the Issuer to enter into any Hedge Agreements. Furthermore, the Issuer shall not hold itself out, whether through advertising or otherwise, as a bank, insurance company or finance company, or as originating loans, lending funds, making a market in loans or other assets or selling loans or other assets to customers. The Issuer will not amend the Issuer Charter and the Co-Issuer will not amend its Certificate of Formation or the Limited Liability Company Operating Agreement, if such amendment would result in the rating (including any private or confidential rating) of any Class of Rated Notes being reduced or withdrawn. Except as provided in the Transaction Documents, at any time at which the Issuer is not a Qualified REIT Subsidiary, the Issuer shall not engage in any business or activity or hold any asset that would cause the Issuer to be engaged in a U.S. trade or business for U.S. federal income tax purposes, except as the result of ownership of Equity Interests or securities received in an Offer in accordance with the provisions of this Indenture. 7.13.

CHANGE OR WITHDRAWAL OF RATING

The Issuer shall promptly notify the Trustee in writing and upon receipt of such notice the Trustee shall promptly notify the Rated Noteholders and each Hedge Counterparty if at any time the rating of any Class of Rated Notes has been, or is known will be, changed or withdrawn. 7.14.

REPORTING

At any time when the Co-Issuers are not subject to Section 13 or 15(d) of the Exchange Act and are not exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, upon the request of a Holder or Beneficial Owner of a Rated Note or Income Note, the CoIssuers shall promptly furnish or cause to be furnished Rule 144A Information to such Holder or Beneficial Owner, to a prospective purchaser of such Rated Note or Income Note designated by such Holder or Beneficial Owner or to the Trustee for delivery to such Holder or Beneficial Owner or a prospective purchaser designated by such Holder or Beneficial Owner, as the case may be, in order to permit compliance by such Holder or Beneficial Owner with Rule 144A under the Securities Act in connection with the resale of such Rated Note or Income Note by such Holder or Beneficial Owner. 7.15.

RATED NOTE CALCULATION AGENT (a)

The Issuer hereby agrees that for so long as any of the Rated Notes remain Outstanding the Issuer will at all times cause there to be an agent appointed to calculate LIBOR in respect of each Interest Period in accordance with the terms of Schedule B (the Rated Note Calculation Agent), which agent shall be a financial institution, subject to supervision or examination by federal or state authority, having a rating of at least “BBB+” by S&P and having an office within the United States. Whenever the Rated Note Calculation Agent is required to act or exercise judgment, it will do so in good faith and in a commercially reasonable manner. The Issuer has initially appointed the Trustee as Rated Note Calculation Agent for purposes of determining LIBOR for each Interest Period. If the Rated Note Calculation Agent is unable or unwilling to act as such or is removed by the Issuer, the Issuer (after consultation with the Collateral Manager) will propose a leading bank which is engaged in transactions in Dollar deposits in the international Eurodollar market and which does not control or is not controlled by or 130

Processed and formatted by SEC Watch - Visit SECWatch.com

under common control with the Co-Issuers or any of their Affiliates as a replacement Rated Note Calculation Agent for approval by Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes. The Rated Note Calculation Agent may not resign its duties without a successor having been duly appointed. (b)

7.16.

As soon as possible after 11:00 a.m. (London time) on each LIBOR Calculation Date, but in no event later than 11:00 a.m. (New York time) on the London Banking Day immediately following each LIBOR Calculation Date, the Rated Note Calculation Agent will calculate LIBOR for the next Interest Period and the Periodic Interest payable for such Interest Period in respect of the Outstanding Rated Notes, rounded to the nearest cent, with half a cent being rounded upward, on the related Payment Date to be given to the Co-Issuers, the Trustee, the Collateral Manager, the Depositary, Euroclear, Clearstream and the Note Paying Agent. The Rated Note Calculation Agent will also specify to the Co-Issuers and the Collateral Manager the quotations upon which the Applicable Periodic Interest Rate for each Class of Rated Notes is based, and in any event the Rated Note Calculation Agent must notify the Co-Issuers and the Collateral Manager before 5:00 p.m. (New York time) on each applicable LIBOR Calculation Date if it has not determined and is not in the process of determining LIBOR with respect to the Rated Notes and the Periodic Interest with respect to each Class of Rated Notes, together with its reasons for the delay.

LISTING

The Issuer will use its commercially reasonable efforts to obtain and maintain the listing of each Class of Rated Notes (other than the Class A-R Notes) on the Cayman Islands Stock Exchange. 7.17.

AMENDMENT OF CERTAIN DOCUMENTS

The Issuer will not agree to any amendment to or modification, substitution or replacement of the Corporate Services Agreement, the Collateral Management Agreement, the Account Control Agreement or any Hedge Agreement at any time without obtaining Rating Confirmation with respect to any such amendment, modification, substitution or replacement and will not amend, modify or waive any “nonpetition” or “limited recourse” provisions of any Transaction Document to which it is a party without obtaining a Rating Confirmation with respect to such modification. The Trustee shall provide each of the Holders of Rated Notes, the Collateral Manager, each Hedge Counterparty and the Rating Agencies with a copy of any such amendment or modification within 10 Business Days before effecting such amendment or modification. Prior to entering into any waiver in respect of the any of the foregoing agreements, the Issuer will provide to each Rating Agency and the Trustee with written notice of such waiver. 7.18.

PURCHASE OF COLLATERAL; INFORMATION REGARDING COLLATERAL; RATING CONFIRMATION (a)

The Issuer will use reasonable efforts to purchase, on or before the Effective Date (with amounts on deposit in the Uninvested Proceeds), Collateral Interests having an aggregate Principal Balance of not less than U.S.$450,000,000 (which amount includes all Future Funding Obligations with respect to Earn-Out Assets) (assuming, for these purposes, settlement (in accordance with customary settlement procedures in the relevant markets) of all agreements entered into by the Issuer to acquire Collateral Interests scheduled to settle on or following the Effective Date). 131

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

The Issuer (or the Collateral Manager on behalf of the Issuer) shall cause to be delivered to the Trustee on the Effective Date an amended Schedule A listing all Collateral Interests purchased on or before the Effective Date, which schedule will supersede any prior Schedule A delivered to the Trustee.

(c)

On or before the Effective Date, the Issuer (or the Collateral Manager on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Rated Notes, each Hedge Counterparty and each Rating Agency (in addition to any such Officer’s certificate, the information set forth in such Officer’s certificate shall also be provided to S&P in a form that complies with S&P’s Preferred Format) demonstrating compliance by the Issuer with its obligations under Section 7.18(a) and satisfaction of each applicable Collateral Quality Test (with the exception of the S&P CDO Monitor Test), and Coverage Test or, if on the Effective Date, the Issuer shall be in default in the performance of its obligations under this Section 7.18 or any of the Collateral Quality Tests (with the exception of the S&P CDO Monitor Test) or the specified Coverage Tests shall fail to be satisfied, the Issuer (or the Collateral Manager on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Rated Notes, each Hedge Counterparty and each Rating Agency specifying the details of such default or failure; provided that the failure to satisfy any of the Collateral Quality Tests or Coverage Tests does not constitute an Event of Default but such failure may result in a Rating Confirmation Failure.

(d)

No later than fifteen (15) Business Days after the Effective Date, the Issuer (or the Collateral Manager on its behalf) shall deliver or cause to be delivered to the Trustee an accountant’s certificate (the Accountant’s Certificate) (i) confirming the information with respect to each Collateral Interest set forth on the amended schedule delivered pursuant to Section 7.18(b) as of the Effective Date, and the information provided by the Issuer with respect to every other asset included in the Collateral, (ii) certifying as of the Effective Date the procedures applied and their associated findings with respect to the Coverage Tests and the Collateral Quality Tests (with the exception of the S&P CDO Monitor Test) and (iii) specifying the procedures undertaken to review data and computations relating to the foregoing clause (ii) held by the Issuer on the Effective Date.

(e)

The Issuer (or the Collateral Manager on its behalf) shall request in writing that each of the Rating Agencies confirm in writing (a Rating Confirmation), within thirty (30) Business Days after the Effective Date, the ratings (including any private or confidential ratings) assigned by it on the Closing Date to the Rated Notes. In the event that the Issuer fails to obtain a Rating Confirmation within thirty (30) days after the Effective Date (a Rating Confirmation Failure), on the next and succeeding Payment Dates, the Issuer will be required to pay principal, to the extent of Available Funds in the Collection Account and as provided in Section 11.1, of the Notes in the order of the Note Payment Sequence, to the extent necessary for each of the Rating Agencies to provide a Rating Confirmation or until each Class of Notes is paid in full (and the Class A-R Commitments are simultaneously reduced in accordance with Section 17.1(e)); provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (i) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Earn-Out Asset Account, and (ii) any remainder will be deposited in the Collection Account as Collateral Principal Collections. Notwithstanding the foregoing, if (i) the Issuer (or the Collateral Manager on its behalf) has requested in writing that each of the Rating Agencies provide Rating Confirmation 132

Processed and formatted by SEC Watch - Visit SECWatch.com

within five (5) Business Days after the Effective Date, (ii) the Issuer (or the Collateral Manager on its behalf) has obtained confirmation by electronic mail, facsimile or telephone that each of the Rating Agencies has received such request and has promptly delivered to the applicable Rating Agency any additional information reasonably requested by such Rating Agency, and (iii) any of the Rating Agencies fails to respond to such request within thirty (30) Business Days after the Effective Date, then such failure to respond will not immediately constitute a Rating Confirmation Failure but shall not constitute receipt of Rating Confirmation; provided that Rating Confirmation Failure shall thereafter occur immediately upon receipt from the Rating Agencies of an actual notice of Rating Confirmation Failure. (f)

Not later than fifteen (15) Business Days following the end of each 3-month period, the Collateral Manager on behalf of the Issuer shall provide to S&P a report containing the representations and warranties made with respect to any Commercial Mortgage Loans, Mezzanine Loans, Subordinate Mortgage Loan Interests, Participation Interests, Credit Lease Loans and Tenant Lease Loan Interests purchased by the Issuer during the preceding 3-month period, including any exceptions and qualifications thereto.

(g)

On each Payment Date on which a Rating Confirmation Failure occurs, each related Hedge Agreement (other than Deemed Floating Asset Hedges) will be terminated in part in accordance with the terms and conditions thereof, including compliance with any applicable requirement that the Issuer receive Rating Confirmation from S&P, and any amounts due and payable pursuant to such Hedge Agreement in connection with such termination thereof will be paid on such Payment Date in accordance with Section 11.1. ARTICLE VIII SUPPLEMENTAL INDENTURES

8.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF RATED NOTEHOLDERS Without the consent of the Holders of any Rated Notes, the Initial Hedge Counterparty (except as specified below) or the Income Noteholders, the Co-Issuers, when authorized by Board Resolutions or by action by written consent of the limited liability company manager, as applicable, and the Trustee, at any time and from time to time subject to the requirement provided below in this Section 8.1 with respect to the ratings of the Rated Notes and subject to Section 8.3, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for certain limited purposes including, inter alia, to: (a)

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 herein and in the Rated Notes and the assumption by any such successor Person of the covenants of the Co-Issuer herein and in the Rated Notes (other than the Class H Notes, Class J Notes and Class K Notes) pursuant to Section 7.10 or 7.11;

(b)

add to the covenants of the Co-Issuers (in the case of the Rated Notes other than the Class H Notes, Class J Notes or the Class K Notes) or the Issuer (in the case of the Class H Notes, the Class J Notes or the Class K Notes) or the Trustee for the benefit of the Holders of all of the Rated Notes;

(c)

pledge any additional property to the Trustee; 133

Processed and formatted by SEC Watch - Visit SECWatch.com

(d)

add to the conditions, limitations or restrictions on the authorized amount, terms and purposes of the issue, authentication and delivery of the Rated Notes;

(e)

effect the appointment of a successor;

(f)

reduce the permitted minimum denomination of the Rated Notes;

(g)

take any action necessary or advisable to prevent the Issuer, any Note Paying Agent or the Trustee from being subject to withholding or other taxes, fees or assessments, to prevent the Issuer from failing to qualify as a Qualified REIT Subsidiary or, at any time at which the Issuer is not a Qualified REIT Subsidiary, to prevent the Issuer from being treated as engaged in a U.S. trade or business or otherwise being subjected to U.S. federal, state or local income tax on a net income tax basis; provided that such action will not cause the Noteholders to experience any material change to the timing, character or source of income from the Notes and will not be considered a significant modification resulting in an exchange for purposes of section 1.1001-3 of the U.S. Treasury regulations;

(h)

modify the restrictions on and procedures for resale and other transfer of the Rated 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 (in addition to that provided under Section 3(c)(7) thereunder) or to remove restrictions on resale and transfer to the extent not required thereunder;

(i)

grant, convey, transfer, assign, mortgage or pledge any property to or with the Trustee for the benefit of the Secured Parties;

(j)

correct or amplify the description of any property at any time subject to the lien of this Indenture, or to better assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations) or to subject to the lien of this Indenture any additional property;

(k)

make any change required by the stock exchange on which any Class of Rated Note is listed, if any, in order to permit or maintain such listing;

(l)

correct, amend, cure any manifest error, inconsistency, defect or ambiguity or correct any typographical error in this Indenture;

(m)

modify this Indenture to conform the terms herein to the terms set forth in the then current Offering Circular;

(n)

modify any provision (other than in respect of a Reserved Matter), with respect to restrictions upon the Issuer’s rights to acquire and dispose of Collateral Interests and other assets, that the Issuer or the Collateral Manager determines to be necessary or desirable in order for the Issuer to maintain any desired exemption from registration of the Issuer under the Investment Company Act or of the Notes under the Securities Act;

(o)

with the consent of the Collateral Manager, modify the Collateral Quality Tests and Coverage Tests and the definitions applicable thereto; 134

(p)

agree to any modification of this Indenture or any other Transaction Document (other than in respect of a Reserved Matter), which is, in the opinion of the Trustee, proper to make if, in the opinion of the Trustee (based upon an opinion of counsel), such modification will not have a material adverse effect on the interests of Holders of any Class or Classes of Notes or the Initial Hedge Counterparty and which is of a formal, minor or technical nature or is to correct a manifest error.

The Trustee shall not enter into any such supplemental indenture unless the Trustee has been provided with an Opinion of Counsel from nationally recognized U.S. tax counsel experienced in such matters to the effect that either (A) at any time at which the Issuer is a Qualified REIT Subsidiary the proposed supplemental indenture will not cause the Issuer to fail to be treated as a Qualified REIT Subsidiary or (B) at any other time, the proposed supplemental indenture will not otherwise cause the Issuer to be subject to U.S. federal income tax on a net income basis. In addition, the Trustee may, but is not obligated to, without the consent of the Rated Noteholders or of the Holders of any relevant Class or Classes of Rated Notes, agree to any modification of any other Transaction Document which is of a formal, minor or technical nature or is to correct a manifest error and which is, in the opinion of the Trustee, proper to make, in the opinion of the Trustee (based upon an opinion of counsel); provided such modification will not have a material adverse effect on the interests of the Initial Hedge Counterparty or the Holders of any Class or Classes of Notes. For so long as any Rated Notes are Outstanding, no such supplemental indenture shall be effective unless and until Rating Confirmation has been received. The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental

Processed and formatted by SEC Watch - Visit SECWatch.com

indenture which affects the Trustee’s own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. Without obtaining the requisite consents of the applicable parties pursuant to this Section 8.1, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of the Initial Hedge Counterparty any Holder of Rated Notes or of the Income Noteholders would be materially and adversely affected thereby. Unless notified by (i) a Majority of the then Aggregate Outstanding Amount of any Class of Rated Notes that such Class will be materially and adversely affected, (ii) a Majority of the aggregate principal amount of Income Notes Outstanding that the Income Noteholders will be materially and adversely affected or (iii) the Initial Hedge Counterparty that the Initial Hedge Counterparty will be materially and adversely affected, the Trustee shall be entitled to rely upon an Officer’s certificate of the Collateral Manager or the Issuer as to whether the interests of any Holder of Rated Notes or of Income Notes would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the PAA Issued Note Paying Agent). The Collateral Manager will not be bound by any supplemental indenture that affects the obligations of the Collateral Manager unless the Collateral Manager has consented thereto (which consent will not be unreasonably withheld). The Co-Issuers shall not consent to any supplemental indenture that would have a material adverse effect on the Initial Hedge Counterparty without the consent of the Initial Hedge Counterparty. At the cost of the Co-Issuers, the Trustee shall provide to the Rated Noteholders, the PAA Issued Note Paying Agent, each Hedge Counterparty and each Rating Agency a copy of any proposed supplemental indenture at least 10 days prior to the execution thereof by the Trustee and, for so long as any Rated Notes are Outstanding, request a Rating Confirmation from each Rating Agency with respect to such supplemental indenture. As soon as practicable after the execution by the Trustee and the Issuer of 135

Processed and formatted by SEC Watch - Visit SECWatch.com

any such supplemental indenture, the Trustee shall provide to the Rated Noteholders, the PAA Issued Note Paying Agent, each Hedge Counterparty and each Rating Agency a copy of the executed supplemental indenture. For so long as any Rated Notes are Outstanding, no supplemental indenture shall be effective unless and until a Rating Confirmation from each Rating Agency has been received. 8.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF RATED NOTEHOLDERS With the written consent of the Holders of not less than a majority of the then Aggregate Outstanding Amount of each adversely affected Class of Rated Notes, the written consent of 66 2/3% of the Holders of the aggregate principal amount of the Outstanding Income Notes if materially and adversely affected thereby (which consent shall be evidenced by an Officer’s certificate of the Issuer certifying that such consent has been obtained), the Class A-R Note Agent if it is materially and adversely affected thereby, the prior written consent of the Initial Hedge Counterparty if it is materially and adversely affected thereby, and Rating Confirmation and, the Trustee and Co-Issuers may, subject to Section 8.3, enter into one or more indentures supplemental hereto in order to: (a)

change the applicable Stated Maturity Date of the Rated Notes or scheduled redemption of the principal of or the due date of any installment of interest on the Rated Notes or the Class A-R Commitment Fee, reduce the principal amount thereof or the rate of interest thereon, or the Redemption Price with respect thereto, or change the earliest date on which Rated Notes may be redeemed, change the provisions of this Indenture relating to the application of proceeds of any Collateral to the payment of principal of or interest on the Rated Notes or change any place where, or the coin or currency in which, Rated Notes or the principal thereof or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity Date thereof (or, in the case of redemption, on or after the Redemption Date);

(b)

reduce the percentage, in principal amount, of Holders of Rated Notes of each Class, or the percentage of Income Noteholders, whose consent is required for the authorization of any supplemental indenture or for any waiver of compliance with certain provisions of this Indenture or certain defaults thereunder or their consequences;

(c)

impair or adversely affect the Collateral other than as permitted by this Indenture;

(d)

permit the creation of any security interest ranking prior to or on a parity with the security interest of this Indenture with respect to any part of the Collateral or terminate such security interest on any property at any time subject thereto (other than in accordance with this Indenture) or deprive the Holder of any Rated Note or the Initial Hedge Counterparty of the security afforded by the security interest of this Indenture;

(e)

reduce the percentage of the aggregate principal amount of Holders of Rated Notes of each Class whose consent is required to request the Trustee to preserve the Collateral or rescind the Trustee’s election to preserve the Collateral pursuant to Section 5.5 or to sell or liquidate the Collateral pursuant to Section 5.4 or 5.5;

(f)

modify any of the provisions of this Section 8.2, except to increase the percentage of the aggregate principal amount of Outstanding Rated Notes of each Class whose Holders’ consent is required for any such action or to provide that other provisions of this Indenture cannot be modified or waived without the written consent of the Holders of 66 2/3% of the then Aggregate Outstanding Amount of each affected Class of Rated Notes Outstanding and the Initial Hedge Counterparty; 136

Processed and formatted by SEC Watch - Visit SECWatch.com

(g)

modify the definition of the term “Outstanding” or Section 11.1;

(h)

modify any of the provisions of this Indenture in such a manner as to affect the calculation of the amount of any payment of interest or principal of any Rated Note on any Payment Date or to affect the right of the Holders of Rated Notes or the Initial Hedge Counterparty to the benefit of any provisions for the redemption of such Rated Notes contained therein;

(i)

modify provisions related to the bankruptcy or insolvency of the Co-Issuers; or

(j)

modify provisions stating that the obligations of the Co-Issuers are joint and several limited recourse obligations of the CoIssuers payable solely from the Collateral in accordance with the terms of this Indenture (Section 8.2(a) through (j) collectively, the Reserved Matters).

The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. Not later than 15 Business Days prior to the execution of any proposed supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Co-Issuers, shall mail to the Rated Noteholders, PAA Issued Note Paying Agent, the Class A-R Note Agent, each Hedge Counterparty, the Collateral Manager and each Rating Agency a copy of such proposed supplemental indenture (or a description of the substance thereof) and shall request Rating Confirmation with respect to such supplemental indenture. If any Class of Rated Notes is then rated by any Rating Agency, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, Rating Confirmation would not be received with respect to such supplemental indenture, unless each Holder of Rated Notes of each Class whose rating will be reduced or withdrawn has, after notice that the proposed supplemental indenture would result in such reduction or withdrawal of the rating of the Class of Rated Notes held by such Holder, consented to such supplemental indenture. Without having obtained the consent of the applicable parties pursuant to this Section 8.2, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of any Holder of Rated Notes, the Initial Hedge Counterparty or of the Income Noteholders would be materially and adversely affected thereby. Unless notified by (i) the Holders of a Majority of the then Aggregate Outstanding Amount of any Class of Rated Notes that such Class will be materially and adversely affected or (ii) the Holders of a Majority of aggregate principal balance of the Income Notes that the Income Noteholders will be materially and adversely affected, the Trustee shall be entitled to rely upon an Officer’s certificate of the Collateral Manager or the Issuer as to whether the interests of any Holder of Rated Notes or of the Income Noteholders would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the PAA Issued Note Paying Agent). It shall not be necessary for any Act of Rated Noteholders or any consent of Income Noteholders under this Section 8.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act or consent shall approve the substance thereof. Promptly after the execution by the Co-Issuers and the Trustee of any supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Co-Issuers, shall mail or make available to 137

Processed and formatted by SEC Watch - Visit SECWatch.com

the Rated Noteholders, each Hedge Counterparty, the PAA Issued Note Paying Agent (for forwarding to the Income Noteholders), the Class A-R Note Agent, the Collateral Manager and each Rating Agency a copy thereof. Any failure of the Trustee to publish or mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. In addition, the Issuer shall cause to be delivered a copy of the executed supplemental indenture to the Repository for posting on the Repository in the manner described in Section 14.3. 8.3. EXECUTION OF SUPPLEMENTAL INDENTURES In executing or accepting the additional trusts created by any supplemental indenture permitted by this Section 8 or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Sections 6.1 and 6.3) shall be fully protected in relying in good faith upon an Opinion of Counsel, stating that the execution of such supplemental indenture is authorized, or permitted by this Indenture and that all conditions precedent thereto have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or indemnities under this Indenture or otherwise. Such supplemental indenture will not be binding on the Collateral Manager to the extent that it reduces the rights or increases the obligations of the Collateral Manager, unless such supplemental indenture is consented to in writing by the Collateral Manager. 8.4. EFFECT OF SUPPLEMENTAL INDENTURES Upon the execution of any supplemental indenture under this Section 8, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Rated Notes theretofore and thereafter authenticated and delivered hereunder or under the Paying Agency Agreement shall be bound thereby. Notwithstanding anything to the contrary herein, no amendment or modification of or supplement to this Indenture will be effective until the Collateral Manager has received written notice of such amendment, modification or supplement and, if such amendment, modification or supplement affects the rights, obligations or compensation of the Collateral Manager, the Collateral Manager has consented in writing to the terms of the proposed amendment. In addition, the consent of any predecessor Collateral Manager will be required to implement any such amendment, modification or supplemental that would change any provision of this Indenture entitling such predecessor Collateral Manager to any fee or other amount payable to it under this Indenture or to reduce or delay the right of such predecessor to such payment. 8.5. REFERENCE IN INDENTURE ISSUED NOTES TO SUPPLEMENTAL INDENTURES Indenture Issued Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Section 8 may, and if required by the Trustee shall, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Co-Issuers shall so determine, new Indenture Issued Notes, so modified as to conform in the opinion of the Trustee and the Co-Issuers to any such supplemental indenture, may be prepared and executed by the Co-Issuers and authenticated and delivered by the Trustee in exchange for Outstanding Indenture Issued Notes. 138

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE IX REDEMPTION OF RATED NOTES 9.1. REDEMPTION OF RATED NOTES The Rated Notes will be subject to redemption in whole but not in part at their respective Redemption Prices, in each case, in accordance with the procedures, and subject to the satisfaction of the conditions, in Section 9.2 below, in the following circumstances: (a)

on or after the Payment Date occurring in June 2008 and continuing until the Stated Maturity Date (the Call Period), at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Income Notes Outstanding (an Optional Redemption);

(b)

on any Payment Date following the occurrence and during the continuation of a Tax Event, at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Income Notes Outstanding (such a redemption, a Tax Redemption); and

(c)

automatically and without any direction by any Person, (i) if the Notes have not been redeemed in full on or after the Payment Date occurring in June 2018, and (ii) if any of the conditions set forth in Sections 9.2(a) through (d) below have not been met or if the highest bidder fails to pay the purchase price within six (6) Business Days following such Payment Date, the Payment Date thereafter, unless the Notes are redeemed in full prior to the next Auction Date (such a redemption, an Auction Call Redemption).

9.2. REDEMPTION PROCEDURES; AUCTION In connection with any Redemption, the Trustee and the Collateral Manager will, in accordance with the procedures set forth in Schedule E (the Auction Procedures) and at the expense of the Issuer, conduct an auction (an Auction) of the Collateral Interests included in the Collateral on a date (each such date, an Auction Date) occurring no later than ten (10) Business Days prior to any scheduled Redemption Date. Any of the Initial Purchaser, the Collateral Manager, the Income Noteholders, the Trustee or their respective Affiliates may, but will not be required to, bid at the Auction. (a)

Any Redemption will be subject to the satisfaction of each of the following conditions: (1)

the related Auction has been conducted in accordance with the Auction Procedures;

(2)

the Trustee has received bids for the Collateral Interests (or for each of the related Subpools) from at least two Qualified Bidders (including the winning Qualified Bidder, and which may include the Collateral Manager) identified on a list of qualified bidders provided by the Collateral Manager to the Trustee;

(3)

the Collateral Manager certifies that the Highest Auction Price would result in the Sale Proceeds from the Collateral Interests (or the related Subpools) for a purchase price (paid in cash) plus the Balance of all Eligible Investments and cash held by the Issuer, plus any termination payments payable by a Hedge Counterparty to the Issuer (in excess of any amounts payable by the Issuer to a Hedge Counterparty) resulting from the termination of the related Hedge 139

Processed and formatted by SEC Watch - Visit SECWatch.com

Agreement pursuant to the Redemption being at least equal to the sum of (i) the aggregate Redemption Prices of the Notes plus (ii) any accrued but unpaid fees and expenses of the Issuer pursuant to Section 11.1(b)(1) and (24) through (27) (including any termination payments payable by the Issuer resulting from the termination of any Hedge Agreement pursuant to the Redemption) plus (iii) any Outstanding Interest Advances, together with interest thereon; and (4)

the bidder(s) who offered the Highest Auction Price for the Collateral Interests (or the related Subpools) enter(s) into a written agreement with the Issuer (which the Issuer will execute if the conditions set forth above and in this Indenture are satisfied, which execution will constitute certification by the Issuer that such conditions have been satisfied) that obligates the highest bidder(s) (or the highest bidder for each Subpool) to purchase all of the Collateral Interests (or the relevant Subpool) and provides for payment in full (in Cash) of the purchase price to the Trustee on or prior to the sixth Business Day following the relevant Auction Date.

Provided that all of the conditions set forth in this Section 9.2(a)(1) through (4) have been met, the Trustee will sell and transfer the Collateral Interests (or each related Subpool), without representation, warranty or recourse, to the bidder(s) who offered the Highest Auction Price for the Collateral Interests (or the related Subpools) in accordance with and upon completion of the Auction Procedures. If any of the conditions set forth in this Section 9.2(a)(1) through (4) are not met, (i) the Redemption will not occur on the Payment Date following the relevant Auction Date, (ii) the Trustee will give notice of the withdrawal of the Redemption, (iii) subject to clause (iv) below, the Trustee will decline to consummate such sale and will not terminate any Hedge Agreements and may not solicit any further bids or otherwise negotiate any further sale of Collateral Interests in relation to such Auction and (iv) unless the Rated Notes are redeemed in full prior to the next succeeding Auction Date, the Trustee will conduct another Auction on the next succeeding Auction Date. (b)

In addition, any Optional Redemption requires the occurrence of the following: (1)

at least four (4) Business Days before the scheduled Redemption Date, the Collateral Manager has furnished to the Trustee evidence, in form satisfactory to the Trustee, that the Collateral Manager on behalf of the Issuer has entered into a binding agreement or agreements with an institution or institutions (or guarantor or guarantors of the obligations): (A) with regard to which Rating Confirmation has been received; or (B) whose long-term unsecured debt obligations (other than such obligations whose rating is based on the credit of a person other than such institution) have a credit rating from Moody’s, if rated by Moody’s, of “P-1” and of at least “A-1” from S&P; and in each case, to sell, not later than the Business Day immediately preceding the scheduled Redemption Date, in immediately available funds, all or part of the Collateral Interests at a purchase price (paid in Cash) which together with the Balance of all Eligible Investments and Cash held by the Issuer will be at least equal to the sum of (i) the aggregate Redemption Prices of the Notes plus (ii) any accrued but unpaid fees and expenses of the Issuer pursuant to Section 11.1(b)(1) and (24) through (27) (including any termination payments payable by the Issuer resulting from the termination of any Hedge Agreement pursuant to the Redemption); or

(2)

prior to selling any Collateral Interests or any other collateral, the Collateral Manager certifies that the expected proceeds from such sale will, in the 140

Processed and formatted by SEC Watch - Visit SECWatch.com

aggregate, equal or exceed, in each case, the sum of (A) any amounts payable in connection with an Optional Redemption pursuant to Section 9.2 of the Notes plus (B) all expenses of such redemption and all other administrative fees and expenses payable on the related Redemption Date. The Trustee will deposit the purchase price for the Collateral Interests in the Collection Account, and the Rated Notes and, to the extent funds are available therefor, the Income Notes, will be redeemed on the Payment Date immediately following the relevant Auction Date in the order of priorities set forth in Section 11.1. Any Redemption will only be effected on a Payment Date. Installments of principal and interest due on or prior to a Redemption Date shall continue to be payable to the Holders of such Rated Notes as of the relevant Record Dates according to their terms. 9.3. RECORD DATE; NOTICE TO TRUSTEE OF REDEMPTION (a)

The Issuer shall set the Redemption Date and the applicable Record Date and give notice thereof to the Trustee pursuant to Section 9.3(b) below and shall issue an Issuer Request to the Trustee for the provision of the information necessary for the Issuer to compile the Redemption Date Statement in accordance with Section 10.11(b).

(b)

In the event of any Redemption, the Issuer shall, at least 45 days (but not more than 90 days) prior to the Redemption Date, notify the Trustee and each Hedge Counterparty of such Redemption Date, the applicable Record Date, the principal amount of each Class of Notes to be redeemed on such Redemption Date and the Redemption Price of such Notes.

9.4. NOTICE OF REDEMPTION Notice of Redemption will be given by first-class mail, postage prepaid, mailed not less than eight (8) Business Days prior to the applicable Redemption Date, to each Hedge Counterparty, the Class A-R Note Agent, each Rating Agency and each Holder of Rated Notes at such Holder’s address in the Note Register maintained by the Note Registrar in accordance with the provisions of this Indenture and to the Collateral Manager. Rated Notes called for Redemption must be surrendered at the office of any Note Paying Agent appointed pursuant to this Indenture in order to receive the Redemption Price. All notices of redemption shall state: (a)

the applicable Redemption Date;

(b)

the applicable Record Date;

(c)

the Redemption Price;

(d)

that all the Notes of the relevant Class are being redeemed in full and that interest on the applicable principal amount of Notes shall cease to accrue on the date specified in the notice; and

(e)

the place or places where such Rated Notes are to be surrendered for payment of the Redemption Price, which shall be the office or agency of the Note Paying Agent to be maintained as provided in Section 7.2.

Notice of redemption shall be given by the Co-Issuers or, at the Co-Issuers’ request, by the Trustee in the name and at the expense of the Co-Issuers. Failure to give notice of redemption, or any 141

Processed and formatted by SEC Watch - Visit SECWatch.com

defect therein, to any Holder of any Note selected for redemption shall not impair or affect the validity of the redemption of any other Notes. 9.5. NOTICE OF WITHDRAWAL With regard to an Optional Redemption or a Tax Redemption, any notice of redemption may be withdrawn by the Issuer up to the fourth Business Day prior to the Redemption Date by written notice to the Trustee, each Hedge Counterparty and the Collateral Manager only if the Collateral Manager is unable to deliver such sale agreement or agreements or certifications, as the case may be, in form satisfactory to the Trustee. With regard to any Redemption, notice of any withdrawal pursuant to Section 9.2 shall be given by the Trustee to each Holder of Rated Notes at such Holder’s address in the Note Register maintained by the Note Registrar by overnight courier guaranteeing next day delivery (or second day delivery outside the United States) sent not later than the third Business Day prior to such Redemption Date. 9.6. RATED NOTES PAYABLE ON REDEMPTION DATE Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after the Redemption Date (unless the Issuer shall default in the payment of the Redemption Price) such Rated Notes shall cease to bear interest. Upon final payment on a Note to be redeemed, the Holder shall present and surrender such Note at the place specified in the notice of redemption on or prior to such Redemption Date; provided that if there is delivered to the Co-Issuers (i) such security or indemnity as may be required by them to save each of them harmless and (ii) an undertaking thereafter to surrender such Note, then, in the absence of notice to the Co-Issuers that the applicable Note has been acquired by a bona fide purchaser, such final payment shall be made without presentation or surrender. Installments of interest on Rated Notes of a Class so to be redeemed whose Stated Maturity Date is on or prior to the Redemption Date shall be payable to the Holders of such Rated Notes, or one or more predecessor Rated Notes, registered as such at the close of business on the relevant Record Date according to the terms and provisions of Section 2.6(e). If any Rated Note called for redemption shall not be paid upon surrender thereof for redemption, the principal thereof shall, until paid, bear interest from the Redemption Date at the Applicable Periodic Interest Rate for each successive Interest Period the Rated Note remains Outstanding. 9.7. SPECIAL AMORTIZATION If the Collateral Manager notifies the Trustee in writing that it has determined, in its sole discretion, that investments in additional Collateral Interests would either be impractical or not beneficial, the amount of such Collateral Principal Collections available pursuant to Section 11.1(b)(22), as determined by the Collateral Manager (the Special Amortization Amount) shall be applied to the payment of principal of the Notes on the next succeeding Payment Date (a Special Amortization) in accordance with Section 11.1(b)(22)(ii) hereof. Payments of principal of the Notes pursuant to Section 11.1 (b)(22)(ii) shall be made: (a)

if each of the S&P Special Amortization Pro Rata Condition and the Moody’s Special Amortization Pro Rata Condition is satisfied with respect to the related Payment Date, pro rata to the respective Classes of the Rated Notes (for purposes of the pro rata allocation to the Class A Senior Notes based on the Class A Senior Pro Rata Allocation) pursuant to Section 11.1(b)(22)(i) of the Priority of Principal Payments provided that a 142

Processed and formatted by SEC Watch - Visit SECWatch.com

Special Amortization Notice is delivered by the Collateral Manager to the Issuer and the Trustee; or (b)

if the criteria for either the S&P Special Amortization Pro Rata Condition or the Moody’s Special Amortization Pro Rata Condition are not satisfied, sequentially to the respective Classes of the Rated Notes pursuant to Section 11.1(b)(22)(ii)(2) of the Priority of Principal Payments.

If the Collateral Manager elects to initiate a Special Amortization, the Collateral Manager shall deliver on or prior to the related Calculation Date, to each of the Trustee and each Rating Agency, advance written notice (which may be included in the related Note Report) (each, a Special Amortization Notice) specifying the identity and principal amount of each Class of Rated Notes to be paid pursuant to such Special Amortization and that the Collateral Manager has been unable to identify for purchase by the Issuer Substitute Collateral Interests that comply with the Reinvestment Criteria and the other applicable requirements of this Indenture, and that the other applicable requirements of this Indenture, and that all other Indenture requirements for such Special Amortization are complied with. On each Payment Date on which a Special Amortization occurs, each related Hedge Agreement (other than Deemed Floating Asset Hedges) will be terminated in part in accordance with the terms and conditions thereof, including compliance with any applicable requirement that the Issuer receive Rating Confirmation from S&P, and any amounts due and payable pursuant to such Hedge Agreement in connection with such termination thereof will be paid on such Payment Date in accordance with Section 11.1. ARTICLE X ACCOUNTS, ACCOUNTINGS AND RELEASES 10.1. COLLECTION OF FUNDS (a)

Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all funds and other property payable to or receivable by the Trustee pursuant to this Indenture, including all payments due on the Pledged Securities, in accordance with the terms and conditions of such Pledged Securities. The Trustee shall segregate and hold all such funds and property received by it in trust for the Secured Parties and shall apply such funds as provided in this Indenture.

(b)

Each of the parties hereto hereby agrees to cause the Custodian or any other Securities Intermediary that holds any funds or other property for the Issuer or the Co-Issuer in an Account to agree with the parties hereto that (1) each Account is a Securities Account in respect of which the Trustee is the Entitlement Holder, (2) each Account is held by a financial institution that has a combined capital and surplus of at least U.S.$250,000,000 and being subject to supervision or examination by federal or state banking authority, (3) the Cash, Securities and other property credited to any Account is to be treated as a Financial Asset under Article 8 of the UCC and (4) the securities intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC) for that purpose will be the State of New York. In no event may any Financial Asset held in any Account be registered in the name of, payable to the order of, or specially Indorsed to, the Issuer unless such Financial Asset has also been Indorsed in blank or to the Custodian or other Securities Intermediary that holds such Financial Asset in such Account. Each Account 143

Processed and formatted by SEC Watch - Visit SECWatch.com

shall be held and maintained at an office located in Minneapolis, Minnesota or Columbia, Maryland. 10.2. GENERAL PROVISIONS APPLICABLE TO ACCOUNTS The Payment Account, Collateral Account, Uninvested Proceeds Account, Collection Account (including each Collateral SubAccount therein), Expense Reserve Account, each Hedge Counterparty Collateral Account (if any), Earn-Out Asset Account, Interest Reserve Account and Class A-R Holder Collateral Account shall remain at all times with a financial institution having a long-term debt rating of at least “BBB+” by S&P. (a)

The Trustee agrees to give the Issuer prompt notice (with a copy to each Hedge Counterparty, the Collateral Manager, each Rating Agency, the Class A-R Note Agent and the PAA Issued Note Paying Agent) if any Account or any funds on deposit therein, or otherwise standing to the credit of any Account, shall become subject to any writ, order, judgment, warrant of attachment, execution or similar process.

(b)

The Issuer (or the Collateral Manager on behalf of the Issuer) shall direct the Trustee to invest and reinvest any funds on deposit in any of the Accounts (other than the Payment Account) in Eligible Investments. In the event that the Collateral Manager has not delivered investment instructions to the Trustee or after the occurrence of an Event of Default, the Trustee shall invest and reinvest any funds on deposit in any Account (other than the Payment Account) as fully as practicable in investments described in clause (vii) of the definition of Eligible Investments maturing not later than the earlier of (i) 30 days after the date of such investment or (ii) the Business Day immediately preceding the next Payment Date. With respect to each Account, all interest and other income from Eligible Investments purchased with funds on deposit in such Account shall be deposited in such Account, any gain realized from such investments shall be credited to such Account, and any loss resulting from such investments shall be charged to such Account. Any gain or loss with respect to an Eligible Investment shall be allocated in such a manner as to increase or decrease, respectively, Collateral Principal Collections and/or Collateral Interest Collections in the proportion that the amount of Collateral Principal Collections and/or Collateral Interest Collections used to acquire such Eligible Investment bears to the purchase price thereof. The Trustee shall not in any way be held liable by reason of any insufficiency of any such Account resulting from any loss relating to any such investment. Nothing herein shall be deemed to relieve the Bank or its Affiliates from any duties or liabilities with respect to investments in obligations of the Bank or any Affiliate thereof.

(c)

All funds deposited from time to time in the Collection Account, the Expense Reserve Account or the Interest Reserve Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided.

10.3. COLLATERAL ACCOUNT The Trustee shall, prior to the Closing Date, cause the Custodian to establish a Securities Account which shall be designated as the Collateral Account, which shall be in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties and into which the Trustee shall from time to time deposit Collateral. All Collateral from time to time deposited in, or otherwise standing to the credit of, the Collateral Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided. The Co-Issuers shall not have any legal, 144

Processed and formatted by SEC Watch - Visit SECWatch.com

equitable or beneficial interest in the Collateral Account other than in accordance with the Priority of Payments. 10.4. UNINVESTED PROCEEDS ACCOUNT The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the Uninvested Proceeds Account, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties, into which the Trustee shall deposit all Uninvested Proceeds (other than the organizational and structuring fees and expenses of the Co-Issuers (including, without limitation, the legal fees and expenses of counsel to the Co-Issuers, Wachovia Capital Markets, LLC and the Collateral Manager), the expenses of offering the Rated Notes and the Income Notes (including placement fees and structuring fees) and amounts deposited in the Expense Reserve Account on such date). On or prior to the Effective Date, the Collateral Manager on behalf of the Issuer may direct the Trustee to, and upon such direction the Trustee shall, apply funds in the Uninvested Proceeds Account to purchase additional Collateral Interests and, pending such investment in additional Collateral Interests, such funds will be invested in Eligible Investments, as directed by the Collateral Manager, with stated maturities no later than the Business Day immediately preceding the next Payment Date; provided, however that during the Ramp-Up Period, Substitute Collateral Interests shall be purchased with amounts in the Uninvested Proceeds Account, if sufficient amounts are available in the Uninvested Proceeds Account, and only if sufficient amounts are not available in the Uninvested Proceeds Account, with any Collateral Principal Collections. The Trustee shall transfer any Uninvested Proceeds remaining on deposit in the Uninvested Proceeds Account on the Effective Date to the Collection Account, at the direction of the Collateral Manager, to be treated as either (i) Collateral Interest Collections deposited in the Collateral Interest Collections Sub-Account, provided that a Rating Confirmation Failure has not occurred, or (ii) if a Rating Confirmation Failure occurs, as Collateral Principal Collections deposited in the Collateral Principal Collections Sub-Account. 10.5. COLLECTION ACCOUNT (a)

Collection Account (1)

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the Collection Account, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. The Trustee shall cause to be established two sub-accounts of the Collection Account. The Trustee shall deposit Collateral Principal Collections into one sub-account (the Collateral Principal Collections Sub-Account) and Collateral Interest Collections into the other sub-account (the Collateral Interest Collections Sub-Account). At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Collection Account (including the Collateral Principal Collection Sub-Account) in Eligible Investments or Substitute Collateral Interests in accordance with the requirements and limitations contained in Section 12.1(c).

(2)

The Trustee, within one Business Day after receipt of any Distribution or other proceeds that are not Cash shall so notify the Issuer and the Issuer shall sell such Distribution or other proceeds for Cash in accordance with Section 12.1.

(3)

The Trustee shall transfer to the Payment Account for application pursuant to Section 11.1 and in accordance with the calculations and the instructions contained in the Note Valuation Report prepared by the Issuer pursuant to 145

Section 10.11(a), on or prior to the Business Day prior to each Payment Date, funds on deposit in the Collection Account (including reinvestment income) other than Collections received after the end of the Due Period with respect to such Payment Date. An Authorized Officer of the Issuer or the Collateral Manager’s approval of the Note Valuation Report shall constitute direction to the Trustee to, and upon such approval, the Trustee shall, transfer to the Payment Account, for application pursuant to Section 11.1 no later than the Business Day prior to each Payment Date, all Interest Advances made to or by the Trustee pursuant to Section 10.17 and any amounts then held in the Collection Account other than proceeds received after the end of the Due Period with respect to such Payment Date. (4)

The Trustee shall withdraw and apply amounts on deposit in the Collection Account in accordance with any Redemption Date Statement delivered to the Trustee in connection with the redemption of Rated Notes pursuant to Section 9.1.

(5)

Payments due to any Hedge Counterparty shall be paid, in accordance with Section 11.1 pro rata with all other Hedge Agreement payments on the applicable Payment Date; provided that the Issuer’s payment obligations under any Deemed Floating Asset Hedges payable on a date other than a Payment Date shall only be paid to the extent Collateral Interest Collections are then available in the Collateral Interest Collections Sub-Account. With respect to Hedge Agreements paid during the related Due Period, the Trustee, in accordance with this Section 10.5(a)(5), shall transfer Collateral Interest Collections to the Payment Account for payment to the related Hedge Counterparty on the payment date required pursuant to the related Hedge Agreement.

Processed and formatted by SEC Watch - Visit SECWatch.com

10.6. EXPENSE RESERVE ACCOUNT The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the Expense Reserve Account, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. On the Closing Date, the Trustee shall deposit into the Expense Reserve Account an amount equal to U.S.$25,000 together with an amount sufficient to pay any outstanding fees and expenses of the Issuer in relation to the offering of the Rated Notes and the Income Notes which are not paid on the Closing Date. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Expense Reserve Account in Eligible Investments. Any amounts held in the Expense Reserve Account in excess of U.S.$25,000 on the day which is 60 days following the Closing Date (or, if such day is not a Business Day, the next following Business Day) shall be transferred by the Trustee into the Uninvested Proceeds Account. Thereafter, the Trustee shall transfer to the Expense Reserve Account from the Payment Account amounts required to be deposited therein pursuant to Section 11.1(a) and in accordance with the calculations and the instruction contained in the Note Valuation Report prepared by the Issuer pursuant to Section 10.11(a). Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be to pay (on any day other than a Payment Date) accrued and unpaid Administrative Expenses of the Co-Issuers; provided that the Trustee shall deposit all amounts remaining on deposit in the Expense Reserve Account at the time when substantially all of the Issuer’s assets have been sold or otherwise disposed of into the 146

Processed and formatted by SEC Watch - Visit SECWatch.com

Collections Account as Collateral Interest Collections and will be distributed in accordance with the Section 11 on the immediately succeeding Payment Date. 10.7. INTEREST RESERVE ACCOUNT The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the Interest Reserve Account, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Interest Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Interest Reserve Account in Eligible Investments. On each Payment Date, in accordance with the Priority of Payments, the Trustee will deposit the Interest Reserve Amount, if any, into the Interest Reserve Account. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Interest Reserve Account shall be to deposit into the Payment Account, on the Business Day prior to each Payment Date, the Balance of the Interest Reserve Account (including reinvestment income) for distribution as Collateral Interest Collections in accordance with the Priority of Payments on the related Payment Date. 10.8. EARN-OUT ASSET ACCOUNT With respect to any Earn-Out Asset except as set forth in the last sentence of this paragraph, the Trustee, if so directed by the Collateral Manager, at the time of purchase thereof shall withdraw from the Collateral Principal Collections Sub-Account and deposit into the Earn-Out Asset Account the amount of funds equal to or greater than the combined aggregate Future Funding Obligations under such EarnOut Asset included in the Collateral Interests less the amount of any previous Future Advances, as specified in such direction. Upon initial purchase of an Earn-Out Asset, such Future Funding Obligation shall be treated as part of the purchase price for such Collateral Interest. A deposit into the Earn-Out Asset Account is not required to be made in connection with the purchase of an Earn-Out Asset to the extent that the Total Unfunded Future Advance Amounts, including the Unfunded Future Advance Amounts with respect to such Earn-Out Asset, are less than the Available Aggregate Class A-R Undrawn Amount. The Issuer (at the direction of the Collateral Manager) will deposit any Class A-R Draws into the Earn- Out Asset Account. As directed by the Collateral Manager in writing and in accordance with this Indenture, amounts on deposit in the Earn-Out Asset Account shall be invested in overnight funds that are Eligible Investments. On the Business Day immediately preceding each Payment Date, the income received on amounts contained in the Earn-Out Asset Account during the related Due Period shall be withdrawn from such account and deposited in the Collection Account as Collateral Interest Collections. The amounts on deposit in the Earn-Out Asset Account may only be applied to fund Future Advance Amounts or on the date on which the Notes are redeemed in full, shall be transferred to the Collateral Principal Collection Sub-Account and distributed pursuant to the Priority of Payments; provided, that to the extent that the amounts then on deposit in the Earn-Out Asset Account exceed the Total Unfunded Future Advance Amount, the Collateral Manager may direct the Trustee to transfer such excess to the Collection Account as Collateral Principal Collections for distribution in accordance with Section 11.1. After the Commitment Termination Time, the amounts on deposit in the Earn-Out Asset Account will in no event be less than the Total Unfunded Future Advance Amount. Funds in the Earn-Out Asset Account shall be available for application at the direction of the Collateral Manager (i) to fund any Future Advance Amounts, (ii) during the Reinvestment Period, to 147

Processed and formatted by SEC Watch - Visit SECWatch.com

make Class A-R Prepayments and (iii) to the Collateral Principal Collection Sub-Account as Collateral Principal Collections for application on the next Payment Date (provided that such direction is delivered on or before the related Calculation Date); provided, however, that the Collateral Manager may elect, rather than to fund such Future Advance with a withdrawal from the Earn-Out Asset Account, to instead fund such Future Advance with a Class A-R Draw; provided, further, that no application pursuant to clause (ii) or (iii) above shall exceed the excess of (a) the sum of (1) amounts on deposit in the Earn-Out Asset Account and (2) the Available Aggregate Class A-R Undrawn Amount over (b) the Total Unfunded Future Advance Amount. Upon (i) the sale or maturity of an Earn-Out Asset or (ii) the occurrence of an event of default with respect to an Earn-Out Asset or any other event or circumstance which results in the irrevocable reduction of the undrawn commitments under such Earn-Out Asset, any funds in the Earn-Out Asset Account in excess of the amount needed to cover any drawdowns on all remaining Earn-Out Assets will be transferred, at the direction of the Collateral Manager, to the Collection Account as Collateral Principal Collections and will be distributed in accordance with Section 11.1 on the immediately succeeding Payment Date. 10.9. PAYMENT ACCOUNT The Trustee shall, prior to the Closing Date, establish a Securities Account which shall be designated as the Payment Account, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Payment Account shall be held in trust by the Trustee for the benefit of the Secured Parties. Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Payment Account shall be to pay the interest on and the principal of the Rated Notes in accordance with their terms and the provisions of this Indenture and, upon Issuer Order, to pay Administrative Expenses, amounts due to the Advancing Agent or the Trustee in connection with the reimbursement of Interest Advances and interest thereon and other amounts specified therein, each in accordance with the Priority of Payments. The Co-Issuers shall not have any legal, equitable or beneficial interest in the Payment Account other than in accordance with the Priority of Payments. 10.10. REPORTS BY TRUSTEE The Trustee shall supply, in a timely fashion to each Rating Agency (so long as any Rated Notes are rated by such Rating Agency), each Hedge Counterparty, the Holders of Rated Notes, the Collateral Manager, the PAA Issued Note Paying Agent, the Initial Purchaser, the Placement Agent, the Issuer and the Advancing Agent any information regularly maintained by the Trustee that each such Person may from time to time request with respect to the Pledged Securities or the Accounts reasonably needed to complete the Note Valuation Report or to provide any other information reasonably available to the Trustee by reason of its acting as Trustee hereunder and required to be provided by Section 10.11. The Trustee shall forward to the Collateral Manager, the Holders of Rated Notes of the Controlling Class, the Advancing Agent, or upon request therefor, any Holder of a Rated Note shown on the Note Register, the Initial Purchaser, each Hedge Counterparty or the PAA Issued Note Paying Agent, copies of notices and other writings received by it from the issuer of any Collateral Interest or from any Clearing Agency with respect to any Collateral Interest advising the holders of such security of any rights that the holders might have with respect thereto (including notices of calls and redemptions of securities) as well as all periodic financial reports received from such issuer and Clearing Agencies with respect to such issuer; provided that the Trustee shall not disclose any unpublished S&P Rating assigned by S&P with respect to any Collateral Interest without the prior consent of S&P. 148

Processed and formatted by SEC Watch - Visit SECWatch.com

As promptly as possible following the delivery of each Note Valuation Report to the Trustee pursuant to Section 10.11(a) or (b), as applicable, the Issuer shall cause a copy of such report to be delivered the Repository for posting on the Repository in the manner described in Section 14.3. In connection therewith, each of the Co-Issuers acknowledges and agrees that each Note Valuation Report shall be posted to the Repository for use in the manner described in the section headed “Terms of Use” on the Repository. In the event that a Distribution on any Collateral Interest is not paid to the Trustee on the Due Date therefor, the Trustee shall provide the Advancing Agent with notice of such default on the Business Day immediately following such default. In addition, (i) the Trustee shall provide the Advancing Agent (either electronically or in hard-copy format) with copies of all reports received from any trustee, trust administrator, master servicer or similar administrative entity with respect to the Collateral Interests and (ii) upon request, the Trustee shall promptly make available to the Advancing Agent any other information reasonably available to the Trustee by reason of its acting as Trustee hereunder to permit the Advancing Agent to make a determination of recoverability with respect to any Interest Advance and to otherwise perform its advancing obligations hereunder. 10.11. ACCOUNTINGS (a)

Accounting. Not later than five Business Days (or, in the case of the first report, not later than eight Business Days) following the last Business Day of each calendar month (other than a month in which a Payment Date occurs), commencing in April 2006, the Issuer shall deliver an accounting (each, a Monthly Report), determined as of the last Business Day of such month, and the Issuer shall deliver, not later than the related Payment Date and after the reconciliation process described in this Section 10.11, an accounting (each, a Remittance Report and, together with the Monthly Reports, the Note Valuation Reports), determined as of each Calculation Date, to each Rating Agency, the Trustee, the Collateral Manager, the Issuer and the Advancing Agent and make available via the Trustee’s internet website, initially located at www.cdolink.com to the Trustee, each Hedge Counterparty, the PAA Issued Note Paying Agent, each Note Transfer Agent, Wachovia Capital Markets, LLC, the Advancing Agent, the Issuer and, upon written request therefor, any Holder of a Rated Note shown on the Note Register. The Note Valuation Report shall contain the following information (which shall, in the case of any Note Valuation Report delivered to S&P, be presented in a form that complies with S&P’s Preferred Format) determined, unless otherwise specified below, as of the related Calculation Date; provided, however, that the Monthly Reports shall not contain the information described in clauses (3), (8), (9), (10), (11), (15) and (16): (1)

the calculation showing compliance with each of the Coverage Tests, accompanied by a list setting forth the applicable maximum or minimum value, percentage or ratio which must be maintained pursuant to this Indenture with respect to each of the Coverage Tests and a list setting forth the results of the calculation of each of the Coverage Tests with respect to the Collateral Interests, the calculation showing whether the S&P CDO Monitor Test is satisfied (including the weighted average rating, the default measure, variability measure and correlation measure, the scenario default rate and/or such other information required to be computed with respect to the S&P CDO Monitor Test), and the calculation showing the Moody’s Maximum Weighted Average Rating Factor Test, the Weighted Average Fixed Rate Coupon, the Weighted Average Spread, the Weighted Average Life, the S&P Minimum Average Recovery Rate and the 149

Processed and formatted by SEC Watch - Visit SECWatch.com

Moody’s Minimum Average Recovery Rate and, if applicable, the Moody’s Post- Acquisition Compliance Test; (2)

the estimated remaining Average Life of each of the Collateral Interests;

(3)

the Applicable Periodic Interest Rate in respect of each Class of Notes and the amount of Periodic Interest payable to the Holders of the Notes for such Payment Date (in the aggregate and by Class);

(4)

the amount (if any) payable to each Hedge Counterparty pursuant to the related Hedge Agreement;

(5)

the amount (if any) payable by each Hedge Counterparty pursuant to the related Hedge Agreement:

(6)

the Aggregate Fees and Expenses payable on the next Payment Date on an itemized basis;

(7)

the Aggregate Fees and Expenses paid during a period of twelve (12) months ending on the next Payment Date on an itemized basis;

(8)

for the Collection Account:

(9)

(i)

the Balance on deposit in the Collection Account and the Collateral Principal Collections Sub-Account at the end of the related Due Period;

(ii)

the nature and source of any Collections in the Collection Account and the Collateral Principal Collections Sub-Account, including Collections received since the date of the last Note Valuation Report;

(iii)

the amounts payable from the Collection Account in accordance with the priority set forth in Section 11.1 on the next Payment Date; and

(iv)

the Balance remaining in the Collection Account immediately after all payments and deposits to be made on such Payment Date;

(v)

the Balance on deposit in the Collateral Principal Collections Sub- Account.

for the Interest Reserve Account: (i)

the balance on deposit in the Interest Reserve Account at the end of the related Due Period;

(ii)

the amount payable from the Interest Reserve Account pursuant to the Priority of Payments on the next Payment Date;

(iii)

the Interest Reserve Amount to be paid into the Interest Reserve Account on the next Payment Date; and 150

Processed and formatted by SEC Watch - Visit SECWatch.com

(iv)

(10)

(11)

the Balance remaining in the Interest Reserve Account immediately after all payments and deposits to be made on such Payment Date;

for the Expense Reserve Account: (i)

the amount to be paid into the Expense Reserve Account on the next Payment Date; and

(ii)

the Balance remaining in the Expense Reserve Account immediately after all payments and deposits to be made on such Payment Date;

for the Earn-Out Asset Account: (i)

the balance on deposit in the Earn-Out Asset Account at the end of the related Due Period;

(ii)

the amount, if any, payable from the Earn-Out Asset Account;

(iii)

the amount, if any, to be paid into the Earn-Out Asset Account on the next Payment Date; and

(iv)

the Balance remaining in the Earn-Out Asset Account immediately after all payments and deposits to be made on such Payment Date;

(12)

for the Class A-R Holder Collateral Account, the Balance remaining in the Class A-R Holder Collateral Account immediately after all payments and deposits to be made on such Payment Date;

(13)

any Hedge Receipt Amount or Hedge Payment Amount for the related Payment Date, and for each Hedge Agreement (if any), the outstanding notional amount of such Hedge Agreement and the amounts, if any, scheduled to be received or paid, as the case may be, by the Issuer pursuant to such Hedge Agreement for the related Payment Date, separately stating the portion payable in accordance with Section 11.1;

(14)

the aggregate amount of outstanding Interest Advances;

(15)

the amount of Income Note Excess Funds on the related Payment Date;

(16)

the amount of the Senior Collateral Management Fee and the amount of the Subordinate Collateral Management Fee;

(17)

such other information as the Collateral Manager, the Initial Purchaser, the Trustee, any Rating Agency or any Hedge Counterparty may reasonably request;

(18)

with respect to each Collateral Interest, the Principal Balance, the annual coupon rate or spread to the relevant floating rate index, the frequency of coupon payments, the amount of principal payments received, the maturity date, the issuer, the country in which the issuer is incorporated or organized, the S&P Industry Classification Group, the Moody’s Recovery Rate, the S&P Recovery Rate, the S&P Rating and the Moody’s Rating (provided that if any Moody’s 151

Processed and formatted by SEC Watch - Visit SECWatch.com

Rating for any Collateral Interest is an “estimated” or “shadow” rating, such rating shall be identified as “estimated” or “shadow rated,” shall be disclosed with an asterisk (or any such other marking designed to indicate an estimated or shadow rating) in the place of the applicable estimated or shadow rating and shall include the date as of which such rating was first provided by Moody’s to the Issuer); and any S&P Rating which is determined from an implied rating, a credit estimate, a confidential rating or another non-public rating, shall not be distinguished and shall either (i) be reported in a single column with the public ratings of S&P (without distinguishing the source) or (ii) be reported in a separate column labeled “Non-public and Implied S&P Rating.” (19)

the Principal Balance, the maturity date, the S&P Rating, the Moody’s Rating and the issuer of each Eligible Investment included in the Collateral;

(20)

(A) the identity and Principal Balance of each Collateral Interest that became a Credit Risk Interest, an Impaired Interest, an Equity Interest, a Written Down Interest, a Withholding Tax Interest, a Deferred Interest PIK Bond, a Buy/Sell Interest, a Taxed Collateral Interest or a Taxed Property, (B) the date, as provided by the Collateral Manager, on which any Collateral Interest became a Credit Risk Interest, an Impaired Interest, an Equity Interest, a Written Down Interest, a Buy/Sell Interest, a Withholding Tax Interest, a Taxed Collateral Interest or a Taxed Property, (C) whether the Collateral Manager has directed the Issuer to sell or not to sell such Collateral Interest, and (D) the date by which any such sale occurs;

(21)

the identity of each Collateral Interest that was upgraded or downgraded or placed on watch for upgrade or downgrade by any Rating Agency since the date of the last Note Valuation Report;

(22)

the Principal Balance and identity of each Collateral Interest that was released for sale indicating the reason for such sale and the amount and identity of each Collateral Interest that was granted since the date of the last Note Valuation Report;

(23)

the identity and Principal Balance of each Collateral Interest that was a Credit Risk Interest, an Impaired Interest, an Equity Interest, a Written Down Interest, a Buy/Sell Interest, a Withholding Tax Interest, a Buy/Sell Interest, a Deferred Interest PIK Bond, a Taxed Collateral Interest, a Taxed Property or a Discretionary Sale;

(24)

the purchase price of each Pledged Security granted and the sale price of each Pledged Security subject to a sale since the date of the last Note Valuation Report; and whether such Pledged Security is a Collateral Interest, an Eligible Investment or proceeds in the Collection Account;

(25)

the amount of Purchased Accrued Interest;

(26)

a description of any transactions with the Collateral Manager, the Issuer, the Collateral Administrator and the Trustee and any Affiliates thereof;

(27)

the Herfindahl Score; 152

Processed and formatted by SEC Watch - Visit SECWatch.com

(28)

the components of the S&P CDO Monitor Test;

(29)

the Fitch Recovery for each Class of Notes;

(30)

the components of the Fitch Poolwide Expected Loss Test; and

(31)

the amount of any Class A-R Draws, remaining Class A-R Commitments, the Total Net Unfunded Future Advance Amount, the Total Unfunded Future Advance Amount and Future Funding Obligations.

Upon receipt of each Note Valuation Report, the Trustee and the Collateral Manager shall compare the information contained therein to the information contained in their respective records with respect to the Collateral and shall, within two (2) Business Days after receipt of such Note Valuation Report, notify each of the Issuer, the Collateral Manager, the Trustee, each Hedge Counterparty, Moody’s, S&P and Fitch if the information contained in the Note Valuation Report does not conform to the information maintained by the Trustee or the Collateral Manager as applicable, with respect to the Collateral, and detail any discrepancies. In the event that any discrepancy exists, the Trustee and the Issuer, or the Collateral Manager shall attempt to promptly resolve the discrepancy. If such discrepancy cannot be promptly resolved, the Trustee shall within five (5) Business Days after discovery of such discrepancy cause the Independent Accountants of recognized international reputation to review such Note Valuation Report and the Trustee’s and the Collateral Manager’s records to determine the cause of such discrepancy. If such review reveals an error in the Note Valuation Report or the records of the Trustee or the Collateral Manager, as the case may be, such item shall be revised accordingly and, as so revised, shall be utilized in making further calculations. Subject to the terms of this Indenture, the Trustee shall be entitled to rely on the information supplied by the Collateral Manager in relation to the preparation of the Note Valuation Report and shall not be liable for the accuracy or completeness of such information or the lack thereof. In addition to the foregoing information, each Note Valuation Report shall include a statement to the following effect: “The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act), or under any state securities laws, and the Co-Issuers have not been and will not be registered under the United States Investment Company Act of 1940, as amended (the 1940 Act). Each Holder of the Notes, other than those Holders that are not “U.S. persons” (U.S. Person) within the meaning of Regulation S (Regulation S) under the Securities Act and have acquired their Notes outside the United States pursuant to Regulation S, is required to be both (i) (A) with respect to any Rated Note, a “qualified institutional buyer” as defined in Rule 144A under the Securities Act (Qualified Institutional Buyer) or (B) solely with respect to the Income Notes, any of NorthStar OS VI, LLC, NS Advisors, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(A) under the Securities Act (each of the foregoing, a Permitted NS Purchaser) and (ii) a “qualified purchaser” (Qualified Purchaser) within the meaning of Section 3(c)(7) of the 1940 Act, purchasing for its own account or for the account of another Qualified Purchaser, that can make all of the representations in this Indenture applicable to a holder that is a U.S. Person. The beneficial interest in the Notes may be transferred only to a transferee that meets both of the criteria in clauses (i) and (ii) above and can make all of the representations in this Indenture applicable to a Holder that is a U.S. Person, except that any such transfer in reliance on Regulation S can be made only to a transferee that is not a U.S. Person. The Issuer has the right to compel any Holder that does not meet the qualifications and the transfer restrictions set forth in this 153

Processed and formatted by SEC Watch - Visit SECWatch.com

Indenture to sell its interest in the Notes, or may sell such interest on behalf of such owner, pursuant to the Indenture.” (b)

(c)

Redemption Date Instructions. Not less than five Business Days after receiving an Issuer Request requesting information regarding a redemption pursuant to Section 9.1 of the Rated Notes of a Class as of a proposed Redemption Date set forth in such Issuer Request, the Trustee shall provide the necessary information (to the extent it is available to the Trustee) to the Issuer, and the Issuer shall compute the following information and provide such information in a statement (the Redemption Date Statement) delivered to the Trustee: (1)

the Aggregate Outstanding Amount of the Rated Notes of the Class or Classes to be redeemed as of such Redemption Date;

(2)

the amount of accrued interest due on such Rated Notes as of the last day of the Interest Period immediately preceding such Redemption Date; and

(3)

the amount in the Collection Account available for application to the redemption of such Rated Notes.

If the Trustee shall not have received any accounting provided for in this Section 10.11 on the first Business Day after the date on which such accounting is due to the Trustee, the Trustee shall use reasonable efforts to cause such accounting to be made by the applicable Payment Date or Redemption Date. To the extent the Trustee is required to provide any information or reports pursuant to this Section 10.11 as a result of the failure of the Issuer to provide such information or reports, the Trustee shall be entitled to retain an Independent certified public accountant in connection therewith and the reasonable costs incurred by the Trustee for such Independent certified public accountant shall be reimbursed pursuant to Section 6.8. The Trustee will make the Note Valuation Report available via its internet website initially located at www.cdolink.com. All information made available on the Trustee’s website will be restricted and the Trustee will only provide access to such reports to those parties entitled thereto pursuant to this Indenture. In connection with providing access to its website, the Trustee may require registration and the acceptance of a disclaimer. Questions regarding the Trustee’s website can be directed to the Trustee’s customer service desk at phone number 301-815-6600.

10.12. RELEASE OF SECURITIES (a)

If no Event of Default has occurred and is continuing and subject to Section 12, the Issuer shall, in connection with any sale required pursuant to Section 12.1, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the settlement date for any sale of a security certifying that the conditions set forth in Section 12.1 are satisfied, direct the Trustee to release such security from the lien of this Indenture against receipt of payment therefor.

(b)

The Issuer shall, if notified that the issuer of the Pledged Security requires delivery of such Pledged Security as a condition to redemption or payment in full, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the date set for redemption or payment in full of a Pledged 154

Processed and formatted by SEC Watch - Visit SECWatch.com

Security, certifying that such security is being redeemed or paid in full, direct the Trustee or, at the Trustee’s instructions, the Custodian, to deliver such security, if in physical form, duly endorsed, or, if such security is a Clearing Corporation Security, to cause it to be presented, to the appropriate paying agent therefor on or before the date set for redemption or payment, in each case against receipt of the redemption price or payment in full thereof. (c)

The Trustee shall, upon receipt of an Issuer Order at such time as there are no Rated Notes Outstanding and all obligations of the Co-Issuers hereunder have been satisfied, release the Collateral from the lien of this Indenture.

(d)

The Issuer may retain agents (including the Collateral Manager) to assist the Issuer in preparing any notice or other report required under Section 10.12 and this Section 10.13.

10.13. REPORTS BY INDEPENDENT ACCOUNTANTS (a)

At the Closing Date the Issuer (or the Collateral Manager on its behalf) shall appoint a firm of Independent certified public accountants of recognized national reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Indenture. Upon any resignation by such firm, the Issuer shall (after consultation with the Collateral Manager) propose a replacement firm meeting the criteria set forth in the preceding sentence for approval by a Majority of the Controlling Class. Upon approval by a Majority of the Controlling Class, the Issuer shall promptly appoint such firm by Issuer Order delivered to the Trustee, each Hedge Counterparty, the Collateral Manager and each Rating Agency. If the Issuer shall fail to appoint a successor to a firm of Independent certified public accountants which has resigned within 30 days after such resignation, the Issuer shall promptly notify the Trustee of such failure in writing. The fees of such Independent certified public accountants and its successor shall be payable by the Issuer as provided in Section 11.1.

(b)

On or before May 31 of each year (commencing with May 31, 2007), the Issuer shall cause to be delivered to the Trustee, the PAA Issued Note Paying Agent and each Rating Agency an Accountant’s Report specifying the procedures applied and their associated findings with respect to the Note Valuation Reports and any Redemption Date Statements prepared in the preceding year. At least 60 days prior to the Payment Date in May 2007 (and, if at any time a successor firm of Independent certified public accountants is appointed, prior to the Payment Date in August following the date of such appointment), the Issuer shall deliver to the Trustee an Accountant’s Report specifying in advance the procedures that such firm will apply in making the aforementioned findings throughout the term of its service as accountants to the Issuer. The Trustee shall promptly forward a copy of such Accountant’s Report to each Hedge Counterparty, the Rating Agencies, the PAA Issued Note Paying Agent and each Holder of Class A Senior Notes (or, if no Class A Senior Notes are Outstanding, each Holder of Class A-2 Notes or, if no Class A Notes are Outstanding, each Holder of Class B Notes or, if no Class B Notes are Outstanding, each Holder of Class C Notes or, if no Class C Notes are Outstanding, each Holder of Class D Notes or, if no Class D Notes are Outstanding, each Holder of Class E Notes or, if no Class E Notes are Outstanding, each Holder of Class F Notes or, if no Class F Notes are Outstanding, each Holder of Class G Notes or, if no Class G Notes are Outstanding, each Holder of Class H Notes or, if no Class H Notes are Outstanding, each Holder of Class J Notes or, if no Class J Notes are Outstanding, each Holder of Class K Notes), at the address shown on the Note Register. The Issuer shall not approve the institution of 155

Processed and formatted by SEC Watch - Visit SECWatch.com

such procedures if a Majority of the Controlling Class or the Collateral Manager, by notice to the Issuer and the Trustee within 30 days after the date of the related notice to the Trustee, object thereto. (c)

Any statement delivered to the Trustee pursuant to Section 10.13(b) above shall be made available by the Trustee to any Holder of a Rated Note shown on the Note Register upon written request therefor.

10.14. REPORTS TO RATING AGENCIES In addition to the information and reports specifically required to be provided to the Rating Agencies, the PAA Issued Note Paying Agent, the Holders of Rated Notes and each Hedge Counterparty pursuant to the terms of this Indenture or the Paying Agency Agreement (as the case may be), the Issuer shall provide or procure to provide the Rating Agencies and each Hedge Counterparty with (a) all information or reports delivered to the Trustee hereunder and (b) such additional information as the Rating Agencies, each Hedge Counterparty or the PAA Issued Note Paying Agent may from time to time reasonably request, provided that such information may be obtained and provided without unreasonable burden or expense. The Issuer shall promptly notify the Trustee, the PAA Issued Note Paying Agent if the rating of any Class of Rated Notes has been, or it is known by the Issuer that such rating will be, changed or withdrawn. The Issuer shall notify each Rating Agency and each Hedge Counterparty in the case of (i) termination or amendment of any Transaction Document or organizational document of the Issuer or Co-Issuer, (ii) termination or change of party to any of the Transaction Documents or (iii) material breach of any of the Transaction Documents by any party thereto. 10.15. TAX MATTERS The Issuer and the Co-Issuer agree to treat, and hereby notify the Trustee to treat, and, by accepting a Certificated Class A-G Note, a Class H Note or Class J Note, each Holder of a Certificated Class A-G Note, a Class H Note or Class J Note agrees to treat, for U.S. federal income, state and local income and franchise tax and any other income tax purposes, for so long as an Owner REIT qualifies for U.S. federal income tax purposes as a REIT and 100% of the Class H Notes, Class J Notes, Class K Notes, Income Notes, and Ordinary Shares (other than any Class H Notes, Class J Notes or Class K Notes with respect to which the Issuer has received an Opinion of Counsel rendered by nationally recognized U.S. tax counsel experienced in such matters to the effect that the Class H Notes, Class J Notes or Class K Notes, as applicable, will be treated as indebtedness for U.S. federal income tax purposes) are owned by the Owner REIT, directly or indirectly through one or more Qualified REIT Subsidiaries thereof or one or more entities disregarded as entities separate from the Owner REIT or its Qualified REIT Subsidiaries, (i) the Certificated Class A-G Notes as indebtedness solely of the Owner REIT, and not as indebtedness of the Issuer or the Co-Issuer, and at any other time, as indebtedness solely of the Issuer and not the Co- Issuer, (ii) the Class H Notes, Class J Notes, Class K Notes and Income Notes as indebtedness of the Issuer for legal purposes and for certain tax purposes, and at any other time, as indebtedness solely of the Issuer and not the Co-Issuer, and (iii) the Income Notes as not issued or outstanding for tax purposes, and at any other time, as equity in the Issuer. The Issuer (and, with respect to the Certificated Class A-G Notes, the Co-Issuer) agree, and, by accepting a Certificated Class A-G Note, Class H Note or Class J Note, each Holder of a Certificated Class A-G Note or Class H Note agrees, to report all income (or loss) in accordance with such treatment, and not to take any action inconsistent with such treatment except as otherwise required by any taxing authority under applicable law. The Issuer agrees that, for purposes of U.S. federal income taxes, for so long as an Owner REIT qualifies for U.S. federal income tax purposes as a REIT and 100% of the Class H Notes, Class J Notes, Class K Notes, Income Notes, and Ordinary Shares (other than any Class H Notes, Class J Notes or Class K Notes with respect to which the Issuer has received an Opinion of Counsel rendered by nationally recognized U.S. tax counsel experienced in such 156

Processed and formatted by SEC Watch - Visit SECWatch.com

matters to the effect that the Class H Notes, Class J Notes or Class K Notes, as applicable, will be treated as indebtedness for U.S. federal income tax purposes) are owned by the Owner REIT, directly or indirectly through one or more Qualified REIT Subsidiaries thereof or one or more entities disregarded as entities separate from the Owner REIT or its Qualified REIT Subsidiaries, the Issuer will be treated as a Qualified REIT Subsidiary of the Owner REIT, and at any other time, the Issuer agrees not to elect to be treated as other than an association taxable as a corporation for U.S. federal income tax purposes. The Class A-R Commitment Fee will be includible as ordinary income by a U.S. Holder of a Class A-R Note in accordance with its regular method of tax accounting. 10.16. [RESERVED] 10.17. INTEREST ADVANCES (a)

With respect to each Payment Date for which the sum of (i) Collateral Interest Collections collected during the related Due Period and (ii) funds on deposit in the Collection Account, are insufficient to remit the interest due and payable with respect to the Class A Notes and Class B Notes on the following Payment Date (the amount of such insufficiency, an Interest Shortfall), so long as that no Event of Default is occurring (except an Event of Default with respect to the non-payment of interest on the Class A Notes or the Class B Notes), the Trustee shall provide the Advancing Agent with written notice of such Interest Shortfall no later than 12:00 noon (New York time) on the Business Day immediately preceding such Payment Date. The Trustee shall provide the Advancing Agent with notice, prior to any funding of an Interest Advance (as defined below) by the Advancing Agent, of any additional interest remittances received by the Trustee after deliver of such initial notice that reduce such Interest Shortfall. No later than 5:00 p.m. (New York time) on the Business Day immediately preceding the related Payment Date, the Advancing Agent shall advance the difference between such amounts (each such advance, an Interest Advance) by deposit of an amount equal to such Interest Shortfall in the Payment Account, subject to a determination of recoverability by the Advancing Agent as described in Section 10.17(b). Any Interest Advance made by the Advancing Agent with respect to a Payment Date that is in excess of the actual Interest Shortfall for such Payment Date shall be refunded to the Advancing Agent by the Trustee on the same Business Day that such Interest Advance was made (or, if such Interest Advance is made prior to final determination by the Trustee of such Interest Shortfall, on the Business Day of such final determination). The Advancing Agent shall provide the Trustee written notice of a determination by the Advancing Agent that a proposed Interest Advance would constitute a Nonrecoverable Advance no later than the close of business on the Business Day immediately preceding the related Payment Date. If the Advancing Agent does not make any required Interest Advance at or prior to the time at which distributions are to be made pursuant to Section 11.1, the Trustee shall be required to make such Interest Advance, subject to a determination of recoverability by the Trustee as described in Section 10.17(b). The Trustee shall be entitled to conclusively rely on any determination by the Advancing Agent that an Interest Advance, if made, would constitute a Nonrecoverable Advance. Notwithstanding the foregoing, to the extent the Advancing Agent fails to make an Interest Advance it was required to make, the Advancing Agent shall not be entitled to make a recoverability determination affecting the Trustee’s obligation to provide an Interest Advance and any such determination shall not be binding on the Trustee. 157

Notwithstanding anything herein to the contrary, neither the Advancing Agent nor the Trustee shall be required to make any Interest Advance unless such Person determines, in its sole discretion, exercised in good faith and, with respect to any such determination made by the Advancing Agent, in accordance with the Advancing Standards (as defined below), that such Interest Advance, plus interest expected to accrue thereon at the Reimbursement Rate, will be recoverable from subsequent payments or collections with respect to all Collateral Interests. Such interest on any Interest Advance will be payable to the Advancing Agent or the Trustee, as the case may be, out of default charges collected in respect of the Collateral Interests for the related period or, in connection with the reimbursement of such Interest Advance, out of Collateral Interest Collections, and to the extent not reimbursed in full by Collateral Interest Collections, out of Collateral Principal Collections then on deposit in the Collection Account or any collection account established in favor of the Underlying Trust (provided that interest on Nonrecoverable Advances will be payable first from Collateral Principal Collections, and to the extent not reimbursed in full from Collateral Principal Collections, from Collateral Interest Collections then on deposit in the Collection Account or any collection account established in favor of the Underlying Trust). To the extent interest on any outstanding Interest Advance cannot be offset by such default charges, such interest accrued on outstanding Interest Advances made in respect thereof will result in a reduction in amounts payable on the Collateral Interests. In determining whether any proposed Interest Advance will be, or whether any Interest Advance previously made is, a Nonrecoverable Advance, the Advancing Agent or the Trustee, as applicable, will take into account: (1)

amounts that may be realized on each Mortgaged Property in its “as is” or then current condition and occupancy;

(2)

that such Interest Advances, together with interest accruing thereon, may only be recovered from subsequent payments or collections on the Collateral Interests, as allocable thereto from recoveries on the related Mortgage Properties pursuant to the related participation agreement, intercreditor agreement or other similar agreement;

(3)

that the related Senior Interests may be required to be fully paid and any advances (and interest thereon) made in respect of such Senior Interests may be required to be fully reimbursed, prior to any amounts recovered in respect of the Mortgaged Properties being allocated or otherwise made available to the Collateral Interests;

Processed and formatted by SEC Watch - Visit SECWatch.com

(4)

the possibility and effects of future adverse change with respect to the Mortgaged Properties, the potential length of time before such Interest Advance may be reimbursed and the resulting degree of uncertainty with respect to such reimbursement; and

(5)

the fact that Interest Advances are intended to provide liquidity only and not credit support to the Noteholders.

For purposes of any such determination of whether an Interest Advance constitutes or would constitute a Nonrecoverable Advance, an Interest Advance will be deemed to be nonrecoverable if the Advancing Agent or the Trustee, as applicable, determines that future payments or collections on the Collateral Interests may be insufficient to fully reimburse such Interest Advance, plus interest thereon at the Reimbursement Rate, within a reasonable period of time. Absent bad faith, the determination by the Advancing 158

Processed and formatted by SEC Watch - Visit SECWatch.com

Agent or the Trustee, as applicable, as to the nonrecoverability of any Interest Advance shall be conclusive and binding on the Noteholders. The Trustee shall be entitled to conclusively rely on any determination by the Advancing Agent that an Interest Advance, if made, would constitute a Nonrecoverable Advance. The Collateral Manager and the Advancing Agent shall provide any information regarding the Collateral reasonably requested by the Trustee in connection with the Trustee’s determination of whether any Interest Advance would be recoverable. (b)

The Advancing Agent and the Trustee will each be entitled to recover any previously unreimbursed Interest Advance made by it (including any Nonrecoverable Advance), together with interest thereon, in accordance with the Section 11.1(k).

(c)

The Advancing Agent and the Trustee will each be entitled with respect to any Interest Advance made by it (including Nonrecoverable Advances) to interest accrued on the amount of such Interest Advance for so long as it is outstanding at the Reimbursement Rate.

(d)

The Advancing Agent’s obligations to make Interest Advances in respect of the Class A Notes and Class B Notes will continue through the date on which the outstanding principal amount of such Notes is paid in full or redeemed.

(e)

In no event will the Advancing Agent or the Trustee be required to advance any payments in respect of interest on any Notes other than the Class A Notes and Class B Notes or any payments in respect of principal on any Notes.

(f)

In consideration of the performance of its obligations hereunder, the Trustee shall be entitled to receive, in its capacity as backup advancing agent, at the times set forth herein and subject to the conditions and the priority of distribution provisions hereof, to the extent funds are available therefor, the Trustee Interest Advance Fee. In addition, to the extent that the Trustee makes an Interest Advance on any Payment Date that the Advancing Agent was required, but failed to make, the Trustee shall be entitled to receive the Advancing Agent Fee (in addition to the Trustee Interest Advance Fee) for such Payment Date and any future Payment Dates upon which such Interest Advance remains outstanding.

(g)

In consideration of the performance of its obligations hereunder, the Advancing Agent shall be entitled to receive, at the times set forth herein and subject to the conditions and the priority of distribution provisions hereof, to the extent funds are available therefor, the Advancing Agent Fee (except to the extent the Advancing Agent Fee is being paid to the Trustee as described in clause (f), above).

(h)

The determination by the Advancing Agent or the Trustee, as applicable, (i) that it has made a Nonrecoverable Advance or (ii) that any proposed Interest Advance, if made, would constitute a Nonrecoverable Advance, shall be evidenced by an Officer’s certificate delivered promptly to the Trustee (or, if applicable, retained thereby) and the Issuer, setting forth the basis for such determination; provided, that failure to give such notice, or any defect therein, shall not impair or affect the validity of, or the Advancing Agent’s or the Trustee’s entitlement to reimbursement with respect to, any Interest Advance. 159

Processed and formatted by SEC Watch - Visit SECWatch.com

(i)

The Advancing Agent, in such capacity, shall act in the best interests of the Class A Noteholders and the Class B Noteholders (taking into account the interests of the Class A Noteholders and the Class B Noteholders collectively), as determined by the Advancing Agent, in its good faith judgment and in accordance with this Indenture and applicable law, and in all cases without regard to: (i) any relationship that the Advancing Agent may have with any obligor under a Collateral Interest or any Affiliate of such obligor, any seller or any other parties to this Indenture; (ii) the ownership of any Note by the Advancing Agent or any of its Affiliates; (iii) the adequacy of the Advancing Agent’s right to receive compensation for its services and reimbursement for its costs hereunder; (iv) the ownership or management of any interests in any mortgage loans, mortgaged properties, mezzanine loans or Collateral Interests by the Advancing Agent; (v) any obligation of the Advancing Agent or any of its Affiliates to cure a breach of a representation or warranty or document defect with respect to, or repurchase or substitute for any Collateral Interest; and (vi) any other debt the Advancing Agent or any of its Affiliates has extended to any obligor under any Collateral Interest or any of its Affiliates (the criteria specified in this Section 10.17(i), collectively referred to as the Advancing Standards). ARTICLE XI APPLICATION OF MONIES

11.1.

DISBURSEMENTS OF FUNDS FROM PAYMENT ACCOUNT; PRIORITY OF PAYMENTS (a)

Collateral Interest Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Rated Notes in connection with an Event of Default, in accordance with a Note Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Interest Collections, to the extent of Available Funds in the Payment Account, together with any Interest Advances applied for such Payment Date, less any amounts applied to reimburse any outstanding Interest Advances, together with interest thereon, as described in Section 10.17, less any amounts applied to pay any Hedge Counterparties during the applicable Due Period (other than any termination payments payable under clause (28) below), as described in Section 10.5(a)(5), will be applied by the Trustee in the following order of priority: (1)

to pay, in the following order: (i)

taxes and filing fees and registration fees (including, without limitation, annual return fees) payable by the Co-Issuers, if any; and then,

(ii)

pro rata the amount of any due and unpaid Trustee Fee, Trustee Interest Advance Fee, Class A-R Note Agent Fee and PAA Issued Note Paying Agent Fee; and then,

(iii)

the amount of any due and unpaid fees to the Administrator; and then,

(iv)

pro rata the amount of any due and unpaid Trustee Expenses and Underlying Trust Expenses; and then, 160

Processed and formatted by SEC Watch - Visit SECWatch.com

(v)

the amount of any due and unpaid fees of any Servicer owed directly by the Issuer; and then

(vi)

the amount of any due and unpaid fees and expenses of the Rating Agencies; and then,

(vii)

pro rata the amount of any due and unpaid Advancing Agent Fee, expenses of the Administrator and Administrative Expenses not included in (iii), (iv), (v) and (vi) above, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee; and then,

(viii)

to deposit to the Expense Reserve Account the amount needed to bring the amount on deposit therein to U.S.$25,000 (unless the Collateral Manager directs that a lesser amount be deposited to the Expense Reserve Account);

provided that the cumulative amount paid under (iii) through (viii) above (excluding any Administrative Expenses due or accrued with respect to the actions taken on or prior to the Closing Date and accounting fees that the Trustee is required to pay (other than certain accountants’ fees related to annual reviews) and fees the Trustee pays in connection with any Event of Default and any default of the Collateral Interests) may not exceed U.S.$225,000 in the aggregate in any consecutive 12-month period; (2)

to pay the Senior Collateral Management Fee with respect to such Payment Date and any Senior Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date;

(3)

to pay any Hedge Counterparty any amounts due to such Hedge Counterparty under any Hedge Agreement to the extent not paid during the related Due Period pursuant to Section 10.5(a)(5), pro rata, including any termination payments other than any termination payments payable under Section 11.1(a)(28), below;

(4)

to pay (a) Periodic Interest on the Class A Senior Notes and any Defaulted Interest on the Class A Senior Notes (and interest thereon), and (b) the Class A-R Commitment Fee in each case pro rata, based on amounts due;

(5)

to pay Periodic Interest on the Class A-2 Notes and any Defaulted Interest on the Class A-2 Notes (and interest thereon);

(6)

to pay Periodic Interest on the Class B Notes and any Defaulted Interest on the Class B Notes (and interest thereon);

(7)

to pay an amount equal to the Interest Reserve Amount for deposit into the Interest Reserve Account;

(8)

if a Rating Confirmation Failure occurs, on each Payment Date commencing with the Payment Date immediately following the Effective Date, to pay principal of the Notes in accordance with the Note Payment Sequence, in the amounts 161

Processed and formatted by SEC Watch - Visit SECWatch.com

necessary for each Rating Agency to confirm its respective ratings of the Notes assigned on the Closing Date or until each Class of Notes is paid in full; (9)

if either of the Class A/B Coverage Tests is not satisfied as of the preceding Calculation Date, first, to pay principal of the Class A-1 Notes and Class A-R Notes then Outstanding, pro rata, based on the Class A Senior Pro Rata Allocation, until such Class A/B Coverage Test is satisfied as of such Calculation Date or until the Class A Senior Notes are paid in full; provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (a) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Earn-Out Asset Account, and (b) any remainder will be deposited in the Collection Account as Collateral Principal Collections, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class A/B Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class A/B Coverage Test is satisfied or until the Class B Notes are paid in full;

(10)

to pay Periodic Interest on the Class C Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class C Notes (and interest thereon);

(11)

to pay the Class C Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(12)

to pay Periodic Interest on the Class D Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class D Notes (and interest thereon);

(13)

to pay the Class D Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any

(14)

if either of the Class C/D Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal of the most Senior Class of Notes then Outstanding, first, with respect to the Class A Senior Notes, to pay principal of the Class A-1 Notes and Class A-R Notes then Outstanding, pro rata, based on the Class A Senior Pro Rata Allocation, until such Class C/D Coverage Test is satisfied as of such Calculation Date or until the Class A Senior Notes are paid in full; provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (a) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Earn-Out Asset Account, and (b) any remainder will be deposited in the Collection Account as Collateral Principal Collections, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class C/D Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class C/D Coverage Test is satisfied or until the Class D Notes are paid in full;

(15)

to pay Periodic Interest on the Class E Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class E Notes (and interest thereon); 162

Processed and formatted by SEC Watch - Visit SECWatch.com

(16)

to pay the Class E Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(17)

to pay Periodic Interest on the Class F Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class F Notes (and interest thereon);

(18)

to pay the Class F Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(19)

to pay Periodic Interest on the Class G Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class G Notes (and interest thereon);

(20)

to pay the Class G Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(21)

if either of the Class E/F/G Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal of the most Senior Class of Notes then Outstanding, first, with respect to the Class A Senior Notes, to pay principal of the Class A-1 Notes and Class A-R Notes then Outstanding, pro rata, based on the Class A Senior Pro Rata Allocation, until such Class E/F/G Coverage Test is satisfied as of such Calculation Date or until the Class A Senior Notes are paid in full; provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (a) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Earn-Out Asset Account, and (b) any remainder will be deposited in the Collection Account as Collateral Principal Collections, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class E/F/G Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class E/F/G Coverage Test is satisfied or until the Class G Notes are paid in full;

(22)

to pay Periodic Interest on the Class H Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class H Notes (and interest thereon);

(23)

to pay the Class H Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(24)

to pay Periodic Interest on the Class J Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class J Notes (and interest thereon);

(25)

to pay the Class J Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(26)

to pay Periodic Interest on the Class K Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class K Notes (and interest thereon), to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement 163

Processed and formatted by SEC Watch - Visit SECWatch.com

(27)

to pay the Class K Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any, to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement;

(28)

to pay termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, pro rata, if such termination occurred solely as the result of an event of default or a termination event (other than Illegality or Tax Event, each as defined in the related Hedge Agreement) with respect to the Hedge Counterparty as Defaulting Party or sole Affected Party, as the case may be;

(29)

to the Class A-R Noteholders, any accrued and unpaid Class A-R Increased Costs and Class A-R Breakage Costs and, in the event the Collateral Manager requires any Class A-R Noteholder to transfer or assign its interest in the Class A-R Notes as a result of such Noteholder claiming any Class A-R Increased Costs, to the applicable Class AR Noteholder, any reasonable costs incurred by such Noteholder in effecting such transfer or assignment, including any Class A-R Breakage Costs related thereto;

(30)

to pay, in the following order: (i)

any due and unpaid Trustee Fee, Trustee Interest Advance Fee, Underlying Trust Expenses, Class A-R Note Agent Fee, PAA Issued Note Paying Agent Fee, Trustee Expenses, Advancing Agent Fee and other Administrative Expenses, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee, in each case, in the same order of priority as provided in Section 11.1(a)(1) above and to the extent not paid in full under Section 11.1(a)(1) above without regard to any limitation on any maximum amounts payable on such date contained therein; and

(ii)

on a pro rata basis, any due and unpaid expenses and other liabilities of the Co-Issuers to the extent not paid under Section 11.1(a)(1) above, whether as a result of an amount limitation imposed thereunder or otherwise;

(31)

to pay the Subordinate Collateral Management Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date;

(32)

to repay, pro rata, the amount of any outstanding Cure Advances, if any;

(33)

all Income Note Excess Funds to the PAA Issued Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Paying Agency Agreement;

Provided, however, with respect to this Section 11.1(a), for purposes of determining if any Principal Coverage Test is satisfied after giving effect to payments of principal, the denominator of such Principal Coverage Test shall be determined after giving effect to any principal of the 164

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes paid pursuant to any clauses prior to such clause and such clause on the related Payment Date (b)

Collateral Principal Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Rated Notes in connection with an Event of Default, in accordance with a Note Valuation Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Principal Collections, to the extent of Available Funds in the Payment Account, less any amounts applied to reimburse Interest Advances together with interest thereon, as described in Section 10.17, will be applied by the Trustee in the following order of priority: (1)

to the payment of the amounts referred to in Sections 11.1(a)(1) through (8), in the same order of priority specified therein, but only to the extent not paid in full thereunder;

(2)

if either of the Class A/B Coverage Tests is not satisfied as of the preceding Calculation Date, and to the extent that the amounts paid pursuant to clause (9) of the Priority of Payments—Collateral Interest Collections are insufficient to cause the Class A/B Coverage Tests to be satisfied, first, to pay principal of the Class A-1 Senior Notes and Class A-R Notes then Outstanding, pro rata, based on the Class A Senior Pro Rata Allocation, until such Class A/B Coverage Test is satisfied as of such Calculation Date or until the Class A Senior Notes are paid in full; provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (a) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Earn-Out Asset Account, and (b) any remainder will be deposited in the Collection Account as Collateral Principal Collections, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class A/B Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class A/B Coverage Test is satisfied or until the Class B Notes are paid in full;

(3)

if the Class A Notes and Class B Notes are no longer Outstanding, to pay Periodic Interest on the Class C Notes and any Defaulted Interest on the Class C Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(10) are insufficient to pay such amounts in full thereunder;

(4)

if the Class A Notes and Class B Notes are no longer Outstanding, to pay the Class C Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(11) are insufficient to pay such amounts in full thereunder;

(5)

if the Class A Notes, Class B Notes and Class C Notes are no longer Outstanding, to pay Periodic Interest on the Class D Notes and any Defaulted Interest on the Class D Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(12) are insufficient to pay such amounts in full thereunder; 165

(6)

if the Class A Notes, Class B Notes, and Class C Notes are no longer Outstanding, to pay the Class D Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that amounts paid pursuant to Section 11.1(a)(13) are insufficient to pay such amounts in full thereunder;

(7)

if either of the Class C/D Coverage Tests is not satisfied as of the preceding Calculation Date, and to the extent that the amounts paid pursuant to clause (14) of the Priority of Payments—Collateral Interest Collections are insufficient to cause the Class C/D Coverage Tests to be satisfied, to pay principal of the most Senior Class of Notes then Outstanding, first, with respect to the Class A Senior Notes, to pay principal of the Class A-1 Notes and Class A-R Notes then Outstanding, pro rata, based on the Class A Senior Pro Rata Allocation, until such Class C/D Coverage Test is satisfied as of such Calculation Date or until the Class A Senior Notes are paid in full; provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (a) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Earn-Out Asset Account, and (b) any remainder will be deposited in the Collection Account as Collateral Principal Collections, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class C/D Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class C/D Coverage Test is satisfied or until the Class D Notes are paid in full;

(8)

if the Class A Notes, Class B Notes, Class C Notes and Class D Notes are no longer Outstanding, to pay Periodic Interest on the Class E Notes and any Defaulted Interest on the Class E Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(15) are insufficient to pay such amounts in full thereunder;

(9)

if the Class A Notes, Class B Notes, Class C Notes and Class D Notes are no longer Outstanding, to pay the Class E Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(16) are insufficient to pay such amounts in full thereunder;

(10)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes are no longer Outstanding, to

Processed and formatted by SEC Watch - Visit SECWatch.com

pay Periodic Interest on the Class F Notes and any Defaulted Interest on the Class F Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(17) are insufficient to pay such amounts in full thereunder; (11)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes are no longer Outstanding, to pay the Class F Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(18) are insufficient to pay such amounts in full thereunder;

(12)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes are no longer Outstanding, to pay Periodic Interest on the Class G Notes and any Defaulted Interest on the Class G Notes (and interest 166

Processed and formatted by SEC Watch - Visit SECWatch.com

thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(19) are insufficient to pay such amounts in full thereunder; (13)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes are no longer Outstanding, to pay the Class G Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(20) are insufficient to pay such amounts in full thereunder;

(14)

if either of the Class E/F/G Coverage Tests is not satisfied as of the preceding Calculation Date, and to the extent that the amounts paid pursuant to clause (21) of the Priority of Payments—Collateral Interest Collections are insufficient to cause the Class E/F/G Coverage Tests to be satisfied, to pay principal of the most Senior Class of Notes then Outstanding, first, with respect to the Class A Senior Notes, to pay principal of the Class A-1 Notes and Class A-R Notes then Outstanding, pro rata, based on the Class A Senior Pro Rata Allocation, until such Class E/F/G Coverage Test is satisfied as of such Calculation Date or until the Class A Senior Notes are paid in full; provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (a) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Earn-Out Asset Account, and (b) any remainder will be deposited in the Collection Account as Collateral Principal Collections, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class E/F/G Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class E/F/G Coverage Test is satisfied or until the Class G Notes are paid in full;

(15)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes are no longer Outstanding, to pay Periodic Interest on the Class H Notes and any Defaulted Interest on the Class H Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(22) are insufficient to pay such amounts in full thereunder;

(16)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes are no longer Outstanding, to pay the Class H Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(23) are insufficient to pay such amounts in full thereunder;

(17)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes are no longer Outstanding, to pay Periodic Interest on the Class J Notes and any Defaulted Interest on the Class J Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(24) are insufficient to pay such amounts in full thereunder;

(18)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes are no longer Outstanding, to pay the Class J Cumulative Applicable Periodic Interest Shortfall 167

Processed and formatted by SEC Watch - Visit SECWatch.com

Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(25) are insufficient to pay such amounts in full thereunder; (19)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes are no longer Outstanding, to pay Periodic Interest on the Class K Notes and any Defaulted Interest on the Class K Notes (and interest thereon) to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement, to the extent that the amounts paid pursuant to Section 11.1(a)(26) are insufficient to pay such amounts in full thereunder;

(20)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes are no longer Outstanding, to pay the Class K Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon) to the PAA Issued Note Paying Agent for payment on the Class K Notes in accordance with the Paying Agency Agreement, to the extent that the amounts paid pursuant to Section 11.1(a)(27) are insufficient to pay such amounts in full thereunder;

(21)

in such amounts pursuant to written instructions to the Trustee from the Collateral Manager no later than the related Calculation Date, in the Collateral Manager’s discretion and in the priority directed by the Collateral Manager prior to the last day of the Reinvestment Period, (a) to the Class A-R Notes, as Class A-R Note Prepayments and (b) to the Earn-Out Asset Account, up to the Current Pay Future Advance Amount (including amounts already on deposit therein);

(22)

on or prior to the last day of the Reinvestment Period to pay, in the following order: (i)

to be retained in the Collection Account (a) to invest in Eligible Investments pending reinvestment in Substitute Collateral Interests at a later date, (b) to reinvest in Substitute Collateral Interests subject to the Reinvestment Criteria and (c) for payment of a Special Amortization in accordance with clause (ii) below (to the extent of available Collateral Principal Collections determined by the Collateral Manager);

(ii)

on each Payment Date through and including the last Payment Date during the Reinvestment Period, if the Collateral Manager notifies the Trustee in writing that it has decided to declare a Special Amortization, the amount of available Collateral Principal Collections determined by the Collateral Manager, (a) if each of the S&P Special Amortization Pro Rata Condition and the Moody’s Special Amortization Pro Rata Condition is satisfied, to pay each Class of Rated Notes, pro rata based on their respective aggregate outstanding principal amounts (for purposes of the pro rata allocation to the Class A Senior Notes based on the Class A Senior Pro Rata Allocation; provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (1) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Earn-Out Asset Account, and (2) any remainder will be deposited in the Collection Account as Collateral Principal Collections) 168

Processed and formatted by SEC Watch - Visit SECWatch.com

and (b) if the S&P Special Amortization Pro Rata Condition or the Moody’s Special Amortization Pro Rata Condition is not satisfied, to pay principal of each Class of Rated Notes in accordance with the Note Payment Sequence until each such Class of Rated Notes have been paid in full; (23)

after the end of the Reinvestment Period, to pay principal of each Class of Rated Notes in accordance with the Note Payment Sequence until each such Class of Rated Notes have been paid in full;

(24)

to pay termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, pro rata, if such termination occurred solely as the result of an event of default or a termination event (other than Illegality or Tax Event, each as defined in the related Hedge Agreement) with respect to the Hedge Counterparty as Defaulting Party or sole Affected Party, as the case may be, to the extent that the amounts paid pursuant to Section 11.1(a)(28) are insufficient to pay such amounts in full thereunder;

(25)

to pay, in the following order: (i)

any due and unpaid Trustee Fee, Trustee Interest Advance Fee, Underlying Trust Expenses, Class A-R Note Agent Fee, PAA Issued Note Paying Agent Fee, Trustee Expenses, Advancing Agent Fee and other Administrative Expenses, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee, in each case, in the same order of priority as provided in Section 11.1(b)(1) above and to the extent not paid in full under Section 11.1(b)(1) above and to the extent that the amounts paid pursuant to Section 11.1(a)(1) and (30) are insufficient to pay such amounts in full thereunder; and

(ii)

on a pro rata basis, any due and unpaid expenses and other liabilities of the Co-Issuers to the extent not paid under Section 11.1(b)(1) above and to the extent that the amounts paid pursuant to Section 11.1(a)(1) and (28) are insufficient to pay such amounts in full thereunder, whether as a result of an amount limitation imposed thereunder or otherwise;

(26)

to pay the Subordinate Collateral Management Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date, to the extent that the amounts paid pursuant to Section 11.1(a)(31) are insufficient to pay such amounts in full thereunder;

(27)

to repay, pro rata, the amount of any outstanding Cure Advances, if any to the extent that the amounts paid pursuant to clause (30) of the Priority of Payments—Collateral Interest Collections are insufficient to pay such amounts in full thereunder; and

(28)

all Income Note Excess Funds to the PAA Issued Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Paying Agency Agreement. 169

Processed and formatted by SEC Watch - Visit SECWatch.com

Provided, however, with respect to with respect to this Section 11.1(b), for purposes of determining if any Principal Coverage Test is satisfied after giving effect to payments of principal, the denominator of such Principal Coverage Test shall be determined after giving effect to any principal of the Notes paid pursuant to any clauses prior to such clause and such clause on the related Payment Date. (c)

If an Event of Default has occurred and is continuing, on the date or dates determined by the Trustee, the Trustee will pay, from all collections from, and proceeds of the sale or liquidation of, the Collateral (excluding any amounts necessary to reimburse any unpaid Interest Advances, together with interest thereon), in the following order: (1)

amounts corresponding to the amounts set forth in clauses Section 11.1(a)(1) through (3), and (to the extent not covered by Section 11.1(a)(1) through (3)) Section 11.1(b)(1);

(2)

the Periodic Interest on the Class A Senior Notes (including Defaulted Interest on such Class A Notes, if any) and then outstanding principal of the Class A Senior Notes, (provided that payments of interest on the Class A Senior Notes and the Class A-R Commitment Fee in respect of the Class A-R Notes will be paid pro rata between the Class A-1 Notes and the Class A-R Notes based on amounts due) and then principal of the Class A Senior Notes (provided that payments of principal of the Class A Senior Notes will be made pro rata based on their respective outstanding principal amounts) until paid in full until paid in full;

(3)

the Periodic Interest on the Class A-2 Notes (including Defaulted Interest on such Class A-2 Notes, if any) and then outstanding principal of the Class A-2 Notes until paid in full;

(4)

the Periodic Interest on the Class B Notes (including Defaulted Interest on such Class B Notes, if any) and then outstanding principal of the Class B Notes until paid in full;

(5)

the Periodic Interest on the Class C Notes (including Defaulted Interest on the Class C Notes, if any) and then outstanding principal of the Class C Notes (including the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(6)

the Periodic Interest on the Class D Notes (including Defaulted Interest on the Class D Notes, if any) and then outstanding principal of the Class D Notes (including Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(7)

the Periodic Interest on the Class E Notes (including Defaulted Interest on the Class E Notes, if any) and then outstanding principal of the Class E Notes (including Class E Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(8)

the Periodic Interest on the Class F Notes (including Defaulted Interest on the Class F Notes, if any) and then outstanding principal of the Class F Notes (including Class F Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full; 170

Processed and formatted by SEC Watch - Visit SECWatch.com

(9)

the Periodic Interest on the Class G Notes (including Defaulted Interest on the Class G Notes, if any) and then outstanding principal of the Class G Notes (including Class G Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(10)

the Periodic Interest on the Class H Notes (including Defaulted Interest on the Class H Notes, if any) and then outstanding principal of the Class H Notes (including Class H Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(11)

the Periodic Interest on the Class J Notes (including Defaulted Interest on the Class J Notes, if any) and then outstanding principal of the Class J Notes (including Class J Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(12)

to the PAA Issued Note Paying Agent, the Periodic Interest on the Class K Notes (including Defaulted Interest on the Class K Notes, if any) and then outstanding principal of the Class K Notes (including Class K Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(13)

amounts corresponding to the amounts set forth in Section 11.1(a)(28) through (33) and Section 11.1(b)(21) through (28); and

(14)

to the PAA Issued Note Paying Agent, any remaining amounts for distributions on the Income Notes.

(d)

Not later than 12:00 p.m., New York time, on or before the Business Day preceding each Payment Date, the Issuer shall, pursuant to Section 10, remit or cause to be remitted to the Trustee for deposit in the Payment Account an amount of Cash sufficient to pay the amounts described in Section 11.1(a) and 11.1(b) required to be paid on such Payment Date.

(e)

If, on any Payment Date, the amount available in the Payment Account from amounts received in the related Due Period is insufficient to make the full amount of the disbursements required by the statements furnished by the Issuer pursuant to Section 10.12(b), the Trustee shall make the disbursements called for in the order and according to the priority set forth under Section 11.1(a) and 11.1(b), subject to Section 13.1, to the extent funds are available therefor.

(f)

Except as otherwise expressly provided in this Section 11.1, if on any Payment Date the amount of funds is insufficient to make the full amount of the disbursements required by any clause or subclause of Section 11.1(a) or 11.1(b) to different Persons, the Trustee shall make the disbursements called for by such clause or subclause ratably in accordance with the respective amounts of such disbursements then due and payable to the extent funds are available therefor.

(g)

[Reserved].

(h)

Any amounts to be paid to the PAA Issued Note Paying Agent pursuant to Section 11.1(a)(26), (27) and (33) or Section 11.1(b)(19), (20) and (28) will be released from the lien of this Indenture. 171

Processed and formatted by SEC Watch - Visit SECWatch.com

(i)

If directed by the Holder of not less than 100% of the Income Notes, the Trustee shall withhold distributions to the PAA Issued Note Paying Agent that would otherwise be paid pursuant to Section 11.1(a)(33) and Section 11.1(b)(28) in respect of distributions on the Income Notes. Further, any Holder of Income Notes may elect at any time to make additional capital contributions to the Issuer, which contributions will be pledged to the Trustee as Collateral pursuant to this Indenture. Any such retained distribution or additional capital contribution will be deemed to be Collateral Principal Collections received in the Due Period following the Due Period relating to the Payment Date on which the option is exercised. Any Holder who makes an additional capital contribution will not be entitled to interest or additional return thereon.

(j)

The Advancing Agent and the Trustee shall be entitled to receive the Advancing Agent Fee and the Trustee Interest Advance Fee, respectively, in each case payable in accordance with the Priority of Payments. In addition, the Advancing Agent and the Trustee shall each be entitled on each Payment Date to reimbursement of any previously unreimbursed Interest Advance made by it, together with interest thereon, from Collateral Interest Collections, and to the extent not reimbursed in full by Collateral Interest Collections, from Collateral Principal Collections, prior to application of Collections in accordance with Section 11.1(a), (b) and (c); provided that (i) reimbursement of Interest Advances (other than Nonrecoverable Advances) shall not cause an additional Interest Shortfall, (ii) reimbursement of Nonrecoverable Advances, together with interest thereon, will be made first from Collateral Principal Collections, and to the extent not reimbursed in full from Collateral Principal Collections, from Collateral Interest Collections and (iii) reimbursement of Nonrecoverable Advances shall be made regardless of whether such reimbursement causes an additional Interest Shortfall. Prior to an Interest Advance becoming a Nonrecoverable Advance, such reimbursement shall not be payable to the extent it would trigger an additional Interest Shortfall and shall be junior in priority to the payment of interest due on the Class A Notes and Class B Notes on such Payment Date, but shall be senior in priority to payment of interest on any other Class of Notes. For purposes of the foregoing, an Interest Advance shall be deemed to be a Nonrecoverable Advance if the Advancing Agent or the Trustee, as applicable, determines that future payments or collections on the Collateral Interests could reasonably be expected to be insufficient to fully reimburse such Interest Advance, plus interest thereon. Amounts used for the reimbursement of Interest Advances and interest thereon shall not be included in the Available Funds for any Payment Date. Notwithstanding the foregoing, the Advancing Agent or the Trustee, as applicable, may opt, in their sole discretion, to defer the reimbursement for Nonrecoverable Advances to a subsequent Payment Date or Payment Dates if such reimbursement would trigger an additional Interest Shortfall. Notwithstanding the foregoing, the Advancing Agent will be permitted (but not obligated) to defer or otherwise structure the timing of recoveries of Nonrecoverable Advances in such manner as the Advancing Agent determines is in the best interest of the holders of the Class A Notes and the Class B Notes, as a collective whole, which may include being reimbursed for Nonrecoverable Advances in installments. In addition, based upon information available at such time, the Advancing Agent or the Trustee, as applicable, shall provide 15 days prior notice to the Collateral Manager, the Trustee and each Rating Agency if an Interest Advance is determined to be a Nonrecoverable Advance and whether or not reimbursement thereof shall be deferred; provided, that the failure to provide such notice shall in no way limit the rights of either of the Trustee or the Advancing Agent to reimburse itself for Nonrecoverable Advances on any Payment Date. 172

ARTICLE XII PURCHASE AND SALE OF COLLATERAL INTERESTS 12.1.

SALE OF COLLATERAL INTERESTS (a)

Sale of Collateral Interests. (1)

Subject to the satisfaction of the conditions specified in Section 10.12 as applicable, if the Collateral Manager, on behalf of the Issuer, pursuant to this Article 12, shall direct the Trustee to sell any Impaired Interest, Credit Risk Interest, Written Down Interest, Buy/Sell Interest, Withholding Tax Interest, CMBS, Real Estate CDO Security, Taxed Collateral Interest, Taxed Property, REIT Debt Security or Participation Interest, the Trustee shall sell in the manner directed by the Collateral Manager, such Impaired Interest, Equity Interest, Credit Risk Interest, Written Down Interest, Buy/Sell Interest, Taxed Collateral Interest, Taxed Property, Withholding Tax Interest, CMBS, Real Estate CDO Security, Taxed Collateral Interest, Taxed Property, REIT Debt Security or Participation Interest.

(2)

Upon the occurrence of an Investment Guidelines Event, the Collateral Manager shall direct the Issuer to sell any Taxed Collateral Interest or Taxed Property within 90 days after such Investment Guidelines Event (or such shorter time period as provided in the Collateral Management Agreement) in accordance with the provisions of the Collateral Management Agreement.

(3)

The Collateral Manager may, in its reasonable discretion, direct the Issuer to sell or otherwise dispose of any Impaired Interest, Credit Risk Interest, Written Down Interest, Buy/Sell Interest, Taxed Collateral Interest, Taxed Property or Withholding Tax Interest. The Collateral Manager shall direct the Issuer to sell or otherwise dispose of any Collateral Interest that is an Equity Interest as soon as practicable after such Collateral Interest becomes an Equity Interest.

Processed and formatted by SEC Watch - Visit SECWatch.com

(4)

The Collateral Manager may direct the Issuer to (i) sell any Buy/Sell Interest at any time if the Sales Proceeds thereof are at least equal to its Principal Balance (adjusted for any Collateral Principal Payments received thereon) or (ii) purchase the corresponding pari passu participation from the related participant at any time, regardless of whether such purchase would occur during the Reinvestment Period or whether Reinvestment Criteria would be satisfied thereafter, so long as the Issuer entered into a binding agreement with the Collateral Manager, any of its Affiliates or any other person qualified in accordance with this Indenture to purchase such corresponding pari passu participation from the Issuer at a purchase price equal to that paid by the Issuer to such participant and such purchaser thereof either (A) has a long term rating by S&P of “A-” or a short term rating by S&P of “A-1”, (B) is a Qualified Institutional Lender or (C) Rating Confirmation from S&P has been received; provided that Rating Confirmation shall be deemed to have been received with respect to the Sellers and any NorthStar Subsidiary, as described in and subject to the terms of, the S&P Letter or with respect to any entities described in any amendments to or renewals of the S&P Letter. 173

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

(5)

In the event of a Redemption, the Collateral Manager shall direct the Trustee to sell Collateral Interests without regard to the foregoing limitations; provided that the Sale Proceeds therefrom and other amounts available therefor will be at least sufficient to pay certain expenses, including all amounts due under any Hedge Agreements, and redeem, in whole but not in part, the Notes at the applicable Redemption Prices; and provided, further, that such Sale Proceeds are used to make such a Redemption.

(6)

The Collateral Manager shall sell any Collateral Interest pursuant to this Section 12 only at a price that, in its judgment, is not substantially less than the market value of such Collateral Interest at the time of such sale.

(7)

So long as no Event of Default has occurred and is continuing, the Collateral Manager, on behalf of the Issuer, may, at any time prior to the end of the Reinvestment Period, direct the Trustee to sell, and the Trustee will sell in the manner directed by the Collateral Manager, (a) any Collateral Interest that is a CMBS, a Real Estate CDO Security, or a REIT Debt Security and in each case is not an Impaired Interest or a Credit Risk Interest and (b) any Participation Interest that is not an Impaired Interest or a Credit Risk Interest (each such sale, a Discretionary Sale) provided that: (i) the aggregate principal balance of such Collateral Interests sold pursuant to such Discretionary Sales for a given calendar year does not exceed 15% of the Collateral Interest Principal Balance at the beginning of that year, (ii) the Collateral Manager believes in good faith that Sale Proceeds from such Discretionary Sale can be reinvested within 30 Business Days after the sale of such Collateral Interest in one or more Substitute Collateral Interests having an aggregate Principal Balance of not less than 100% of the Principal Balance of the Collateral Interest being sold, (iii) after giving effect to such sale and to the purchase of Substitute Collateral Interests with the Sale Proceeds thereof, the Reinvestment Criteria will be met and (iv) such Collateral Manager has not been removed, or voted to be removed, for “cause” as provided under the Collateral Management Agreement.

Reinvestment of Sale Proceeds and Replacement of Collateral Interests. Subject to Section 9.7 above, following the Closing Date and during the Reinvestment Period, subject to the satisfaction of the Eligibility Criteria and the Reinvestment Criteria, the Collateral Manager, acting on behalf of the Issuer, shall use reasonable efforts to cause the Trustee to reinvest Sale Proceeds received at any time from the sale of Collateral Interests that are Impaired Interests, Equity Interests, Credit Risk Interests, Written Down Interests, Buy/Sell Interests, Taxed Collateral Interests, Taxed Properties or Withholding Tax Interests in Substitute Collateral Interests with an aggregate purchase price up to the amount of the Sale Proceeds, and to reinvest Collateral Principal Payments, transfers from the Earn-Out Asset Account and proceeds of Class A-R Draws in Substitute Collateral Interests; provided, however, that prior to any such acquisition of Substitute Collateral Interests by or on behalf of the Issuer in the manner described above, the Reinvestment Criteria are satisfied on the date of such acquisition. Under no circumstances shall Collateral Principal Collections (including Sale Proceeds) be reinvested following the Reinvestment Period, and amounts on deposit in the Earn-Out Asset Account will only be applied to fund Future Advances and for transfer to the Collateral Principal Collection Sub-Account in accordance with Section 10.8. During the Reinvestment Period, Class A-R Draws (and at any time, the amounts on deposit in the 174

Processed and formatted by SEC Watch - Visit SECWatch.com

Earn-Out Asset Account) may be applied to fund Future Advance Amounts prior to making payments on the Notes. (c)

After the Effective Date, within 10 Business Days of purchasing any Substitute Collateral Interest that is not rated by Moody’s, the Collateral Manager shall deliver to Moody’s a set of asset and underwriting materials in form and substance reasonably acceptable to Moody’s (the Reinvestment Asset Information) describing such Substitute Collateral Interest. After receiving the Reinvestment Asset Information, Moody’s may provide an estimated rating (a Moody’s Estimated Rating) to the Collateral Manager with respect to such Substitute Collateral Interest. If the Collateral Manager receives a Moody’s Estimated Rating that is lower than the estimated tranched rating permitted pursuant to clause (ii) of the definition of Moody’s Rating, then the Collateral Manager shall calculate the Moody’s Maximum Weighted Average Rating Factor Test using such Moody’s Estimated Rating. For all other purposes, the Moody’s Maximum Weighted Average Rating Factor Test will be calculated using the Moody’s Rating. In the event that such calculation (using the Moody’s Estimated Rating) indicates that the purchase of the related Substitute Collateral Interest caused the Moody’s Post-Acquisition Compliance Test to not be satisfied (a Moody’s PostAcquisition Compliance Test Failure), the Collateral Manager is permitted to take any of the following actions to cause the Moody’s Post-Acquisition Compliance Test to be satisfied: (i) direct the Trustee to sell such Substitute Collateral Interest (or a Participation Interest therein) that caused the Moody’s Post-Acquisition Compliance Test Failure, at a price at least equal to the price paid by the Issuer for the Substitute Collateral Interest, plus any fees and expenses attributable to such sale, (ii) instruct the Trustee to sell any other Collateral Interest (or a Participation Interest therein) (provided that such sale price may only be less than the principal balance thereof if the aggregate net discount for such sale and all prior sales pursuant to this Section 12.2(c) does not exceed the aggregate principal balance of the Income Notes and any outstanding Class H Notes, Class J Notes and Class K Notes) and/or (iii) instruct the Trustee to purchase additional Substitute Collateral Interests (or a Participation Interest therein), subject to the Reinvestment Criteria, that would result in satisfaction of the Moody’s Post-Acquisition Compliance Test. If the Moody’s Post-Acquisition Compliance Test is not satisfied within 135 days of a finding of a Moody’s Post-Acquisition Compliance Test Failure, then until such time as the Moody’s PostAcquisition Compliance Test is satisfied, the Issuer may only purchase a subsequent Substitute Collateral Interest if it is rated by Moody’s. For the avoidance of doubt, any Collateral Interest sold pursuant to clauses (i) or (ii) above will not be considered an Impaired Interest, Written Down Interest, Withholding Tax Interest, Buy/Sell Interest, Taxed Collateral Interest, Taxed Property, Credit Risk Interest or Discretionary Sale. Notwithstanding anything described in this Indenture to the contrary, the Issuer will have the right to effect any transaction which has been consented to in writing by holders of Rated Notes evidencing 100% of the aggregate outstanding principal amount of each Class of Notes and of which each Rating Agency has been notified.

12.2.

PORTFOLIO CHARACTERISTICS

Except as provided in Section 12.3(c), a security will be eligible for inclusion in the Collateral as a Pledged Collateral Interest only if, as evidenced by an Officer’s certificate from the Collateral Manager 175

Processed and formatted by SEC Watch - Visit SECWatch.com

to the Trustee, each of the following eligibility criteria is satisfied immediately after the Issuer Grants such Collateral Interest to the Trustee (collectively, the Eligibility Criteria): (a)

it is issued by an issuer incorporated or organized under the laws of the United States, the Bahamas, Bermuda, the Cayman Islands, the British Virgin Islands, the Netherlands Antilles, Jersey, Guernsey or Luxembourg;

(b)

it is U.S. Dollar-denominated and all cash flows thereunder are to be paid in U.S. Dollars, and it is not convertible into, or payable in, any other currency; provided, however, the requirements of this Section (b) will not be applicable if Rating Confirmation is obtained;

(c)

it is one of the Specified Types of Collateral Interests;

(d)

it has an S&P Rating (which rating does not include a “p”, “pi”, “q”, “t” or “r” subscript) and a Moody’s Rating;

(e)

either (A) the Issuer is a Qualified REIT Subsidiary and its acquisition would not cause the Owner REIT to fail to qualify as a REIT under the Code or (B) the acquisition, ownership, enforcement and disposition of such security will not cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or otherwise to be subject to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation (other than as attributable to property received in connection with a foreclosure, as permitted under the Transaction Documents);

(f)

the payments on such security are not subject to withholding tax unless the issuer thereof or the obligor thereon is required to make additional payments sufficient to cover any withholding tax imposed at any time on payments made to the Issuer with respect thereto (for the avoidance of doubt, this clause will not apply to any commitment fees with respect to the unfunded portion of any Earn-Out Assets);

(g)

its acquisition would not cause the Issuer or the pool of Collateral to be required to register as an investment company under the Investment Company Act;

(h)

it is not an obligation that is ineligible under its Underlying Instruments to be purchased by the Issuer and pledged to the Trustee, and in the case of a Mezzanine Loan, a Subordinate Mortgage Loan Interest, a Credit Lease Loan, a Tenant Lease Loan Interest, a Participation Interest or a Commercial Mortgage Loan (not including and Commercial Mortgage Loan underlying or comprising a Collateral Interest), it is not ineligible under its Underlying Instruments to be purchased by the Underlying Trust;

(i)

it is not an insurance-linked debt instrument containing a provision pursuant to which the issuer’s obligation to pay interest or principal is deferred or forgiven in the event of loss due to certain natural catastrophes specified in the Underlying Instruments;

(j)

it provides for the payment of principal (or, in the case of Preferred Equity Securities, distributions attributable to the return of capital by their governing documents) at not less than par upon maturity;

(k)

(A) its Underlying Instruments do not obligate the Issuer to make any future advances or any other payment except the purchase price thereof (except for obligations to provide for Future Advance Amounts in the case of Earn-Out Assets) and (B) in the case of an Earn-Out 176

Processed and formatted by SEC Watch - Visit SECWatch.com

Asset, the sum of (1) amounts on deposit in the Earn-Out Asset Account at such time (after giving effect to any deposit by the Issuer with respect to such Earn-Out Asset) and (2) the Aggregate Class A-R Undrawn Amount shall equal at all times an amount sufficient to meet the Total Unfunded Future Advance Amount (including the Future Funding Obligations related to such Earn-Out Asset) in full; (l)

it is not an obligation with respect to which, in the reasonable judgment of the Collateral Manager, the timely repayment of principal and interest is subject to substantial non-credit related risks;

(m)

it is not an Interest Only Security;

(n)

it is not an obligation issued by an Emerging Market Issuer;

(o)

it is not an obligation that has, at the time of purchase, any deferred or capitalized interest unless by its terms it was scheduled to defer or capitalize interest;

(p)

it is not an obligation that, at the time it is purchased, is a Credit Risk Interest, an Impaired Interest, a Written Down Interest or a Deferred Interest PIK Bond;

(q)

it is not a Synthetic Security;

(r)

If it is a Participation Interest in a Commercial Mortgage Loan, the entity that created such participation interest is either (A) a special purpose entity meeting S&P’s then current published criteria for bankruptcy-remote special purpose entities, (B) a Qualified Institutional Lender or (C) an entity with respect to which Rating Confirmation has been received; provided that Rating Confirmation shall be deemed to have been received with respect to the Sellers and any NorthStar Subsidiary, as described in, and subject to the terms of, the S&P Letter or with respect to any entities described in any amendments to or renewals of the S&P Letter, provided further that a securitization trust, a CDO issuer or a similar securitization vehicle shall be deemed to be a special purpose entity for purposes of this section (r) of the Eligibility Criteria;

(s)

at the time the obligation is purchased by the Issuer: (1)

it is not an obligation issued by an issuer located in a country that imposes foreign exchange controls that effectively limit the availability or use of U.S. Dollars to make when due the scheduled payments of principal and interest on such security;

(2)

it is not, and does not provide for conversion or exchange into, Margin Stock at any time over its life;

(3)

it is not an obligation which (1) was incurred in connection with a merger, acquisition, consolidation or sale of all or substantially all of the assets of a person or entity or similar transaction and (2) by its terms is required to be repaid within one year of the incurrence thereof with proceeds from additional borrowings or other refinancing;

(4)

it is not the subject of (1) any offer by the issuer of such obligation or by any other person made to all of the holders of such obligation to purchase or 177

Processed and formatted by SEC Watch - Visit SECWatch.com

otherwise acquire such obligation (other than pursuant to any redemption in accordance with the terms of the related Underlying Instruments) or to convert or exchange such obligation into or for cash, securities or any other type of consideration or (2) any solicitation by an issuer of such obligation or any other person to amend, modify or waive any provision of such obligation or any related Underlying Instrument, and has not been called for redemption; (5)

it is not an Equity Interest;

(6)

except with respect to Preferred Equity Securities, it is not an obligation that by the terms of its Underlying Instruments provides for conversion or exchange (whether mandatory or at the option of the issuer or the holder thereof) into equity capital at any time prior to its maturity;

(7)

it is not a financing by a debtor-in-possession in any insolvency proceeding;

(8)

it is not a first loss tranche of any securitization that does not have (a) an S&P Rating (as defined in clause (i) of the definition of S&P Rating) or (b) a Moody’s Rating (as defined in clause (i) of the definition of Moody’s Rating), that in either case addresses the obligation of the obligor (or guarantor, if applicable) to pay principal of and interest on the relevant Collateral Interest in full, which ratings are monitored on an ongoing basis by the relevant Rating Agency;

(9)

it is not an obligation that provides for the payment of interest (or, in the case of Preferred Equity Securities, dividends or other distributions) in cash less frequently than semi-annually;

(10)

(A) if it is a Commercial Mortgage Loan, a Mezzanine Loan, a Subordinate Mortgage Loan Interest, a Credit Lease Loan or a Tenant Lease Loan Interest, no commercial mortgage loan underlying, securing or constituting such Collateral Interest has a maturity date (including any extension option) that is later than 10 years prior to the Stated Maturity Date; and (B) if it is a CMBS, such CMBS (without regard to the maturities of any collateral underlying such CMBS) does not have a rated final maturity date later than five years after the Stated Maturity Date; provided that, with respect to any such CMBS that has a stated maturity or a rated final distribution date scheduled to occur later than the Stated Maturity Date, such CMBS is rated at least “A3” by Moody’s (and, if rated “A3”, it is not on credit watch with negative implications); (C) if it is a REIT Debt Security, such REIT Debt Security does not have a rated final maturity date later than the Stated Maturity Date; (D) if it is a Preferred Equity Security, the date (after giving effect to all permissible extensions thereof) by which distributions on such Preferred Equity Security attributable to the return of capital by its governing documents are required to be made is not later than the Stated Maturity Date (after giving effect to all anticipated settlement concerns in connection with such return of capital); and (E) if it is a Real Estate CDO Security, it does not have a stated maturity later than five years after the Stated Maturity Date; provided that, with respect to any such Real Estate CDO Security that has a stated maturity or a rated final distribution date scheduled to occur later than the Stated Maturity Date, such Real Estate CDO Security is rated at least “Aa2” by Moody’s (and, if rated “Aa2”, it is not on credit watch with negative implications); except that, up to 3% of the aggregate Principal Balance of all initial Collateral Interests may 178

Processed and formatted by SEC Watch - Visit SECWatch.com

consist of Real Estate CDO Securities with a Moody’s Rating of below “Aa2” and with a stated maturity not more than five years after the Stated Maturity Date; and (11)

if it is a Deemed Floating Rate Collateral Interest, the Deemed Floating Asset Hedge entered into with respect to such Deemed Floating Rate Collateral Interest conforms to all requirements set forth in the definition of “Deemed Floating Asset Hedge;”

(t) if it is a (1) Subordinate Mortgage Loan Interest and the related senior mortgage loan is not otherwise serviced in connection with a commercial mortgage backed securitization transaction, it is serviced in accordance with the related participation agreement, intercreditor agreement or servicing agreement the terms of which are substantially similar to the terms of servicing agreements entered into in connection with CMBS transactions rated by S&P or a servicing agreement with respect to which Rating Confirmation from S&P has been received and (2) Credit Lease Loan, a Tenant Lease Loan Interest, a Preferred Equity Security, a Mezzanine Loan or a Commercial Mortgage Loan (not including any Commercial Mortgage Loan underlying or comprising a Collateral Interest), or a Participation Interest therein, it is serviced (or in the case of a Mezzanine Loan, a Preferred Equity Security or a Commercial Mortgage Loan acquired by the Issuer on the Closing Date or within 60 days thereafter, will be serviced within 60 days of the Closing Date) in accordance with a servicing agreement the terms of which are substantially similar to the terms of servicing agreements entered into in connection with CMBS transactions rated by S&P or a servicing agreement with respect to which Rating Confirmation from S&P has been received; (u) if it is a Mezzanine Loan, a Subordinate Mortgage Loan Interest, a Commercial Mortgage Loan (other than a Credit Lease Loan or a Tenant Lease Loan Interest), or a Participation Interest therein, such Collateral Interest shall have the benefit of (i) either (A) representations and warranties made by the related Seller of such Collateral Interest (with such exceptions, qualifications and omissions as the Collateral Manager shall reasonably determine) substantially similar to either (x) the representations and warranties set forth on Schedule J- 1 hereto or (y) in the case of a Mezzanine Loan or a Subordinate Mortgage Loan Interest, the representations and warranties made by the related Seller of such Collateral Interest in connection with the CMBS transaction including the related senior interest in such Collateral Interest (provided that such CMBS transaction is rated by S&P) or (B) representations and warranties with respect to which Rating Confirmation from S&P has been received and (ii) remedies for the breach of such representations and warranties or the existence of document defects that are either (A) substantially similar to the remedies provided in the Asset Transfer Agreements or (B) with respect to which Rating Confirmation from S&P has been received; (v) if it is a Credit Lease Loan or a Tenant Lease Loan Interest or a Participation Interest therein, such Collateral Interest shall have the benefit of (i) either (A) representations and warranties made by the related Seller of such Collateral Interest (with such exceptions, qualifications and omissions as the Collateral Manager shall reasonably determine) substantially similar to the representations and warranties set forth on Schedule J-1 (to the extent such representations and warranties are applicable to Credit Lease Loans and Tenant Lease Loan Interests) and Schedule J-2 hereto or (B) representations and warranties with respect to which Rating Confirmation from S&P has been received and (ii) remedies for the breach of representations and warranties or the existence of document defects that are either (A) substantially similar to the remedies provided in the Asset Transfer Agreements or (B) with respect to which Rating Confirmation from S&P has been received; 179

(w) if it is a Preferred Equity Security, such Collateral Interest shall have the benefit of (i) either (A) representations and warranties made by the related Seller of such Collateral Interest (with such exceptions, qualifications and omissions as the Collateral Manager shall reasonably determine) substantially similar to the representations and warranties set forth on Schedule J-3 hereto or (B) representations and warranties with respect to which Rating Confirmation from S&P has been received and (ii) remedies for the breach of representations and warranties or the existence of document defects that are either (A) substantially similar to the remedies provided in the Asset Transfer Agreements or (B) with respect to which Rating Confirmation from S&P has been received; and (x) if it is a Collateral Interest acquired after the Closing Date, it will be transferred (i) from a Seller to the Depositor pursuant to an agreement substantially similar to the Asset Transfer Agreements and (ii) from the Depositor (in the case of a CMBS, Real Estate CDO Security or REIT Debt Security) or the Underlying Trustee (in the case of a Trust Certificate) to the Issuer pursuant to an agreement substantially similar to the Bill of Sale; provided that notwithstanding anything to the contrary herein, the Issuer may, while attempting to dispose of property acquired in foreclosure or similar circumstances, make an election under Section 882(d) of the Code to treat the income related to real property located in the United States as income that is effectively connected with a U.S. trade or business. 12.3.

CONDITIONS APPLICABLE TO ALL TRANSACTIONS INVOLVING SALE OR GRANT (a)

Any transaction effected under Section 5, Section 9, Section 10.2 or Section 12.1 shall be conducted on an arm’s length basis and if effected with the Issuer, the Trustee, the Collateral Manager or any Affiliate of any of the foregoing, shall be effected in a secondary market transaction on terms at least as favorable to the Rated Noteholders as would be the case if such Person were not so Affiliated; provided that any disposition of a Collateral Interest in accordance with Section 12.1 shall be deemed to comply with this Section 12.3(a). The Trustee shall have no responsibility to oversee compliance with this clause by the other parties.

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

Upon any purchase or substitution pursuant to this Section 12, all of the Issuer’s right, title and interest to the Pledged Security or Securities shall be, and hereby is, Granted to the Trustee pursuant to this Indenture, such Pledged Security or Securities shall be registered in the name of the Trustee, and, if applicable, the Trustee shall receive such Pledged Security or Securities. The Trustee shall receive, not later than the date of delivery of any Pledged Security pursuant to a purchase under this Section 12, (a) an Officer’s certificate of the Collateral Manager certifying (1) compliance with the Reinvestment Criteria in accordance with Section 12.1(b), (2) that the Collateral Interest to be sold constitutes an Impaired Interest, Credit Risk Interest, Written Down Interest, Buy/Sell Interest, Taxed Collateral Interest, Taxed Property or Withholding Tax Interest, or upon the occurrence of an Investment Guidelines Event, Preferred Equity Security and (3) that any security to be purchased satisfies the definition of Collateral Interest and (b) an Officer’s certificate of the Collateral Manager on behalf of the Issuer containing the statements set forth in Section 3.2(b)(2) through (4), (6) and (7).

(c)

Notwithstanding anything contained in this Section 12 to the contrary, the Issuer shall, subject to Section 12.3(d), have the right to effect any transaction to which the Initial Hedge Counterparty, Holders of Rated Notes evidencing 100% of the Aggregate 180

Processed and formatted by SEC Watch - Visit SECWatch.com

Outstanding Amount of each Class of Rated Notes, and each Income Noteholder has consented, and of which each Rating Agency has been notified in advance. (d)

Except as specifically provided in this Indenture, at any time at which the Issuer is not a Qualified REIT Subsidiary, the Issuer may not (i) engage in any business or activity that would cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or (ii) acquire or hold any asset that is an equity interest in an entity that is treated as a partnership engaged in a U.S. trade or business for U.S. federal income tax purposes or the acquisition or ownership of which otherwise would subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation. ARTICLE XIII SECURED PARTIES’ RELATIONS

13.1.

SUBORDINATION (a)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes agree for the benefit of the Holders of the Class A Senior Notes that the Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Senior Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Senior Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived, the Class A Senior Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Senior Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Senior Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Senior Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(b)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes agree for the benefit of the Holders of the Class A Notes that the Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived, the Class A Notes shall be paid in full in Cash or, to the extent a Majority of the Class A 181

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the CoIssuer agree, for the benefit of the Holders of the Class A Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (c)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes agree for the benefit of the Holders of the Class A Notes and Class B Notes that the Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes and Class B Notes the Subordinate Interests) shall be subordinate and junior to the Class A Notes and Class B Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived, the Class A Notes and Class B Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes and Class B Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes and Class B Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes and Class B Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(d)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes and Class C Notes that the Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes and Class C Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes and Class C Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes and Class C Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes, Class B Notes and Class C Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes and Class C Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B 182

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes and Class C Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (e)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes and Class D Notes that the Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes and Class D Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes and Class D Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes and Class D Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, Class B Notes, Class C Notes and Class D Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes and Class D Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes and Class D Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(f)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes that the Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes shall be paid in full in Cash or, to the extent a Majority of each of Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes and not before one year and one day has elapsed since 183

Processed and formatted by SEC Watch - Visit SECWatch.com

such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (g)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class G Notes, Class H Notes, Class J Notes and Class K Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes that the Class G Notes, Class H Notes, Class J Notes and Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the CoIssuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(h)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class H Notes, Class J Notes and Class K Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes that the Class H Notes, Class J Notes and Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B 184

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (i)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class J Notes and Class K Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes that the Class J Notes and the Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(j)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class K Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes that the Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and 185

Processed and formatted by SEC Watch - Visit SECWatch.com

the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. 13.2.

STANDARD OF CONDUCT

In exercising any of its or their voting rights, rights to direct and consent or any other rights as a Secured Party under this Indenture, subject to the terms and conditions of this Indenture, including Section 5.9, a Secured Party or Secured Parties shall not have any obligation or duty to any Person or to consider or take into account the interests of any Person and shall not be liable to any Person for any action taken by it or them or at its or their direction or any failure by it or them to act or to direct that an action be taken, without regard to whether such action or inaction benefits or adversely affects any Secured Party, the Issuer, or any other Person. ARTICLE XIV MISCELLANEOUS 14.1.

FORM OF DOCUMENTS DELIVERED TO TRUSTEE

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Manager may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Authorized Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Manager or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer, the Co-Issuer, the Collateral Manager or any other Person, stating that the information with respect to such factual matters is in the possession of the Issuer, the Co-Issuer, the Collateral Manager or such other Person, unless such Authorized Officer of the Issuer, the Co-Issuer or the Collateral Manager or such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Any Opinion of Counsel may also be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Manager, stating that the information with respect to such matters is in the possession of the Issuer, the Co-Issuer or the Collateral Manager, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. 186

Processed and formatted by SEC Watch - Visit SECWatch.com

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture it is provided that the absence of the occurrence and continuation of a Default is a condition precedent to the taking of any action by the Trustee at the request or direction of the Issuer or the Co-Issuer, then notwithstanding that the satisfaction of such condition is a condition precedent to the Co-Issuers’ rights to make such request or direction, the Trustee shall be protected in acting in accordance with such request or direction if it does not have actual knowledge of the occurrence and continuation of such Default as provided in Section 6.1(d). 14.2.

14.3.

ACTS OF RATED NOTEHOLDERS (a)

Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Rated Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Rated Noteholders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action or actions embodied therein and evidenced thereby) are herein sometimes referred to as the Act of the Rated Noteholders, signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Co-Issuers, if made in the manner provided in this Section 14.2.

(b)

The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Trustee deems sufficient.

(c)

The principal amount and registered numbers of Rated Notes held by any Person, and the date of his holding the same, shall be proved by the Note Register.

(d)

Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Rated Notes shall bind the Holder (and any transferee thereof) of such Rated Note and of every Rated Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Co-Issuers in reliance thereon, whether or not notation of such action is made upon such Rated Note.

NOTICES, ETC., TO TRUSTEE, THE CO-ISSUERS AND THE RATING AGENCIES

Any request, demand, authorization, direction, notice, consent, waiver or Act of Rated Noteholders or other documents provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a)

the Trustee, the PAA Issued Note Paying Agent, the Class A-R Note Agent by any Rated Noteholder or by the Issuer or the Co-Issuer shall be sufficient for every purpose hereunder if in writing and sent by facsimile in legible form and confirmed by overnight courier service guaranteed next day delivery to the Trustee or the PAA Issued Note Paying Agent addressed to it at 9062 Old Annapolis Road, Columbia, Maryland 21045, Attn: CDO Trust Services—N-Star REL CDO VI, telephone number 410-884-2000, fax 187

Processed and formatted by SEC Watch - Visit SECWatch.com

number 410-715-3748, with a copy to P.O. Box 98, Columbia Maryland 21046 or at any other address previously furnished in writing to the Co-Issuers or Rated Noteholder by the Trustee, PAA Issued Note Paying Agent or the Class A-R Note Agent; (b)

the Issuer by the Trustee or by any Rated Noteholder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, to the Issuer addressed to it at c/o Walkers SPV Limited, P.O. Box 908GT, Walker House, Mary Street, George Town, Grand Cayman, Cayman Islands, Attention: The Directors, or at any other address previously furnished in writing to the Trustee by the Issuer;

(c)

the Co-Issuer by the Trustee or by any Rated Noteholder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, to the Co-Issuer addressed to it at c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19711, Attention: Donald Puglisi, Esq., facsimile no. 302-738-7210, or at any other address previously furnished in writing to the Trustee by the Co-Issuer; or

(d)

the Rating Agencies by the Co-Issuers or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, (i) in the case of Moody’s, addressed to Moody’s Investors Service, Inc., 99 Church Street, New York, New York 10007 facsimile no. (212) 553-7820, Attention: NorthStar REL CDO VI CBO CLO Monitoring (email: cdomonitoring@moody’s.com); (ii) in the case of S&P, addressed to S&P, 55 Water Street, 41st Floor, New York, New York, 10041, Attention: CDO Surveillance and all Note Valuation Reports shall be sent to S&P electronically at [email protected]; and (iii) in the case of Fitch, addressed to Fitch, Inc., One State Street Plaza, New York, New York 10004, telecopy No. (212) 908-0500, Attention: Commercial Real Estate Loan CDOs, Performance Analytics (or by electronic mail at [email protected] and [email protected]) or such other address that Fitch shall designate in the future;

(e)

the Collateral Manager by the Co-Issuers or by the Trustee or a Majority of the Rated Notes, or by the Collateral Administrator shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and sent by facsimile in legible form and confirmed by overnight courier service guaranteed next day delivery, or by electronic mail (where expressly provided herein) to the Collateral Manager addressed to it at the address specified in the Collateral Management Agreement or at any other address previously furnished in writing to the Co-Issuers or the Trustee by the Collateral Manager;

(f)

the PAA Issued Note Paying Agent by the Trustee in writing sent by facsimile confirmed by overnight courier guaranteed next day delivery;

(g)

Wachovia Capital Markets, LLC by the Co-Issuers, the Collateral Manager or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by telecopy in legible form, to Wachovia Capital Markets, 188

Processed and formatted by SEC Watch - Visit SECWatch.com

LLC addressed to Wachovia Capital Markets, LLC., 375 Park Avenue, New York, New York 10152, Attention: Structured Credit Products Group; (h)

to the Repository by the Issuer pursuant to this Indenture shall be made available to the Repository by electronic mail as a pdf (portable document format) file to CDO Library, c/o The Bond Market Association, 360 Madison Avenue (18th Floor), New York, NY 10017; Electronic mail address: [email protected]; and

(i)

each Hedge Counterparty by the Co-Issuers, the Collateral Manager or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by telecopy in legible form, to the address set forth in the related Hedge Agreement.

Delivery of any request, demand, authorization, direction, notice, consent, waiver or Act of Rated Noteholders or other documents made as provided above will be deemed effective: (i) if in writing and delivered in person or by overnight courier service, on the date it is delivered; (ii) if sent by facsimile transmission, on the date that transmission is received by the recipient in legible form (as evidenced by the sender’s written record of a telephone call to the recipient in which the recipient acknowledged receipt of such facsimile transmission); and (iii) if sent by mail, on the date that mail is delivered or its delivery is attempted; in each case, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Business Day. 14.4.

NOTICES AND REPORTS TO RATED NOTEHOLDERS; WAIVER

Except as otherwise expressly provided herein, where this Indenture provides for a report to Holders or for a notice to Holders of Rated Notes of any event, such notice shall be sufficiently given to Holders of Rated Notes if in writing and mailed, first-class postage prepaid, to each Holder of a Rated Note affected by such event, at the address of such Holder as it appears in the Note Register, not earlier than the earliest date and not later than the latest date, prescribed for the giving of such report or notice and such report or notice shall be in the English language. Notwithstanding any provision to the contrary contained herein or in any agreement or document related hereto, any report, statement or other information to be provided by the Trustee may be provided by providing access to the Trustee’s website containing such information. Such reports and notices will be deemed to have been given on the date of such mailing. The Trustee will deliver to the Holder of any Rated Note shown on the Note Register any readily available information or notice requested to be so delivered, at the expense of the Issuer. Neither the failure to mail any notice, nor any defect in any notice so mailed, to any particular Holder of a Rated Note shall affect the sufficiency of such notice with respect to other Holders of Rated Notes. Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Rated Noteholders shall be filed with the Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. 189

In the event that, by reason of the suspension of the regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Rated Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. 14.5.

EFFECT OF HEADINGS AND TABLE OF CONTENTS The Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

14.6.

SUCCESSORS AND ASSIGNS

All covenants and agreements in this Indenture by the Co-Issuers shall bind their respective successors and assigns, whether so expressed or not. Written notice of any assignment shall be promptly provided by the Issuer to the Holders of Rated Notes, each Hedge Counterparty and each Rating Agency. 14.7.

SEVERABILITY

In case any provision in this Indenture or in the Rated Notes shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 14.8.

BENEFITS OF INDENTURE The Rated Noteholders, the Initial Hedge Counterparty and each Income Noteholder is an express third-party beneficiary of this

Processed and formatted by SEC Watch - Visit SECWatch.com

Indenture. Nothing in this Indenture or in the Rated Notes, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the Rated Noteholders, the Initial Hedge Counterparty and each Income Noteholder, any benefit or any legal or equitable right, remedy or claim under this Indenture. 14.9.

GOVERNING LAW

This Indenture and each Rated Note shall be construed in accordance with, and this Indenture and each Rated Note and all matters arising out of or relating in any way whatsoever (whether in contract, tort or otherwise) to this Indenture or any Rated Note shall be governed by, the law of the State of New York. 14.10.

SUBMISSION TO JURISDICTION

The Co-Issuers hereby irrevocably submit to the non-exclusive jurisdiction of the Supreme Court of the State of New York sitting in Manhattan and the U.S. District Court for the Southern District of New York, and any court of appeal therefrom, in any action or proceeding arising out of or relating to the Rated Notes or this Indenture, and the Co-Issuers hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in such New York State or federal court. The Co-Issuers hereby irrevocably waive, to the fullest extent that they may legally do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The CoIssuers hereby irrevocably appoint and designate CT Corporation, 111 Eighth Avenue, 13th Floor, New York, New York 10011, or any other Person having and maintaining a place of business in the State of New York whom the Co-Issuers may from time to time hereafter designate as the true and lawful attorney and duly authorized agent for acceptance of service of legal process of the Co-Issuers. The Co-Issuers agree that a final 190

Processed and formatted by SEC Watch - Visit SECWatch.com

judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 14.11.

COUNTERPARTS

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 14.12.

WAIVER OF JURY TRIAL

EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING. Each party hereby (i) certifies that no representative, agent or attorney of the other has represented, expressly or otherwise, that the other would not, in the event of a Proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it has been induced to enter into this Indenture by, among other things, the mutual waivers and certifications in this paragraph. 14.13.

JUDGMENT CURRENCY

This is an international financing transaction in which the specification of Dollars (the Specified Currency), and the specification of the place of payment, as the case may be (the Specified Place), is of the essence, and the Specified Currency shall be the currency of account in all events relating to payments of or on the Rated Notes. The payment obligations of the Co-Issuers under this Indenture and the Rated Notes shall not be discharged by an amount paid in another currency or in another place, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on conversion to the Specified Currency and transfer to the Specified Place under normal banking procedures does not yield the amount of the Specified Currency at the Specified Place. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder or the Rated Notes in the Specified Currency into another currency (the Second Currency), the rate of exchange which shall be applied shall be that at which in accordance with normal banking procedures the Trustee could purchase the Specified Currency with the Second Currency on the Business Day next preceding that on which such judgment is rendered. The obligation of the Co-Issuers in respect of any such sum due from the Co-Issuers hereunder shall, notwithstanding the rate of exchange actually applied in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by the Trustee of any sum adjudged to be due hereunder or under the Rated Notes in the Second Currency the Trustee may in accordance with normal banking procedures purchase and transfer to the Specified Place the Specified Currency with the amount of the Second Currency so adjudged to be due; and the Co-Issuers hereby, as a separate obligation and notwithstanding any such judgment (but subject to the Priority of Payments as if such separate obligation in respect of each Class of Rated Notes constituted additional principal owing in respect of such Class of Rated Notes), agree to indemnify the Trustee and each Rated Noteholder against, and to pay the Trustee or such Rated Noteholder, as the case may be, on demand in the Specified Currency, any difference between the sum originally due to the Trustee or such Rated Noteholder, as the case may be, in the Specified Currency and the amount of the Specified Currency so purchased and transferred. 14.14.

CONFIDENTIAL TREATMENT OF DOCUMENTS

Except as otherwise provided in this Indenture or as required by law, this Indenture and any Hedge Agreement shall be treated by the Trustee and the Collateral Manager as confidential. The Trustee shall provide a copy of this Indenture to the PAA Issued Note Paying Agent and to any Holder of a beneficial interest in any Rated Note upon written request therefor certifying that it is such a Holder. 191

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE XV Assignment of Agreements, Etc. 15.1.

ASSIGNMENT

The Issuer, in furtherance of the covenants of this Indenture and as security for the Rated Notes and amounts payable to the Rated Noteholders hereunder and the performance and observance of the provisions hereof, hereby assigns, transfers, conveys and sets over to the Trustee, for the benefit of the Secured Parties, all of the Issuer’s estate, right, title and interest in, to and under the Corporate Services Agreement, the Collateral Management Agreement, the Asset Transfer Agreements and any Hedge Agreement into which the Issuer may enter, including (i) the right to give all notices, consents and releases thereunder, (ii) the right to give all notices of termination, including the commencement, conduct and consummation of proceedings at law or in equity, (iii) the right to receive all notices, accountings, consents, releases and statements thereunder and (iv) the right to do any and all other things whatsoever that the Issuer is or may be entitled to do thereunder; provided that nothing herein shall obligate the Trustee to determine independently whether “cause” exists for the removal of the Collateral Manager pursuant to the Collateral Management Agreement. For the avoidance of doubt, in no event shall the Trustee be required to perform the obligations of the Collateral Manager under the Collateral Management Agreement. 15.2.

NO IMPAIRMENT

The assignment made hereby is executed as collateral security, and the execution and delivery hereby shall not in any way impair or diminish the obligations of the Issuer under the provisions of the Corporate Services Agreement or, the Collateral Management Agreement. 15.3.

TERMINATION, ETC.

Upon the redemption and cancellation of the Rated Notes and the payment of all other Secured Obligations and the release of the Collateral from the lien of this Indenture, this assignment and all rights herein assigned to the Trustee for the benefit of the Secured Parties shall cease and terminate and all the estate, right, title and interest of the Trustee in, to and under the Corporate Services Agreement and the Collateral Management Agreement shall revert to the Issuer and no further instrument or act shall be necessary to evidence such termination and reversion. 15.4.

ISSUER AGREEMENTS, ETC

The Issuer represents that it has not executed any other assignment of the Collateral Administration Agreement or the Collateral Management Agreement. The Issuer agrees that this assignment is irrevocable, and that it will not take any action which is inconsistent with this assignment or make any other assignment inconsistent herewith. The Issuer will, from time to time upon the request of the Trustee, execute all instruments of further assurance and all such supplemental instruments with respect to this assignment as the Trustee may reasonably specify. 192

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE XVI HEDGE AGREEMENTS 16.1.

HEDGE AGREEMENTS (a)

The Issuer may, after the Closing Date, enter into one or more Hedge Agreements (including one or more Deemed Floating Asset Hedges) with Hedge Counterparties as the Issuer may elect in its sole discretion, in each case (i) subject to Rating Confirmation and (ii) with the delivery to the Issuer of an Opinion of Counsel to the Hedge Counterparty; provided that the Issuer will not be required to obtain Rating Confirmation in connection with entering into any Deemed Floating Asset Hedges which are Form-Approved Hedge Agreements with a Hedge Counterparty that satisfies the Hedge Counterparty Ratings Requirement.

(b)

The Issuer shall assign such Hedge Agreement to the Trustee pursuant to Article 15 hereof.

(c)

The Trustee shall, on behalf of the Issuer and in accordance with the Note Valuation Report, pay amounts due to any Hedge Counterparty under any Hedge Agreement on any Payment Date in accordance with Section 11.1 and Section 10.5(a)(5).

(d)

Upon the entry of the Issuer into a Hedge Agreement, the Trustee shall cause the Custodian to establish a segregated, noninterest bearing Securities Account which shall be designated as a Hedge Counterparty Collateral Account with respect to the Hedge Counterparty in respect of which the Trustee shall be the Entitlement Holder and which the Trustee shall hold in trust for the benefit of the Secured Parties. The Trustee shall deposit all collateral received from such Hedge Counterparty under the related Hedge Agreement in such Hedge Counterparty Collateral Account. Any and all funds at any time on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be held in trust by the Trustee for the benefit of the Secured Parties subject to the rights and interests of the related Hedge Counterparty under the related Hedge Agreement. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be (i) for application to obligations of the related Hedge Counterparty to the Issuer under the Hedge Agreement that are not paid when due (whether when scheduled or upon early termination) or (ii) to return collateral to the related Hedge Counterparty when and as required by the related Hedge Agreement in each case upon the direction of the Issuer pursuant to an Issuer Order. No assets credited to any Hedge Counterparty Collateral Account shall be considered an asset of the Issuer for purposes of any of the Coverage Tests or any Redemption unless and until the Issuer or the Trustee on its behalf is entitled to foreclose on such assets in accordance with the terms of the Hedge Agreement.

(e)

Upon its receipt of notice that the Hedge Counterparty has defaulted in the payment when due of its obligations to the Issuer under any Hedge Agreement (or, if earlier, when the Trustee becomes aware of such default) the Trustee shall make a demand on such Hedge Counterparty, or any guarantor, if applicable, demanding payment forthwith. The Trustee shall give notice to the Rated Noteholders and each Rating Agency upon the continuance of the failure by such Hedge Counterparty to perform its obligations for two Business Days following a demand made by the Trustee on such Hedge Counterparty. 193

Processed and formatted by SEC Watch - Visit SECWatch.com

(f)

If at any time any Hedge Agreement becomes subject to early termination due to the occurrence of an “event of default” or a “termination event” (each as defined in the related Hedge Agreement), the Issuer and the Trustee shall take such actions, if any, (following the expiration of any applicable grace period) to enforce the rights of the Issuer and the Trustee thereunder as may be permitted by the terms of such Hedge Agreement and consistent with the terms hereof, and shall apply any proceeds of any such actions (including the proceeds of the liquidation of any collateral pledged by the related Hedge Counterparty) to enter into a replacement Hedge Agreement on substantially identical terms or on such other terms as to which each Rating Agency shall have provided a Rating Confirmation with a substitute Hedge Counterparty with respect to which the Hedge Counterparty Ratings Requirement is satisfied and each Rating Agency shall have provided a Rating Confirmation. If the Issuer is the sole non-Affected Party or the sole non-Defaulting Party with respect to such “event of default” or “termination event”, the Issuer will (with the assistance of the Collateral Manager) obtain quotations with respect to such replacement Hedge Agreement from five prospective counterparties Independent from the Issuer, the Collateral Manager and each other that satisfy the Hedge Counterparty Ratings Requirement and with respect to which a Rating Confirmation shall have been obtained and enter into a replacement Hedge Agreement with the prospective counterparty that provides the lowest quotation (if the Issuer is required to make a payment to such replacement counterparty) or the highest quotation (if such replacement counterparty is required to make a payment to the Issuer).

(g)

The Issuer shall notify each Rating Agency if at any time any Hedge Counterparty is required to post collateral or assign its rights and obligations in and under the related Hedge Agreement.

(h)

No Hedge Agreement may be amended or modified at any time other than to effect the appointment of a substitute Hedge Counterparty or to effect a modification which is of a formal, minor or technical nature or is to correct a manifest error and which, in the opinion of the Trustee (based upon an Opinion of Counsel) would not have a material adverse effect on the interests of Holders of the Rated Notes or of Holders of any Class or Classes of Rated Notes or the Holders of the Income Notes unless the Issuer has obtained Rating Confirmation with respect to such amendment or modification. The Trustee shall provide the Collateral Manager and the Rating Agencies with a copy of any such amendment or modification within 10 Business Days before effecting such modification.

(i)

The Issuer shall enter into a Hedge Agreement only if the payments from the Hedge Counterparty thereunder are not subject to withholding tax or if the related Hedge Counterparty shall be required in accordance with the terms of the related Hedge Agreement to pay additional amounts to the Issuer sufficient to cover any withholding tax due on payments made by such Hedge Counterparty to the Issuer under such Hedge Agreement, subject to the Issuer making customary payee tax representations and providing customary tax documentation. At any time at which the Issuer is not a Qualified REIT Subsidiary, the Issuer shall not enter into any Hedge Agreement the acquisition (including the manner of acquisition), ownership, enforcement or disposition of which would subject the Issuer to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation.

(j)

The Issuer will not terminate any Hedge Agreement without receiving Rating Confirmation with respect to such termination except to the extent otherwise specified herein. 194

ARTICLE XVII CLASS A-R NOTES 17.1.

DRAWS ON THE CLASS A-R NOTES AND CLASS A-R COMMITMENT (a)

Pursuant to the Class A-R Note Purchase Agreement and subject to compliance with the conditions set forth therein and herein, the Issuer (or the Collateral Manager on behalf of the Issuer) may request, and the Holders of the Class A-R Notes (or any Liquidity Provider with respect to such Holders) shall be obligated to make, advances under the Class A-R Notes (each such advance, a Class A-R Draw) to fund, during both the Ramp- Up Period and the Reinvestment Period, Future Advance Amounts relating to Earn-Out Assets and to acquire Substitute Collateral Interests. After the Reinvestment Period and/or the occurrence of an Event of Default, the Issuer will fund Future Advance Amounts relating to Earn-Out Assets from amounts on deposit in the Earn-Out Asset Account. Class A-R Draws may be made on any Business Day from and including the Closing Date to but excluding the Commitment Termination Time (the date of such Class A-R Draw, the Class A-R Draw Date).

(b)

Draws may be made from time to time in accordance with the Class A-R Note Purchase Agreement. The Issuer shall duly and punctually perform each of its obligations under the Class A-R Note Purchase Agreement. The Issuer shall not be required to borrow any amount under the Class A-R Notes at any time unless the applicable servicer or the Collateral Manager, as applicable, has determined that a Future Advance is required under the related Underlying Instruments and the amounts on deposit in the Earn-Out Asset Account, if any, are insufficient to make sure Future Advance. The obligation of the Issuer to make any such Class A-R Draw is subject to the conditions to make a Class A-R Draw in Sections 4.01 and 4.02 of the Note Purchase Agreement.

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

On the Mandatory Class A-R Draw Date, the Issuer (or the Collateral Manager on behalf of the Issuer) shall make a Class AR Draw in an amount equal to the Aggregate Class AR Undrawn Amount, the proceeds of which will be deposited as follows: (i) an amount equal to the Total Net Unfunded Future Advance Amount will be deposited in the Earn- Out Asset Account, and (ii) any remainder will be deposited in the Collection Account as Collateral Principal Collections. Immediately following such draw, the Class A-R Commitments will terminate.

(d)

The Trustee shall (at the direction of the Collateral Manager) upon receipt of the proceeds of any Class A-R Draw, deposit such proceeds into the Earn-Out Asset Account where such amounts shall be applied in accordance with Section 10.8.

(e)

The aggregate Class A-R Commitments shall not exceed the Maximum Class A-R Commitment. To the extent that the principal amount of the Class A-1 Notes is reduced pursuant to a Mandatory Redemption, Special Amortization or redemption in connection with a Rating Confirmation Failure, then Class A-R Commitments will be reduced so that the Class A-R Commitments equal the Class A-R Proportion of the outstanding principal amount of the Class A-1 Notes. The portion of each such reduction of the Class A-R Commitment applicable to each Class A-R Note shall be the pro rata share of the unfunded Class A-R Commitments represented by such Class A-R Note. Thus, the Class A-R Commitments will be reduced by the total amount of principal payments allocable to the Class A-R Notes which are paid to the Class A-R Notes and the remainder deposited 195

Processed and formatted by SEC Watch - Visit SECWatch.com

as follows: (i) an amount equal to the Total Net Unfunded Future Advance Amount will be deposited in the Earn-Out Asset Account, and (ii) any remainder will be deposited in the Collection Account as Collateral Principal Collections. (f)

17.2.

17.3.

Prior to the Commitment Termination Time, the Aggregate Class A-R Undrawn Amount must be at least equal to the Total Net Unfunded Future Advance Amount.

CLASS A-R INTEREST AND CLASS A-R COMMITMENT FEE. (a)

With respect to any Payment Date or Class A-R Prepayment Date, interest on the Class A-R Notes will be payable in arrears in an amount equal to (i) the product of (1) the Average Drawn Class A-R Note Portion during the Interest Period with respect to such Payment Date, (2) the Class A-R Note Interest Rate, and (3) the actual number of days elapsed in such Interest Period, divided by (ii) 360; provided, that interest accrued in respect of amounts borrowed under the Class A-R Notes during the period following the Calculation Date through such Payment Date will be payable (without penalty interest thereon) on the next succeeding Payment Date. Interest on the Class A-R Notes will be computed on the basis of a 360-day year and the actual number of days elapsed. Interest will be payable to the Holders of the Class A-R Notes, pro rata, based on their Class A-R Interest Allocation Percentage.

(b)

The Class A-R Commitment Fee will be payable in arrears on each Payment Date and will rank pari passu with the payment of interest on the Class A Senior Notes. Interest at the Class A-R Note Interest Rate will accrue on any portion of the Class A-R Commitment Fee that is not paid when due.

PREPAYMENTS OF CLASS A-R NOTES. (a)

During the Reinvestment Period, the Class A-R Notes may be prepaid (in whole or in part) without payment of premium, at the option of the Issuer (at the direction of the Collateral Manager) (i) prior to any payments on any other Class of Rated Notes, on any Payment Date from Collateral Principal Collections to the extent Collateral Principal Collections are available for such application pursuant to the Priority of Payments and from amounts on deposit in the Earn-Out Asset Account or (ii) from excess amounts on deposit in the Collateral Principal Collection Sub-Account and the Earn-Out Asset Account on an Interim Payment Date, but subject to the payment by the Issuer of Class A-R Breakage Costs, if any. The Collateral Manager (on behalf of the Issuer) must provide not less than two Business Days’ notice to the Class A-R Note Agent (with a copy to the Trustee) in connection with any Class A-R Prepayment to be made on an Interim Payment Date. Any Class AR Breakage Costs shall be paid in accordance with the Priority of Payments on the Payment Date following the applicable Class A-R Prepayment Date.

(b)

If any Class A-R Prepayment is made on a day other than a Payment Date, the Trustee shall pay the Class A-R Noteholders (i) accrued and unpaid interest in respect of the amount of such Class A-R Prepayment on such date and (ii) any Class A-R Breakage Costs resulting from such Class A-R Prepayment in accordance with the Priority of Payments on the first Payment Date following the Due Period in which such Class A-R Prepayment is made. 196

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

17.4.

The aggregate principal amount of any partial voluntary Class A-R Prepayment, in respect of the Class A-R Notes (taken as a whole) will be at least $500,000 (and integral multiples of $1 in excess thereof) or, if the aggregate outstanding amount under the Class A-R Notes is less than $500,000, such lesser amount. Any Class A-R Draw will be made by the Collateral Manager on behalf of the Issuer, pro rata, according to the unused portion of the Class A-R Commitment of each Class A-R Noteholder. The Issuer shall make all Class A-R Prepayments pro rata based on the Aggregate Outstanding Amount of the Class A-R Notes at the time such prepayment is made. Subject to compliance with certain draw conditions specified in the Class A-R Note Purchase Agreement and herein, all such prepaid amounts may be re-borrowed until the Commitment Termination Time.

CLASS A-R RATING CRITERIA

At the time of its purchase of a Class A-R Note and prior to the Commitment Termination Time, each Holder of a Class A-R Note must satisfy the Class A-R Rating Criteria. If any Holder of Class A-R Notes at any required time fails to satisfy the Class A-R Rating Criteria and such Holder shall not have deposited cash in a Holder Sub-Account in such amount and at such time as required by the Class A-R Note Purchase Agreement to which such Holder is a party, the Collateral Manager on behalf of the Issuer shall use reasonable efforts promptly to replace such Holder with another entity that meets the Class A-R Rating Criteria (by requiring the replaced Holder to transfer all of its rights and obligations in respect of the Class A-R Notes to the transferee entity). The purchase of Class A-R Notes (whether in connection with the initial placement or in a subsequent transfer) by any purchaser who does not satisfy the Class AR Rating Criteria set forth in clause (i) of the definition thereof at the time of such purchase but who is then entitled to the benefits of a Liquidity Facility described in clause (iii) of such definition shall not be permitted unless Rating Confirmation is obtained with respect to the acquisition of Class A-R Notes by such purchaser. 17.5.

CLASS A-R HOLDER COLLATERAL ACCOUNT (a)

The Trustee shall, prior to the Closing Date, establish a Securities Account which shall be designated as the Class A-R Holder Collateral Account, which shall be held in trust for the benefit of the Holders of the Class A-R Notes (and, to the extent of amounts applied in accordance with the Class A-R Note Purchase Agreement for such purpose, for the benefit of the Holders of the Notes) and each Liquidity Provider and over which the Trustee shall have exclusive control and the sole right of withdrawal. Any and all funds at any time on deposit in, or otherwise to the credit of, the Class A-R Holder Collateral Account shall be held in trust by the Trustee for the benefit of the Holders of the Class AR Notes. If at any time any Holder of a Class A-R Note shall be required to deposit funds into the Class A-R Holder Collateral Account pursuant to the terms of the Class A-R Note Purchase Agreement, then (i) the Collateral Manager shall direct the Trustee to and the Trustee shall create a segregated sub-account of the Class A-R Holder Collateral Account for such Class A-R Holder (each, a Holder Sub-Account) and (ii) the Class A-R Note Agent shall deposit all funds received from such Holder into such Holder SubAccount. All payments of principal of the Class A-R Notes otherwise payable to such Holder shall be deposited in such Holder Sub-Account to the extent provided in the Class A-R Note Purchase Agreement. The only permitted withdrawal from or application of funds credited to a Holder Sub-Account shall, notwithstanding the occurrence of any Event of Default, be to satisfy such Holder’s obligations under the Class A-R Note Purchase Agreement, as specified in this Section 17.5 and to return such amounts to such Holder in accordance with Sections 17.5(c) and (d). 197

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

The deposit of funds into a Holder Sub-Account pursuant to Section 17.5 by any Holder of a Class A-R Note shall not constitute a Draw by the Issuer and shall not constitute a utilization of the Class A-R Commitment of such Holder, and the funds so deposited shall not constitute principal outstanding under such Class A-R Note. However, from and after the establishment of a Holder Sub-Account with respect to any Holder of Class A-R Notes until otherwise provided below, (i) the obligation of such Holder to advance funds under its Class A-R Notes as part of any Class A-R Draw under this Indenture and the Class A-R Note Purchase Agreement shall be satisfied by the Trustee, acting at the direction of the Collateral Manager, withdrawing funds from such Holder Sub-Account in the amount of such Holder’s share of such Class A-R Draw (determined in accordance with the Class A-R Note Purchase Agreement), and (ii) all payments of principal with respect to advances made by such Holder under its Class A-R Notes (whether or not originally funded from such Holder Sub-Account) (and, in the case of any defaulting Holder, all payments of interest thereon) shall be satisfied by the Trustee depositing or causing the deposit of the related funds into such Holder Sub-Account in the amount of such Holder’s share of such Class A-R Draw (determined in accordance with the Class A-R Note Purchase Agreement), with notice of such deposit to the Class A-R Note Agent. The Trustee acting at the direction of the Collateral Manager shall have full power and authority to withdraw funds (with notice of any such withdrawal to the Class A-R Note Agent) from each such Holder Sub-Account at the time of, and in connection with, the making of any such Class A-R Draw and to deposit funds (with notice of any such deposit to the Class A-R Note Agent) into each such Holder Sub-Account, all in accordance with the terms of and for the purposes set forth in this Indenture and the related Class A-R Note Purchase Agreement.

(c)

If at any time the amount of funds on deposit in the Holder Sub-Account relating to any Holder of Class A-R Notes, net of any reinvestment earnings in respect of Class A-R Eligible Investments, exceeds the undrawn amount of the Class A-R Commitment of such Holder (whether due to a reduction in the Class A-R Commitment or otherwise), then the Collateral Manager on behalf of the Issuer shall instruct the Trustee to remit to such Holder a specified portion of such funds then held in the related Holder Sub- Account in an amount equal to such excess.

(d)

If at any time a Holder of Class A-R Notes is no longer required to deposit or maintain funds in the Class A-R Holder Collateral Account pursuant to the terms of its Class A-R Note Purchase Agreement to which such Holder is a party, then the Collateral Manager shall notify the Trustee of such fact and direct the Trustee to remit all funds then held in the relevant Holder Sub-Account (after giving effect to any Class A-R Draw in respect of such Class A-R Notes to be made on such date) (other than reinvestment earnings in respect of Class A-R Eligible Investments which shall be remitted to such Holder as provided in Section 17.5(c)) to such Holder (with notice thereof to the Class A-R Note Agent), and thereafter all payments of principal and interest with respect to advances made by such Holder shall be paid directly to such Holder in accordance with the terms of this Indenture and the Class A-R Note Purchase Agreement.

(e)

The Trustee agrees to give the Collateral Manager, the Issuer and the related Holder immediate notice if it becomes aware that the Class A-R Holder Collateral Account or any funds on deposit therein, or otherwise to the credit of the Class A-R Holder Collateral Account, shall become subject to any writ, order, judgment, warrant of attachment, execution or similar process. The Issuer shall not have any legal, equitable or beneficial interest in the Class A-R Holder Collateral Account. 198

Processed and formatted by SEC Watch - Visit SECWatch.com

(f)

For so long as any amounts are on deposit in a Holder Sub-Account, the Trustee shall, at the written direction of the related Class A-R Noteholder (which may be in the form of standing instructions), invest and reinvest such funds in investments which satisfy the definition of the term Eligible Investments but which mature not later than the day following the date of acquisition thereof (collectively, Class A-R Eligible Investments). Investment earnings received during each Due Period in respect of Class A-R Eligible Investments in the Holder Sub-Account of a Holder of Class A-R Notes will (so long as such Holder is not a Defaulting Holder) be paid to such Holder on the related Payment Date. In the absence of such instructions, such funds will remain uninvested. 199

Processed and formatted by SEC Watch - Visit SECWatch.com

In Witness Whereof, we have set our hands as of the date first above written. Executed as a Deed by N-STAR REL CDO VI LTD., as Issuer By: /s/ Derrie Boggess Name: Derrie Boggess Title: Director N-STAR REL CDO VI LLC, as Co-Issuer By: /s/ Donald J. Puglisi Name: Donald J. Puglisi Title: Manager WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By: /s/ Karen J. Ridgeway Name: Karen J. Ridgeway Title: Vice President 200

Processed and formatted by SEC Watch - Visit SECWatch.com

CONFIRMED AND ACCEPTED, as of the date first above written: NS ADVISORS, LLC, as Advancing Agent By: /s/ Mark E. Chertok Name: Mark E. Chertok Title: CFO 201

Exhibit 10.17 EXECUTION COPY Dated as of June 22, 2006

N-STAR REAL ESTATE CDO VII LTD., as Issuer

LASALLE BANK NATIONAL ASSOCIATION, as Trustee

INDENTURE

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS S e ction

Page

PRELIMINARY STATEMENT

1

GRANTING CLAUSES

1

ARTICLE I Definitions and Interpretation 1.1. Definitions 1.2. Assumptions as to Collateral Debt Securities, Fees, Etc. 1.3. Rules of Construction

2 2 57 59

ARTICLE II The Rated Notes 2.1. Forms Generally 2.2. Authorized Amount; Applicable Periodic Interest Rate; Stated Maturity Date; Denominations 2.3. Execution, Authentication, Delivery and Dating 2.4. Registration, Transfer and Exchange of Rated Notes 2.5. Mutilated, Defaced, Destroyed, Lost or Stolen Rated Notes 2.6. Payment of Principal and Interest; Rights Preserved

60 60

ARTICLE III Conditions Precedent 3.1. General Provisions 3.2. Security for the Rated Notes 3.3. Custodianship; Transfer of Collateral Debt Securities and Eligible Investments

75 75 76

ARTICLE IV Satisfaction and Discharge 4.1. Satisfaction and Discharge of Indenture 4.2. Application of Trust Money 4.3. Repayment of Funds Held by Note Paying Agent

81 81 82 83

ARTICLE V Events of Default; Remedies 5.1. Events of Default 5.2. Acceleration of Maturity; Rescission and Annulment 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee 5.4. Remedies 5.5. Preservation of Collateral 5.6. Trustee May Enforce Claims Without Possession 5.7. Application of Funds Collected 5.8. Limitation on Suits 5.9. Unconditional Rights of Rated Noteholders to Receive Principal and Interest 5.10. Restoration of Rights and Remedies 5.11. Rights and Remedies Cumulative 5.12. Delay or Omission Not Waiver 5.13. Control by Controlling Class 5.14. Waiver of Past Defaults 5.15. Undertaking for Costs 5.16. Waiver of Stay or Extension Laws 5.17. Sale of Collateral 5.18. Action on the Rated Notes

83 83 84 85 87 89 91 91 91

i

61 62 62 70 71

78

92 92 92 92 93 93 94 94 94 95

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

ARTICLE VI The Trustee 6.1. Certain Duties and Responsibilities 6.2. Notice of Default 6.3. Certain Rights of Trustee 6.4. Authenticating Agents 6.5. Not Responsible for Recitals or Issuance of Rated Notes 6.6. May Hold Rated Notes 6.7. Funds Held in Trust 6.8. Compensation and Reimbursement 6.9. Corporate Trustee Required; Eligibility 6.10. Resignation and Removal; Appointment of Successor 6.11. Acceptance of Appointment by Successor 6.12. Merger, Conversion, Consolidation or Succession to Business of Trustee 6.13. Co-Trustees 6.14. Certain Duties Related to Delayed Payment of Proceeds; Other Notices 6.15. Representations and Warranties of the Bank 6.16. Exchange Offers, Proposed Amendments etc. 6.17. Fiduciary for Rated Noteholders Only; Agent For Other Secured Parties 6.18. Withholding

95 95 97 97 99 99 100 100 100 101 102 103

ARTICLE VII Covenants 7.1. Payment of Principal and Interest 7.2. Maintenance of Office or Agency 7.3. Funds for Rated Note Payments to be Held in Trust 7.4. Existence of Issuer 7.5. Protection of Collateral 7.6. Opinions as to Collateral 7.7. Performance of Obligations 7.8. Negative Covenants 7.9. Statement as to Compliance 7.10. Issuer May Consolidate, Etc., Only on Certain Terms 7.11. Successor Substituted 7.12. No Other Business 7.13. Change or Withdrawal of Rating 7.14. Reporting 7.15. Rated Note Calculation Agent 7.16. Listing 7.17. Amendment of Certain Documents 7.18. Purchase of Collateral; Information Regarding Collateral; Rating Confirmation

107 107 107 108 109 110 111 111 113 114 114 116 116 117 117 117 118 118

ARTICLE VIII Supplemental Indentures 8.1. Supplemental Indentures Without Consent of Rated Noteholders 8.2. Supplemental Indentures with Consent of Rated Noteholders 8.3. Execution of Supplemental Indentures 8.4. Effect of Supplemental Indentures 8.5. Reference in Rated Notes to Supplemental Indentures

120 120 122 124 125 125

ii

103 103 104 105 105 106 106

118

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

ARTICLE IX Redemption of Rated Notes 9.1. Redemption of Rated Notes 9.2. Redemption Procedures; Auction 9.3. Record Date; Notice to Trustee of Redemption 9.4. Notice of Redemption 9.5. Notice of Withdrawal 9.6. Rated Notes Payable on Redemption Date 9.7. Special Amortization

125 125 126 127 128 128 129 129

ARTICLE X Accounts, Accountings and Releases 10.1. Collection of Funds 10.2. General Provisions Applicable to Accounts 10.3. Collateral Account 10.4. Uninvested Proceeds Account 10.5. Collection Account 10.6. Expense Reserve Account 10.7. Non-Monthly Pay Asset Interest Reserve Account 10.8. Ramp-Up Interest Reserve Account 10.9. Payment Account 10.10. Derivative Contract Counterparty Accounts 10.11. Derivative Contract Issuer Account 10.12. Reports by Trustee 10.13. Accountings 10.14. Release of Securities 10.15. Reports by Independent Accountants 10.16. Reports to Rating Agencies 10.17. Tax Matters 10.18. Tax Information

130 130 130 131 131 132 132 133 133 133 134 135 136 136 141 142 143 143 143

ARTICLE XI Application of Monies 11.1. Disbursements of Funds from Payment Account; Priority of Payments

144 144

ARTICLE XII Purchase and Sale of Collateral Debt Securities 12.1. Sale of Collateral Debt Securities 12.2. Portfolio Characteristics 12.3. Conditions Applicable to all Transactions Involving Sale or Grant

154 154 156 159

ARTICLE XIII Secured Parties’ Relations 13.1. Subordination 13.2. Standard of Conduct

160 160 164

ARTICLE XIV Miscellaneous 14.1. Form of Documents Delivered to Trustee 14.2. Acts of Rated Noteholders 14.3. Notices, Etc., to Trustee, the Issuer and the Rating Agencies 14.4. Notices and Reports to Rated Noteholders; Waiver 14.5. Effect of Headings and Table of Contents 14.6. Successors and Assigns 14.7. Severability 14.8. Benefits of Indenture

164 164 165 165 167 167 167 168 168

iii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

14.9. 14.10. 14.11. 14.12. 14.13. 14.14.

Governing Law Submission to Jurisdiction Counterparts Waiver of Jury Trial Judgment Currency Confidential Treatment of Documents

168 168 168 168 169 169

ARTICLE XV Assignment of Agreements, Etc. 15.1. Assignment 15.2. No Impairment 15.3. Termination, Etc. 15.4. Issuer Agreements, Etc.

169 169 170 170 170

ARTICLE XVI Hedge Agreement 16.1. Hedge Agreements

170 170

Schedules Schedule A Schedule B Schedule C Schedule D-1 Schedule D-2 Schedule E Schedule F Schedule G Schedule H Schedule I

Schedule of Collateral Debt Securities as of the Closing Date LIBOR Formula Schedule of Temporary Ramp-Up Securities S&P’s Recovery Rate Matrix Moody’s Recovery Rate Matrix Auction Procedures S&P’s Notching Criteria S&P’s Types of Asset-Backed Securities ineligible for Notching S&P’s Industry Classification Groups Fitch Industry Classification Groups

Exhibits Exhibit A-1 Exhibit A-2 Exhibit B-1 Exhibit C-1 Exhibit C-2 Exhibit C-3 Exhibit D Exhibit E-1 Exhibit E-2 Exhibit F Exhibit G Exhibit H Exhibit I

Form of Regulation S Global Note Form of Rule 144A Global Note Form of Definitive Class E Note Form of Rule 144A Transfer Certificate Form of Regulation S Transfer Certificate Form of Definitive Class E Transfer Certificate Form of Funding Certificate Form of Opinion of Clifford Chance US LLP Form of Opinion of Walkers Form of Opinion of Kennedy Covington Lobdell & Hickman, L.L.P. Form of Opinion of Thacher Proffitt & Wood LLP Form of Opinion of internal counsel to Bank of America, N.A. Rated Noteholder’s Certificate iv

THIS INDENTURE dated as of June 22, 2006 among: N-STAR REAL ESTATE CDO VII LTD., an exempted company incorporated and existing under the law of the Cayman Islands; and LASALLE BANK NATIONAL ASSOCIATION, a national banking association, organized under the law of the United States, as trustee. PRELIMINARY STATEMENT The Issuer is duly authorized to execute and deliver this Indenture to provide for the issuance of the Rated Notes as provided in this Indenture. All covenants and agreements made by the Issuer herein are for the benefit and security of the Secured Parties. The Issuer is entering into this Indenture, and the Trustee is accepting the trusts created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. All things necessary to make this Indenture a valid agreement of the Issuer in accordance with its terms have been done. GRANTING CLAUSES The Issuer hereby Grants to the Trustee, for the benefit and security of the Secured Parties, all of its right, title and interest in, to and under, in

Processed and formatted by SEC Watch - Visit SECWatch.com

each case, whether now owned or existing, or hereafter acquired or arising, the following property (other than the Excepted Property) (a) the Collateral Debt Securities listed on Schedule A, the Temporary Ramp-Up Securities listed on Schedule C, the Collateral Debt Securities acquired after the Closing Date and any Equity Securities which, in each case, are delivered to the Trustee (directly or through a Securities Intermediary) after the Closing Date pursuant to the terms hereof and all payments thereon or with respect thereto, (b) the Collection Account (including each Collateral Sub-Account established therein), each Derivative Contract Issuer Account, the Ramp-Up Interest Reserve Account, the Non-Monthly Pay Asset Interest Reserve Account, the Payment Account, the Expense Reserve Account (including each Collateral Sub-Account), the Collateral Account, the Uninvested Proceeds Account, all amounts credited to such accounts, and Eligible Investments purchased with funds credited to such accounts and all income from the investment of funds therein, (c) the rights of the Issuer under each of the Transaction Documents to which the Issuer is a party and all payments to the Issuer thereunder or with respect thereto, (d) all Cash or other property delivered to the Trustee (directly or through a Securities Intermediary) and (e) all proceeds, whether voluntary or involuntary, of and to any of the property of the Issuer described in the preceding clauses (collectively, the Collateral). Such Grants are made to the Trustee to hold in trust, to secure the Rated Notes equally and ratably without prejudice, priority or distinction between any Rated Note and any other Rated Note by reason of difference in time of issuance or otherwise, except as expressly provided in this Indenture, and to secure (i) the payment of all amounts due on the Rated Notes and under the Hedge Agreement and the Collateral Management Agreement in accordance with their respective terms, (ii) the payment of all other sums payable under this Indenture and (iii) compliance with the provisions of this Indenture, the Hedge Agreement and the Collateral Management Agreement, all as provided in this Indenture (collectively, the Secured Obligations). Except to the extent otherwise provided in this Indenture, the Issuer does hereby constitute and irrevocably appoint the Trustee the true and lawful attorney of the Issuer, with full power (in the name of the Issuer or otherwise), to exercise all rights of the Issuer with respect to the Collateral held for the benefit and security of the Secured Parties and to ask, require, demand, receive, settle, compromise, compound and give acquittance for any and all moneys and claims for moneys due and to become due

Processed and formatted by SEC Watch - Visit SECWatch.com

under or arising out of any of the Collateral held for the benefit and security of the Secured Parties, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Trustee may deem to be necessary or advisable in the premises. The power of attorney granted pursuant to this Indenture and all authority hereby conferred are granted and conferred solely to protect the Trustee’s interest in the Collateral held for the benefit and security of the Secured Parties and shall not impose any duty upon the Trustee to exercise any power. This power of attorney shall be irrevocable as one coupled with an interest prior to the payment in full of all the obligations secured hereby. Except to the extent otherwise provided in this Indenture, this Indenture shall constitute a security agreement under the law of the State of New York. Upon the occurrence of any Event of Default and in addition to any other rights available under this Indenture or any other instruments included in the Collateral held for the benefit and security of the Secured Parties or otherwise available at law or in equity, the Trustee shall have all rights and remedies of a secured party on default under the law of the State of New York and other applicable law to enforce the assignments and security interests contained herein and, in addition, shall have the right, subject to compliance with any mandatory requirements of applicable law, to sell or apply any rights and other interests assigned or pledged hereby in accordance with the terms hereof at public or private sale. It is expressly agreed that anything therein contained to the contrary notwithstanding, the Issuer shall remain liable under any instruments included in the Collateral to perform all the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and except as otherwise expressly provided herein, the Trustee shall not have any obligations or liabilities under such instruments by reason of or arising out of this Indenture, nor shall the Trustee be required or obligated in any manner to perform or fulfill any obligations of the Issuer under or pursuant to such instruments or to make any payment, to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim, or to take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. The designation of the Trustee in any transfer document or record is intended and shall be deemed, first, to refer to the Trustee as custodian on behalf of the Issuer and second, to refer to the Trustee as secured party on behalf of the Secured Parties, provided that the Grant made by the Issuer to the Trustee pursuant to the granting clauses hereof shall apply to any Collateral bearing such designation. The Trustee acknowledges such Grants, accepts the trust hereunder in accordance with the provisions hereof, and agrees to perform the duties herein in accordance with the required standard of care set forth herein such that the interests of the Secured Parties may be protected. Each of the Secured Parties hereby agrees and acknowledges that it shall not have any claim on the funds and property from time to time deposited in or credited to the Income Note Distribution Account and the proceeds thereof. ARTICLE I DEFINITIONS AND INTERPRETATION 1.1.

DEFINITIONS

Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Indenture. Whenever any reference is made to an amount the determination of which is governed by Section 1.2, the provisions of Section 1.2 2

Processed and formatted by SEC Watch - Visit SECWatch.com

shall be applicable to such determination or calculation, whether or not reference is specifically made to Section 1.2, unless some other method of calculation or determination is expressly specified in the particular provision. In addition, terms defined in Article 9 of the UCC and used but not capitalized herein have the meanings assigned thereto in Article 9 of the UCC. Account means any of the Collection Account (including each Collateral Sub-Account established therein), the Collateral Account, the Uninvested Proceeds Account, the Payment Account, the Ramp-Up Interest Reserve Account, the Non-Monthly Pay Asset Interest Reserve Account the Expense Reserve Account (including each Collateral Sub-Account established therein), each Derivative Contract Issuer Account, if any, and each Derivative Contract Counterparty Account. Account Control Agreement means that certain Account Control Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, among the Issuer, the Trustee and the Custodian. Accountants’ Report means a report of a firm of Independent certified public accountants of recognized national reputation appointed by the Issuer (or the Collateral Manager on its behalf) on the Closing Date pursuant to Section 10.14(a), which may be the firm of Independent accountants that reviews or performs procedures with respect to the financial reports prepared by the Issuer. Accountholder means the holder of the Accounts pursuant to the Account Control Agreement. Act has the meanings specified in Section 14.2. Actual Rating means, with respect to any Collateral Debt Security or Eligible Investment, the actual expressly monitored outstanding public rating assigned by a Rating Agency without reference to any other rating by another Rating Agency. Administrative Expenses means amounts (including any applicable indemnities) due from, or accrued for, the account of the Issuer with respect to any Payment Date to (i) the Trustee for Trustee Expenses; (ii) the Income Note Paying Agent pursuant to the Income Note Paying Agency Agreement; (iii) the Collateral Administrator pursuant to the Collateral Administration Agreement; (iv) the independent accountants, agents and counsel of the Issuer for fees and expenses (including, without limitation, tax reports); (v) the Rating Agencies for fees and expenses in connection with any Class of Notes rated by each such Rating Agency (including, without limitation, expenses for credit estimates and ongoing surveillance of the ratings of the Notes); (vi) the Administrator pursuant to the Corporate Services Agreement; (vii) the Collateral Manager and its counsel for fees, expenses and indemnities under the Transaction Documents to the extent set forth therein (including, without limitation, amounts payable under the Collateral Management Agreement but excluding the Collateral Management Fee); (viii) any other Person in respect of any governmental fee, charge or tax (including all filing, registration and annual return fees payable to the Cayman Islands’ government and registered office fees); and (ix) any other Person in respect of any other fees or expenses permitted under the Indenture and the documents delivered pursuant to or in connection with this Indenture, the Income Note Paying Agency Agreement, the Collateral Management Agreement and the Notes; provided that Administrative Expenses may not include any amounts due or accrued with respect to the actions taken on, or prior to, the Closing Date. Administrator means Walkers SPV Limited and any successor thereto appointed under the Corporate Services Agreement. Affected Party has the meaning given to such term in the applicable Hedge Agreement or Synthetic Security. 3

Processed and formatted by SEC Watch - Visit SECWatch.com

Affiliate means any person, directly or indirectly through one or more intermediaries, controlling, controlled by or under common control with the person; provided that (i) with respect to the Issuer, “Affiliate” shall be deemed not to include Walkers SPV Limited or any entity which Walkers SPV Limited controls and (ii) control of a person shall mean the power, direct or indirect, (a) to vote more than 50% of the securities having ordinary voting power for the election of directors of such person or (b) to direct or cause the direction of the management and policies of such person whether by contract or otherwise. Agent Members means members of, or participants in, the Clearing Agencies. Aggregate Fees and Expenses means, on any Payment Date, the sum of (i) the Trustee Fee with respect to such Payment Date and any unpaid Trustee Fee accrued with respect to a previous Payment Date, (ii) the Senior Collateral Management Fee and all expenses of the Collateral Manager payable by the Issuer pursuant to the Collateral Management Agreement with respect to such Payment Date and any unpaid Senior Collateral Management Fee and unpaid expenses of the Collateral Manager accrued with respect to a previous Payment Date, (iii) the Trustee Expenses and other expenses (including other Administrative Expenses) of the Issuer (including the fees to be paid to the Irish Stock Exchange), (iv) taxes payable by the Issuer, if any, and (v) all other expenses of the Issuer (including, without limitation, Administrative Expenses) payable on such Payment Date pursuant to Section 11.1(a)(1) and 11.1(b)(1) (in each case to the extent not included in clauses (i) through (vi) above). Aggregate Outstanding Amount means, when used with respect to any of the Rated Notes at any time, the aggregate principal amount of such Rated Notes Outstanding at such time. Except as otherwise provided herein, (i) the Aggregate Outstanding Amount of any Class C Notes at any time shall include the Class C Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class C Notes at such time, (ii) the Aggregate Outstanding Amount of any Class D Notes at any time shall include the D Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class D Notes at such time and (iii) the Aggregate Outstanding Amount of any Class E Notes at any time shall include the Class E Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class E Notes at such time. Applicable Periodic Interest Rate means, for any Interest Period, (i) with respect to the Class A Notes, the applicable Class A Note Interest Rate, (ii) with respect to the Class B Notes, the applicable Class B Note Interest Rate, (iii) with respect to the Class C Notes, the applicable Class C Note Interest Rate, (iv) with respect to the Class D Notes, the applicable Class D Note Interest Rate and (v) with respect to the Class E Notes, the applicable Class E Note Interest Rate. Applicable Recovery Rate means, with respect to any Collateral Debt Security on any Measurement Date, the Fitch Recovery Rate, the Moody’s Recovery Rate and the S&P Recovery Rate applicable to such Collateral Debt Security on such date. Approved Replacement Person means a replacement or additional Key Manager appointed in accordance with the procedures described in Section 16 of the Collateral Management Agreement. Articles means the Amended and Restated Memorandum and Articles of Association of the Issuer, filed under the Companies Law (2004 Revision) of the Cayman Islands, as modified and supplemented and in effect from time to time. Asset-Backed Securities are debt securities that entitle the holders thereof to receive payments that depend primarily on the cash flow from (i) a specified pool of financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period, together with rights or other assets 4

Processed and formatted by SEC Watch - Visit SECWatch.com

designed to assure the servicing or timely distribution of proceeds to holders of such securities (including, for the avoidance of doubt, leases) or (ii) real estate mortgages, either fixed or revolving, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to the holders of such securities. Assumed Reinvestment Rate means, with respect to any Account or fund securing the Rated Notes, the greater of (i) LIBOR minus 0.50% and (ii) zero. Auction has the meaning specified in Section 9.2. Auction Call Redemption has the meaning specified in Section 9.1(c). Auction Date has the meaning specified in Section 9.2; provided that, for the purposes of Section 5.5, “Auction Date” means the date upon which an Auction of the Collateral Debt Securities is conducted in connection with an Event of Default. Auction Procedures has the meaning specified in Section 9.2. Auction Purchase Agreement has the meaning specified in Schedule E. Authenticating Agent means, with respect to the Rated Notes or any Class of the Rated Notes, the Person designated by the Trustee, if any, to authenticate such Rated Notes on behalf of the Trustee pursuant to Section 6.4. Authorized Officer means (i) with respect to the Issuer, any Officer of the Issuer who is authorized to act for the Issuer in matters relating to, and binding upon, the Issuer, (ii) with respect to the Collateral Manager, any officer of the Collateral Manager who is authorized to act for the Collateral Manager in matters relating to, and binding upon, the Collateral Manager, (iii) with respect to the Trustee or any other bank or trust company acting as trustee of an express trust or as custodian, a Trust Officer and (iv) with respect to the Income Note Paying Agent, any officer who is authorized to act for the Income Note Paying Agent in matters relating to, and binding upon, the Income Note Paying Agent. 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. Available Funds means, with respect to any Payment Date, the amount of any positive balance (of Cash or Eligible Investments) in the Collection Account as of the Calculation Date relating to such Payment Date and, with respect to any other date, such amount as of that date. Average Life means, on any Calculation Date with respect to any Collateral Debt Security (other than any Trust Preferred Security), the quotient obtained by the Collateral Manager by dividing (i) the sum of the products of (a) the number of years (rounded to the nearest one tenth thereof) from such Calculation Date to the respective dates of each successive distribution of principal of such Collateral Debt Security (assuming that (1) no Collateral Debt Securities default or are sold, (2) any optional redemption of the Collateral Debt Securities occurs in accordance with their respective terms and (3) any extension of the Real Estate Interests is exercised) and (b) the respective amounts of principal of such scheduled distributions by (ii) the sum of all successive scheduled distributions of principal on such Collateral Debt Security. The Average Life of any Trust Preferred Security on any Calculation Date occurring on or after the Closing Date, to and including the Payment Date in June 2018, shall be the call date of such Trust Preferred Security or, in the event the call is not exercised on or prior to such call date, the excess of 20 years over the period of time from the Closing Date of such Trust Preferred Security to the date such 5

Processed and formatted by SEC Watch - Visit SECWatch.com

Trust Preferred Security is acquired by the Issuer (rounded to the nearest 0.5 year) and for any Calculation Date thereafter shall be reduced by 0.5 years for every six month period thereafter. Balance means at any time, with respect to Cash or Eligible Investments in any Account at such time, the aggregate of the (i) current balance of Cash, demand deposits, time deposits, certificates of deposit and federal funds; (ii) principal amount of interest-bearing corporate and government securities, money market accounts and repurchase obligations; and (iii) purchase price (but not greater than the face amount) of non-interest-bearing government and corporate securities and commercial paper. Bank means LaSalle Bank National Association, a national banking association organized under the laws of the United States, in its individual capacity and not as Trustee. Bankruptcy Code means the U.S. Bankruptcy Code, Title 11 of the United States Code, as amended or where the context requires, the applicable insolvency provisions of the laws of the Cayman Islands. BAS means Banc of America Securities LLC. Beneficial Owner means, with respect to any Global Note, each Person that appears on the records of a Clearing Agency (other than each such Clearing Agency to the extent that it is an accountholder with the other Clearing Agency for the purpose of operating the “bridge” between them) as entitled to a particular amount of Notes by reason of an interest in a Global Note (for all purposes other than with respect to the payment of principal of and interest on the Rated Notes, the right to which will be vested, as against the Issuer and the Trustee, solely in the Person in whose name the Global Note is registered in the Note Register (in the case of the Notes) or the Income Note Register (in the case of the Income Notes)); provided that the Trustee and the Income Note Paying Agent may conclusively rely upon the certificate of a Clearing Agency as to the identity of such Persons holding an interest in a Global Note. Benefit Plan Investor means (i) an “employee benefit plan” (as defined in Section 3(3) of ERISA), whether or not subject to Title I of ERISA, including without limitation governmental plans, foreign plans and church plans, (ii) a “plan” (as defined in Section 4975(e)(1) of the Code), whether or not subject to Section 4975 of the Code, including, without limitation, individual retirement accounts and Keogh plans or (iii) an entity whose underlying assets include plan assets by reason of such an employee benefit plan’s or plan’s investment in such entity, including, without limitation, as applicable, an insurance company general account. Board of Directors means, with respect to the Issuer, the directors of the Issuer duly appointed in accordance with the Articles. Board Resolution means, with respect to the Issuer, a resolution of the Board of Directors of the Issuer. Business Day means any day that is not a Saturday, Sunday or other day on which commercial banking institutions in New York, New York, Chicago, Illinois or any other city in which the Corporate Trust Office of the Trustee is located are authorized or obligated by law or executive order to be closed; provided that, if any action is required of the Irish Paying Agent, solely for purposes of determining when such action of the Irish Paying Agent is required, days on which commercial banking institutions in Dublin, Ireland are authorized or obligated by law or executive order to be closed will also be considered in determining whether such day is a “Business Day”; provided, further that if any action is required of the Issuer (or of the Administrator on its behalf), solely for purposes of determining when such action of the Issuer is required, days on which commercial banking institutions in the Cayman Islands are authorized or obligated by law or executive order to be closed will also be considered in determining whether such day is a “Business Day.” 6

Processed and formatted by SEC Watch - Visit SECWatch.com

Calculation Date means, with respect to any Payment Date, the last day of the related Due Period. Call Period has the meaning specified in Section 9.1(a) hereof. Cash means such funds denominated with currency of the United States as at the time shall be legal tender for payment of all public and private debts, including funds credited to a deposit account or a Securities Account. Cash Release Conditions has the meaning specified in Section 12.1(c). Cashflow Hedge Agreement means any Hedge Agreement entered into for the purpose of protecting the Issuer against a cashflow timing mismatch with respect to one or more Collateral Debt Securities. CDO of CDO Securities means securities that entitle the Holders thereof to receive payments that depend on the cash flow from a portfolio of assets, the majority in principal amount of which are collateralized debt obligations. CDS Principal Balance means, prior to the Effective Date, not less than U.S.$467,500,000, and thereafter, the aggregate Principal Balance of (i) Collateral Debt Securities included in the Collateral (including any Collateral Debt Securities that have become Defaulted Securities or Written Down Securities) and (ii) Eligible Investments, in each case, purchased with the proceeds of the issuance of the Notes or thereafter with Collateral Principal Collections. Certificated Security has the meaning specified in Section 8-102(a)(4) of the UCC. Certificate of Authentication has the meaning specified in Section 2.3(f). Class means each of the classes comprised of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Income Notes. Class A Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class A Notes in full by their Stated Maturity Dates and the timely payment of interest on such Class A Notes. Class A Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class A Note Scenario Default Rate from the Class A Note Break-Even Default Rate. Class A Note Interest Rate means the Class A-1 Note Interest Rate, the Class A-2 Note Interest Rate or the Class A-3 Note Interest Rate, as applicable. Class A Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class A Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class A Notes means the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes. Class A-1 Note Interest Rate means LIBOR plus 0.27%. Class A-1 Notes means the U.S.$338,250,000 aggregate principal amount of Class A-1 Floating Rate Notes due 2051. 7

Processed and formatted by SEC Watch - Visit SECWatch.com

Class A-2 Note Interest Rate means LIBOR plus 0.32%. Class A-2 Notes means the U.S.$54,250,000 aggregate principal amount of Class A-2 Floating Rate Notes due 2051. Class A-3 Note Interest Rate means LIBOR plus 0.33%. Class A-3 Notes means the U.S.$50,000,000 aggregate principal amount of Class A-3 Floating Rate Notes due 2051. Class A/B Coverage Tests means the Class A/B Interest Coverage Test and the Class A/B Principal Coverage Test. Class A/B Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes and the Class B Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Non-Monthly Pay Asset Interest Reserve Account for the Payment Date immediately following such Measurement Date. Class A/B Interest Coverage Test means, for so long as any Class A Notes or Class B Notes remain Outstanding, a test that is satisfied as of any Measurement Date if the Class A/B Interest Coverage Ratio as of such date of determination is equal to or greater than 115.0%; provided that for any Measurement Date occurring on the Effective Date through the Payment Date immediately subsequent to the Effective Date, the Class A/B Interest Coverage Test will be satisfied if Class A/B Interest Coverage Ratio is equal to or greater than 100%. Class A/B Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes and the Class B Notes Outstanding as of such Measurement Date. Class A/B Principal Coverage Test means, for so long as any Class A Notes or Class B Notes remain Outstanding, a test satisfied on any Measurement Date if the Class A/B Principal Coverage Ratio as of such date of determination is equal to or greater than 106.3%. Class B Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class B Notes in full by their Stated Maturity Date and the timely payment of interest on such Class B Notes. Class B Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class B Note Scenario Default Rate from the Class B Note Break-Even Default Rate. Class B Note Interest Rate means LIBOR plus 0.38%. Class B Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class B Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. 8

Processed and formatted by SEC Watch - Visit SECWatch.com

Class B Notes means the U.S.$30,300,000 aggregate principal amount of Class B Floating Rate Notes due 2051. Class C Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class C Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes or Class B Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class C Notes. Class C Coverage Tests means the Class C Interest Coverage Test and the Class C Principal Coverage Test. Class C Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class C Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class C Interest Coverage Ratio means on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes, the Class B Notes and the Class C Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Non-Monthly Pay Asset Interest Reserve Account for the Payment Date immediately following such Measurement Date. Class C Interest Coverage Test means, for so long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, a test that is satisfied as of any Measurement Date when the Class C Interest Coverage Ratio is equal to or greater than 110.0%; provided that for any Measurement Date occurring on the Effective Date through the Payment Date immediately subsequent to the Effective Date, the Class C Interest Coverage Test will be satisfied if Class C Interest Coverage Ratio is equal to or greater than 100%. Class C Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class C Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class C Notes. Class C Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class C Note Scenario Default Rate from the Class C Note Break-Even Default Rate. Class C Note Interest Rate means LIBOR plus 0.60%. Class C Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class C Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class C Notes means the U.S.$22,000,000 aggregate principal amount of Class C Deferrable Floating Rate Notes due 2051. 9

Class C Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes, the Class B Notes and the Class C Notes Outstanding as of such Measurement Date. Class C Principal Coverage Test means, for so long as any Class A Notes, Class B Notes or Class C Notes remain Outstanding, a test satisfied on any Measurement Date if the Class C Principal Coverage Ratio as of such Measurement Date is equal to or greater than 104.1%. Class D Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class D Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes or Class C Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class D Notes. Class D Coverage Tests means the Class D Interest Coverage Test and the Class D Principal Coverage Test. Class D Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class D Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class D-FL Note Interest Rate means LIBOR plus 1.40%. Class D-FX Note Interest Rate means 6.913%. Class D-FL Notes means the U.S.$14,000,000 aggregate principal amount of Class D Deferrable Floating Rate Notes due 2051.

Processed and formatted by SEC Watch - Visit SECWatch.com

Class D-FX Notes means the U.S.$2,000,000 aggregate principal amount of Class D Deferrable Fixed Rate Notes due 2051. Class D Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Non-Monthly Pay Asset Interest Reserve Account for the Payment Date immediately following such Measurement Date. Class D Interest Coverage Test means, for so long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding, a test that is satisfied as of any Measurement Date when the Class D Interest Coverage Ratio is equal to or greater than 105.0%; provided that for any Measurement Date occurring on the Effective Date through the Payment Date immediately subsequent to the Effective Date, the Class D Interest Coverage Test will be satisfied if Class D Interest Coverage Ratio is equal to or greater than 100%. Class D Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, 10

Processed and formatted by SEC Watch - Visit SECWatch.com

after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class D Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class D Notes. Class D Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class D Note Scenario Default Rate from the Class D Note Break-Even Default Rate. Class D Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class D Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class D Notes means collectively the Class D-FL Notes and the Class D-FX Notes. Class D Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes Outstanding as of such Measurement Date. Class D Principal Coverage Test means a test that is satisfied as of any date of determination when the Class D Principal Coverage Ratio is equal to or exceeds 102.6%. Class E Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class E Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class E Notes. Class E Coverage Tests means the Class E Interest Coverage Test and the Class E Principal Coverage Test. Class E Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class E Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class E Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Non-Monthly Pay Asset Interest Reserve Account for the Payment Date immediately following such Measurement Date. Class E Interest Coverage Test means, for so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding, a test that is satisfied as of any Measurement Date when the Class E Interest Coverage Ratio is equal to or greater than 102.5%; provided that for any Measurement Date occurring on the Effective Date through the Payment Date immediately subsequent to the Effective Date, the Class E Interest Coverage Test will be satisfied if Class E Interest Coverage Ratio is equal to or greater than 100%. 11

Processed and formatted by SEC Watch - Visit SECWatch.com

Class E Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class E Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class E Notes. Class E Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class E Note Scenario Default Rate from the Class E Note Break-Even Default Rate. Class E Note Interest Rate means 8.232%. Class E Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class E Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class E Notes means the U.S.$16,200,000 aggregate principal amount of Class E Deferrable Fixed Rate Notes due 2051. Class E Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes Outstanding as of such Measurement Date. Class E Principal Coverage Test means a test that is satisfied as of any date of determination when the Class E Principal Coverage Ratio is equal to or exceeds 101.8%. Clearing Agency means DTC, Euroclear or Clearstream. Clearing Corporation has the meaning specified in Section 8-102(a)(5) of the UCC. Clearstream means Clearstream Banking, société anonyme. Closing Date means June 22, 2006. CMBS Conduit Securities means Commercial Mortgage Backed Securities (a) issued by a single-seller or multi-seller conduit under which the holders of such Commercial Mortgage Backed Securities have recourse to a specified pool of assets (but not other assets originated by the conduit that support payments on other series of securities) and (b) that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Commercial Mortgage Backed Securities) on the cash flow from a pool of commercial mortgage loans. CMBS Credit Tenant Lease Securities means Commercial Mortgage Backed Securities (other than CMBS Large Loan Securities and CMBS Conduit Securities) that entitle the holders thereof to receive payments that depend on the cash flow from a pool of commercial mortgage loans made to finance the acquisition, construction and improvement of properties leased to corporate tenants (or on the cash flow from such leases); provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the CMBS Securities such as a financial guaranty insurance policy. 12

Processed and formatted by SEC Watch - Visit SECWatch.com

CMBS Franchise Securities means Commercial Mortgage Backed Securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such Commercial Mortgage Backed Securities) on the cash flow from (a) a pool of franchise loans made to operators of franchises that provide oil, gasoline, restaurant or food services and provide other services related thereto and (b) leases or subleases of equipment to such operators for use in the provision of such goods and services. CMBS Large Loan Securities means Commercial Mortgage Backed Securities (other than CMBS Conduit Securities) that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Commercial Mortgage Backed Securities) on the cash flow from a commercial mortgage loan or a small pool of commercial mortgage loans made to finance the acquisition or improvement of real properties. CMBS Re-REMIC Securities means any security that is secured directly by, referenced to or representing ownership of, a pool consisting primarily of CMBS Conduit Securities, other CMBS Securities or certificates representing a beneficial interest therein, but not including any Synthetic Security. For the avoidance of doubt, a CMBS Re-REMIC Security shall include any security backed by more than one credit default swap or referencing more than one Reference Obligation or a synthetic collateralized debt obligation or a synthetic resecuritization that (in each case) references more than one CMBS Conduit Security or other CMBS Security or certificates representing a beneficial interest therein. CMBS Securities means CMBS Conduit Securities, CMBS Franchise Securities, CMBS Large Loan Securities, CMBS Single Borrower Securities, CMBS Re-REMIC Securities or CMBS Credit Tenant Lease Securities, as the case may be. CMBS Single Borrower Securities means CMBS Securities (other than CMBS Large Loan Securities and CMBS Credit Tenant Lease Securities) that entitle the holders thereof to receive payments that depend on the cash flow from one or more loans with a single borrower or group of affiliated borrowers secured by one or more properties; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the CMBS Securities such as a financial guaranty insurance policy. Code means the Internal Revenue Code of 1986, as amended. Collateral has the meaning specified in the Granting Clauses. Collateral Administration Agreement means the Collateral Administration Agreement, dated June 22, 2006, by and among the Issuer, the Collateral Manager and the Collateral Administrator, as the same may be amended and modified from time to time in accordance with its terms. Collateral Administrator means LaSalle Bank National Association, solely in its capacity as Collateral Administrator under the Collateral Administration Agreement, unless a successor Person shall have become the Collateral Administrator pursuant to the applicable provisions of Collateral Administration Agreement, in which case Collateral Administrator shall mean such successor Person. Collateral Assignment of Hedge Agreement means the collateral assignment of Hedge Agreement, dated the date that the Issuer enters into the Hedge Agreement, among the Issuer, the Trustee and the Initial Hedge Counterparty, and any other Collateral Assignment of the Hedge Agreement in respect of any Hedge Agreement entered into between the Issuer, the Trustee and a Hedge Counterparty after the Closing Date. 13

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Concentration Limitations will be satisfied if, as of any Measurement Date after the Effective Date, and after giving effect to each purchase of a Collateral Debt Security, each of the following conditions (collectively, the “Collateral Concentration Limitations”) is satisfied in the aggregate (or, in the case of a Collateral Concentration Limitation not satisfied immediately prior to such purchase, such purchase maintains or improves compliance with such Collateral Concentration Limitation): (i)

(ii)

General Limitations (a)

the aggregate Principal Balance of all Collateral Debt Securities that are PIK Bonds does not exceed 6.0% of the CDS Principal Balance;

(b)

the aggregate Principal Balance of all Collateral Debt Securities that are Deemed Floating Rate Collateral Debt Securities does not exceed 17.5% of the CDS Principal Balance;

(c)

the aggregate Principal Balance of all Fixed Rate Collateral Debt Securities does not exceed 75.0% of the CDS Principal Balance;

(d)

the aggregate Principal Balance of all Collateral Debt Securities that provide for periodic payments of interest in Cash less frequently than monthly does not exceed 35.0% of the CDS Principal Balance;

(e)

the aggregate Principal Balance of all Collateral Debt Securities that mature after the Stated Maturity Date does not exceed 15.0% of the CDS Principal Balance;

Collateral Debt Security Type Limitations (a)

the aggregate Principal Balance of all Collateral Debt Securities that are CMBS Securities does not exceed 85.0% of the CDS Principal Balance; provided that no more than 25.0% of the CDS Principal Balance shall consist of CMBS Large Loan Securities, no more than 7.5% of the CDS Principal Balance shall consist of CMBS Credit Tenant Lease Securities and no more than 20.0% of the CDS Principal Balance shall consist of CMBS Re-REMIC Securities;

(b)

the sum of the aggregate Principal Balances of all REIT Debt Securities, Trust Preferred Securities and CRE Debt Obligations does not exceed 25.0% of the CDS Principal Balance; provided that not more than 2.75% of the CDS Principal Balance shall consist of Trust Preferred Securities and not more than 10.0% of the CDS Principal Balance shall consist of CRE Debt Obligations;

(c)

the aggregate Principal Balance of all Collateral Debt Securities that are Real Estate CDO Securities does not exceed 6.0% of the CDS Principal Balance;

(d)

the aggregate Principal Balance of all Collateral Debt Securities that are Real Estate Interests does not exceed 15.0% of the CDS Principal Balance;

(e)

the aggregate Principal Balance of all Collateral Debt Securities that are Synthetic Securities does not exceed 5.0% of the CDS Principal Balance; 14

Processed and formatted by SEC Watch - Visit SECWatch.com

(iii)

(iv)

Ratings Limitations (a)

the aggregate Principal Balance of all Collateral Debt Securities with an Actual Rating from S&P or Fitch below “BBB-” or an Actual Rating from Moody’s below “Baa3” does not exceed 35.0% of the CDS Principal Balance;

(b)

the aggregate Principal Balance of all Collateral Debt Securities with an Actual Rating from S&P or Fitch below “BB-” or an Actual Rating from Moody’s below “Ba3” does not exceed 7.0% of the CDS Principal Balance;

Single Issue Limitations (a)

the aggregate Principal Balance of all Collateral Debt Securities with an Actual Rating from S&P or Fitch of higher than “BB+” or an Actual Rating from Moody’s of higher than “Ba1” that are part of the same Issue does not exceed 3.0% of the CDS Principal Balance, except for up to four Issues not to exceed 4.0% of the CDS Principal Balance; and

(b)

the aggregate Principal Balance of all Collateral Debt Securities that have an Actual Rating from S&P or Fitch of below “BBB-” or an Actual Rating from Moody’s of below “Baa3” that are part of the same Issue does not exceed 2.0% of the CDS Principal Balance, except for up to three Issues not to exceed 3.0% of the CDS Principal Balance;

(v)

Servicer Limitations: with respect to the servicer of the security being acquired, the aggregate Principal Balance of all Collateral Debt Securities serviced by such servicer does not exceed 20.0% of the CDS Principal Balance, except that the aggregate Principal Balance of all Collateral Debt Securities serviced by servicers rated “Below Average” by S&P, or if there is no servicer rating by S&P, having long-term unsecured debt securities rated “BB” or lower, shall not exceed 5.0% of the CDS Principal Balance.

(vi)

Property Type Limitations: the aggregate Principal Balance of all CMBS Conduit Securities and CMBS Large Loan Securities related to Mortgaged Properties that are classified as: (A) multifamily properties does not exceed 40.0% of the CDS Principal Balance; (B) retail properties does not exceed 40.0% of the CDS Principal Balance; (C) office properties does not exceed 45.0% of the CDS Principal Balance; (D) lodging properties does not exceed 35.0% of the CDS Principal Balance; (E) healthcare properties does not exceed 20.0% of the CDS Principal Balance; (F) industrial properties does not exceed 15.0% of the CDS Principal Balance; (G) manufactured housing properties does not exceed 10.0% of the CDS Principal Balance; (H) self storage properties does not exceed 10.0% of the CDS Principal Balance; and (I) any other property type other than those specified in clauses (A) through (H) above does not exceed 15.0% of the CDS Principal Balance;

(vii)

Geographic Limitations: the aggregate Principal Balance of all CMBS Conduit Securities and CMBS Large Loan Securities related to Mortgaged Properties located in: (A) California does not exceed 30.0% of the CDS Principal Balance; (B) New York does not exceed 30.0% of the CDS Principal Balance; (C) Texas does not exceed 30.0% of the CDS Principal Balance; (D) Florida does not exceed 30.0% of the CDS Principal Balance; and (E) any other single state other than California, New York, Texas and Florida does not exceed 15.0% of the CDS Principal Balance;

For purposes of determining compliance with any Collateral Concentration Limitation, (a) all calculated percentages will be rounded to the nearest hundredth of 1% (e.g., 5.13%), (b) Temporary Ramp-Up Securities will be excluded from the calculation of the Collateral Concentration Limitations and (c) with respect to Synthetic Securities, satisfaction of the Collateral Concentration Limitations shall be based on 15

Processed and formatted by SEC Watch - Visit SECWatch.com

the Synthetic Security itself and not on the related Reference Obligations. During the Ramp-Up Period, the Collateral Concentration Limitations will not be taken into account for the purpose of determining compliance by the Issuer with any requirements under the Indenture. Collateral Debt Security means an item of Collateral which satisfies the Eligibility Criteria specified in Section 12.2. Collateral Interest Collections means, with respect to any Due Period and the related Payment Date, without duplication, the sum of (i) (a) all cash payments of interest with respect to any Collateral Debt Securities and Eligible Investments included in the Collateral (including any Sale Proceeds of a Collateral Debt Security sold at a price greater than or equal to its Principal Balance representing unpaid interest accrued thereon to the date of the sale thereof to the extent not treated as Collateral Principal Collections at the option of the Collateral Manager and (b) all Synthetic Security Periodic Payments payable to the Issuer under a Synthetic Security, net, in the case of a Derivative Contract, of any Synthetic Security Periodic Payments payable by the Issuer to the Derivative Contract Counterparty during the related Collection Period, but excluding in the case of the foregoing clauses (a) and (b) all funds received on a Defaulted Security (including any unpaid interest) and any unpaid interest accrued on a Deferred Interest PIK Bond or a Written Down Security to the date of sale) which are received during the related Due Period, (ii) all payments on Eligible Investments purchased with Collateral Interest Collections, (iii) payments received or scheduled to be received from a Hedge Counterparty under any Hedge Agreement (including the Initial Hedge Agreement) on the related Payment Date, excluding any payments received from a Hedge Counterparty upon reduction of the notional amount and any termination payments (provided that so long as the Notes are Outstanding, any termination payments received from a Hedge Counterparty will be used to enter into a substitute Hedge Agreement to the extent required to maintain the then-current rating of the Notes by each Rating Agency), (iv) all amendment and waiver fees, all late payment fees and all other fees and commissions received during the related Due Period (other than fees and commissions received in connection with the sale, restructuring, workout or default of Collateral Debt Securities or in connection with Defaulted Securities or Written Down Securities) (excluding any payments representing exit fees, extension fees or prepayment premiums paid in connection with Real Estate Interests), (v) the Principal Balance of any Eligible Investments purchased with Collateral Interest Collections, (vi) all interest accrued on the Closing Date on Collateral Debt Securities included in the Collateral, (vii) any amounts on deposit in the NonMonthly Pay Asset Interest Reserve Account, (viii) any amounts in the Ramp-Up Interest Reserve Account that are transferred to the Payment Account, (ix) after the Effective Date, at the option of the Collateral Manager, any amount on deposit in the Expense Reserve Account in excess of U.S.$25,000, (x) all income received during the related Due Period on any Eligible Investments then in any Derivative Contract Counterparty Accounts, to the extent transferred to the Collection Account pursuant to and in accordance with Section 10.9 and (xi) all proceeds from the foregoing; provided, however, that Collateral Interest Collections shall not include (i) the funds and other property (including, without limitation, the paid-up share capital of the Issuer) with respect to the Income Notes and the bank account in which such funds and the proceeds thereof are held, (ii) principal of any Collateral Debt Security representing capitalized interest after the date of purchase thereof by the Issuer, (iii) Purchased Accrued Interest or (iv) any amounts contributed by the Income Noteholders as capital contributions pursuant to Section 4.5 of the Income Note Paying Agency Agreement. Collateral Management Agreement means the Collateral Management Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, between the Issuer and the Collateral Manager. Collateral Management Fee means the Senior Collateral Management Fee and the Subordinate Collateral Management Fee. 16

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Manager means NS Advisors, LLC, a Delaware limited liability company, unless a successor Person shall have become Collateral Manager pursuant to the applicable provisions of the Collateral Management Agreement, in which case Collateral Manager shall mean such successor Person. Collateral Principal Collections means, with respect to any Due Period and the related Payment Date, all amounts received by the Issuer during such Due Period that do not constitute Collateral Interest Collections. Collateral Principal Collections shall include, without limitation, (A) principal of any Collateral Debt Security representing capitalized interest after the date of purchase thereof by the Issuer, (B) any Uninvested Proceeds which have not been invested on or prior to the Effective Date and (C) any amounts contributed by the Income Noteholders as capital contributions pursuant to Section 4.5 of the Income Note Paying Agency Agreement. Collateral Principal Collections Sub-Account has the meaning specified in Section 10.5(a)(1) hereof. Collateral Principal Payments means Collateral Principal Collections excluding Sale Proceeds and any amounts received in respect of Eligible Investments. Collateral Quality Tests will be satisfied if, as of any Measurement Date, the Collateral Debt Securities comply, in the aggregate, with all of the requirements set forth below (collectively, the “Collateral Quality Tests”): (1)

the Fitch Weighted Average Rating Factor does not exceed 8.50;

(2)

(a) the Weighted Average Fixed Rate Coupon as of such date equals or exceeds 5.70% and (b) the Weighted Average Spread as of such date equals or exceeds 2.07%;

(3)

the Weighted Average Life Test is satisfied;

(4)

the S&P CDO Monitor Test is satisfied;

(5)

the S&P Minimum Weighted Average Recovery Rate Test is satisfied;

(6)

the Moody’s WARF Test is satisfied;

(7)

the Moody’s Recovery Rate Test is satisfied; and

(8)

the Herfindahl Score of the Collateral Debt Securities is at least 41;

provided that Temporary Ramp-Up Securities will be excluded from the calculation of the Collateral Quality Tests. Collateral Sub-Account means any sub-account established within an Account. Collateralization Event means, provided that no Substitution Event has occurred, any of the following events: (a) the Hedge Ratings Determining Party’s short-term rating from Moody’s is lower than “P-1” or its long-term rating is withdrawn, suspended or downgraded below “Al”, (b) the Hedge Ratings Determining Party’s short-term rating from Fitch is lower than “Fl” or the long-term rating of the Hedge Ratings Determining Party from Fitch is withdrawn, suspended or downgraded below “A”, or (c) the short term rating of the Hedge Ratings Determining Party from S&P is lower than “A-1” or, if the Hedge Ratings Determining Party does not have a short term rating from S&P, the long term rating of such Hedge Ratings Determining Party is lower than “A+”. 17

Processed and formatted by SEC Watch - Visit SECWatch.com

Collection Account means the Securities Account designated the “Collection Account” and established in the name of the Trustee pursuant to Section 10.5, including the Collateral Principal Collections Sub-Account. Collections means, with respect to any Payment Date, the sum of (i) the Collateral Interest Collections collected during the applicable Due Period and (ii) the Collateral Principal Collections collected during the applicable Due Period. Commercial Mortgage Backed Security means securities backed by obligations (including certificates of participations in obligations) that are principally secured by mortgages on real property or interests therein having a multifamily or commercial use, such as regional malls, retail space, office buildings, warehouse or industrial properties, hotels, nursing homes and senior living centers. Commission means the United States Securities and Exchange Commission. Controlling Class means the Class A-1 Notes voting as a single Class, so long as any Class A-1 Notes are Outstanding, and then the Class A-2 Notes, so long as any Class A-2 Notes are Outstanding, and then the Class A-3 Notes, so long as any Class A-3 Notes are Outstanding, and then the Class B Notes, so long as any Class B Notes are Outstanding, and then the Class C Notes, so long as any Class C Notes are Outstanding, and then the Class D Notes, so long as any Class D Notes are Outstanding, and then the Class E Notes, so long as any Class E Notes are Outstanding, in each case, based on the Aggregate Outstanding Amount thereof. Controlling Class Objection means written notice to the Collateral Manager by the Holders of a majority in aggregate principal amount of Outstanding Notes of the Controlling Class objecting in their reasonable discretion to a proposed replacement Key Manager. Controlling Person means any other person (other than a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of the Issuer, a person who provides investment advice for a fee (direct or indirect) with respect to the assets of the Issuer, or any “affiliate” (within the meaning of 29 C.F.R. Section 2510.3-101(f)(3)) of any such person. Corporate Services Agreement means that certain Corporate Services Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, between the Issuer and the Administrator. Corporate Trust Office means the designated corporate trust office of the Trustee, currently located at 181 West Madison Street, 32nd Floor, Chicago, Illinois 60602, Attention: CDO Trust Services Group — N-Star Real Estate CDO VII Ltd., telephone number 312-904-4047, fax number 312-602-3935, or such other address as the Trustee may designate from time to time by notice to the Rated Noteholders, the Income Noteholders, the Collateral Manager and the Issuer or the principal corporate trust office of any successor Trustee. Coverage Tests means the Class A/B Coverage Tests, the Class C Coverage Tests, the Class D Coverage Tests and the Class E Coverage Tests. CRE Debt Obligations means interests in a secured or unsecured, senior or senior subordinated term bank or non-bank loans or other debt obligations, whether in loan or security form, or participations (senior or subordinate) therein, that are obligations (direct or by way of guarantee) of corporations, partnerships or other entities organized under the laws of the United States (or any State thereof) whose business is significantly related to real estate, real estate management and/or real estate ownership; provided that no 18

Processed and formatted by SEC Watch - Visit SECWatch.com

Real Estate Interests, Mezzanine Loans, REIT Debt Securities or Trust Preferred Securities shall constitute CRE Debt Obligations. Credit Lease Loans means mortgage loans secured by mortgages on commercial real estate properties that are subject to a lease to a single tenant. Credit Risk Event means, with respect to any Collateral Debt Security, (i) such Collateral Debt Security has been put on watch for possible downgrade, or has been downgraded, by any Rating Agency, (ii) such Collateral Debt Security has experienced an increase in credit spread of 10% or more (due to credit related reasons as determined by the Collateral Manager in its reasonable business judgment) compared to the credit spread at which such Collateral Debt Security was purchased by the Issuer, determined by reference to an applicable index selected by the Collateral Manager or (iii) there has been an event or circumstance that constitutes a change in the condition of the issuer of such Collateral Debt Security (or of available information with respect to such issuer) that evidences, in the good faith judgment of the Collateral Manager, (a) a significant risk of such Collateral Debt Security materially declining in credit quality, or (b) a significant risk, with a lapse of time, of such Collateral Debt Security becoming a Defaulted Security or a Written Down Security. Credit Risk Security means any Collateral Debt Security with respect to which there shall have occurred a Credit Risk Event. Credit Support Annex means the ISDA Credit Support Annex to a Hedge Agreement between a Hedge Counterparty and the Issuer. Current Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Debt Securities and the proceeds of the disposition thereof held as Cash and (b) Eligible Investments purchased with proceeds of the disposition of Pledged Collateral Debt Securities, existing immediately prior to the sale, maturity or other disposition of a Pledged Collateral Debt Security or immediately prior to the acquisition of a Pledged Collateral Debt Security, as the case may be. Custodian has the meaning specified in Section 3.3(a). Daily Official List means the Daily Official List of the Irish Stock Exchange. Deemed Floating Asset Hedge means, with respect to a Fixed Rate Collateral Debt Security, an interest rate swap having (i) a notional schedule equal to the Principal Balance as it is reduced by expected amortization of such Fixed Rate Collateral Debt Security over time and (ii) payment dates identical to the Payment Dates of the Issuer under the Indenture; provided that, (w) at the time of entry into the Deemed Floating Asset Hedge, (i) the expected principal payments on the Fixed Rate Collateral Debt Security comprising a Deemed Floating Rate Collateral Debt Security will not extend beyond the Stated Maturity Date and (ii) the scheduled notional amount of such Deemed Floating Asset Hedge at any time is equal to the expected principal amount of the related Fixed Rate Collateral Debt Security (as calculated at such time), (x) the Rating Agencies and the Trustee are notified prior to the Issuer’s entry into a Deemed Floating Asset Hedge, and each will be provided with the identity of the proposed hedge counterparty and copies of the hedge documentation and notional schedule, (y) such Deemed Floating Asset Hedge will require Rating Agency Confirmation from S&P to the extent the applicable master agreement or schedule attached thereto is not a hedge agreement with respect to which the documentation thereof conforms in all material respects to a form in respect of which Rating Agency Confirmation was previously obtained by the Issuer and (z) such Deemed Floating Asset Hedge is priced at then-current market rates. 19

Deemed Floating Rate Collateral Debt Security means a Fixed Rate Collateral Debt Security the interest rate of which is hedged into a Floating Rate Collateral Debt Security using a Deemed Floating Asset Hedge; provided that at the time of entry into the Deemed Floating Asset Hedge the Average Life of such Deemed Floating Rate Collateral Debt Security would not increase or decrease by more than one year from its expected average life if it were to prepay at either 50% or 150% of its pricing speed. Pursuant to this Indenture, a Deemed Floating Rate Collateral Debt Security will be deemed a Floating Rate Collateral Debt Security with a spread over LIBOR equal to the related Deemed Floating Spread. Deemed Floating Spread means the difference between the stated rate at which interest accrues on each Fixed Rate Collateral Debt Security that comprises a Deemed Floating Rate Collateral Debt Security (excluding all Defaulted Securities and Deferred Interest PIK Bonds) and the fixed rate that the Issuer agrees to pay on the Deemed Floating Asset Hedge at the time such swap is executed. Default means any Event of Default or any occurrence that, with notice or the lapse of time or both, would become an Event of Default. Defaulted Derivative Contract Counterparty Termination Payment means an amount payable by the Issuer to a Derivative Contract Counterparty that is due following the designation of an “Early Termination Date” (as such term is defined in the related Derivative Contract) (other than in respect of an “Illegality” or a “Tax Event” (as each such term is defined in the related Derivative Contract)), in respect of which the related Derivative Contract Counterparty is the “Defaulting Party” or the sole “Affected Party”. Defaulted Interest means any interest due and payable in respect of any Class A Note or Class B Note or, if no Class A Notes or Class B Notes are Outstanding, in respect of any Class C Note or, if no Class C Notes are Outstanding, in respect of any Class D Note, or if no Class D Notes are Outstanding, in respect of any Class E Note, and any interest on such Defaulted Interest that (in each case) is not punctually paid or duly provided for on the applicable Payment Date (including the applicable Stated Maturity Date) of the applicable Rated Note.

Processed and formatted by SEC Watch - Visit SECWatch.com

Defaulted Securities Amount means the sum, with respect to each Defaulted Security in the Collateral, of the lesser of (i) the product of the Principal Balance of such Defaulted Security and the lowest of the Applicable Recovery Rates of such Defaulted Security and (ii) the product of the Principal Balance of such Defaulted Security and the Market Value of such Defaulted Security. Defaulted Security means any Collateral Debt Security or any other security included in the Collateral: (i)

as to which (a) the issuer thereof has defaulted in the payment of principal or interest (without giving effect to any applicable notice or grace period or waiver, unless the Collateral Manager certifies to the Trustee that in the Collateral Manager’s judgment such default of up to the lesser of (1) three Business Days and (2) the grace period provided for in the Underlying Instruments is due to non-credit and non-fraud related reasons and the Collateral Manager has so certified in writing to the Trustee or (b) pursuant to its Underlying Instruments, there has occurred any default or event of default which entitles the holders thereof, with notice or passage of time or both, to accelerate the maturity (whether by mandatory prepayments, mandatory redemption or otherwise) of all or a portion of the outstanding principal amount of such security, unless (1) in the case of a default or event of default consisting of a failure of the obligor on such security to make required interest payments and/or scheduled principal payments, such security has resumed current payments of interest and scheduled principal in cash (including all past due interest and scheduled principal) and, in the Collateral Manager’s judgment, will continue to make such current payments of interest in cash (provided that no restructuring has been effected) or (2) in 20

Processed and formatted by SEC Watch - Visit SECWatch.com

the case of any other default or event of default, such default or event of default is no longer continuing (provided that no event of default has been waived with respect to (A) a default in the payment of principal or interest or (B) insolvency in the event that all outstanding amounts have not been paid) and such security satisfies the criteria for inclusion of securities in the definition of “Collateral Debt Security”; (ii)

that ranks pari passu with or subordinate to any other indebtedness for borrowed money owing by the issuer of such security, if any (for purposes hereof, “Other Indebtedness”; provided, however, that such Other Indebtedness of such issuer will not include series of such Other Indebtedness that may be issued or owing by a separate special purpose entity and is not guaranteed by the issuer) if such issuer had defaulted in the payment of principal or interest in respect of such Other Indebtedness (without giving effect to any applicable notice or grace period or waiver, unless the Collateral Manager certifies to the Trustee that in the Collateral Manager’s judgment such default of up to the lesser of (a) three Business Days and (b) the grace period provided for in the Underlying Instruments is due to non-credit and non-fraud related reasons and the Collateral Manager has so certified in writing to the Trustee), unless, in the case of a default or event of default consisting of a failure of the obligor on such security to make required interest payments and/or scheduled principal payments, such Other Indebtedness has resumed current payments of interest and scheduled principal (including all due interest and scheduled principal) in cash (whether or not any waiver or restructuring has been effected) and, in the Collateral Manager’s judgment, will continue to make such current payments of interest and scheduled principal in cash; provided that a security shall be considered a Defaulted Security pursuant to this clause (ii) only if the Collateral Manager knows, after due inquiry as required pursuant to the Collateral Management Agreement, that the issuer thereof is (or is reasonably expected by the Collateral Manager to be, as of the next scheduled payment distribution date) in default (without giving effect to any applicable grace period or waiver) as to payment of principal and/or interest on another obligation (and such default has not been cured or waived) which is senior or pari passu in right of payment to such Collateral Debt Security;

(iii)

with respect to which any bankruptcy, insolvency or receivership proceeding has been initiated in respect of the issuer of such Collateral Debt Security, or there has been proposed or effected any distressed exchange or other debt restructuring where the issuer of such Collateral Debt Security has offered the debt holders a new security or package of securities that, in the judgment of the Collateral Manager either (a) amounts to a diminished financial obligation or (b) has the purpose of helping the issuer to avoid default. For the avoidance of doubt in applying and interpreting this definition of Defaulted Security, the Collateral Manager shall be deemed to have knowledge of all information that Authorized Officers of the Collateral Manager have actually received, and shall be responsible under the Collateral Management Agreement for obtaining and reviewing information available to it either in its capacity as an investment manager of national standing or as holder of such Collateral Debt Security;

(iv)

if such Collateral Debt Security has been rated “C” or lower by Moody’s or “CC” or lower by S&P or Fitch or if S&P has withdrawn its rating and has not provided the Issuer with a shadow rating;

(v)

which is a Written Down Security unless S&P has affirmed its rating of such Written Down Security; or

(vi)

that is a Synthetic Security that has a single Reference Obligation (A) the Reference Obligation of which would (if owned by the Issuer) constitute a Defaulted Security or (B) the Derivative 21

Processed and formatted by SEC Watch - Visit SECWatch.com

Contract Counterparty with respect to which is a “Defaulting Party” or the sole “Affected Party” (as such terms are defined therein) thereunder. Defaulting Party has the meaning given to such term in the applicable Hedge Agreement or Synthetic Security. Deferred Interest PIK Bond means (A) a PIK Bond (other than a Trust Preferred Security) with respect to which interest has been deferred or capitalized or does not pay interest when scheduled (other than a Defaulted Security) for each consecutive payment date occurring over a period of the lesser of (i) six months or (ii) two consecutive payment dates, but only until such time as payment of interest on such PIK Bond has resumed and all capitalized and deferred interest and any interest thereon has been paid in cash in accordance with the terms of the Underlying Instruments; or (B) a PIK Bond that is a Trust Preferred Security with respect to which interest has been deferred or capitalized and remains outstanding. Deferred Interest PIK Bond Amount means, with respect to each Deferred Interest PIK Bond in the Collateral, the lesser of (i) the product of the Principal Balance of such Deferred Interest PIK Bond and the lowest of the Applicable Recovery Rates of such Deferred Interest PIK Bond and (ii) the product of the Principal Balance of such Deferred Interest PIK Bond and the Market Value of such Deferred Interest PIK Bond. Definitive Class A-D Note has the meaning specified in Section 2.1(c). Definitive Class E Note has the meaning specified in Section 2.1(d). Definitive Class E Note Transfer Certificate has the meaning specified in Section 2.4(d)(1). Definitive Income Notes means Income Notes issued in the form of physical certificates in definitive, fully registered form. Depositary means, with respect to the Rated Notes issued in the form of one or more Global Notes, the Person designated as Depositary pursuant to Section 2.2(e), or any successor thereto, appointed pursuant to the applicable provisions of this Indenture. Depositary Participant means a broker, dealer, bank or other financial institution or other Person for whom from time to time the Depositary effects book-entry transfers and pledges of notes deposited with the Depositary. Derivative Contract means a credit derivative, total return swap or other similar contract or agreement executed by the Issuer with a Derivative Contract Counterparty, in respect of which the Issuer has exposure synthetically through such contract to one or more (including a pool of) Reference Obligations or obligors; provided that any Derivative Contract executed by the Issuer shall (i) contain appropriate limited recourse and non-petition provisions equivalent (mutatis mutandis) to those set forth herein and Rating Agency Confirmation from S&P shall have been obtained before entering into such Derivative Contract and (ii) require the Issuer to deposit into the Derivative Contract Counterparty Account an amount equal to its maximum potential exposure under such Derivative Contract. Derivative Contract Counterparty means an entity required to make periodic premium payments to the Issuer pursuant to the terms of a Derivative Contract and which satisfies the Derivative Contract Counterparty Rating Requirement. 22

Processed and formatted by SEC Watch - Visit SECWatch.com

Derivative Contract Counterparty Account means each account established for the benefit of a Derivative Contract Counterparty in connection with a Derivative Contract pursuant to Section 10.9 hereof. Derivative Contract Counterparty Rating Requirement means the requirement that an entity will satisfy if it has (or its guarantor under a guarantee meeting S&P’s then-current criteria for guarantees has) (A) (i) a long term debt rating of at least “Aa3” by Moody’s or (ii) a long term debt rating of at least “Al” by Moody’s and a short-term debt rating of “P-1” and (B) a short term rating of at least “A-1+” by S&P (or “A1” by S&P if the premium (and any other relevant amount (such as coupon) required under the relevant Derivative Contract) to be paid by such Derivative Contract Counterparty is posted one payment period in advance for the term of the Derivative Contract) and is not on negative watch. Derivative Contract Issuer Account means each account established for the benefit of the Issuer in connection with a Derivative Contract pursuant to Section 10.10 hereof. Derivative Security means a security in the form of a credit-linked note, trust certificate, collateralized bond obligation or collateralized loan or similar obligation in respect of which the Issuer has exposure synthetically to one or more (including a pool of) Reference Obligations or obligors through a swap or other agreement executed by the issuer of such security with a person other than the Issuer and in respect of which the Issuer has no ongoing payment obligations; provided, however that a Derivative Security shall not include any security backed by more than one credit default swap or referencing more than one Reference Obligation or a synthetic collateralized debt obligation or synthetic resecuritization that (in each case) references CMBS Conduit Securities or other CMBS Securities or certificates representing a beneficial interest therein (which, for the avoidance of doubt, shall (in each case) be treated as a CMBS Re-REMIC Security). Distribution means any payment of principal, interest or fee or any dividend or premium payment made on, or any other distribution in respect of, an obligation or security. Dollar or U.S.$ means currency of the United States as at the time shall be legal tender for all debts, public and private. DTC means The Depository Trust Company, and its nominees and their respective successors. Due Date means each date on which a Distribution is due on a Pledged Security. Due Period means, with respect to each Payment Date, the period beginning on the day following the last day of the preceding Due Period relating to the preceding Payment Date (or, in the case of the Due Period that is applicable to the first Payment Date, beginning on the Closing Date) and ending at the later of (i) the close of business on the fourth Business Day preceding such Payment Date and (ii) the close of business on the fourth Business Day following the 11th day of the same calendar month as such Payment Date, or if the 11th day of such calendar month is not a Business Day, the fifth Business Day following the 11th day of such calendar month. Effective Date means the date that is the earliest of (i) the 120 days following the Closing Date, (ii) the date on which the Issuer has purchased Collateral Debt Securities, excluding Temporary Ramp-Up Securities, having an aggregate par amount of U.S.$ 550,000,000 or (iii) such earlier date (if any) that is designated by the Collateral Manager by notice to the Trustee under the Indenture; provided that in the event that such day does not fall on a Business Day, the Effective Date shall be the next succeeding Business Day. 23

Processed and formatted by SEC Watch - Visit SECWatch.com

Eligibility Criteria has the meaning specified in Section 12.2. Eligible Investments means any U.S. dollar denominated investment that, at the time it is delivered to the Trustee, is one or more of the following obligations or securities, including, without limitation, those investments for which the Trustee or an Affiliate of the Trustee provides services: (i)

cash;

(ii)

direct Registered obligations of, and Registered obligations the timely payment of principal of and interest on which is fully and expressly guaranteed by, the United States of America, or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America;

(iii)

demand and time deposits in, interest bearing trust accounts and certificates of deposit of, bankers’ acceptances issued by, or federal funds sold by any depository institution or trust company (including the Trustee) incorporated under the laws of the United States of America or any state thereof and subject to the supervision and examination by federal and/or state banking authorities so long as the commercial paper and/or debt obligations of such depository institution or trust company (or, in the case of the principal depository institution in a holding company system, the commercial paper or debt obligations of such holding company) at the time of such investment or contractual commitment providing for such investment have a credit rating of: (a)

in the case of long-term debt obligations, not less than “Aa2” by Moody’s, “AA+” by S&P and “AA” if rated by Fitch; or

(b)

in the case of commercial paper and short-term debt obligations including time deposits, “P-1” by Moody’s, “A-1+” by S&P and “Fl” if rated by Fitch (provided that, in the case of commercial paper and short-term debt obligations with a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment a long-term credit rating of not less than “AA+” by S&P and a short- and long-term credit rating of not less than “F1+” and “AA”, respectively, if rated by Fitch; provided, however, that (1) so long as LaSalle Bank National Association is rated at least “A-1” by S&P and not on negative watch and (2) LaSalle Bank National Association is the Trustee, overnight time deposits with LaSalle Bank National Association shall be an Eligible Investment);

(iv)

Registered securities other than mortgage-backed securities bearing interest or sold at a discount issued by any corporation under the laws of the United States of America or any state thereof that have a credit rating of “Aa2” by Moody’s, “AA+” by S&P and “AA” if rated by Fitch at the time of such investment or contractual commitment providing for such investment;

(v)

unleveraged repurchase obligations (if treated as debt for tax purposes by the issuer) with respect to any security described in clause (ii) above, entered into with a depository institution or trust company (acting as principal) described in clause (iii) or entered into with broker-dealers registered with the Commission (acting as principal) whose short-term debt has a credit rating of “P-1” by Moody’s, “A-1+” by S&P and “F1+” if rated by Fitch at the time of such investment in the case of any repurchase obligation for a security having a maturity not more than 183 days from the date of its issuance or whose long-term debt has a credit rating of at least “Aa2” by Moody’s, “AA+” by S&P and “AA” if rated by Fitch at the time of such investment in the case of any repurchase obligation for a security having a maturity more than 183 days from the date of its issuance; 24

Processed and formatted by SEC Watch - Visit SECWatch.com

(vi)

commercial paper or other short-term obligations having at the time of such investment a credit rating of (a) (1)“F1” by Fitch and that have a maturity of not more than 30 days from its date of issuance or (2) “F1+” by Fitch and that have a maturity of more than 30 days but less than one year from its date of issuance and (b) “P-1” by Moody’s and “A-1+” by S&P that are registered and are either bearing interest or are sold at a discount from the face amount thereof and that have a maturity of not more than 183 days from its date of issuance; provided that in the case of commercial paper with a maturity of longer than 91 days, the issuer of such commercial paper (or, in the case of a principal depository institution in a holding company system, the holding company of such system), if rated by the Rating Agencies, must have at the time of such investment a long-term credit rating of at least “Aa2” by Moody’s, “AA+” by S&P and “AA” if rated by Fitch;

(vii)

money market funds with respect to any investments described in clauses (ii) through (vi) above having, at the time of such investment, a credit rating of not less than “Aaa” by Moody’s, “AAA/AAAm/AAAm-G” by S&P (if such funds are rated by S&P) and a credit rating of “AAA” if rated by Fitch, respectively (including those for which the Trustee is investment manager or advisor), provided that such fund or vehicle is formed and has its principal office outside the United States; and

(viii)

any other investments approved in writing by the Rating Agencies;

provided that (a) Eligible Investments purchased with funds in the Collection Account will be held until maturity except as otherwise specifically provided herein and will include only such obligations or securities as mature no later than the Business Day prior to the Payment Date next succeeding the date of investment in such obligations or securities, unless such Eligible Investments are investments of the type described in clause (i) or (iii) above, in which event such Eligible Investments may mature on such Payment Date and (b) none of the foregoing obligations or securities will constitute Eligible Investments if all, or substantially all, of the remaining amounts payable thereunder will consist of interest and not principal payments, if such security is purchased at a price in excess of 100% of par, if such security is subject to substantial non-credit related risk, as determined by the Collateral Manager in its judgment, if any income from or proceeds of disposition of the obligation or security is or will be subject to deduction or withholding for or on account of any withholding or similar tax or the acquisition (including the manner of acquisition), ownership, enforcement or disposition of the obligation or security will subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation, or if such security has an assigned rating with an “r”, “t”, “p”, “pi” or “q” subscript, or if such security is a mortgage-backed security or if such security is subject to an Offer. Eligible SPV Jurisdiction means Bahamas, Bermuda, the Cayman Islands, the Channel Islands, the Netherlands Antilles, Luxembourg or any other similar jurisdiction (so long as Rating Agency Confirmation is obtained in connection with the inclusion of such other jurisdiction) generally imposing either no or nominal taxes on the income of companies organized under the laws of such jurisdiction. Emerging Market Issuer means a sovereign or non-sovereign issuer located in a country that is in Latin America, Asia, Africa, Eastern Europe or the Caribbean or in a country the dollar-denominated sovereign debt obligations of which are rated lower than “Aa” by Moody’s, “AA” by S&P and “AA” by Fitch; provided that an issuer of Asset-Backed Securities located in any Eligible SPV Jurisdiction shall not be an Emerging Market Issuer for purposes hereof if the underlying collateral of such Asset-Backed Securities consists solely of obligations of obligors located in the United States and Qualifying Foreign Obligors. Entitlement Holder has the meaning specified in Section 8-102(a)(7) of the UCC. 25

Processed and formatted by SEC Watch - Visit SECWatch.com

Entitlement Order has the meaning specified in Section 8-102(a)(8) of the UCC. Equity Security means any security that does not entitle the holder thereof to receive periodic payments of interest and one or more installments of principal acquired by the Issuer as a result of the exercise or conversion of Collateral Debt Securities, in conjunction with the purchase of Collateral Debt Securities or in exchange for a Collateral Debt Security. ERISA means the U.S. Employee Retirement Income Security Act of 1974, as amended. Euroclear means Euroclear Bank S.A/N.V., as operator of the Euroclear system. Event of Default has the meaning specified in Section 5.1. Excepted Property means the U.S.$1,000 of capital contributed to the Issuer in respect of the Issuer’s Ordinary Shares in accordance with the Articles and U.S.$1,000 representing a profit fee to the Issuer. Exchange Act means the United States Securities Exchange Act of 1934, as amended. Expense Reserve Account means the Securities Account designated the “Expense Reserve Account” and established in the name of the Trustee pursuant to Section 10.6. Fee Basis Amount means an amount equal, for any Payment Date, to the average of the aggregate CDS Principal Balance (excluding the aggregate Principal Balance of Defaulted Securities) on the first day of the related Due Period and the aggregate CDS Principal Balance (excluding the aggregate Principal Balance of Defaulted Securities) on the last day of such Due Period. Financial Asset has the meaning specified in Section 8-102(a)(9) of the UCC. Financing Statement means a financing statement relating to the Collateral naming the Issuer as debtor and the Trustee on behalf of the Secured Parties as secured party. Fitch means Fitch, Inc. and any successor or successors thereto. Fitch Industry Classification Group means any of the Fitch industry and sub-industry classification groups as currently set forth in “Global Rating Criteria for Collateralised Debt Obligations” available at www.fitchratings.com. Fitch may, from time to time, modify or replace this criteria which may have modified or replaced this report if Fitch provides notice thereof to the Issuer, the Collateral Manager and the Trustee. Fitch Rating means (A) with respect to any Collateral Debt Security other than a Trust Preferred Security, for determining the Fitch Rating as of any date of determination: (i)

if such Collateral Debt Security is rated by Fitch, the Fitch Rating shall be such rating as published in any publicly available source;

(ii)

if such Collateral Debt Security is not rated by Fitch, or the Fitch Rating cannot be determined by the method in clause (i) above, and a rating is publicly available from both S&P and Moody’s, the Fitch Rating shall be the lower of such ratings; and if a rating is publicly available from only one of S&P and Moody’s, the Fitch Rating shall be the equivalent of such rating by S&P or Moody’s, as the case may be; and 26

Processed and formatted by SEC Watch - Visit SECWatch.com

(iii)

(B)

in all other circumstances, the Fitch Rating shall be the private rating assigned by Fitch upon request of the Collateral Manager;

with respect to any Collateral Debt Security that is a Trust Preferred Security, (i) if the issuing entity (or the direct or indirect parent of such issuing entity) of such Trust Preferred Security has a public rating by Fitch, that public rating shall apply, or (ii) if such Trust Preferred Security has no public rating by Fitch, it shall be the private rating assigned by Fitch upon request of the Collateral Manager.

provided that (a) if such Collateral Debt Security has been put on rating watch negative for possible downgrade by any Rating Agency, then the rating used to determine the Fitch Rating under clause (ii) above shall be one (1) rating subcategory below such rating by that Rating Agency, (b) if such Collateral Debt Security has been put on rating watch positive for possible upgrade by any Rating Agency, then the rating used to determine the Fitch Rating under clause (ii) above shall be one rating subcategory above such rating by that Rating Agency and (c) notwithstanding the rating definition described above, Fitch reserves the right to issue a rating estimate for any Collateral Debt Security at any time. Fitch Rating Factor means, for the purpose of computing the Fitch Weighted Average Rating Factor, with respect to any Collateral Debt Security or Eligible Investment on any relevant date, the number set forth in the table below opposite the Fitch Rating of such Collateral Debt Security or Eligible Investment: Fitch Ratin g

AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+

Fitch Ratin g Factor

Fitch Ratin g

Fitch Ratin g Factor

.019 .057 .089 1.15 1.65 1.85 2.44 3.13 3.74 7.26 10.18

BB BBB+ B BCCC+ CCC CC C DDD-D

13.53 18.46 22.84 27.67 34.98 43.36 48.52 77.00 95.00 100.00

Fitch Recovery Rate means, with respect to a Collateral Debt Security on any Calculation Date, an amount equal to the percentage corresponding to the domicile, original rating, seniority and tranche thickness of such item of Collateral Debt Security as currently set forth on the Closing Date in “Global Rating Criteria for Collaterised Debt Obligations” available at www.fitchratings.com. Fitch may, from time to time, modify or replace this criteria and Fitch may apply the current criteria which may have modified or replaced this report if Fitch provides notice thereof to the Issuer, the Collateral Manager and the Trustee. Fitch Weighted Average Rating Factor means the number determined on any Calculation Date by dividing (i) the summation of the series of products obtained (a) for any Collateral Debt Security that is not a Defaulted Security or Deferred Interest PIK Bond, by multiplying (1) the Principal Balance on such Calculation Date of each such Collateral Debt Security by (2) its respective Fitch Rating Factor on such Calculation Date and (b) for any Defaulted Security or Deferred Interest PIK Bond, by multiplying (1) the Applicable Recovery Rate for such Defaulted Security or Deferred Interest PIK Bond by (2) the 27

Processed and formatted by SEC Watch - Visit SECWatch.com

Principal Balance on such Calculation Date of each such Defaulted Security or Deferred Interest PIK Bond by (3) its respective Fitch Rating Factor on such Calculation Date by (ii) the sum of (a) the aggregate Principal Balance on such Calculation Date of all Collateral Debt Securities and Eligible Investments that are not Defaulted Securities or Deferred Interest PIK Bonds, plus (b) the summation of the series of products obtained by multiplying (1) the Applicable Recovery Rate for each Defaulted Security or Deferred Interest PIK Bond by (2) the Principal Balance on such Calculation Date of such Defaulted Security or Deferred Interest PIK Bond, and rounding the result up to the nearest whole number. Fixed Rate Collateral Debt Security means any Collateral Debt Security which bears a fixed rate of interest. Fixed Rate 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 zero and the excess, if any, of the Weighted Average Fixed Rate Coupon for such Measurement Date over 5.70%, and (b) the aggregate Principal Balance of all Collateral Debt Securities that are Fixed Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities, Deferred Interest PIK Bonds and Deemed Floating Rate Collateral Debt Securities) and the denominator of which is the aggregate Principal Balance of all Collateral Debt Securities that are Floating Rate Collateral Debt Securities or Deemed Floating Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities and Deferred Interest PIK Bonds). Fixed Rate Notes means the Class D-FX Notes and the Class E Notes. Floating Rate Collateral Debt Security means any Collateral Debt Security which bears interest based upon LIBOR, prime rate or another floating rate index. Floating Rate Notes means, collectively, the Class A Notes, the Class B Notes, the Class C Notes and the Class D-FL Notes. Form-Approved Hedge Agreement means a Hedge Agreement relating to a specific Hedge Counterparty with respect to which (a) the related Collateral Debt Security could be purchased by the Issuer without any required action by the Rating Agencies and (b) the documentation of which conforms in all material respects to a form for such Hedge Counterparty which does not require Rating Agency Confirmation (as certified to the Trustee by the Collateral Manager, following receipt of confirmation by the Collateral Manager from the Hedge Counterparty and the Rating Agencies); provided that (i) such Form-Approved Hedge Agreement shall not provide for any upfront payments to be made to any Hedge Counterparty (other than the Initial Hedge Counterparty), (ii) any revised Form-Approved Hedge Agreement with respect to a particular Hedge Counterparty shall be approved by each of the Rating Agencies at least ten days prior to the initial use thereof, (iii) any Rating Agency may withdraw its consent to the use of a particular Form-Approved Hedge Agreement by written notice to the Trustee, the Collateral Manager and the relevant Hedge Counterparty (provided that such withdrawal of consent shall not affect any existing Hedge Agreement entered into with such Hedge Counterparty) and (iv) the Issuer (or the Collateral Manager on its behalf) shall deliver to the Trustee and each Rating Agency a copy of each Form-Approved Hedge Agreement specifying the Hedge Counterparty to which it relates upon receipt of Rating Agency Confirmation with respect thereto, and the Trustee’s records (when taken together with any correspondence received from the Rating Agencies pursuant to clause (ii)) shall be conclusive evidence of such form. Four-Month Period means, at any time during the Reinvestment Period, the period of four months following the earliest date as of which the number of Key Managers that are employed on a substantially 28

Processed and formatted by SEC Watch - Visit SECWatch.com

full-time basis in the position of managing director or other management-level employee by the Collateral Manager (or any of its successors or assigns permitted pursuant to Section 16 of the Collateral Management Agreement) becomes less than one. GAAP has the meaning specified in Section 6.3(k). Global Notes means the Rule 144A Global Notes and the Regulation S Global Notes. Grant means to grant, bargain, sell, warrant, alienate, remise, demise, release, convey, assign, transfer, mortgage, pledge, create and grant a security interest in and right of set-off against, deposit, set over and confirm. A Grant of the Pledged Securities, or of any other instrument, shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate continuing right to claim for, collect, receive and receipt for principal, interest and fee payments in respect of the Pledged Securities or such other instruments, and all other amounts payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto. Hedge Agreement means, collectively, any of one or more interest rate protection agreements (including the Initial Hedge Agreements) or any Cashflow Hedge Agreement, as amended from time to time, together with any replacement hedge agreements on substantially identical terms (or that otherwise satisfies the conditions of Section 16.1(d)), entered into pursuant to Section 16.1 or a Deemed Floating Asset Hedge. Hedge Counterparty means (a) with respect to each Initial Hedge Agreement entered into on the Closing Date, the Initial Hedge Counterparty (or any permitted assignee or successor) and (b) any hedge counterparty (or any permitted assignee or successor) under a Hedge Agreement (including under a Deemed Floating Asset Hedge or any Cashflow Hedge Agreement) that satisfies the Hedge Counterparty Ratings Requirement. Hedge Counterparty Collateral Account means each Securities Account designated the “Hedge Counterparty Collateral Account” and established in the name of the Trustee pursuant to Section 16.1(f). Hedge Counterparty Ratings Requirement means, with respect to any Hedge Ratings Determining Party: (a) either (x) (1) a rating on the short-term obligations of the Hedge Ratings Determining Party of “P-1” and (2) a rating on the long-term unsecured, senior debt obligations of the Hedge Ratings Determining Party of at least “Al” by Moody’s or (y) if there is no short-term rating by Moody’s, a rating on the long-term unsecured, senior debt obligations of the Hedge Ratings Determining Party of at least “Aa3” by Moody’s; (b) both (x) the short-term rating of such Hedge Ratings Determining Party by Fitch is not lower than “Fl” and (y) the long-term rating of such Hedge Ratings Determining Party by Fitch is not withdrawn, suspended or downgraded below “A”; and (c) either (i) the short-term rating of such Hedge Ratings Determining Party is not lower than “A-1” by S&P or (ii) if such Hedge Ratings Determining Party does not have a short-term rating from S&P, the longterm rating of such Hedge Ratings Determining Party by S&P is not lower than “A+”. Hedge Payment Amount means, with respect to the Hedge Agreement and any Payment Date, the amount, if any, then payable by the Issuer to the Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement. 29

Hedge Ratings Determining Party means (a) unless clause (b) applies with respect to the Hedge Agreement, the Hedge Counterparty or any transferee thereof or (b) any Affiliate of the Hedge Counterparty or any transferee thereof that unconditionally and absolutely guarantees (with the form of such guarantee meeting S&P’s then-current published criteria with respect to guarantees) the obligations of the Hedge Counterparty or such transferee, as the case may be, under the Hedge Agreement. For the purpose of this definition, no direct or indirect recourse against one or more shareholders of the Hedge Counterparty or any such transferee (or against any Person in control of, or controlled by, or under common control with, any such shareholder) shall be deemed to constitute a guarantee, security or support of the obligations of the Hedge Counterparty or any such transferee. Hedge Receipt Amount means, with respect to the Hedge Agreement and any Payment Date, the amount, if any, then payable to the Issuer by the Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement. Herfindahl Index means an index calculated by the Collateral Manager by dividing (i) one by (ii) the sum of, with respect to each Collateral Debt Security, (x) the aggregate Principal Balance of all Collateral Debt Securities issued by a single obligor divided by (y) the CDS Principal Balance, raised to the second power. For purposes of calculating the Herfindahl Index, each U.S.$ 500,000 increment of cash in any Account shall be treated as a single Collateral Debt Security. Herfindahl Score means a measurement of the diversity of a pool of loans of unequal size calculated in accordance with the Herfindahl Index. Highest Auction Price means, in connection with a Redemption, the bid or bids for the Collateral Debt Securities resulting in the highest auction price of one or more Subpools of Collateral Debt Securities. Holder or Noteholder means (i) with respect to any Rated Note, any Rated Noteholder and (ii) with respect to any Income Note, any Income Noteholder, as the context may require.

Processed and formatted by SEC Watch - Visit SECWatch.com

Income Note Distribution Account means the account designated the “Income Note Distribution Account” and established by the Income Note Paying Agent in the name of the Income Note Paying Agent for the benefit of the Issuer pursuant to the Income Note Paying Agency Agreement. Income Note Excess Funds means all remaining Collateral Interest Collections and Collateral Principal Collections as set forth in Section 11.1(a)(23) and 11.1(b)(19). Income Note Paying Agency Agreement means that certain Income Note Paying Agency Agreement, dated as of June 22, 2006, as the same may be amended or supplemented from time to time, between the Issuer and the Income Note Paying Agent. Income Note Paying Agent means LaSalle Bank National Association, and any successors or assigns in its capacity as Income Note Paying Agent under the Income Note Paying Agency Agreement. Income Note Paying Agent Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by, or otherwise owing to, the Income Note Paying Agent during the preceding Due Period in accordance with the Income Note Paying Agency Agreement. Income Note Redemption Approval Condition means, in connection with a Tax Redemption at the direction of the Controlling Class and an Auction Call Redemption, the requirement that, unless and to the extent the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes have waived payment in full of the Income Notes Stated Amount, the Income Noteholders 30

Processed and formatted by SEC Watch - Visit SECWatch.com

receive in connection with such Tax Redemption or Auction Call Redemption an amount equal to (x) the Income Notes Stated Amount minus (y) the aggregate amount of all cash distributions on the Income Notes (whether in respect of distributions or redemption payments made to the Income Note Paying Agent for distribution to the Income Noteholders) on or prior to the relevant Auction Date. Income Note Register means, with respect to the Income Notes, the Income Note Register maintained by the Income Note Registrar. Income Note Registrar means LaSalle Bank National Association, and any successors or assigns in its capacity as Income Note Registrar under the Income Note Paying Agency Agreement. Income Noteholder means, with respect to any Income Note, the Person in whose name such Income Note is registered in the Income Note Register. Income Notes means the U.S.$23,000,000 Income Notes due 2051. Income Notes Stated Amount means U.S.$23,000,000. Indenture means this instrument and, if from time to time supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, as so supplemented or amended. Independent means, as to any Person, any other Person (including, in the case of an accountant, or lawyer, a firm of accountants or lawyers and any member thereof) who (i) does not have and is not committed to acquire any material direct or any material indirect financial interest in such Person or in any Affiliate of such Person, (ii) is not connected with such Person as an Officer, employee, promoter, underwriter, voting trustee, partner, director or Person performing similar functions and (iii) if required to deliver an opinion or certificate to the Trustee pursuant to this Indenture, states in such opinion or certificate that the signer has read this definition and that the signer is Independent within the meaning hereof. “Independent” when used with respect to any accountant may include an accountant who audits the books of such Person if in addition to satisfying the criteria set forth above the accountant is independent with respect to such Person within the meaning of Rule 101 of the Code of Ethics of the American Institute of Certified Public Accountants. Initial Hedge Agreements mean, collectively, each of the interest rate swap agreements entered into between the Issuer and the Initial Hedge Counterparty on the Closing Date. Initial Hedge Counterparty means Bank of America, N.A. under the Initial Hedge Agreement and any of its successors, assigns or replacements under the Initial Hedge Agreement appointed in accordance with the terms of this Indenture and the Initial Hedge Agreement. Initial Payment Date means the Payment Date occurring in July 2006. Instrument has the meaning specified in Section 9-102(a)(47) of the UCC. Interest Coverage Amount means, as of any Measurement Date, an amount equal to (i) the amount received or scheduled to be received as Collateral Interest Collections during the related Due Period, less (ii) (a) the amount payable as Aggregate Fees and Expenses on the related Payment Date, (b) any amounts paid or scheduled to be paid to the Hedge Counterparty on the related Payment Date (excluding any termination payments) and (c) for purposes of calculating the Class A/B Interest Coverage Ratio, the Class C Interest Coverage Ratio, the Class D Interest Coverage Ratio and the Class E Interest Coverage 31

Processed and formatted by SEC Watch - Visit SECWatch.com

Ratio, any amounts scheduled to be paid to the Non-Monthly Pay Asset Interest Reserve Account on the related Payment Date; provided that (a) following the date on which a Collateral Debt Security becomes a Defaulted Security, scheduled Collateral Interest Collections shall not include any amount scheduled to be received on Defaulted Securities or any amount scheduled to be received on securities that are currently deferring interest until (1) such scheduled amounts are actually received in Cash or (2) the cumulative aggregate amounts actually received on a Defaulted Security exceed the Principal Balance of such Defaulted Security, (b) the expected interest income on Floating Rate Collateral Debt Securities and Eligible Investments shall be calculated using the then-current interest rate applicable thereto and (c) with respect to any Written Down Security, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount. Interest Coverage Tests means the Class A/B Interest Coverage Test, the Class C Interest Coverage Test, the Class D Interest Coverage Test and the Class E Interest Coverage Test. Interest Only Security means any security that by its terms provides for periodic payments of interest and does not provide for the repayment of a stated principal amount. Interest Period means (i) with respect to the Initial Payment Date, the period from and including the Closing Date to but excluding the Initial Payment Date and (ii) thereafter with respect to each Payment Date, the period beginning on the first day following the end of the preceding Interest Period and ending on (and including) the day before the next Payment Date. Investment Advisers Act means the United States Investment Advisers Act of 1940, as amended. Investment Company Act means the United States Investment Company Act of 1940, as amended. Irish Listing Agent means NCB Stockbrokers Limited. Irish Paying Agent means NCB Stockbrokers Limited. Issue of Collateral Debt Securities means Collateral Debt Securities issued by the same issuer secured by the same collateral pool. Issuer means N-Star Real Estate CDO VII Ltd., an exempted company incorporated and existing under the law of the Cayman Islands, unless a successor Person shall have become the Issuer pursuant to the applicable provisions of this Indenture, and thereafter “Issuer” shall mean such successor Person. Issuer Order and Issuer Request mean, respectively, a written order or a written request, which may be in the form of a standing order or request in each case dated and signed in the name of the Issuer (or, as expressly provided herein, the Collateral Manager on its behalf) by an Authorized Officer of the Issuer (or, as expressly provided herein, the Collateral Manager). Key Manager means any of David T. Hamamoto, Jean-Michel (Mitch) Wasterlain or any such other additional person as may be appointed Key Managers in accordance with the Collateral Management Agreement (or if David T. Hamamoto, Jean-Michel (Mitch) Wasterlain or any such additional Key Managers have been replaced with one or more Approved Replacement Persons, such Approved Replacement Persons). Key Manager Event means any of the following: (a) the failure by the Collateral Manager to propose a replacement Key Manager within the applicable Four-Month Period, (b) the failure by the Collateral Manager, within the Four-Month Period, to propose a different replacement Key Manager following 32

Processed and formatted by SEC Watch - Visit SECWatch.com

receipt of a Controlling Class Objection or (c) the receipt of another Controlling Class Objection within ten Business Days after delivery of such a proposal for a different replacement Key Manager to the Holders of the Notes of the Controlling Class. LIBOR means, with respect to each Interest Period (other than the first Interest Period), a floating rate equal to the London interbank offered rate for one-month U.S. Dollar deposits determined in the manner described in Schedule B. LIBOR for the first Interest Period will be determined on the second London Banking Day prior to the Closing Date. LIBOR Calculation Date has the meaning specified in Schedule B. Listed Bidders has the meaning specified in Schedule E. London Banking Day has the meaning specified in Schedule B. Majority means (a) with respect to any Class or Classes of Rated Notes, the Holders of more than 50% of the Aggregate Outstanding Amount of the Rated Notes of such Class or Classes of Rated Notes, as the case may be and (b) with respect to Income Notes, the Holders of more than 50% of the Income Notes Stated Amount. Margin Stock means “margin stock” as defined under Regulation U issued by the Board of Governors of the Federal Reserve System. Market Value means, on any date of determination, the average of three or more bid-side prices expressed as a percentage of the par amount, obtained from independent, nationally recognized financial institutions in the relevant market for one or more Collateral Debt Securities, each unaffiliated with each other and the Collateral Manager, as certified by the Collateral Manager (to the extent that such bid-side prices may be obtained by the Collateral Manager using its commercially reasonable efforts and commercially reasonable business judgment). If three or more bid-side prices cannot be so obtained, then the Market Value on such date of determination will be the lower of two bid-side prices, if two bid-side prices are obtained in the manner described above, and the sole bid-side price if only one bid-side price is obtained in the manner described above. If no bids can be obtained in the manner described above, the Market Value will be (1) in respect of an amount equal to but not greater than 7.5% of the Principal Balance of the Proposed Portfolio, the price, expressed as a percentage of the par amount, as determined by the Collateral Manager in its commercially reasonable judgment or (2) the S&P Recovery Rate with respect to such Collateral Debt Security, to the extent not calculated pursuant to clause (1) above. Measurement Date means any of the following: (a) the Effective Date; (b) any date after the Effective Date upon which the Issuer disposes or acquires (which date of acquisition shall be deemed to be the date on which the Issuer enters into commitments to acquire such Collateral Debt Security) any Collateral Debt Security; (c) each Calculation Date; (d) the last Business Day of each calendar month (other than the calendar month preceding the month in which a Calculation Date occurs and any calendar month prior to and including the month in which the Effective Date occurs); and (e) with reasonable notice to the Issuer, the Collateral Manager and the Trustee, any other Business Day that any Rating Agency or Holders of more than 50% of the then Aggregate Outstanding Amount of any Class of Rated Notes requests to be a “Measurement Date”; 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 day that is a Business Day; provided further that for the purposes of determining the Issuer’s compliance with any Coverage Test, the Measurement Date will be on or subsequent to the Effective Date. 33

Processed and formatted by SEC Watch - Visit SECWatch.com

Mezzanine Loans means mezzanine loans secured by ownership interests in entities owning commercial properties. Moneyline Telerate Page 3750 means the display page so designated on Moneyline Telerate Service (or such other page as may replace that page on that service, or such other service as may be nominated as the information vendor, for the purposes of displaying rates comparable to LIBOR). Monitoring Fee means, with respect to each Payment Date, an amount equal to 0.10% per annum of the Fee Basis Amount payable to the Collateral Manager pursuant to the Collateral Management Agreement. Moody’s means Moody’s Investors Service, Inc. Moody’s Rating of any Collateral Debt Security will be determined as follows: (i)

(x) if such Collateral Debt Security is publicly rated by Moody’s, the Moody’s Rating will be such rating, or, (y) if such Collateral Debt Security is not publicly rated by Moody’s, but the Issuer has requested that Moody’s assign a rating to such Collateral Debt Security, the Moody’s Rating will be the rating so assigned by Moody’s;

(ii)

with respect to a CMBS Security, REIT Debt Security, Trust Preferred Security, CRE Debt Obligation or Real Estate CDO Security, if such CMBS Security, REIT Debt Security, Trust Preferred Security, CRE Debt Obligation or Real Estate CDO Security is not rated by Moody’s, then the Moody’s Rating of such CMBS Security, REIT Debt Security or Real Estate CDO Security, as applicable, may be determined using any one of the methods below: (A)

with respect to any REIT Debt Security, Trust Preferred Security or CRE Debt Obligation not publicly rated by Moody’s that is a REIT Debt Security, Trust Preferred Security or CRE Debt Obligation, as applicable, if such REIT Debt Security, Trust Preferred Security or CRE Debt Obligation, as applicable, is publicly rated by S&P, then the Moody’s Rating thereof will be (x) one subcategory below the Moody’s equivalent rating assigned by S&P if the rating assigned by S&P is “BBB-” or greater and (y) two rating subcategories below the Moody’s equivalent rating assigned by S&P if the rating assigned by S&P is below “BBB-”;

(B)

with respect to any CMBS Conduit Security or CMBS Credit Tenant Lease Security not publicly rated by Moody’s, (x) if Moody’s has rated a tranche or class of CMBS Conduit Security or CMBS Credit Tenant Lease Security senior to the relevant issue, then the Moody’s Rating thereof will be one and one-half rating subcategories below the Moody’s equivalent of the lower of the rating assigned by S&P and Fitch to such CMBS Conduit Security or CMBS Credit Tenant Lease Security and (y) if Moody’s has not rated any such tranche or class and S&P and Fitch have rated the subject CMBS Conduit Security or CMBS Credit Tenant Lease Security, then the Moody’s Rating thereof will be two rating subcategories below the Moody’s equivalent of the lower of the rating assigned by S&P and Fitch;

(C)

with respect to any CMBS Large Loan Security or CMBS Re-REMIC Security not publicly rated by Moody’s, the Issuer or the Collateral Manager on behalf of 34

Processed and formatted by SEC Watch - Visit SECWatch.com

the Issuer will request Moody’s to assign a rating to such CMBS Large Loan Security or CMBS Re-REMIC Security on a case-by-case basis; (D)

(iii)

with respect to any other type of CMBS Security, REIT Debt Security or Real Estate CDO Security not referred to in clauses (A) through (C) above will be determined pursuant to subclause (y) of clause (i) above;

with respect to corporate guarantees on any REIT Debt Security, if such corporate guarantees are not publicly rated by Moody’s but another security or obligation of the guarantor or obligor (an Other Security) is publicly rated by Moody’s, and no rating has been assigned in accordance with clause (i) above, the Moody’s Rating of such Collateral Debt Security will be determined as follows: (A)

if the corporate guarantee is a senior secured obligation of the guarantor or obligor and the other security is also a senior secured obligation, the Moody’s Rating of such Collateral Debt Security will be the rating of the other security;

(B)

if the corporate guarantee is a senior unsecured obligation of the guarantor or obligor and the other security is a senior secured obligation, the Moody’s Rating of such Collateral Debt Security will be one rating subcategory below the rating of the other security;

(C)

if the corporate guarantee is a subordinated obligation of the guarantor or obligor and the other security is a senior secured obligation that is: (1) rated “Ba3” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be three rating subcategories below the rating of the other security; or (2) rated “Bl” or lower by Moody’s, the Moody’s Rating of such corporate guarantee will be two rating subcategories below the rating of the other security;

(D)

if the corporate guarantee is a senior secured obligation of the guarantor or obligor and the other security is a senior unsecured obligation that is: (1) rated “Baa3” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be the rating of the other security; or (2) rated “Bal” or lower by Moody’s, the Moody’s Rating of such corporate guarantee will be one rating subcategory above the rating of the other security;

(E)

if the corporate guarantee is a senior unsecured obligation of the guarantor or obligor and the other security is also a senior unsecured obligation, the Moody’s Rating of such corporate guarantee will be the rating of the other security;

(F)

if the corporate guarantee is a subordinated obligation of the guarantor or obligor and the other security is a senior unsecured obligation that is: (1) rated “Bl” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be two rating subcategories below the rating of the other security; or (2) rated “B2” or lower by Moody’s, the Moody’s Rating of such corporate guarantee will be one rating subcategory below the rating of the other security;

(G)

if the corporate guarantee is a senior secured obligation of the guarantor or obligor and the other security is a subordinated obligation that is: (1) rated “Baa3” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be one rating subcategory above the rating of the other security; (2) rated 35

Processed and formatted by SEC Watch - Visit SECWatch.com

below “Baa3” but not rated “B3” by Moody’s, the Moody’s Rating of such corporate guarantee will be two rating subcategories above the rating of the other security; or (3) rated “B3” by Moody’s, the Moody’s Rating of such corporate guarantee will be “B2”; (H)

if the corporate guarantee is a senior unsecured obligation of the guarantor or obligor and the other security is a subordinated obligation that is: (1) rated “Baa3” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be one rating subcategory above the rating of the other security; or (2) rated “Bal” or lower by Moody’s, the Moody’s Rating of such corporate guarantee will also be one rating subcategory above the rating of the other security; and

(I)

if the REIT Debt Security is a subordinated obligation of the guarantor or obligor and the other security is also a subordinated obligation, the Moody’s Rating of such corporate guarantee will be the rating of the other security;

(iv)

with respect to a Real Estate Interest, if such Real Estate Interest is not rated by Moody’s, the Moody’s Rating will be the rating so assigned by Moody’s; or

(v)

if such Collateral Debt Security is a Real Estate CDO Security, no notching is permitted and the Moody’s Rating will be the rating so assigned by Moody’s.

Moody’s Rating Factor means with respect to any Collateral Debt Security, the number set forth in the table below opposite the Moody’s Rating of such Collateral Debt Security. Moody’s Rating

Aaa Aal Aa2 Aa3 Al A2 A3 Baal Baa2 Baa3

Moody’s Rating Factor

Moody’s Rating

Moody’s Rating Factor

1 10 20 40 70 120 180 260 360 610

Bal Ba2 Ba3 B1 B2 B3 Caal Caa2 Caa3 Ca or lower

940 1,350 1,766 2,220 2,720 3,490 4,770 6,500 8,070 10,000

Moody’s Recovery Rate means, with respect to a Collateral Debt Security on any Calculation Date, an amount equal to the percentage for such Collateral Debt Security set forth in the Moody’s Recovery Rate Matrix attached as Schedule D-2 hereto. Moody’s Recovery Rate Test means a test that will be satisfied as of any Measurement Date if the Moody’s Weighted Average Recovery Rate is at least 20%. Moody’s WARF means, as of any Measurement Date, the number obtained by summing the products obtained by multiplying the Principal Balance of each Collateral Debt Security which is not a Defaulted Security held by the Issuer as of such Measurement Date by its Moody’s Rating Factor, dividing such sum by the aggregate Principal Balance of all such Collateral Debt Securities (excluding Defaulted Securities) and rounding the result to the nearest whole number. 36

Processed and formatted by SEC Watch - Visit SECWatch.com

Moody’s WARF Test means a test that will be satisfied on the Effective Date and on any Measurement Date thereafter if the WARF is not more than 850. Moody’s Weighted Average Recovery Rate means the rate on any Measurement Date calculated as a fraction (expressed as a percentage rounded to the nearest 0.1%) the numerator of which is the sum of the products obtained by multiplying the Principal Balance of each Collateral Debt Security (excluding Defaulted Securities) by the applicable Moody’s Recovery Rate and the denominator of which is the CDS Principal Balance (excluding Defaulted Securities). Mortgaged Property means with respect to any CMBS Conduit Security, CMBS Large Loan Security or other applicable CMBS Security, the real property encumbered by any mortgage, deed of trust or other similar security instrument securing such loan and creating a lien on the related borrower’s fee estate or leasehold estate in one or more properties. Non-Monthly Pay Asset Interest Reserve Account means the account established by the Trustee, held in the name of the Trustee for the benefit and on behalf of the Secured Parties and into which the Trustee will deposit, on each Payment Date, the Non-Monthly Pay Asset Interest Reserve Amount, if any, in accordance with the Priority of Payments. Non-Monthly Pay Asset Interest Reserve Amount means the following: (i)

on the Closing Date, U.S.$0;

(ii)

as of any Calculation Date after the Effective Date, the sum of (i) the aggregate amount of Quarterly Pay Security Interest Reserve Amounts for the related Due Period plus (ii) the aggregate amount of Semi-Annual Pay Security Interest Reserve Amounts for the related Due Period.

Note Paying Agent means any Person authorized by the Issuer to pay the principal of or interest on any Rated Notes on behalf of the Issuer as specified in Section 7.2. Note Register and Note Registrar have the respective meanings specified in Section 2.4(a). Note Transfer Agent has the meaning specified in Section 2.4(a). Note Valuation Report has the meaning specified in Section 10.12(a). Notes means, collectively, the Rated Notes and the Income Notes. Offer means, with respect to any security, (a) any offer by the issuer of such security or by any other Person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related Underlying Instruments) or to convert or exchange such security into or for Cash, securities or any other type of consideration or (b) any solicitation by the issuer of such security or any other Person to amend, modify or waive any provision of such security or any related Underlying Instrument. Offering means the offering of the Rated Notes and the Income Notes under the Offering Circular. Offering Circular means the Offering Circular, prepared and delivered on or prior to the Closing Date in connection with the offer and sale of the Rated Notes and the Income Notes, as amended or supplemented from time to time. 37

Processed and formatted by SEC Watch - Visit SECWatch.com

Officer means, (a) with respect to the Issuer and any corporation, the Chairman of the Board of Directors (or, with respect to the Issuer, any director), the President, any Vice President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of such entity; and (b) with respect to any bank or trust company acting as trustee of an express trust or as custodian, any Trust Officer. Opinion of Counsel means a written opinion addressed to the Trustee and each Rating Agency (each, a Recipient), in form and substance reasonably satisfactory to each Recipient, of an attorney at law admitted to practice before the highest court of any state of the United States or the District of Columbia (or the Cayman Islands, in the case of an opinion relating to the laws of the Cayman Islands), which attorney may, except as otherwise expressly provided in this Indenture, be inside or outside counsel for the Issuer and which attorney shall be reasonably satisfactory to the Trustee. Whenever an Opinion of Counsel is required hereunder, such Opinion of Counsel may rely on opinions of other counsel who are so admitted and so satisfactory which opinions of other counsel shall accompany such Opinion of Counsel and shall either be addressed to each Recipient or shall state that each Recipient shall be entitled to rely thereon. Optional Redemption has the meaning specified in Section 9.1(a). Ordinary Shares means the 1,000 ordinary shares, par value U.S.$1.00 per share issued by the Issuer. Outstanding means with respect to the Notes as of any Measurement Date, any and all Notes theretofore authenticated and delivered under the Indenture and the Income Note Paying Agency other than Notes cancelled, redeemed, exchanged or replaced in accordance with the terms of the Indenture or the Income Note Paying Agency Agreement, as applicable; provided that in determining whether the Holders of the requisite percentage of Notes have given any direction, notice, consent, approval or objection, any Notes held or beneficially owned by the Collateral Manager or any of its Affiliates or by an account or fund for which the Collateral Manager or any of its Affiliates acts as the investment advisor with discretionary authority will be disregarded with respect to any vote or consent relating to the removal or termination of the Collateral Manager or the assignment by the Collateral Manager of its rights and obligations under the Collateral Management Agreement, except for any assignments or transfers by the Collateral Manager of its rights and obligations to Affiliates of the Collateral Manager, subject to any applicable requirements under the Investment Advisers Act. Paying Agents means, collectively, the Note Paying Agent and the Income Note Paying Agent. Payment Account means the Securities Account designated the “Payment Account” and established in the name of the Trustee pursuant to Section 10.8. Payment Date means the 25th day of each calendar month, or if such day is not a Business Day, the next succeeding Business Day, commencing in July 2006 and ending on the applicable Stated Maturity Date (which shall be the final Payment Date). Periodic Interest means the amount of interest payable (i) in respect of each Class of Floating Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of the Business Day immediately preceding the relevant Payment Date, multiplying the resulting figure by the actual number of days in such Interest Period, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards), and (ii) in respect of each Class of Fixed Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of the Business Day immediately preceding the relevant Payment Date, multiplying the resulting figure 38

Processed and formatted by SEC Watch - Visit SECWatch.com

by (a) for the first Interest Period, 33 days, and (b) for every other Interest Period, 30 days, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards). Permitted NS Purchaser means (i) NorthStar OS VII, LLC or (ii) NS Advisors, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act. Person means any individual, corporation, partnership, limited liability partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof or any similar entity. PIK Bond means any security that, pursuant to the terms of the related Underlying Instruments, permits the payment of interest thereon to be deferred or capitalized as additional principal thereof or not pay interest when scheduled (but without being a Defaulted Security) or that issues identical securities in lieu of payments of interest in Cash. Placement Agent means Banc of America Securities LLC. Placement Agreement means the agreement, dated as of the Closing Date, between the Issuer and the Placement Agent relating to the placement of the Notes. Pledged Collateral Debt Security means as of any date of determination, any Collateral Debt Security that has been Granted to the Trustee and has not been released from the lien of this Indenture pursuant to Section 10.13. Pledged Securities means on any date of determination, (a) the Collateral Debt Securities, Temporary Ramp-Up Securities, Equity Securities and the Eligible Investments that have been Granted to the Trustee and (b) all non-Cash proceeds thereof, in each case, to the extent not released from the lien of this Indenture pursuant hereto. Pledgee Counterparty has the meaning specified in Section 10.9. Pledgor Counterparty has the meaning specified in Section 10.10. Principal Balance means, with respect to any Collateral Debt Security or Eligible Investment, as of any date of determination, the outstanding principal amount of such Collateral Debt Security or Eligible Investment; provided that the Principal Balance of (i) any Collateral Debt Security which permits the deferral or capitalization of interest will not include any outstanding balance of the deferred and/or capitalized interest, (ii) any Equity Security will be zero, (iii) any putable Collateral Debt Security which matures after the Stated Maturity Date will be the lower of the put price and the outstanding principal amount, (iv) any Collateral Debt Security or Eligible Investment in which the Trustee does not have a first priority perfected security interest shall be deemed to be zero and (v) except as otherwise expressly specified herein, the Principal Balance of a Synthetic Security which is a Derivative Contract shall be equal to the notional amount of such Synthetic Security. Principal Coverage Amount means, on any Measurement Date, an amount equal to the sum of: (i)

the aggregate Principal Balance of all Collateral Debt Securities (other than Defaulted Securities, Written Down Securities and Deferred Interest PIK Bonds) included in the Collateral on such date; 39

(ii)

the aggregate Principal Balance of the Eligible Investments in the Collateral Account on such date that represent Collateral Principal Collections;

(iii)

the Defaulted Securities Amount;

(iv)

with respect to Written Down Securities, the Reduced Principal Balance; and

(v)

with respect to Deferred Interest PIK Bond, the Deferred Interest PIK Bond Amount,

provided that for purposes of determining each of the Principal Coverage Ratios, the Principal Balances for Collateral Debt Securities having an Actual Rating by Moody’s of “Bal” or lower or an Actual Rating by S&P or Fitch of “BB+” or lower will reflect the following values: (1)

the Principal Balance of any Collateral Debt Security having an Actual Rating by Moody’s of “Caal” or lower, or an Actual Rating by S&P or Fitch of “CCC+” or lower, shall be 60% of its principal amount; and

(2)

if more than 7% of the CDS Principal Balance is comprised of Collateral Debt Securities which have an Actual Rating by Moody’s of “B1” or lower but higher than “Caal” or an Actual Rating by S&P or Fitch of “B+” or lower but higher than “CCC+”, then the Principal Balance of such Collateral Debt Securities in excess of such 7% shall be 70% of the principal amount thereof; and

Processed and formatted by SEC Watch - Visit SECWatch.com

(3)

after giving effect to (2) above, if more than 35% of the CDS Principal Balance is comprised of Collateral Debt Securities which have an Actual Rating by Moody’s of “Bal” or lower or an Actual Rating by S&P or Fitch of “BB+” or lower, then: (a)

the Principal Balance of Collateral Debt Securities having an Actual Rating by Moody’s of “Bl” or lower but higher than “Caal” or an Actual Rating by S&P or Fitch of “B+” or lower but higher than “CCC+” in excess of such 35% shall be 70% of the principal amount thereof, and

(b)

after giving effect to the immediately preceding clause (a), the Principal Balance of Collateral Debt Securities having an Actual Rating by Moody’s of “Bal” or lower but higher than “Caal” or an Actual Rating by S&P or Fitch of “BB+” or lower but higher than “CCC+” in excess of 35% shall be 90% of the principal amount thereof.

Principal Coverage Ratios means the Class A/B Principal Coverage Ratio, the Class C Principal Coverage Ratio, the Class D Principal Coverage Ratio and the Class E Principal Coverage Ratio. Principal Coverage Tests means the Class A/B Principal Coverage Test, the Class C Principal Coverage Test, the Class D Principal Coverage Test and the Class E Principal Coverage Test. Principal Prepayments means, following any failure of any Coverage Test as of any Calculation Date, amounts that would otherwise be used (i) for payments of Income Note Excess Funds, (ii) for the purchase of additional Collateral Debt Securities, (iii) for the payment of certain fees and expenses, (iv) in the case of a failure to satisfy either the Class A/B Interest Coverage Test or the Class A/B Principal 40

Processed and formatted by SEC Watch - Visit SECWatch.com

Coverage Test, for interest payments on the Class C Notes, the Class D Notes and the Class E Notes, (v) in the case of a failure to satisfy either the Class C Interest Coverage Test or the Class C Principal Coverage Test, for interest payments on the Class D Notes and the Class E Notes, (vi) in the case of a failure to satisfy either the Class D Interest Coverage Test or the Class D Principal Coverage Test, for interest payments on the Class E Notes, and (vii) in the case of a failure to satisfy either the Class E Interest Coverage Test or the Class E Principal Coverage Test, for payments of Income Note Excess Funds, that are instead applied on the related Payment Date, in each case to the extent necessary to satisfy such Coverage Test as of the related Calculation Date, to principal payments on each Class of Notes, starting with the most senior Class of Notes then Outstanding, until such Coverage Test is satisfied as of the related Calculation Date or the Notes are paid in full. Priority of Payments means, collectively, the priority of payments specified in Section 11.1(a), (b) and (c) or upon an Event of Default, the priority of payments in connection therewith. Proceeding means any suit in equity, action at law or other judicial or administrative proceeding. Prohibited Asset means any of the following asset types: aircraft lease securities, enhanced equipment trust certificates, structured settlement securities, tobacco settlement securities, manufactured housing securities, 12(b)-1 fee securities, future flow securities, emerging markets securities, sub and re-performing credit card securities, franchise loan securities, market value collateralized debt obligations, collateralized loan obligations or CDO of CDO Securities. Proposed Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Debt Securities and the proceeds of disposition thereof held as Cash, (b) Uninvested Proceeds held as Cash and (c) Eligible Investments purchased with Uninvested Proceeds or the proceeds of disposition of Pledged Collateral Debt Securities resulting from the sale, maturity or other disposition of a Pledged Collateral Debt Security or a proposed acquisition of a Collateral Debt Security, as the case may be. Purchased Accrued Interest means all payments of interest received, or amounts collected that are attributable to interest received on Collateral Debt Securities and Eligible Investments, to the extent such payments or amounts constitute accrued interest purchased with Collateral Principal Collections or Uninvested Proceeds except for purchased accrued interest on Collateral Debt Securities purchased on the Closing Date. Qualified Bidder List means a list of not less than three Persons that are Independent from one another and the Issuer prepared by the Collateral Manager and delivered to the Trustee prior to an Auction, as may be amended and supplemented by the Collateral Manager from time to time upon written notice to the Trustee; provided that (i) the Qualified Bidder List may include the Collateral Manager as a Qualified Bidder if it is Independent from the other Persons on such list and (ii) any such notice referred to above shall only be effective on any Auction Date if it was received by the Trustee at least two Business Days prior to such Auction Date. Qualified Bidders means the Persons whose names appear from time to time on the Qualified Bidder List. Qualified Institutional Buyer has the meaning given in Rule 144A under the Securities Act. Qualified Purchaser means (i) a “qualified purchaser” as defined in Section 2(a)(51) of the Investment Company Act and the rules thereunder, (ii) a “knowledgeable employee” with respect to the Issuer as defined in rule 3c-5 under the Investment Company Act or (iii) a company beneficially owned exclusively by one or more “qualified purchasers” and/or “knowledgeable employees” with respect to the Issuer. 41

Processed and formatted by SEC Watch - Visit SECWatch.com

Qualifying Foreign Obligor means a corporation, partnership or other entity organized or incorporated under the law of any of Australia, Canada, France, Germany, Ireland, Italy, New Zealand, Sweden, Switzerland or the United Kingdom, so long as the unguaranteed, unsecured and otherwise unsupported long-term U.S. Dollar-denominated sovereign debt obligations of such country are rated “AA” or better by S&P and “AA” or better by Fitch. Quarterly Pay Security means a security that provides for periodic payments of interest in cash quarterly. Quarterly Pay Security Interest Reserve Amount means, with respect to each Collateral Debt Security that is a Quarterly Pay Security and not entitled to the benefit of a Cashflow Hedge Agreement, as of any Calculation Date, the amount equal to (i) the amount of interest received by the Issuer on the most recent payment date with respect to such Quarterly Pay Security multiplied by (ii) (A) three minus the number of months since the most recent payment date with respect to such Quarterly Pay Security (rounded up to the nearest whole number) divided by (B) three; provided that for any Quarterly Pay Security with respect to which no scheduled interest payments remain, the Quarterly Pay Security Interest Reserve Amount shall be zero. Ramp-Up Collateral Debt Security means each additional Collateral Debt Security selected by the Collateral Manager for purchase by the Issuer and pledged to the Trustee during the Ramp-Up Period. Ramp-Up Interest Reserve Account means the account established by the Trustee, held in the name of the Trustee for the benefit and on behalf of the Secured Parties and into which the Trustee will deposit the Ramp-Up Interest Reserve Amount on the Closing Date. Ramp-Up Interest Reserve Amount means, on the Closing Date, U.S.$1,000,000. Ramp-Up Period means the period commencing on the Closing Date and ending on the Effective Date. Rated Note Calculation Agent has the meaning specified in Section 7.15. Rated Notes means, collectively, the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes. Rated Notes Interest Shortfall Amount means, on any Calculation Date until (but excluding) the first Calculation Date after the Effective Date, the aggregate amount of interest due and payable (without giving effect to any applicable deferments of interest) on the Rated Notes for which Collateral Interest Collections (excluding, prior to the first Calculation Date after the Effective Date, amounts in the Ramp-Up Interest Reserve Account) are insufficient to make payments in full thereon in accordance with the Priority of Payments. Rated Noteholder means, with respect to any Rated Note, the Person in whose name such Note is registered; provided that Beneficial Owners or Agent Members will have no rights under the Indenture with respect to Global Notes, and the Rated Noteholder may be treated by the Issuer and the Trustee (and any agent of any of the foregoing) as the owner of such Global Notes for all purposes whatsoever. Rating means, as the context requires, a Fitch Rating, a Moody’s Rating or an S&P Rating. Rating Agency means each of Fitch, Moody’s and S&P. Rating Agency Confirmation means, with respect to any specified action or determination, for so long as any of the Rated Notes are Outstanding and rated by Moody’s, S&P or Fitch, respectively, the receipt of 42

Processed and formatted by SEC Watch - Visit SECWatch.com

written confirmation by Moody’s, S&P and Fitch, that such specified action or determination will not result in the reduction or withdrawal or other adverse action with respect to their then-current ratings on the Rated Notes (including any private or confidential rating) unless Rating Agency Confirmation is specified herein to be required by only Moody’s, S&P or Fitch, in which case such Rating Agency Confirmation will be sufficient. For the purposes of this definition, “Rating Agencies” will be deemed to not include Fitch except with respect to the Effective Date; provided that notification will be made to Fitch within 30 days of any instance in which Rating Agency Confirmation is required by either Moody’s or S&P. Rating Confirmation has the meaning specified in Section 7.18(e). Rating Confirmation Failure has the meaning specified in Section 7.18(e). Real Estate CDO Securities means securities that entitle the holders thereof to receive payments that depend on the cash flow from or the credit exposure to a portfolio consisting primarily of (i) REIT Debt Securities, (ii) CMBS Securities, (iii) other Specified Types or (iv) a combination of the foregoing; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the Real Estate CDO Securities such as a financial guaranty insurance policy; provided, that a Real Estate CDO Security shall not include a CMBS Re-REMIC Security. Real Estate Interests means interests (other than CRE Debt Obligations, REIT Debt Securities, Real Estate Trust Preferred Securities and Real Estate CDO Securities but including Tenant Lease Loan Interests) that entitle the holders thereof to receive payments that depend primarily on the cash flow from or sale proceeds of mortgage loans on commercial and multifamily properties, including senior and subordinate mortgage loans, participation interests in mortgage loans on commercial and multifamily properties, including subordinate interests, mezzanine loans secured by ownership interests in entities owning commercial properties, mortgage loans secured by mortgages on commercial real estate properties that are subject to a lease to a single tenant or trust certificates representing beneficial ownership interests in the foregoing. Real Estate Trust Preferred Securities means securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities) on the cash flow from either an individual trust security or a pool of trust securities issued (in each case) by a wholly-owned trust subsidiary of an entity whose business is significantly related to real estate, real estate management or real estate ownership and that issues an obligation to such trust subsidiary in exchange for the net issuance proceeds of such securities. Record Date means the date on which the Holders of Rated Notes entitled to (i) vote with respect to any matters under the Indenture are determined, such date being the 15th day (whether or not a Business Day) prior to the date the Trustee delivers notice with respect to such vote and (ii) receive a payment in respect of principal or interest on the succeeding Payment Date or Redemption Date are determined, such date as to any Payment Date or Redemption Date being the 15th day (whether or not a Business Day) prior to such Payment Date or Redemption Date. Redemption means an Optional Redemption, an Auction Call Redemption or a Tax Redemption. Redemption Date means the Payment Date upon which the Rated Notes are redeemed pursuant to an Optional Redemption, an Auction Call Redemption or a Tax Redemption. 43

Processed and formatted by SEC Watch - Visit SECWatch.com

Redemption Date Statement has the meaning specified in Section 10.12(b). Redemption Premium means the premium payable to Holders of each Class of Fixed Rate Notes in connection with an Optional Redemption of each Class of Fixed Rate Notes in an amount equal to the excess, if any, of (i) the present value (discounted to the applicable Redemption Date using the Reinvestment Yield on a monthly basis using a 360-day year of twelve 30-day months as the discount rate) of the remaining payments of interest and principal due on such Class of Fixed Rate Notes, assuming that the entire outstanding principal amount of such Class of Fixed Rate Notes will be paid on the Payment Date occurring in June 2018 and that each intervening payment of interest on such Class of Fixed Rate Notes will be made on the related Payment Date in its entirety (and therefore there is no Defaulted Interest on such Class of Fixed Rate Notes) over (ii) the outstanding principal amount of such Class of Fixed Rate Notes on the applicable Redemption Date. Redemption Price means, (i) with respect to each Class of Rated Notes, (a) their then Aggregate Outstanding Amount plus (b) accrued interest thereon to the date of redemption to the extent not already paid (including, without limitation, any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount and Class E Cumulative Applicable Periodic Interest Shortfall Amount plus (c) in the case of an Optional Redemption only and with respect to any Fixed Rate Notes, the applicable Redemption Premium and (ii) if the Income Notes are redeemed, the “Redemption Price” for the Income Notes, except to the extent the Income Note Redemption Approval Condition applies, means an amount equal to the aggregate of any amounts distributable on the Income Notes in respect of such redemption pursuant to Section 11.1(a) and (b) and in any instance where the Income Note Redemption Approval Condition applies, an amount equal to the amounts necessary to satisfy the Income Note Redemption Approval Condition. Redemption Spread means, with respect to the Class D-FX Notes, 0.70%, and the Class E Notes, 1.375%. Reduced Principal Balance means, with respect to each Written Down Security, the amount to which the original Principal Balance of such Written Down Security is reduced. Reference Banks has the meaning specified in Schedule B. Reference Obligation means the debt securities or other obligations or types of obligations constituting in each case a Specified Type and upon which, in whole or in part, the payment rights of the holder of a Synthetic Security or CMBS Re-REMIC Security are based. Reference Obligor means, with respect to a Reference Obligation, the obligor on such Reference Obligation. Registered means in registered form for U.S. federal income tax purposes and issued after July 18, 1984; provided that a certificate of interest in a trust that is treated as a grantor trust for U.S. federal income tax purposes will not be treated as Registered unless each of the obligations or securities held by the trust was issued after that date. Registered Form has the meaning specified in Section 8-102(a)(13) of the UCC. Regulation S means Regulation S under the Securities Act. Regulation S Definitive Note has the meaning specified in Section 2.4(c)(1)(vi). Regulation S Global Note has the meaning specified in Section 2.1(a). 44

Processed and formatted by SEC Watch - Visit SECWatch.com

Regulation S Note has the meaning specified in Section 2.1(a). Regulation S Transfer Certificate has the meaning specified in Section 2.4(c)(1)(iii). 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 Criteria means, with respect to any reinvestment of Collateral Principal Payments, the following criteria: (i)

the Collateral Quality Tests are satisfied, or, if any Collateral Quality Test was not satisfied immediately prior to such investments, the extent of compliance with such Collateral Quality Test will be maintained or improved immediately following such reinvestment;

(ii)

after the Effective Date, the Collateral Concentration Limitations are satisfied, or, if any of the Collateral Concentration Limitations was not satisfied immediately prior to such investments, such compliance with the Collateral Concentration Limitations will be maintained or improved following such reinvestment;

(iii)

after the Effective Date, the Coverage Tests are satisfied, or, if any Coverage Test was not satisfied immediately prior to such investments, such Coverage Test will be maintained or improved following such reinvestment; and

(iv)

no Event of Default has occurred and is continuing.

Reinvestment Period means the period beginning on the Closing Date and ending on and including the Payment Date in June 2011; provided, however that if (i) a Key Manager Event occurs and (ii) the Holders of a majority in aggregate principal amount of the Outstanding Notes of the Controlling Class direct in writing that the Trustee terminate the Reinvestment Period, then the Reinvestment Period shall instead end upon the Trustee’s issuance of written notice of such termination to the Collateral Manager. Reinvestment Yield means with respect to either class of the Fixed Rate Notes, the rate equal to the sum of the Redemption Spread with respect to such Fixed Rate Note and the applicable yield to maturity implied by (i) the yields reported as of 10:00 a.m. (New York City time) on the tenth Business Day preceding the related Optional Redemption Date on the display page designated as “Page 678” on the Telerate Service (or such other display as may replace Page 678 on the Telerate Service) for actively traded U.S. Treasury securities having a maturity as nearly as practicable equal to the Payment Date occurring in June 2011 or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the tenth Business Day preceding the Optional Redemption Date, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity as nearly as practicable equal to the Payment Date occurring in June 2018. REIT means a real estate investment trust, as defined in Section 856 of the Code or any successor provision. REIT Debt Securities means, collectively, REIT Debt Securities—Diversified, REIT Debt Securities— Health Care, REIT Debt Securities—Hotel, REIT Debt Securities—Industrial, REIT Debt Securities— Mortgage, REIT Debt Securities—Multi-Family, REIT Debt Securities—Office, REIT Debt Securities— Residential, REIT Debt Securities—Retail and REIT Debt Securities—Storage. 45

Processed and formatted by SEC Watch - Visit SECWatch.com

REIT Debt Securities—Diversified means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of diverse real property interests; provided that any Collateral Debt Security falling within any other ABS REIT Debt Security description set forth herein will be excluded from this definition. REIT Debt Securities—Health Care means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including hospitals, clinics, sport clubs, spas and other health care facilities and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Hotel means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including hotels, motels, youth hostels, bed and breakfasts and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Industrial means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including warehouse, industrial and distribution facilities, factories, refinery plants, breweries and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Mortgage means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of mortgages, commercial mortgage-backed securities, collateralized mortgage obligations and other similar mortgage-related securities (including Collateral Debt Securities issued by a hybrid form of such trust that invests in both commercial real estate and commercial mortgages). REIT Debt Securities—Multi-Family means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including multi-family dwellings such as apartment blocks, condominiums and co-operative owned buildings. REIT Debt Securities—Office means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including office buildings, conference facilities and other similar real property interests used in the commercial real estate business. REIT Debt Securities—Residential means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of residential mortgages (other than multi-family dwellings) and other similar real property interests. 46

Processed and formatted by SEC Watch - Visit SECWatch.com

REIT Debt Securities—Retail means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of regional malls, neighborhood shopping centers, big box centers, retail stores, restaurants, bookstores, clothing stores and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Storage means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) a portfolio of properties including storage facilities and other similar real property interests used in one or more similar businesses. REIT Trust Preferred Securities means securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities) on the cash flow from either an individual trust security or a pool of trust securities issued (in each case) by a wholly-owned trust subsidiary of a REIT, or of an operating partnership subsidiary of a REIT, that issues obligations to such trust subsidiary in exchange for the net issuance proceeds of such securities. Relevant Jurisdiction means, as to any obligor on any Collateral Debt Security, any jurisdiction (a) in which the obligor is incorporated, organized, managed and controlled or considered to have its seat, (b) where an office through which the obligor is acting for purposes of the relevant Collateral Debt Security is located, (c) in which the obligor executes Underlying Instruments or (d) in relation to any payment, from or through which such payment is made. 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 and maintained by the Bond Market Association. Requisite Noteholders means the Holders of 662/3% or more of the Outstanding aggregate principal amount of (i) the Class A-1 Notes, so long as any Class A-1 Notes remain Outstanding, (ii) thereafter the Class A-2 Notes, so long as any Class A-2 Notes remain Outstanding, (iii) thereafter the Class A-3 Notes, so long as any Class A-3 Notes remain Outstanding, (iv) thereafter the Class B Notes, so long as any Class B Notes remain Outstanding, (v) thereafter the Class C Notes so long as any Class C Notes remain Outstanding, (vi) thereafter the Class D Notes so long as any Class D Notes remain Outstanding and (vii) thereafter the Class E Notes so long as any Class E Notes remain Outstanding. Reserved Matters has the meaning specified in Section 8.2(j). Rule 144A means Rule 144A under the Securities Act. Rule 144A Definitive Note has the meaning specified in Section 2.4(c)(1)(vi). Rule 144A Global Note has the meaning specified in Section 2.1(b). Rule 144A Information means such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto). Rule 144A Note has the meaning specified in Section 2.1(b). 47

Processed and formatted by SEC Watch - Visit SECWatch.com

Rule 144A Transfer Certificate has the meaning specified in Section 2.4(c)(1)(ii). S&P means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and any successor or successors thereto. S&P CDO Monitor means the dynamic, analytical computer model provided by S&P to the Collateral Manager and the Trustee (together with such instructions and assumptions as are necessary to run such model) on or prior to the Effective Date used to determine the credit risk of a portfolio of Collateral Debt Securities, as may be modified by S&P from time to time. S&P CDO Monitor Test means the test which is satisfied, as of any Calculation Date, if each of the Class A Note Default Differential, the Class B Note Default Differential, the Class C Note Default Differential, the Class D Note Default Differential and the Class E Note Default Differential of the Current Portfolio or the Proposed Portfolio, as applicable, is positive. The S&P CDO Monitor Test will be considered to be improved if the Class A Note Default Differential of the Proposed Portfolio is greater than the Class A Note Default Differential of the Current Portfolio, the Class B Note Default Differential of the Proposed Portfolio is greater than the Class B Note Default Differential of the Current Portfolio, the Class C Note Default Differential of the Proposed Portfolio is greater than the Class C Note Default Differential of the Current Portfolio, the Class D Note Default Differential of the Proposed Portfolio is greater than the Class D Note Default Differential of the Current Portfolio and the Class E Note Default Differential of the Proposed Portfolio is greater than the Class E Note Default Differential of the Current Portfolio. S&P Industry Classification Group means any of the S&P industrial classification groups as set forth on Schedule H and any additional classification groups established by S&P with respect to the Collateral Debt Securities and provided, in each case, by the Collateral Manager or S&P to the Trustee. S&P Minimum Average Recovery Rate means, as of any date of determination, a rate expressed as a percentage equal to the number obtained by (i) summing the products obtained by multiplying the Principal Balance of each Collateral Debt Security by its S&P Recovery Rate set forth in a schedule of the Indenture and (ii) dividing such sum by the CDS Principal Balance less cash and Eligible Investments representing Collateral Principal Collections and (iii) rounding up to the first decimal place. S&P Minimum Weighted Average Recovery Rate Test means a test that will be satisfied as of any Measurement Date if the S&P Minimum Average Recovery Rate is greater than or equal to (i) 39.50% with respect to the Class A Notes, (ii) 43.25% with respect to the Class B Notes, (iii) 47.00% with respect to the Class C Notes, (iv) 49.75% with respect to the Class D Notes and (v) 53.00% with respect to the Class E Notes. S&P’s Preferred Format means an electronic spreadsheet file to be provided to S&P, which file shall include the following information, if available (to the extent such information is not confidential) with respect to each Collateral Debt Security: (a) the name and country of domicile of the issuer thereof and the particular issue held by the Issuer, (b) the CUSIP or other applicable identification number associated with such Collateral Debt Security, (c) the par value of such Collateral Debt Security, (d) the type of issue (including, by way of example, whether such Collateral Debt Security is a bond, loan or asset-backed security), using such abbreviations as may be selected by the Trustee, (e) a description of the index or other applicable benchmark upon which the interest payable on such Collateral Debt Security is based (including, by way of example, fixed rate, step-up rate, zero coupon and LIBOR), (f) the coupon (in the case of a Collateral Debt Security which bears interest at a fixed rate) or the spread over the applicable index (in the case of a Collateral Debt Security which bears interest at a floating rate), (g) the S&P Industry Classification Group for such Collateral Debt Security, (h) the Stated Maturity Date of such 48

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Debt Security, (i) the S&P Rating of such Collateral Debt Security or the issuer thereof, as applicable, (j) the Principal Balance in cash and in Eligible Investments, (k) the priority category assigned by S&P to such Collateral Debt Security, if available, and (1) such other information as the Trustee may determine to include in such file. S&P Rating means the rating by S&P of any Collateral Debt Security determined as follows: (a)

if S&P has assigned a rating to such Collateral Debt Security either publicly or privately (in the case of a private rating, with the written consent of the issuer of such Collateral Debt Security for use of such private rating and delivery of a copy of such consent to S&P), the S&P Rating shall be the rating assigned thereto by S&P; provided that, solely for purposes of determining compliance with the S&P CDO Monitor Test, if such Collateral Debt Security is placed on a watch list for possible upgrade or downgrade by S&P, the S&P Rating applicable to such Collateral Debt Security shall be one rating subcategory above or below, respectively, the S&P Rating applicable to such Collateral Debt Security immediately prior to such Collateral Debt Security being placed on such watch list;

(b)

if such Collateral Debt Security is not rated by S&P but the Issuer or the Collateral Manager on behalf of the Issuer has requested that S&P assign a rating to such Collateral Debt Security, the S&P Rating shall be the credit estimate rating so assigned by S&P; provided that pending receipt from S&P of such rating, if such Collateral Debt Security is not eligible for notching in accordance with Schedule G, such Collateral Debt Security shall have an S&P Rating of “CCC-”, otherwise such S&P Rating shall be the rating assigned according to Schedule F until such time as S&P shall have assigned a credit estimate rating thereto; provided further that, so long as any of the Notes remain Outstanding, prior to or immediately following the acquisition of any Collateral Debt Security where S&P has assigned a credit estimate rating, the Issuer shall submit to S&P a request to perform a credit estimate on such Collateral Debt Security, on or prior to the one-year anniversary of the acquisition of any such Collateral Debt Security, together with all information reasonably required by S&P to perform such estimate; or

(c)

if any Collateral Debt Security is a Collateral Debt Security that has not been assigned a rating by S&P and is not a Collateral Debt Security listed in Schedule G, as identified by the Collateral Manager, the S&P Rating of such Collateral Debt Security shall be the rating determined by reference to Schedule F; provided that (i) if any Collateral Debt Security shall, at the time of its purchase by the Issuer, be listed for a possible upgrade or downgrade on either Moody’s or Fitch’s then current credit rating watch list, then the S&P Rating of such Collateral Debt Security shall be one subcategory above or below, respectively, the rating then assigned to such item as set forth in Schedule A, (ii) for purposes of determining compliance with S&P CDO Monitor Test, if the rating assigned to such Collateral Debt Security pursuant to this subparagraph (c) is placed on a watch list for possible upgrade or downgrade by any Rating Agency, the S&P Rating applicable to such Collateral Debt Security shall be one rating subcategory above or below, respectively, the S&P Rating applicable to such Collateral Debt Security immediately prior to such Collateral Debt Security being placed on such watch list and (iii) the aggregate Principal Balance that may be given a rating based on this subparagraph (c) may not exceed 20% of the aggregate Principal Balance of all Collateral Debt Securities; provided that if any Collateral Debt Security has not been assigned a rating by S&P and is a type of Collateral Debt Security not listed on Schedule G, subsequent to the Closing Date, the acquisition of any such Collateral Debt Security will require an estimate or shadow rating from S&P, the assignment of an S&P Recovery Rate to such Collateral Debt Security and receipt of Rating Agency Confirmation from S&P prior to the acquisition by the Issuer of such Collateral Debt Security. 49

Notwithstanding the foregoing, if any Collateral Debt Security shall, at the time of its purchase by the Issuer, be listed for a possible upgrade or downgrade on the then current S&P credit rating watch list, then the S&P Rating of such Collateral Debt Security shall be one subcategory above or below, respectively, the rating then assigned to such item by S&P, as applicable; provided that if such Collateral Debt Security is removed from such list at any time, it shall be deemed to have its then-current actual rating by S&P. S&P Recovery Rate means, with respect to a Collateral Debt Security on any Calculation Date, an amount equal to the percentage for such Collateral Debt Security set forth in the S&P Recovery Rate Matrix attached as Schedule D-1 hereto (determined in accordance with procedures prescribed by S&P for such Collateral Debt Security on such Calculation Date or, in the case of Defaulted Securities, the S&P Rating immediately prior to default). S&P Weighted Average Recovery Rate means, as of any Calculation Date, a rate expressed as a percentage equal to the number obtained by (i) summing the products obtained by multiplying the Principal Balance of each Collateral Debt Security by its S&P Recovery Rate and (ii) dividing such sum by the aggregate Principal Balance of the Collateral Debt Securities and (iii) rounding up to the first decimal place. For this purpose, the Principal Balance of a Defaulted Security or Deferred Interest PIK Bond will be deemed to be equal to its outstanding principal amount (excluding any capitalized interest thereon). Sale has the meaning specified in Section 5.17(a). Sale Proceeds means all proceeds (including accrued interest) received with respect to Collateral Debt Securities and Equity Securities as a result of sales of such Collateral Debt Securities and Equity Securities pursuant to the Indenture, net of any reasonable amounts expended by the Collateral Manager or the Trustee in their good faith determination in connection with such sale or disposition. Schedule of Collateral Debt Securities means the list of Collateral Debt Securities securing the Rated Notes that is attached as Schedule A.

Processed and formatted by SEC Watch - Visit SECWatch.com

Scheduled Distribution means, with respect to any Pledged Security, for each Due Date, the scheduled payment in Cash of principal and/or interest and/or fees due on such Due Date with respect to such Pledged Security, determined in accordance with the assumptions specified in Section 1.2. Second Currency has the meaning specified in Section 14.13. Secured Parties means the Trustee, for the benefit of the Rated Noteholders, the Collateral Manager and each Hedge Counterparty. Securities Account has the meaning specified in Section 8-501(a) of the UCC. Securities Act means the United States Securities Act of 1933, as amended. Securities Intermediary has the meaning specified in Section 8-102(a)(14) of the UCC. Security has the meaning specified in Section 8-102(a)(15) of the UCC. Semi-Annual Pay Security means a security that provides for periodic payments of interest in Cash semi-annually. 50

Processed and formatted by SEC Watch - Visit SECWatch.com

Semi-Annual Pay Security Interest Reserve Amount means, with respect to each Collateral Debt Security that is a Semi-Annual Pay Security and not entitled to the benefit of a Cashflow Hedge Agreement, as of any Calculation Date, the amount equal to (i) the amount of interest received by the Issuer on the most recent payment date with respect to such Semi-Annual Pay Security multiplied by (ii) (A) six minus the number of months since the most recent payment date with respect to such Semi-Annual Pay Security (rounded up to the nearest whole number) divided by (B) six; provided that for any Semi-Annual Pay Security with respect to which no scheduled interest payments remain, the Semi-Annual Pay Security Interest Reserve Amount shall be zero. Senior means having a higher position or priority in respect of rights (including, unless otherwise specified, a right to payment) vis-à-vis one or more other parties or classes, including among Classes of Notes. Senior Collateral Management Fee means with respect to each Payment Date, a senior fee equal to the sum of (a) the Monitoring Fee and (b) the Senior Structuring Fee payable to the Collateral Manager pursuant to the Collateral Management Agreement; provided that the Senior Collateral Management Fee will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Senior Collateral Management Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Senior Collateral Management Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Senior Collateral Management Fee accrued but not paid prior to the resignation or removal of the Collateral Manager shall continue to be payable to the Collateral Manager on the Payment Date immediately following the effectiveness of such resignation or removal. Senior Structuring Fee means, with respect to each Payment Date, an amount equal to 0.05% per annum of the Fee Basis Amount payable to the Collateral Manager pursuant to the Collateral Management Agreement. Special Amortization Pro Rata Condition means with respect to any Payment Date that either: (A)

(I) the aggregate CDS Principal Balance as of the related Calculation Date is at least equal to 50% of the aggregate CDS Principal Balance on the Effective Date, (II) the Collateral Quality Tests are satisfied, (III) no Principal Coverage Test is failing as of such Payment Date and (IV) no Principal Coverage Test has previously failed for two or more Calculation Dates unless, as of the related Payment Date, the Principal Coverage Ratio related to such Principal Coverage Test equals or exceeds the related Principal Coverage Ratio in existence on the Effective Date; or

(B)

if clause (A) above is not satisfied, Rating Agency Confirmation has been provided by S&P and Moody’s with respect to the pro rata payment of principal of the Rated Notes.

Specified Currency has the meaning specified in Section 14.13. Specified Person has the meaning specified in Section 2.5(a). Specified Place has the meaning specified in Section 14.13. Specified Types means CMBS Securities, REIT Debt Securities, Real Estate CDO Securities, CRE Debt Obligations, Trust Preferred Securities and Real Estate Interests. Spread has the meaning specified in the definition of Reinvestment Criteria. 51

Processed and formatted by SEC Watch - Visit SECWatch.com

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 greater of zero and the excess, if any, of the Weighted Average Spread for such date over 2.07%, and (b) the aggregate Principal Balance of all Floating Rate Collateral Debt Securities and Deemed Floating Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities or Deferred Interest PIK Bonds) and the denominator of which is the aggregate Principal Balance of all Collateral Debt Securities that are Fixed Rate Collateral Debt Securities (excluding Defaulted Securities, Written Down Securities, Deferred Interest PIK Bonds and Deemed Floating Rate Collateral Debt Securities). Stated Maturity Date means June 22, 2051. Subordinate Collateral Management Fee means the fee payable to the Collateral Manager at a per annum rate in arrears on each Payment Date pursuant to the Collateral Management Agreement, in an amount (as certified by the Collateral Manager to the Trustee) equal to 0.20% of the Fee Basis Amount for such Payment Date; provided that the Subordinate Collateral Management Fee will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Subordinate Collateral Management Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Subordinate Collateral Management Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Subordinate Collateral Management Fee accrued but not paid prior to the resignation or removal of the Collateral Manager shall continue to be payable to the Collateral Manager on the Payment Date immediately following the effectiveness of such resignation or removal. Subordinate means having a lower position or priority in respect of rights (including, unless otherwise specified, a right to payment) vis-à-vis one or more other parties or Classes, including among Classes of Notes. Subordinate Interests has the meaning specified in Section 13.1(a), (b), (c), (d), (e), (f) or (g), as applicable. Subpool means each of the groups of the Collateral Debt Securities designated by the Collateral Manager in accordance with the Auction Procedures on which the Listed Bidders may provide a separate bid in an Auction. Substitute Collateral Debt Security means a debt obligation meeting the Eligibility Criteria acquired by or on behalf of the Issuer with Collateral Principal Proceeds or Sale Proceeds that are reinvested in accordance with the provisions of the Indenture. Substitute Party has the meaning specified in Section 16.1(d). Substitution Event means, in connection with the Initial Hedge Counterparty, any of the following: (i)

The short-term rating of the Hedge Ratings Determining Party from Moody’s is “P-2” or lower or the long-term rating of the Hedge Ratings Determining Party from Moody’s is withdrawn, suspended or downgraded to “A3” or lower or, if the related Hedge Ratings Determining Party does not have a short-term rating, the long-term rating of the related Hedge Ratings Determining Party from Moody’s is withdrawn, suspended or falls to “A2” or lower;

(ii)

So long as any of the Notes are Outstanding and rated by S&P, the short-term rating from S&P of the Initial Hedge Counterparty is withdrawn, suspended or downgraded below 52

Processed and formatted by SEC Watch - Visit SECWatch.com

“A-3” or, if no short-term rating is available, the long-term rating from S&P of the Initial Hedge Counterparty is withdrawn, suspended or downgraded below “BBB-”; or (iii)

The short-term rating of the Initial Hedge Counterparty from Fitch is withdrawn, suspended or downgraded below “F2” or the long-term rating of the Initial Hedge Counterparty from Fitch is withdrawn, suspended or downgraded below “BBB+”.

Synthetic Security means a Derivative Contract or a Derivative Security pursuant to which the Issuer sells credit protection with respect to one or more (including a pool of) Reference Obligations or obligors; provided that: (a)

for physical settlement to the Issuer, such Synthetic Security must also provide (or warrant) that delivery of any deliverable obligations thereunder to the Issuer and transfer of such deliverable obligations by the Issuer to a third party will not require or cause the Issuer to assume, and will not subject the Issuer to, any obligation or liability (other than immaterial, nonpayment obligations and any assignment or transfer fee in respect of loans), or the issuer thereof will indemnify the Issuer against such obligations and liabilities;

(b)

such Synthetic Security shall have a Fitch Rating, an S&P Rating and an S&P Recovery Rate and a Moody’s Recovery Rate and a Moody’s Rating Factor assigned by the respective Rating Agency;

(c)

Rating Agency Confirmation from S&P is received at or prior to the time of acquisition of the Synthetic Security;

(d)

the Reference Obligation is a Specified Type; and

(e)

such Synthetic Security shall not be a security wherein the Issuer is buying credit protection or otherwise acquiring a “short” position in any one or more Reference Obligations.

Synthetic Security Counterparty means a Derivative Contract Counterparty or other entity (other than the Issuer) required to make payments on a Synthetic Security pursuant to the terms of the Synthetic Security. Synthetic Security Periodic Payments means, with respect to a Synthetic Security, periodic payments made pursuant thereto other than (i) any credit protection or cash or physical settlement amount payable upon a credit event and (ii) any breakage amount or other termination amount owing upon a termination, in whole or in part, of such Synthetic Security. Tax Event means a new, or change in any, U.S. or foreign tax statute, treaty, regulation, rule, ruling, practice, procedure or judicial decision or interpretation, occurring in each case after the Closing Date, which results in (i) any portion of any payment due from any issuer or obligor under any Collateral Debt Security becoming properly subject to the imposition of U.S. or foreign withholding tax, which withholding tax is not compensated for by a “gross up” provision under the terms of the related Collateral Debt Security, (ii) any jurisdiction imposing net income, profits, or similar tax on the Issuer, (iii) the Issuer being required to deduct or withhold from any payment under a Hedge Agreement for or on account of any tax and the Issuer being obligated to make a gross up payment (or otherwise pay additional amounts) to a Hedge Counterparty, or (iv) a Hedge Counterparty being required to deduct or withhold from any payment under a Hedge Agreement for or on account of any tax for whatever reason if such Hedge Counterparty is not required to pay to the Issuer such additional amount as is necessary to 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 53

Processed and formatted by SEC Watch - Visit SECWatch.com

deduction or withholding been required, and where the sum of the amount of (i) such a tax or taxes imposed on the Issuer or withheld from payments to the Issuer to the extent the Issuer receives less than the full amount that the Issuer would have received had no such deduction occurred, and (ii) such gross up payments required to be made by the Issuer to the extent they exceed the amounts that the Issuer would have been required to pay had no deduction or withholding been required, in the aggregate, equals 10% or more of the amount of aggregate interest payments on all of the related Collateral Debt Securities during the related Due Period. Tax Redemption has the meaning specified in Section 9.1(b). Tax Subsidiary has the meaning specified in Section 7.7(e). Taxed Collateral Debt Security has the meaning specified in Section 7.7(e). Taxes means any present or future taxes, duties, assessments or governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by any governmental authority having power to tax. Temporary Ramp-Up Security means each security that is listed on Schedule C hereto that (i) is a direct unsecured debt obligation of the U.S. Government, (ii) bears interest at a fixed rate, (iii) is acquired by the Issuer on the Closing Date in furtherance of interest rate hedging of the Issuer’s portfolio by being sold on or prior to the Effective Date in conjunction with the acquisition of one or more Ramp-Up Collateral Debt Securities and (iv) is rated in the highest rating category by at least one nationally recognized rating agency. Tenant Lease Loan Interests means securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities) on the cash flow from a commercial mortgage loan made to finance the acquisition, construction and improvement of properties leased to corporate tenants (or on the cash flow from such leases). Transaction Documents means the Indenture, the Collateral Management Agreement, the Account Control Agreement, the Hedge Agreement, the Corporate Services Agreement, the Collateral Administration Agreement, the Income Note Paying Agency Agreement and the Placement Agreement. Trust Officer means, when used with respect to the Trustee, any Officer within the CDO Trust Services Group of the Corporate Trust Office working on the transaction described in this Indenture and (or any successor group of the Trustee) authorized to act for and on behalf of the Trustee, including any vice president, assistant vice president or other Officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such Officers, respectively, or to whom any corporate trust matter is referred at the CDO Trust Services Group of the Corporate Trust Office because of such person’s knowledge of and familiarity with the particular subject. Trust Preferred Securities means collectively REIT Trust Preferred Securities and Real Estate Trust Preferred Securities. Trustee means LaSalle Bank National Association, and any successors or assigns, in its capacity as trustee under this Indenture. Trustee Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by or otherwise owing to the Trustee during the preceding Due Period in 54

Processed and formatted by SEC Watch - Visit SECWatch.com

accordance with the Indenture, other than the Trustee Fee, including, without limitation, any expenses or indemnities incurred by the Trustee and the Bank in its capacities as Collateral Administrator, Calculation Agent, Note Paying Agent, Income Note Paying Agent and Registrar. Trustee Fee means, with respect to any Payment Date, the fee payable to the Trustee in an aggregate amount equal to 0.015% per annum of the CDS Principal Balance as of the first day of the related Due Period; provided that so long as any Class of Rated Notes remain Outstanding, such fee shall in no event be an annual amount less than U.S.$25,000. UCC means the Uniform Commercial Code as in effect in the State of New York. Underlying Instrument means each of the agreements pursuant to which a Pledged Security has been issued or created and each other agreement that governs the terms of or secures the obligations represented by such Pledged Security or of which holders of such Pledged Security are the beneficiaries. Uninvested Proceeds means, at any time, the net proceeds received by the Issuer on the Closing Date from the initial issuance of the Notes, to the extent such proceeds have not theretofore been invested in Collateral Debt Securities. Uninvested Proceeds Account has the meaning specified in Section 10.4. United States or U.S. means the United States of America, including the States thereof and the District of Columbia. Unregistered Securities has the meaning specified in Section 5.17(c). U.S. Person has the meaning given in Regulation S under the Securities Act. USA PATRIOT Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56 (2001). Weighted Average Fixed Rate Coupon means, as of any Measurement Date, the sum (rounded up to the next 0.001%) of: (a)

the number obtained by (i) multiplying the Principal Balance of each Fixed Rate Collateral Debt Security (except Collateral Debt Securities that are currently deferring interest) held in the portfolio as of such date by the then-current interest rate, (ii) summing the amounts determined pursuant to clause (i) for all Fixed Rate Collateral Debt Securities held in the portfolio as of such date and (iii) dividing such sum by the aggregate Principal Balance of all Fixed Rate Collateral Debt Securities held in the portfolio as of such date; provided that for purposes of calculating the Weighted Average Fixed Rate Coupon of Collateral Debt Securities that are Defaulted Securities, the Written Down Amount with respect to Written Down Securities and Equity Securities will be excluded, except for those Defaulted Securities that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument; plus

(b)

if the number obtained in clause (a) is less than 5.70%, the Spread Excess.

Weighted Average Life means, on any Calculation Date with respect to all Collateral Debt Securities (excluding any Defaulted Securities), the number obtained by the Collateral Manager by (i) summing the products obtained by multiplying (a) the Average Life at such time of each Collateral Debt Security by 55

Processed and formatted by SEC Watch - Visit SECWatch.com

(b) the outstanding Principal Balance of such Collateral Debt Security and (ii) dividing such sum by the aggregate Principal Balance at such time of all Collateral Debt Securities. Weighted Average Life Test means a test that shall be satisfied as of any Measurement Date during any period set forth below if the Weighted Average Life of all Collateral Debt Securities as of such Measurement Date is less than or equal to the number of years set forth in the table below: As of an y C alculation Date O ccurrin g Du rin g th e Pe riod Be low

W e ighte d Ave rage Life (in Ye ars)

Closing Date – <1.0 year >1.0 year – <2.0 years >2.0 years – <3.0 years >3.0 years – <4.0 years >4.0 years – <5.0 years >5.0 years – Stated Maturity Date

10.0 years 9.0 years 8.0 years 7.0 years 6.0 years 5.0 years

Weighted Average Spread means, as of any Measurement Date, the sum (rounded up to the next 0.001%) of: (a)

the number obtained by (i) summing the products obtained by multiplying (A) for each Floating Rate Collateral Debt Security (other than any Defaulted Security, Written Down Security or Deferred Interest PIK Bond), the stated spread above LIBOR at which interest accrues on such Collateral Debt Security as of such date and, for each Deemed Floating Rate Collateral Debt Security (other than any Defaulted Security, Written Down Security or Deferred Interest PIK Bond), the Deemed Floating Spread by (B) the Principal Balance of such Collateral Debt Security as of such date and (ii) dividing such sum by the aggregate Principal Balance of all Floating Rate Collateral Debt Securities and all Deemed Floating Rate Collateral Debt Securities; provided that for purposes of calculating the Weighted Average Spread, Collateral Debt Securities that are Defaulted Securities, the Written Down Amount with respect to Written Down Securities and Equity Securities will be excluded, except for those Defaulted Securities that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument; plus

(b)

if the number obtained pursuant to the calculations in clause (a) is less than 2.07%, the Fixed Rate Excess.

Withholding Tax Security means a Collateral Debt Security if: (i)

any payments thereon to the Issuer are subject to withholding tax imposed by any jurisdiction (other than U.S. backup withholding tax or other similar withholding tax); and

(ii)

under the underlying documentation with respect to such Collateral Debt Security, the issuer of or counterparty with respect to such Collateral Debt Security is not required to make “gross-up” payments to the Issuer that cover the full amount of such withholding tax on an after-tax basis.

Written Down Amount means, with respect to each Written Down Security, the amount by which the original Principal Balance of such Written Down Security is reduced as notified by or on behalf of the related issuer or trustee to the holders of such Written Down Security (including appraisal reductions on CMBS Securities). 56

Processed and formatted by SEC Watch - Visit SECWatch.com

Written Down Security means any Collateral Debt Security as to which the aggregate par amount of such Collateral Debt Security and all other securities secured by the same pool of collateral that rank pari passu with or senior in priority of payment to such Collateral Debt Security exceeds the aggregate par amount (including reserved interest or other amounts available for overcollateralization) of all collateral securing such securities (excluding defaulted collateral); provided that the Issuer shall immediately send notice to S&P by facsimile and e-mail upon any Collateral Debt Security becoming a Written Down Security. 1.2.

ASSUMPTIONS AS TO COLLATERAL DEBT SECURITIES, FEES, ETC.

The provisions set forth in this Section 1.2 shall be applied in connection with all calculations required to be made pursuant to this Indenture with respect to Scheduled Distributions on any Pledged Security, or any payments on any other assets included in the Collateral, and with respect to the income that can be earned on Scheduled Distributions on such Pledged Securities and on any other amounts that may be received for deposit in the Collection Account. (a)

All calculations with respect to Scheduled Distributions on the Pledged Securities securing the Rated Notes shall be made by the Issuer or the Collateral Administrator on behalf of the Issuer using (in the case of the Collateral Debt Securities) the assumptions that (i) no Pledged Security defaults or is sold, (ii) prepayment of any Pledged Security during any month occurs at a rate equal to the average rate of prepayment during the period of six consecutive months immediately preceding the current month (or, with respect to any Pledged Security that has not been outstanding for at least six consecutive calendar months, at the rate of prepayment assumed at the time of issuance of such Pledged Security), (iii) any clean-up call with respect to a Pledged Security will be exercised when economic to the Person or Persons entitled to exercise such call and (iv) no other optional redemption of any Pledged Security will occur except for those that have actually occurred or as to which irrevocable notice thereof shall have been given.

(b)

For purposes of determining compliance with the Interest Coverage Tests, except as otherwise specified in the Interest Coverage Tests, there shall be excluded all payments in respect of Defaulted Securities and Deferred Interest PIK Bonds unless the Trustee or Collateral Manager has actual knowledge such payments will be made in Cash and will be received on or before the Due Date therefor and all other scheduled payments (whether of principal, interest, fees or other amounts) including payments to the Issuer under any Hedge Agreement, as to which the Trustee or Collateral Manager has actual knowledge will not be made in Cash or will not be received when due. For purposes of calculating the Class A/B Interest Coverage Ratio, the Class C Interest Coverage Ratio, the Class D Interest Coverage Ratio and the Class E Interest Coverage Ratio: (1)

the expected interest income on Collateral Debt Securities and Eligible Investments and the expected interest payable on the Rated Notes and amounts, if any, payable under the Hedge Agreement will be calculated using the interest rates applicable thereto on the applicable date of determination;

(2)

accrued original issue discount on Eligible Investments will be deemed to be a scheduled interest payment thereon due on the date such original issue discount is scheduled to be paid; and

(3)

it will be assumed that no principal payments are made on the Rated Notes during the applicable periods. 57

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

For each Due Period, the Scheduled Distribution on any Pledged Security (other than (i) a Defaulted Security, (ii) a Deferred Interest PIK Bond or (iii) an Equity Security, which, in each case except as otherwise provided herein, shall be assumed to have a Scheduled Distribution of zero and with respect to any Written Down Security, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount) shall be the sum of (x) the total amount of payments and collections in respect of such Pledged Security (including the proceeds of the sale of such Pledged Security received during the Due Period) that, if paid as scheduled, will be available in the Collection Account at the end of the Due Period for payment on the Rated Notes or other amounts payable pursuant to this Indenture and of certain expenses of the Issuer plus (y) any such amounts received in prior Due Periods that were not disbursed on a previous Payment Date (provided that such sum shall be computed without regard to any amounts excluded from the determination of compliance with the Coverage Tests pursuant to Section 1.2(b)).

(d)

Subject to Section 1.2(b), each Scheduled Distribution receivable with respect to a Pledged Security shall be assumed to be received on the applicable Due Date, and each such Scheduled Distribution shall be assumed to be immediately deposited in the Collection Account and, except as otherwise specified, to earn interest at the Assumed Reinvestment Rate. All such funds shall be assumed to continue to earn interest until the date on which they are required to be available in the Collection Account for transfer to the Payment Account and application, in accordance with the terms hereof, to payments of principal of or interest on the Rated Notes or other amounts payable pursuant to this Indenture.

(e)

With respect to any Collateral Debt Security as to which any interest or other payment thereon is subject to withholding tax of any Relevant Jurisdiction, each Distribution thereon shall, for purposes of the Coverage Tests and each Collateral Quality Test, be deemed to be payable net of such withholding tax unless the issuer thereof or obligor thereon is required to make additional payments sufficient on an after tax basis to cover any withholding tax imposed on payments to the Issuer with respect thereto (including in respect of any such additional payment). On any date of determination, the amount of any Scheduled Distribution due on any future date shall be assumed to be made net of any such uncompensated withholding tax based upon withholding tax rates in effect on such date of determination.

(f)

For purpose of determining compliance with the Interest Coverage Tests, it will be assumed that any amount required to be paid for taxes, filing and registration fees on the Payment Date immediately following the relevant Due Period shall be equal to the aggregate amount for which the Trustee has received an invoice or demand for payment on or prior to the relevant Measurement Date.

(g)

Any reference in the definition of “Senior Collateral Management Fee” or “Subordinate Collateral Management Fee” in Section 1.1(a) to an amount calculated with respect to a period at a per annum rate shall be computed on the basis of a 360 day year and the actual number of days elapsed during the applicable Due Period.

(h)

Unless otherwise specified, test calculations that evaluate to a percentage will be rounded to the nearest one-hundredth, and test calculations that evaluate to a number or decimal will be rounded to the nearest one hundredth. 58

Processed and formatted by SEC Watch - Visit SECWatch.com

1.3.

(i)

Unless otherwise specified, all calculations required to be made and all reports which are to be prepared pursuant to this Indenture with respect to the Collateral Debt Securities, shall be made on the basis of the date on which the Issuer makes a commitment to acquire or to sell an asset, as applicable (the trade date), not the settlement date for such sale.

(j)

For the purpose of determining fees constituting Administrative Expenses payable under the Priority of Payments hereunder, periods longer or shorter than a one-month period shall be prorated based on the number of days in such period.

(k)

If the Issuer or the Collateral Manager determines that a Collateral Debt Security would fall within the definition of more than one Specified Type, then the Issuer or the Collateral Manager shall classify that obligation in a manner it deems appropriate and reasonable.

RULES OF CONSTRUCTION Unless the context otherwise clearly requires: (a)

the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined;

(b)

whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms;

(c)

the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”;

(d)

the word “will” shall be construed to have the same meaning and effect as the word “shall”;

(e)

any definition of or reference to any agreement, statute, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein);

(f)

any reference herein to any Person, or to any Person in a specified capacity, shall be construed to include such Person’s successors and assigns or such Person’s successors in such capacity, as the case may be;

(g)

all references in this instrument to designated “Sections”, “clauses” and other subdivisions are to the designated Sections, clauses and other subdivisions of this instrument as originally executed, and the words “herein”, “hereof”, “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Section, clause or other subdivision; and

(h)

unless otherwise stated to the contrary herein, any payments to be made by the Issuer (or by the Trustee on behalf of the Issuer) in respect of a Class of Notes shall be payable pari passu between any subclasses of such Class of Notes. 59

ARTICLE II THE RATED NOTES 2.1.

FORMS GENERALLY (a)

The Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes offered and sold in reliance on Regulation S (each, a Regulation S Note) shall be issued in fully Registered form without interest coupons substantially in the form of the note attached as Exhibit A-1 (each, a Regulation S Global Note) with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office in Chicago, Illinois, as custodian for DTC and registered in the name of DTC or a nominee of DTC, duly executed by the Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be.

(b)

The Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes offered and sold in the United States pursuant to an exemption from the registration requirements of the Securities Act (Rule 144A Notes) shall be issued in fully Registered form without interest coupons substantially in the form of the note attached as Exhibit A-2 (each, a Rule 144A Global Note), with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for DTC and registered in the name of DTC or a nominee of DTC, duly executed by the Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be.

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

Regulation S Global Notes and Rule 144A Global Notes may also be exchanged under the limited circumstances set forth in Section 2.4 for notes in definitive fully Registered form without interest coupons (each, a Definitive Class A-D Note), which may be either a Regulation S Definitive Class A-D Note or a Rule 144A Definitive Class A-D Note, with such legends as may be applicable thereto, which shall be duly executed by the Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided.

(d)

The Class E Notes offered or sold in the United States or to U.S. Persons pursuant to Rule 144A or another applicable exemption from registration under the Securities Act shall be issued in the form of physical certificates in definitive fully Registered form without interest coupons substantially in the form of the certificated note attached as Exhibit B-1 (each, a Definitive Class E Note), as the case may be, with such legends as may be applicable thereto, which shall be duly executed by the Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided.

(e)

The Issuer in issuing the Rated Notes may use “CUSIP” or “private placement” numbers (if then generally in use), and, if so, the Trustee will indicate the “CUSIP” or “private placement” numbers of the Rated Notes in notices of redemption and related materials as a convenience to Holders; provided that any such notice may state that no representation 60

Processed and formatted by SEC Watch - Visit SECWatch.com

is made as to the correctness of such numbers either as printed on the Rated Notes or as contained in any notice of redemption and related materials. 2.2.

AUTHORIZED AMOUNT; APPLICABLE PERIODIC INTEREST RATE; STATED MATURITY DATE; DENOMINATIONS (a)

The aggregate principal amount of Rated Notes which may be issued under this Indenture may not exceed U.S.$527,000,000, excluding Rated Notes issued upon registration of, transfer of, or in exchange for, or in lieu of, other Rated Notes pursuant to Section 2.4, 2.5 or 8.5.

(b)

Such Rated Notes shall be divided into eight Classes having designations, original principal amounts, original Applicable Periodic Interest Rates and Stated Maturities as follows:

De signation

Class A-1 Notes Class A-2 Notes Class A-3 Notes Class B Notes Class C Notes Class D-FL Notes Class D-FX Notes Class E Notes

O rigin al Prin cipal Am ou n t

Applicable Pe riodic In te re st Rate

Rate d Note S tate d Maturity Date

U.S.$338,250,000 U.S.$54,250,000 U.S.$50,000,000 U.S.$30,300,000 U.S.$22,000,000 U.S.$14,000,000 U.S.$2,000,000 U.S.$16,200,000

LIBOR + 0.27% LIBOR + 0.32% LIBOR + 0.33% LIBOR + 0.38% LIBOR + 0.60% LIBOR + 1.40% 6.913% 8.232%

June 2051 June 2051 June 2051 June 2051 June 2051 June 2051 June 2051 June 2051

The Rated Notes will be issuable in minimum denominations of U.S.$250,000 and, in each case, only in integral multiples of U.S.$1,000 in excess of such minimum denominations. After issuance, (x) a Rated Note may fail to be in compliance with the minimum denomination requirement as a result of the repayment of principal thereon in accordance with the Priority of Payments and (y) the Class B Notes, the Class C Notes, the Class D Notes or the Class E Notes may fail to be in an amount which is an integral multiple of U.S.$1,000 due to the addition to the principal amount thereof of deferred interest. (c)

Interest shall accrue on the Aggregate Outstanding Amount of each Class of Rated Notes (determined as of the first day of each Interest Period and after giving effect to any payment of principal occurring on such day) from the Closing Date and will be payable in arrears on each Payment Date. Interest on each Class of Rated Notes and interest on Defaulted Interest will be calculated in accordance with the definition of Periodic Interest.

(d)

The Rated Notes shall be redeemable as provided in Section 9.

(e)

The Depositary for the Global Notes shall initially be DTC. 61

Processed and formatted by SEC Watch - Visit SECWatch.com

(f)

2.3.

2.4.

The Rated Notes shall be numbered, lettered or otherwise distinguished in such manner as may be consistent herewith, determined by the Authorized Officer of the Issuer executing such Rated Notes as evidenced by its execution of such Rated Notes.

EXECUTION, AUTHENTICATION, DELIVERY AND DATING (a)

The Rated Notes shall be executed on behalf of the Issuer by an Authorized Officer of the Issuer. The signatures of such Authorized Officers on the Rated Notes may be manual or facsimile (including in counterparts).

(b)

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

(c)

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

(d)

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

(e)

Rated Notes issued upon transfer, exchange or replacement of other Rated Notes shall be issued in authorized denominations reflecting the original aggregate principal amount of the Rated Notes so transferred, exchanged or replaced, but shall represent only the current Aggregate Outstanding Amount of the Rated Notes so transferred, exchanged or replaced. In the event that any Rated Note is divided into more than one Rated Note in accordance with this Section 2, the original principal amount of such Rated Note shall be proportionately divided among the Rated Notes delivered in exchange therefor and shall be deemed to be the original aggregate principal amount of such subsequently issued Rated Notes.

(f)

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

REGISTRATION, TRANSFER AND EXCHANGE OF RATED NOTES (a)

Registration of Rated Notes. The Trustee is hereby appointed as the registrar hereunder (the Note Registrar). The Trustee is hereby appointed as a transfer agent with respect to the Rated Notes (the Note Transfer Agent). The Note Registrar shall (acting solely for this purpose as agent for the Issuer) keep a register (the Note Register) at the Corporate 62

Processed and formatted by SEC Watch - Visit SECWatch.com

Trust Office in which, subject to such reasonable regulations as it may prescribe, the Note Registrar shall provide for the registration of Rated Notes and the registration of transfers of Rated Notes. Upon any resignation or removal of the Note Registrar, the Issuer (after consultation with the Collateral Manager) shall propose a replacement for approval by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class. The Issuer may not terminate the appointment of the Note Registrar or any Note Transfer Agent without the consent of each Holder of Rated Notes. Subject to this Section 2.4, upon surrender for registration of transfer of any Rated Notes at the office or agency of the Issuer to be maintained as provided in Section 7.2, the Issuer shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Rated Notes of any authorized denomination and of a like aggregate principal amount. At the option of the Holder, Rated Notes may be exchanged for Rated Notes of like terms, in any authorized denominations and of like aggregate principal amount, upon surrender of the Rated Notes to be exchanged at such office or agency. Whenever any Rated Note is surrendered for exchange, the Issuer shall execute and the Trustee shall authenticate and deliver the Rated Notes that the Rated Noteholder making the exchange is entitled to receive. All Rated Notes issued and authenticated upon any registration of transfer or exchange of Rated Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Rated Notes surrendered upon such registration of transfer or exchange. Every Rated Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to a Holder for any registration of transfer or exchange of Rated Notes, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith and delivery charges, if any, not made by regular mail. (b)

The initial sale of each Note may be made in accordance with Section 4(2) of (or another applicable exemption from registration under) the Securities Act or in accordance with Regulation S under the Securities Act.

(c)

Transfers of Class A Notes, Class B Notes, Class C Notes and Class D Notes. (1)

Subject to Section 2.4(c)(4), exchanges or transfers of beneficial interests in a Global Note may be made only in accordance with the rules and regulations of the Depositary and the transfer restrictions contained in the legend on such Global Note and exchanges or transfers of interests in a Global Note may be made only in accordance with the following: (i)

Subject to Section 2.4(c)(1)(ii) through (vi), transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, 63

Processed and formatted by SEC Watch - Visit SECWatch.com

to nominees of the Depositary or to a successor of the Depositary or such successor’s nominee. (ii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Regulation S Global Note for a beneficial interest in a Rule 144A Global Note upon provision to the Trustee and the Issuer of a written certification in the form of Exhibit C-1 (a Rule 144A Transfer Certificate).

(iii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Rule 144A Global Note for a beneficial interest in a Regulation S Global Note upon provision to the Trustee and the Issuer of a written certification substantially in the form of Exhibit C-2 (a Regulation S Transfer Certificate).

(iv)

An owner of a beneficial interest in a Regulation S Global Note may transfer such interest in the form of a beneficial interest in such Regulation S Global Note without the provision of written certification; provided that (1) such transfer is made to a Person who is not a U.S. Person in an offshore transaction in reliance on an exemption from the registration requirements of the Securities Act under Regulation S and (2) the transferee, by purchase of such interest in such Regulation S Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Regulation S Transfer Certificate.

(v)

An owner of a beneficial interest in a Rule 144A Global Note may transfer such interest in the form of a beneficial interest in such Rule 144A Global Note without the provision of written certification; provided that the transferee, by purchase of such interest in such Rule 144A Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Rule 144A Transfer Certificate.

(vi)

In the event Definitive Class A-D Notes are issued pursuant to Section 2.4(c)(5), the Trustee shall cause the transfer of (i) any beneficial interest in a Global Note for a Definitive A-D Note that is a Regulation S Note (a Regulation S Definitive Note), upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any beneficial interest in a Global Note for a Definitive A-D Note that is a Rule 144A Note (a Rule 144A Definitive Note), upon provision to the Trustee, the Issuer and the Note Registrar of a Rule 144A Transfer Certificate.

(2)

Subject to Section 2.4(c)(4), in the event Definitive Class A-D Notes are issued pursuant to Section 2.4(c)(5), the Trustee shall cause the transfer of (i) any Definitive A-D Note for a beneficial interest in a Regulation S Global Note, upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any Definitive A-D Note for a beneficial interest in a Rule 144A Global Note, upon provision to the Trustee and the Issuer of a Rule 144A Transfer Certificate.

(3)

Upon acceptance for exchange or transfer of a beneficial interest in a Global Note for a Definitive A-D Note, or upon acceptance for exchange or transfer of a 64

Processed and formatted by SEC Watch - Visit SECWatch.com

Definitive A-D Note for a beneficial interest in a Global Note, each as provided herein, the Trustee shall approve the instruction at the Depositary to adjust the principal amount of such Global Note on its records to evidence the date of such exchange or transfer and the change in the principal amount of such Global Note. (4)

Subject to the restrictions on transfer and exchange set forth in this Section 2.4 and to any additional restrictions on transfer or exchange specified in the Definitive Class A-D Notes, the Holder of any Definitive A-D Note may transfer or exchange the same in whole or in part (in a principal amount equal to the minimum authorized denomination or any larger authorized amount) by surrendering such Definitive A-D Note at the Corporate Trust Office or at the office of any Note Transfer Agent, together with (x) in the case of any transfer, an executed instrument of assignment and (y) in the case of any exchange, a written request for exchange. Following a proper request for transfer or exchange, the Trustee shall (provided it has available in its possession an inventory of Definitive Class A-D Notes), within five Business Days of such request if made at such Corporate Trust Office, or within ten Business Days if made at the office of a Note Transfer Agent (other than the Trustee), authenticate and make available at such Corporate Trust Office or at the office of such Note Transfer Agent, as the case may be, to the transferee (in the case of transfer) or Rated Noteholder (in the case of exchange) or send by first class mail (at the risk of the transferee in the case of transfer or Rated Noteholder in the case of exchange) to such address as the transferee or Rated Noteholder, as applicable, may request, a Definitive A-D Note or Notes, as the case may require, for a like aggregate principal amount and in such authorized denomination or denominations as may be requested. The presentation for transfer or exchange of any Definitive Note shall not be valid unless made at the Corporate Trust Office or at the office of a Note Transfer Agent or by a duly authorized attorney-in-fact. Beneficial interests in Global Notes shall be exchangeable for Definitive Class A-D Notes only under the limited circumstances described in Section 2.4(c)(5).

(5)

Interests in a Global Note deposited with or on behalf of the Depositary pursuant to Section 2.1 hereunder shall be transferred (A) to the Beneficial Owners thereof in the form of Definitive Class A-D Notes only if such transfer otherwise complies with this Section 2.4 (including Section 2.4(c)(1) and (2) and (1) the Depositary notifies the Issuer that it is unwilling or unable to continue as Depositary for the Rated Notes, (2) the Depositary ceases to be a “clearing agency” registered under the Exchange Act and a successor Depositary is not appointed by the Issuer within 90 days of such notice or (3) as a result of any amendment to or change in the laws or regulations of the Cayman Islands, or of any authority therein or thereof having power to tax, or in the interpretation or administration of such laws or regulations which become effective on or after the Closing Date, the Issuer, the Trustee or any Note Paying Agent becomes aware that it is or will be required to make any deduction or withholding from any payment in respect of the Global Notes which would not be required if the Global Notes were not represented by a global certificate or (B) to the purchaser thereof in the form of one or more Definitive Notes in accordance with the provisions of Section 2.4(c)(1).

(6)

If interests in any Global Note are to be transferred to the Beneficial Owners thereof in the form of Definitive Class A-D Notes pursuant to Section 2.4(c)(5), 65

Processed and formatted by SEC Watch - Visit SECWatch.com

such Global Note shall be surrendered by the Depositary, or its custodian on its behalf, to the Corporate Trust Office or to the Note Transfer Agent located in Chicago, Illinois and the Trustee shall authenticate and deliver without charge, upon such transfer of interests in such Global Note, an equal aggregate principal amount of Definitive Notes of authorized denominations. The Definitive Class A-D Notes transferred pursuant to this Section 2.4 shall be executed, authenticated and delivered only in the denominations specified in Section 2.2(b) and registered in such names as the Depositary shall direct in writing. (7)

(d)

For so long as one or more Global Notes are Outstanding: (i)

the Trustee and its directors, officers, employees and agents may deal with the Depositary for all purposes (including the making of distributions on, and the giving of notices with respect to, the Global Notes);

(ii)

unless otherwise provided herein and subject to Section 2.4(c)(7)(i) above, the rights of Beneficial Owners shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such Beneficial Owners and the Depositary;

(iii)

for purposes of determining the identity of and principal amount of Rated Notes beneficially owned by a Beneficial Owner, the records of the Depositary shall be conclusive evidence of such identity and principal amount and the Trustee may conclusively rely on such records when acting hereunder;

(iv)

the Depositary will make book-entry transfers among the Depositary Participants of the Depositary and will receive and transmit distributions of principal of and interest on the Global Notes to such Depositary Participants; and

(v)

the Depositary Participants of the Depositary shall have no rights under this Indenture under or with respect to any of the Global Notes held on their behalf by the Depositary, and the Depositary may be treated by the Trustee and its agents, employees, officers and directors as the absolute owner of the Global Notes for all purposes whatsoever.

Transfers of Class E Notes. (1)

If a holder of a beneficial interest in a Definitive Class E Note wishes at any time to transfer its interest in such Definitive Class E Note, such holder may transfer or cause the transfer of such interest for an equivalent beneficial interest in one or more such Definitive Class E Notes as provided below. Upon receipt by the Issuer and the Note Registrar of (A) such holder’s Definitive Class E Note properly endorsed for assignment to the transferee and (B) a certificate in the form of Exhibit C-3 (a Definitive Class E Note Transfer Certificate) given by the transferee of such beneficial interest then the Note Registrar shall cancel such Definitive Class E Note, record the transfer in the Note Register and authenticate 66

Processed and formatted by SEC Watch - Visit SECWatch.com

and deliver one or more Definitive Class E Notes bearing the same designation as the Definitive Class E Notes endorsed for transfer, registered in the names specified in the assignment described in clause (A) above, in principal amounts designated by the transferee (the Class and the aggregate of such amounts being the same as the beneficial interest in the Definitive Class E Notes surrendered by the transferor), and in the minimum denominations and integral multiples in excess thereof. In addition, the Note Registrar shall not register any transfer of Definitive Class E Notes to a proposed transferee of Definitive Class E Notes that has represented that it is a Benefit Plan Investor or a Controlling Person if the transfer would result in Benefit Plan Investors owning 25% or more of the value of the outstanding Definitive Class E Notes (as determined without regard to interests held by Controlling Persons, and otherwise contemplated by the applicable regulations under ERISA) immediately after such transfer, based on assurances received from investors. Without limiting the generality of the forgoing, the Note Registrar shall not register any transfer of Definitive Class E Notes represented by Regulation S Notes to a proposed transferee of such Definitive Class E Notes that has represented that it is or may become a Benefit Plan Investor or a Controlling Person. Without limiting the generality of the foregoing, a transfer of beneficial interests in a Definitive Class E Note will not be permitted unless an ERISA Restriction Letter is obtained from each transferee of a Definitive Class E Note, for the benefit of the Issuer, the Trustee and the Placement Agent, (i) in the case of a Defmitive Class E Note not represented by a Regulation S Note, regarding whether it is, or is not and will not be, a Benefit Plan Investor or Controlling Person, or (ii) in the case of a Definitive Class E Note represented by a Regulation S Note, to the effect that it is not and will not be a Benefit Plan Investor or Controlling Person. Any purported transfer in violation of the foregoing requirements shall be null and void ab initio, and the Note Registrar shall not register any such purported transfer and shall not authenticate and deliver such Definitive Class E Notes. (2)

If a holder of a beneficial interest in one or more Definitive Class E Notes wishes at any time to exchange its interest in such Definitive Class E Notes for an interest in one or more such Definitive Class E Notes of different principal amounts, such holder may exchange or cause the exchange of such interest for an equivalent beneficial interest in the Definitive Class E Notes bearing the same designation as the Definitive Class E Notes endorsed for exchange as provided below. Upon receipt by the Note Registrar of (A) such holder’s Definitive Class E Notes properly endorsed for such exchange and (B) written instructions from such holder designating the number and principal amounts of the applicable Definitive Class E Notes to be issued (the aggregate principal amounts of such Definitive Class E Notes being the same as the Definitive Class E Notes surrendered for exchange), then the Note Registrar shall cancel such Definitive Class E Notes, record the exchange in the Note Register and authenticate and deliver one or more Definitive Class E Notes bearing the same designation endorsed for exchange, registered in the same names as the Definitive Class E Notes surrendered by such holder or such different names as are specified in the endorsement described in clause (A) above, in different principal amounts designated by such holder (the Class and the aggregate principal amounts being the same as the beneficial interest in the Definitive Class E Notes surrendered by such holder), and the minimum denominations and integral multiples in excess. 67

(e)

Denominations; Qualified Purchaser Status. No Person may hold a beneficial interest in any Rated Note except in a denomination authorized for the Rated Notes of such Class under Section 2.2(b). In addition, no transfer of a Rated Note (or any interest therein) may be made to any Person that is a U.S. Person unless such Person is (A) a Qualified Institutional Buyer (or, with respect to the Class E Notes, an Institutional Accredited Investor) or an NS Purchaser and (B) a Qualified Purchaser. In addition, no transfer of a Rated Note (or any interest therein) may be made to any Person that is a U.S. Person unless such Person (A) was not formed for the purpose of investing in the Issuer (except when each beneficial owner of the purchaser is a Qualified Purchaser, (B) has received the necessary consent from its beneficial owners if it is a private investment company formed before April 30, 1996, (C) 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, (D) is not a pension, profit, sharing or other retirement trust fund or plan in which the partners, beneficiaries or participants, as applicable, may designate the particular investments to be made, and in a transaction that may be effected without loss of any applicable Investment Company Act exemption, (E) will provide notice to any subsequent transferee of the transfer restrictions provided in the legend, (F) will hold and transfer in a principal amount of not less than U.S. $250,000, for it or for each account for which it is acting and (G) will provide the Issuer from time to time such information as it may reasonably request in order to ascertain compliance with the foregoing. Any purported transfer that is not in compliance with this Section 2.4 or the legends on the Rated Notes will be void ab initio, and will not operate to transfer any rights to the transferee, notwithstanding any instructions to the contrary to the Issuer, the Trustee or any intermediary. If any purported transfer of Rated Notes or any beneficial interest therein to a purported transferee does not comply with the requirements set forth in this Section 2.4 or the legends on the Rated Notes, then the purported transferor of such Rated Notes or beneficial interest therein shall be required to cause the purported transferee to surrender the Rated Notes or any beneficial interest therein in return for a refund of the consideration paid therefor by such transferee (together with interest thereon) or to cause the purported transferee to dispose of such Rated Notes or beneficial interest promptly in one or more open market sales to one or more persons each of whom satisfies the requirements of this Section 2.4 and the legends on the Rated Notes and such purported transferor shall take, and shall cause such transferee to take, all further action necessary or desirable, in the judgment of the Trustee, to ensure that such Rated Notes or any beneficial interest therein are held by persons in compliance therewith.

(f)

Requirement to Sell.

Processed and formatted by SEC Watch - Visit SECWatch.com

(1)

If, notwithstanding the restrictions set forth in this Section 2.4, the Issuer determines that any beneficial owner of a Rule 144A Note (A) is a U.S. Person and (B) is not a Qualified Institutional Buyer and also a Qualified Purchaser, the Issuer may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Rated Note (or interest therein) to a Person that is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser, with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (x) upon written direction from the Issuer, the Trustee shall, and is hereby irrevocably authorized by such beneficial owner to cause its interest in such Rated Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9-611 of the UCC as applied to securities that are customarily sold on a recognized market or 68

Processed and formatted by SEC Watch - Visit SECWatch.com

that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser and (y) pending such transfer, no further payments will be made in respect of such Rated Note (or beneficial interest therein) held by such beneficial owner. (2)

If, notwithstanding the restrictions set forth in this Section 2.4, the Issuer determines that any beneficial owner of a Regulation S Note is (A) a U.S. Person or (B) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), the Issuer may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Rated Note (or interest therein) to a Person that is not (1) a U.S. Person or (2) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30day period, (x) upon written direction from the Issuer, the Trustee shall, and is hereby irrevocably authorized by such beneficial owner to cause its interest in such Rated Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9-611 of the UCC as applied to securities that are customarily sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is neither (1) a U.S. Person nor (2) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA) and (y) pending such transfer, no further payments will be made in respect of such Rated Note (or beneficial interest therein) held by such beneficial owner.

(g)

Legends. Any Rated Note issued upon the transfer, exchange or replacement of Rated Notes shall bear such applicable legend set forth in the relevant Exhibit hereto unless there is delivered to the Trustee, the Note Registrar and the Issuer such satisfactory evidence, which may include an Opinion of Counsel, as may be reasonably required by any of the Trustee, the Note Registrar and the Issuer to the effect that neither such applicable legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A or another exemption from registration under the Securities Act and to ensure that neither the Issuer nor the pool of Collateral becomes an investment company required to be registered under the Investment Company Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Issuer, shall authenticate and deliver Rated Notes that do not bear such applicable legend.

(h)

Expenses; Acknowledgment of Transfer. Transfer, registration and exchange shall be permitted as provided in this Section 2.4 without any charge to the Rated Noteholder except for a sum sufficient to cover any tax or other governmental charge payable in connection therewith or the expenses of delivery (if any) not made by regular mail and payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith pursuant to Section 2.4(a). Registration of the transfer of a Rated Note by the Trustee shall be deemed to be the acknowledgment of such transfer on behalf of the Issuer.

(i)

Surrender upon Final Payment. Upon final payment due on the date on which all outstanding unpaid principal of a Rated Note becomes due and payable as therein or herein provided, whether at the Stated Maturity Date or by declaration of acceleration, 69

Processed and formatted by SEC Watch - Visit SECWatch.com

call for redemption or otherwise, the Holder thereof shall present and surrender such Rated Note at the Corporate Trust Office of the Trustee in Chicago, Illinois.

2.5.

(j)

Repurchase and Cancellation of Rated Notes. The Issuer will not purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the Outstanding Rated Notes except upon the redemption of the Rated Notes in accordance with the terms of this Indenture and the Rated Notes. The Issuer will promptly cancel all Rated Notes acquired by them pursuant to any payment, purchase, redemption, prepayment or other acquisition of Rated Notes pursuant to any provision of this Indenture and no Rated Notes may be issued in substitution or exchange for any such Rated Notes.

(k)

Compliance with Transfer Restrictions. Notwithstanding anything contained herein to the contrary, neither the Trustee nor the Note Registrar shall be responsible for ascertaining whether any transfer complies with the registration provisions of or exemptions from the Securities Act, applicable state securities laws, the rules of any Depositary, ERISA, the Code or the Investment Company Act; provided that if a certificate is specifically required by the express terms of this Section 2.4 to be delivered to the Trustee or the Note Registrar by a purchaser or transferee of a Rated Note, the Trustee or the Note Registrar, as the case may be, shall be under a duty to receive and examine the same to determine whether the transfer contemplated thereby substantially complies with the express terms of this Indenture and shall promptly notify the party delivering the same if such transfer does not comply with such terms. To the extent applicable to the Issuer, the Issuer shall impose additional restrictions to comply with the USA PATRIOT Act, and any such transfer restrictions shall be binding on each Holder or Beneficial Owner of a Rated Note. The Issuer shall notify the Trustee and the Note Registrar of the imposition of any such transfer restrictions.

(1)

Physical Rated Notes. The Issuer will promptly make available to the Trustee without charge a reasonable supply of Definitive Notes in definitive, fully Registered Form, without interest coupons.

MUTILATED, DEFACED, DESTROYED, LOST OR STOLEN RATED NOTES

If, (a) any mutilated or defaced Rated Note is surrendered to a Note Transfer Agent, or if there shall be delivered to the Issuer, the Trustee and the Note Transfer Agent (each, a Specified Person) evidence to their reasonable satisfaction of the destruction, loss or theft of any Rated Note, and (b) there is delivered to the Specified Persons such security or indemnity as may reasonably be required by them to save each of them harmless then, in the absence of notice to the Specified Persons that such Rated Note has been acquired by a bona fide purchaser, the Issuer shall execute and shall direct the Trustee to authenticate, and upon Issuer Request the Trustee shall authenticate and deliver, in lieu of any such mutilated, defaced, destroyed, lost or stolen Rated Note, a new Rated Note of the same Class as such mutilated, defaced, destroyed, lost or stolen Rated Note, of like tenor (including the same date of issuance) and equal principal amount, registered in the same manner, dated the date of its authentication, bearing interest from the date to which interest has been paid on the mutilated, defaced, destroyed, lost or stolen Rated Note and bearing a number not contemporaneously outstanding. If after delivery of such new Rated Note, a bona fide purchaser of the predecessor Rated Note presents for payment, transfer or exchange such predecessor Rated Note, the Specified Persons shall be entitled to recover such new Rated Note from the Person to whom it was delivered or any Person taking therefrom, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Specified Persons in connection therewith. 70

Processed and formatted by SEC Watch - Visit SECWatch.com

In case any such mutilated, defaced, destroyed, lost or stolen Rated Note has become due and payable, the Issuer in its (as applicable) discretion may, instead of issuing a new Rated Note, pay such Rated Note without requiring surrender thereof except that any mutilated Rated Note shall be surrendered. Upon the issuance of any new Rated Note under this Section 2.5, the Issuer, the Trustee or any Note Transfer Agent may require the payment by the registered Holder thereof of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Rated Note issued pursuant to this Section 2.5 in lieu of any mutilated, defaced, destroyed, lost or stolen Rated Note, shall constitute an original additional contractual obligation of the Issuer and such new Rated Note shall be entitled, subject to the second paragraph of this Section 2.5, to all the benefits of this Indenture equally and proportionately with any and all other Rated Notes duly issued hereunder. The provisions of this Section 2.5 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, defaced, destroyed, lost or stolen Rated Notes. 2.6.

PAYMENT OF PRINCIPAL AND INTEREST; RIGHTS PRESERVED (a)

Each Class of Rated Notes shall accrue interest during each Interest Period applicable to such Class in the manner and at the Applicable Periodic Interest Rate specified in Section 2.2. Interest on each Class of Rated Notes shall be due and payable on each Payment Date; provided that (i) interest on the Class A-2 Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A-1 Notes (together with any Defaulted Interest thereon), (ii) interest on the Class A-3 Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A-1 Notes and the Class A-2 Notes (together with any Defaulted Interest thereon), (iii) interest on the Class B Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), (iv) interest on the Class C Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon) and on the Class B Notes (together with any Defaulted Interest thereon), (v) interest on the Class D Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon) and on the Class C Notes (together with any Defaulted Interest thereon), (vi) interest on the Class E Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon) and the Class D Notes (together with any Defaulted Interest thereon), and (vii) interest on all Rated Notes is subordinated in right of payment to the prior payment in full on each Payment Date of other amounts in accordance with Section 11.1. Except as provided in Section 5.5, no payment shall be made by the Issuer hereunder other than on a Payment Date. 71

Processed and formatted by SEC Watch - Visit SECWatch.com

So long as any Class A Notes or Class B Notes are Outstanding, any Class C Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class C Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class C Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, any Class D Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class D Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class D Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding, any Class E Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class E Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class E Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. (b)

The principal of each Rated Note shall be payable no later than the Stated Maturity Date thereof unless the unpaid principal of such Rated Note becomes due and payable at an earlier date by declaration of acceleration, call for redemption or otherwise; provided that: (1)

so long as any Class A-1 Notes are Outstanding, except as provided in Section 9, the payment of principal of the Class A-2 Notes, the Class A-3 Notes, the B Notes, the Class C Notes, the Class D Notes and the Class E Notes (x) may only occur after principal of the Class A-1 Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and other amounts payable in accordance with Section 11.1;

(2)

so long as any Class A-1 Notes or Class A-2 Notes are Outstanding, except as provided in Section 9, the payment of principal of the Class A-3 Notes, the B Notes, the Class C Notes, the Class D Notes and the Class E Notes (x) may only occur after principal of the Class A-1 Notes and Class A-2 Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A1 Notes and Class A-2 Notes and other amounts payable in accordance with Section 11.1;

(3)

so long as any Class A Notes are Outstanding, except as provided in Section 9, the payment of principal of the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes (x) may only occur after principal of the Class A Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and other amounts payable in accordance with Section 11.1;

(4)

so long as any Class A Notes or Class B Notes are Outstanding, the payment of principal of the Class C Notes, the Class D Notes and the Class E Notes (x) may 72

Processed and formatted by SEC Watch - Visit SECWatch.com

only occur after principal of the Class A Notes and the Class B Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and Class B Notes and other amounts payable in accordance with Section 11.1; (5)

so long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, except as provided in Section 9, the payment of principal of the Class D Notes and the Class E Notes (x) may only occur after principal of the Class A Notes, the Class B Notes and the Class C Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes and the Class C Notes and other amounts payable in accordance with Section 11.1; and

(6)

so long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding, except as provided in Section 9, the payment of principal of the Class E Notes (x) may only occur after principal of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes and other amounts payable in accordance with Section 11.1.

(c)

So long as the Coverage Tests are satisfied, principal will not be payable on any Class of Rated Notes except (i) upon the occurrence of a Redemption, (ii) in the case of any Class B Notes, Class C Notes, Class D Notes or Class E Notes, to pay amounts in respect of the Class C Cumulative Applicable Periodic Interest Shortfall Amount, the Class D Cumulative Applicable Periodic Interest Shortfall Amount or the Class E Cumulative Applicable Periodic Interest Shortfall Amount, as the case may be, in accordance with Section 11.1 and (iii) on each Payment Date, in accordance with Section 11.1.

(d)

As a condition to the payment of any principal of or interest on any Rated Note without the imposition of withholding tax, any Note Paying Agent shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor 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 Internal Revenue Service Form W-8 (or applicable successor 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) or other certification acceptable to it to enable the Issuer, the Trustee and any Note Paying Agent to determine their duties and liabilities with respect to any taxes or other charges that they may be required to pay, deduct or withhold in respect of such Rated Note or the Holder of such Rated Note under any present or future law or regulation of the Cayman Islands or the United States or any present or future law or regulation of any political subdivision thereof or taxing authority therein or to comply with any reporting or other requirements under any such law or regulation.

(e)

All payments made by the Issuer under the Rated Notes will be made without any deduction or withholding for or on the account of any tax unless such deduction or withholding is required by applicable law, as modified by the practice of any relevant governmental authority, then in effect. If the Issuer is so required to deduct or withhold, 73

Processed and formatted by SEC Watch - Visit SECWatch.com

then the Issuer will not be obligated to pay any additional amounts in respect of such withholding or deduction. (f)

Payments in respect of principal of and interest on the Rated Notes shall be payable by wire transfer in immediately Available Funds to a Dollar account maintained by the Rated Noteholders in accordance with wire transfer instructions received by any Note Paying Agent on or before the Record Date or, if no wire transfer instructions are received by a Note Paying Agent, by a Dollar check drawn on a bank in the United States mailed to the address of such Rated Noteholder as it appears on the Note Register at the close of business on the Record Date for such payment.

(g)

The principal of and interest on any Rated Note which is payable on a Redemption Date or in accordance with Section 11.1 on a Payment Date and is punctually paid or duly provided for on such Redemption Date or Payment Date shall be paid to the Person in whose name that Rated Note (or one or more predecessor Rated Notes) is registered at the close of business on the Record Date for such payment. All such payments that are mailed or wired and returned to the Note Paying Agent shall be held for payment as herein provided at the office or agency of the Issuer to be maintained as provided in Section 7.2. Payments to Holders of the Rated Notes of each Class shall be made in the proportion that the Aggregate Outstanding Amount of the Rated Notes of such Class registered in the name of each such Holder on the Record Date for such payment bears to the Aggregate Outstanding Amount of all Rated Notes of such Class on such Record Date.

(h)

Payment of any Defaulted Interest may be made in any other lawful manner in accordance with Section 11.1 if notice of such payment is given by the Trustee to the Issuer and the Rated Noteholders, and such manner of payment shall be deemed practicable by the Trustee.

(i)

All reductions in the principal amount of a Rated Note (or one or more predecessor Rated Notes) effected by payments of installments of principal made on any Payment Date or Redemption Date shall be binding upon all future Holders of such Rated Note and of any Rated Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Rated Note.

(j)

Notwithstanding anything to the contrary herein, the obligations of the Issuer under the Rated Notes or this Indenture or arising in connection herewith are limited recourse obligations of the Issuer payable solely from the Collateral and following realization of the Collateral, all obligations of and all claims against the Issuer hereunder or arising in connection herewith shall be extinguished and shall not thereafter revive. No recourse shall be had against any Officer, member, director, employee, security holder or incorporator of the Issuer or its respective successors or assigns for the payment of any amounts payable under the Rated Notes or this Indenture. It is understood that the foregoing provisions of this Section 2.6(j) shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or agreement which is part of the Collateral or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Rated Notes or secured by this Indenture until such Collateral has been realized, whereupon any outstanding indebtedness or obligation shall be extinguished. It is further understood that the foregoing provisions of this Section 2.6(j) shall not limit the right of any Person to name the Issuer as a party 74

Processed and formatted by SEC Watch - Visit SECWatch.com

defendant in any action or suit or in the exercise of any other remedy under the Rated Notes or this Indenture, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity. (k)

Subject to the foregoing provisions of this Section 2.6 and the provisions of Sections 2.4 and 2.5, each Rated Note delivered under this Indenture and upon registration of transfer of or in exchange for or in lieu of any other Rated Note shall carry the rights of unpaid interest and principal that were carried by such other Rated Note. ARTICLE III CONDITIONS PRECEDENT

3.1.

GENERAL PROVISIONS

The Rated Notes may be executed by the Issuer and delivered to the Trustee for authentication and thereupon the same shall be authenticated and delivered by the Trustee (or an Authenticating Agent on its behalf) upon Issuer Request, upon receipt by the Trustee of the following: (a)

an Officer’s certificate of the Issuer, (A) evidencing the authorization by Board Resolution of the execution and delivery of, and the performance of the Issuer’s obligations under, each Transaction Document, in each case as may be amended on or prior to, and as in effect on, the Closing Date, and the execution, authentication and delivery of the Rated Notes and specifying the Stated Maturity Date, the principal amount and the Applicable Periodic Interest Rate with respect to each Class of Rated Notes to be authenticated and delivered, and (B) certifying that (1) the attached copy of such Board Resolution is a true and complete copy thereof, (2) such resolutions have not been rescinded and are in full force and effect on and as of the Closing Date and (3) the Officers authorized to execute and deliver such documents hold the offices and have the signatures indicated thereon;

(b)

either (A) a certificate of the Issuer, or other official document evidencing the due authorization, approval or consent of any governmental body or bodies, at the time having jurisdiction in the premises, together with an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee and the Initial Hedge Counterparty on which the Trustee and the Initial Hedge Counterparty are entitled to rely to the effect that no other authorization, approval or consent of any governmental body is required for the valid issuance of the Rated Notes, or (B) an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee and the Initial Hedge Counterparty to the effect that no such authorization, approval or consent of any governmental body is required for the valid issuance of the Rated Notes except as may have been given; and

(c)

(1)

an opinion of Clifford Chance US LLP, special New York counsel to the Issuer, dated the Closing Date, substantially in the form of Exhibit E-1;

(2)

an opinion of Walkers, special Cayman Islands counsel to the Issuer, dated the Closing Date, substantially in the form of Exhibit E-2;

(3)

an opinion of Kennedy Covington Lobdell & Hickman, L.L.P., counsel to the Trustee, dated the Closing Date, substantially in the form of Exhibit F; 75

Processed and formatted by SEC Watch - Visit SECWatch.com

3.2.

(4)

an opinion of Thacher Proffitt & Wood LLP, counsel to the Collateral Manager, dated the Closing Date, substantially in the form of Exhibit G; and

(5)

an opinion of in-house counsel to the Initial Hedge Counterparty, dated the Closing Date, substantially in the form of Exhibit H;

(d)

an Officer’s certificate of the Issuer, stating that the Issuer is not in Default under this Indenture and that the issuance of the Rated Notes will not result in a breach of any of the terms, conditions or provisions of, or constitute a Default under, the Articles, any indenture or other agreement or instrument to which the Issuer is a party or by which it is bound, or any order of any court or administrative agency entered in any Proceeding to which the Issuer is a party or by which it may be bound or to which it may be subject; that no Event of Default shall have occurred and be continuing; that all of the representations and warranties contained herein are true and correct as of the Closing Date; that all conditions precedent provided in this Indenture relating to the authentication and delivery of the Rated Notes applied for (including in Section 3.2) have been complied with; and that all expenses due or accrued with respect to the Offering or relating to actions taken on or in connection with the Closing Date have been paid;

(e)

an Accountants’ Report (A) confirming the information with respect to each Collateral Debt Security (other than its price) set forth on a schedule setting forth each Collateral Debt Security and the information provided by the Issuer with respect to every other asset forming part of the Collateral, by reference to such sources as shall be specified therein, (B) confirming that, on the Closing Date, the Collateral Debt Securities set forth on Schedule A meet the Collateral Quality Tests (with the exception of the S&P CDO Monitor Test) and (C) specifying the procedures undertaken by them to review data and computations relating to the foregoing statement;

(f)

executed counterparts of this Indenture, the Account Control Agreement, the Collateral Administration Agreement, the Collateral Management Agreement and the other Transaction Documents;

(g)

an executed copy of the Initial Hedge Agreement and an executed copy of the Collateral Assignment of Hedge Agreement with respect thereto (and all acknowledgments thereto);

(h)

execution and delivery of the Financing Statement for filing against the Issuer with the Recorder of Deeds in the District of Columbia; and

(i)

evidence of an entry having been made in the Issuer’s Register of Mortgages and Charges in respect of the charge.

SECURITY FOR THE RATED NOTES Prior to the issuance of the Rated Notes on the Closing Date, the Issuer shall cause the following conditions to be satisfied: (a)

Grant of Security Interest; Delivery of Collateral Debt Securities. The Grant pursuant to the Granting clauses of this Indenture of all of the Issuer’s right, title and interest in and to the Collateral and the transfer of all Collateral Debt Securities purchased by the Issuer on the Closing Date (as set forth in Schedule A) to the Trustee in the manner provided in Section 3.3(b). 76

(b)

Certificate of the Issuer. The delivery to the Trustee of a certificate of an Authorized Officer of the Issuer or the Collateral Manager, for and on behalf of the Issuer, dated as of the Closing Date, to the effect that (x) the Issuer has no assets other than the Collateral, (y) the Issuer has no investments that do not qualify as Collateral Debt Securities or Eligible Investments and (z) in the case of each Collateral Debt Security identified on Schedule A and pledged to the Trustee for inclusion in the Collateral on the Closing Date: (1)

the Issuer is the owner of such Collateral Debt Security free and clear of any liens, claims or encumbrances of any nature whatsoever except for those which are being released on the Closing Date and except for those Granted pursuant to this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on such Collateral Debt Security prior to the first Payment Date and owed by the Issuer to the seller of such Collateral Debt Security;

(2)

the Issuer has acquired its ownership in such Collateral Debt Security in good faith without notice of any adverse claim (within the meaning given to such term by Section 8-102(a)(1) of the UCC), except as described in clause (1) above;

(3)

the Issuer has not assigned, pledged or otherwise encumbered any interest in such Collateral Debt Security (or, if any such interest has been assigned, pledged or otherwise encumbered, it has been released) other than interests Granted pursuant to this Indenture;

(4)

the Issuer has full right to Grant a security interest in and assign and pledge all of its right, title and interest in such

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Debt Security to the Trustee;

(c)

(5)

the information set forth with respect to such Collateral Debt Security on Schedule A is correct and each such Collateral Debt Security is transferred to the Trustee as required by Section 3.2(a) (or, if any such Collateral Debt Security is not so transferred to the Trustee on the Closing Date, the Issuer has entered into a binding agreement to purchase such Collateral Debt Security for settlement within 10 days after the Closing Date);

(6)

each such Collateral Debt Security satisfies the requirements of the definition of “Collateral Debt Security” and is not a Defaulted Security; and

(7)

upon Grant by the Issuer, the Trustee has a first priority perfected security interest in the Collateral (assuming that any Clearing Corporation, Securities Intermediary or other entity not within the control of the Issuer involved in the Grant of Collateral takes the actions required of it under Section 3.3(b) for perfection of that interest) and a “securities entitlement” (as defined in the UCC) with respect to Financial Assets.

Rating Letters. The delivery to the Trustee of an Officer’s certificate of the Issuer, to the effect that (i) attached thereto are true and correct copies of (A) a letter signed by Fitch confirming that the Class A-1 Notes have been rated “AAA”, the Class A-2 Notes have been rated “AAA”, the Class A-3 Notes have been rated “AAA”, the Class B Notes have been rated at least “AA”, the Class C Notes have been rated at least “A”, the Class D Notes have been rated at least “BBB” and the Class E Notes have been rated at least 77

Processed and formatted by SEC Watch - Visit SECWatch.com

“BB”, (B) a letter signed by Moody’s confirming that the Class A-1 Notes have been rated “Aaa”, the Class A-2 Notes have been rated “Aaa”, the Class A-3 Notes have been rated “Aaa”, the Class B Notes have been rated at least “Aa2”, the Class C Notes have been rated at least “A2”, the Class D Notes have been rated at least “Baa2” and the Class E Notes have been rated at least “Ba2” and (C) a letter signed by S&P confirming that the Class A-1 Notes have been rated “AAA”, the Class A2 Notes have been rated “AAA”, the Class A-3 Notes have been rated “AAA”, the Class B Notes have been rated at least “AA”, the Class C Notes have been rated at least “A”, the Class D Notes have been rated at least “BBB” and the Class E Notes have been rated at least “BB” and (ii) each such rating is in full force and effect on the Closing Date.

3.3.

(d)

Accounts. The delivery by the Trustee of evidence of the establishment of the Payment Account, the Collection Account (including each Collateral Sub-Account established therein), the Expense Reserve Account, the Ramp-Up Interest Reserve Account, the Non-Monthly Pay Asset Interest Reserve Account, the Collateral Account and the Uninvested Proceeds Account, each to be established on the Closing Date.

(e)

Funding Certificate. The delivery to the Trustee of a funding certificate (the Funding Certificate), duly executed by an Authorized Officer of the Issuer, relating to, among other things, the disposition of the proceeds of the issuance of the Rated Notes, dated the Closing Date, in substantially the form of Exhibit D hereto.

(f)

Purchases. The delivery to the Trustee of a certification of the Issuer that it shall have entered into one or more agreements to purchase, for settlement on or following the Closing Date in accordance with customary settlement procedures in the relevant markets, Collateral Debt Securities having an aggregate Principal Balance of not less than U.S.$467,500,000.

CUSTODIANSHIP; TRANSFER OF COLLATERAL DEBT SECURITIES AND ELIGIBLE INVESTMENTS (a)

The Trustee shall hold all Certificated Securities and Instruments in physical form at the office of a custodian appointed by it in Illinois (together with any successor, the Custodian) Initially, such Custodian shall be LaSalle Bank National Association with its address 181 West Madison Street, 32nd Floor, Chicago, Illinois 60602, Attention: CDO Trust Services Group – N-Star Real Estate CDO VII Ltd. Any successor custodian shall be a state or national bank or trust company that is not an Affiliate of the Issuer, has a long-term debt rating of at least “BBB+” by S&P and has a combined capital and surplus of at least U.S.$250,000,000.

(b)

Each Collateral Debt Security, Equity Security and Eligible Investment shall be credited to the appropriate Account. Each time that the Issuer shall direct or cause the acquisition of any Collateral Debt Security, Equity Security or Eligible Investment, the Trustee (on behalf of the Issuer) shall, if such Collateral Debt Security, Equity Security or Eligible Investment has not already been transferred to the Collateral Account and credited thereto, cause the transfer of such Collateral Debt Security, Equity Security or Eligible Investment to the Custodian to be held in and credited to the Collateral Account for the benefit of the Trustee in accordance with the terms of this Indenture. The security interest of the Trustee in the funds or other property utilized in connection with such acquisition shall, immediately and without further action on the part of the Trustee, be released. The security interest of the Trustee shall nevertheless come into existence and 78

Processed and formatted by SEC Watch - Visit SECWatch.com

continue in the Collateral Debt Security, Equity Security or Eligible Investment so acquired, including all rights of the Issuer in and to any contracts related to and proceeds of such Collateral Debt Security, Equity Security or Eligible Investment. (c)

On the Closing Date, on each day thereafter, if any, that any Collateral is acquired or otherwise becomes subject to the lien of this Indenture and on the Effective Date, the Issuer represents and warrants to the Trustee as follows: (1)

This Indenture creates a valid and continuing security interest (as defined in the applicable Uniform Commercial Code) in the Collateral in favor of the Trustee on behalf and for the benefit of the Secured Parties, which security interest is prior to all other liens and security interests, and is enforceable as such as against creditors of and purchasers from the Issuer and, upon delivery of the Collateral Debt Securities and filing of the appropriate financing statements in the appropriate filing offices, the lien and security interest created by this Indenture shall be a perfected first priority security interest in favor of the Trustee for the benefit of the Secured Parties.

(2)

The Issuer owns and has good and marketable title to the Collateral free and clear of any liens, claims, encumbrances or defects of any nature whatsoever except for those which are being released on the Closing Date or on the date of purchase by the Issuer or those created pursuant to or contemplated under this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on any Collateral Debt Security prior to the first payment date and owed by the Issuer to the seller of such Collateral Debt Security.

(3)

The Issuer has acquired its ownership in each such Collateral Debt Security, or will acquire in the case of any Collateral Debt Securities which the Issuer has on or before the Closing Date committed to purchase but which will not have settled on or before the Closing Date or any additional Collateral Debt Securities or Substitute Collateral Debt Securities acquired by the Issuer after the Closing Date, in good faith without notice of any adverse claim, except as described in clause (2) above.

(4)

The Issuer (a) has delivered each such Collateral Debt Security, or will deliver any Collateral Debt Securities which the Issuer has on or before the Closing Date committed to purchase but which will not have settled on or before the Closing Date or any additional Collateral Debt Securities or Substitute Collateral Debt Securities acquired by the Issuer after the Closing Date, to the Trustee and (b) has not assigned, pledged, sold, granted a security interest in or otherwise encumbered any interest in such Collateral Debt Security other than interests granted pursuant to this Indenture.

(5)

The Issuer has full right to grant all security interests granted herein.

(6)

All Collateral is comprised of either “securities”, “instruments”, “tangible chattel paper”, “accounts”, “security entitlements” or “general intangibles”, in each case as defined in the applicable Uniform Commercial Code. 79

Processed and formatted by SEC Watch - Visit SECWatch.com

(7)

Each of the Accounts, and all subaccounts thereof, constitute securities accounts as defined in the applicable Uniform Commercial Code.

(8)

All items of the Collateral that constitute security entitlements have been and will have been credited to one of the securities accounts. The securities intermediary for each of the Accounts has agreed to treat all assets credited to the securities accounts as financial assets under the applicable Uniform Commercial Code.

(9)

Other than the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Collateral. The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer that include a description of collateral covering the Collateral other than any financing statement relating to the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder or that has been terminated. The Issuer is not aware of any judgment, Pension Benefit Guarantee Corporation lien or tax lien filings against it.

(10)

The Issuer has caused or will have caused, within ten days of the Closing Date, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Collateral granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder that constitutes chattel paper, instruments, accounts, securities entitlements or general intangibles under the applicable Uniform Commercial Code, if any.

(11)

The Trustee or the Accountholder has in its possession all original copies of the instruments that constitute or evidence the Collateral, if any. The instruments, loan agreements and leases that constitute or evidence the Collateral do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties. All financing statements filed or to be filed against the Issuer in favor of the Trustee on behalf and for the benefit of the Secured Parties in connection herewith describing the Collateral contain a statement to the following effect: “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Trustee on behalf and for the benefit of (A) itself and for the benefit of the Noteholders, (B) the Collateral Manager and (C) each Hedge Counterparty.”

(12)

The authoritative copy of any chattel paper that constitutes or evidences the Collateral, if any, has been communicated to the Trustee and has no marks or notations indicating that it has been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties.

(13)

The Issuer has received or will receive all consents and approvals required by the terms of the underlying loan agreement, indenture or other underlying documentation, if any, relating to the Collateral to the transfer to the Trustee on behalf and for the benefit of the Secured Parties of its interest and rights in the Collateral hereunder. 80

Processed and formatted by SEC Watch - Visit SECWatch.com

(14)

The Issuer, the Accountholder and the Trustee have entered into the Account Control Agreement pursuant to which the Accountholder has agreed to comply with all instructions originated by the Trustee relating to the Accounts without further consent by the Issuer.

(15)

None of the Accounts is in the name of any person other than the Trustee, held on behalf and for the benefit of the Secured Parties. The Issuer has not consented to the Trustee or the Accountholder maintaining any of the Accounts to comply with entitlement orders or instructions of any Person other than the Trustee.

(16)

Notwithstanding any other provision of this Indenture or any other related Transaction Document, the representations in this Section 3.3(c) shall be continuing and deemed to be updated on any day a new item of Collateral is acquired, and remain in full force and effect until such time as all obligations under this Indenture and the Notes have been finally and fully paid and performed and shall survive the termination of this Indenture for any other reason.

(17)

The parties to this Indenture (i) shall not, without obtaining a Rating Agency Confirmation, waive any of the representations in this Section 3.3(c); (ii) shall provide each of the Rating Agencies with prompt written notice of any breach of the representations contained in this Section 3.3(c) upon becoming aware thereof; and (iii) shall not, without obtaining a Rating Agency Confirmation (as determined after any adjustment or withdrawal of the ratings following notice of such breach), waive a breach of any of the representations in this Section 3.3(c). ARTICLE IV SATISFACTION AND DISCHARGE

4.1.

SATISFACTION AND DISCHARGE OF INDENTURE

This Indenture shall be discharged and shall cease to be of further effect with respect to the Collateral securing the Rated Notes and the Rated Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Rated Notes, (iii) rights of Rated Noteholders to receive payments of principal thereof and interest thereon, (iv) the rights, obligations and immunities of the Trustee hereunder, (v) the rights, obligations and immunities of the Collateral Manager hereunder and under the Collateral Management Agreement and (vi) the rights of the Secured Parties as beneficiaries hereof with respect to the property deposited with the Trustee and payable to all or any of them; and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when: (a)

either: (1)

all Rated Notes theretofore authenticated and delivered (other than (A) Rated Notes which have been mutilated, defaced, destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.5 and (B) Rated Notes for whose payment funds have theretofore irrevocably been deposited in trust and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 7.3) have been delivered to the Trustee for cancellation; or 81

Processed and formatted by SEC Watch - Visit SECWatch.com

(2)

all Rated Notes not theretofore delivered to the Trustee for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity Date within one year, or (C) are to be called for redemption pursuant to Section 9.1 under an arrangement satisfactory to the Trustee for the giving of notice of redemption by the Issuer pursuant to Section 9.3 and the Issuer has irrevocably deposited or caused to be deposited with the Trustee, in trust for such purpose, Cash or non-callable direct obligations of the United States in an amount sufficient, according to the Priority of Payments as verified by a firm of nationally recognized Independent certified public accountants, to pay and discharge the entire indebtedness on all Rated Notes not theretofore delivered to the Trustee for cancellation, including all principal and interest (including Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount and Class E Cumulative Applicable Periodic Interest Shortfall Amount accrued to the date of such deposit) (in the case of Rated Notes which have become due and payable) or to the Stated Maturity Date or the Redemption Date, as the case may be; provided that (x) such obligations are entitled to the full faith and credit of the United States and (y) this subclause (2) shall not apply if an election to act in accordance with the provisions of Section 5.5(a) shall have been made and not rescinded;

(b)

the Issuer has paid or caused to be paid all other sums payable hereunder (including amounts payable pursuant to the Hedge Agreement, the Income Note Paying Agency Agreement, the Corporate Services Agreement, the Collateral Management Agreement and the Collateral Administration Agreement) and no other amounts will become due and payable by the Issuer; and

(c)

the Issuer has delivered to the Trustee and the Initial Hedge Counterparty Officer’s certificates and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the rights and obligations of the Issuer, the Trustee and the Hedge Counterparty and, if applicable, the Rated Noteholders, as the case may be, under Sections 2.6, 4.1, 4.2, 5.9, 5.18, 6.7, 6.8, 7.1 and 7.3 shall survive. 4.2.

APPLICATION OF TRUST MONEY

All funds deposited with the Trustee pursuant to Section 4.1 for the payment of principal of and interest on the Rated Notes and amounts payable pursuant to the Hedge Agreement, the Collateral Management Agreement, the Income Note Paying Agency Agreement, the Corporate Services Agreement and the Collateral Administration Agreement shall be held in trust and applied by it in accordance with the provisions of the Rated Notes and this Indenture, including the Priority of Payments, for the payment either directly or through any Note Paying Agent, as the Trustee may determine, to the Person entitled thereto of the respective amounts in respect of which such funds has been deposited with the Trustee; but such funds need not be segregated from other funds except to the extent required herein or required by law. 82

Processed and formatted by SEC Watch - Visit SECWatch.com

4.3.

REPAYMENT OF FUNDS HELD BY NOTE PAYING AGENT

In connection with the satisfaction and discharge of this Indenture with respect to the Rated Notes, all funds then held by any Note Paying Agent other than the Trustee under the provisions of this Indenture shall, upon demand of the Issuer, be paid to the Trustee to be held and applied pursuant to Section 7.3 and in accordance with the Priority of Payments and thereupon such Note Paying Agent shall be released from all further liability with respect to such funds. ARTICLE V EVENTS OF DEFAULT; REMEDIES 5.1.

EVENTS OF DEFAULT

Event of Default, is defined as any one of the following wherever used herein, means any one of the following events as set forth in Section 5.1(a) through (h) (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a)

a default for five Business Days in the payment, when due and payable, of any interest on any Class A Note or Class B Note or, if there are no Class A Notes or Class B Notes Outstanding, on any Class C Note or, if there are no Class A Notes, Class B Notes or Class C Notes Outstanding, on any Class D Note or, if there are no Class A Notes, Class B Notes, Class C Notes or Class D Notes Outstanding, on any Class E Note;

(b)

a default in the payment of any principal, when due and payable of any Rated Note (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent or the Note Registrar, such default continues for a period of five Business Days);

(c)

the failure on any Payment Date to disburse amounts available in accordance with Section 11.1 (except as provided in Section 5.1(a) and (b) above) and a continuation of such failure for three Business Days (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent or the Note Registrar, such default continues for a period of five Business Days);

(d)

on any Measurement Date, the Class A/B Principal Coverage Ratio is less than 100%;

(e)

the Issuer or the pool of Collateral becomes an investment company required to be registered under the Investment Company Act;

(f)

a default in the performance, or breach, of any other covenant (it being understood that non-compliance with any of the Coverage Tests, the Collateral Concentration Limitations or the Collateral Quality Tests will not constitute a default or breach) or of any representation or warranty of the Issuer under the Indenture of any representation or if any certificate or writing delivered pursuant thereto proves to be incorrect when made, which default or breach has a material adverse effect on the Rated Noteholders and continues for a period of 30 days (or, in the case of a default, breach or failure of a representation or warranty regarding the Collateral, 15 days) of the earlier of knowledge 83

Processed and formatted by SEC Watch - Visit SECWatch.com

by the Issuer or the Collateral Manager or notice to the Issuer and the Collateral Manager by the Trustee or to the Issuer and the Collateral Manager by the Holders of at least 25%, of the then Aggregate Outstanding Amount of the Rated Notes of any Class, specifying such default, breach or failure and requiring it to be remedied and stating that such notice is a “Notice of Default” under this Indenture; (g)

the entry of a decree or order by a court having competent jurisdiction adjudging the 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 under the Bankruptcy Code or any other applicable law, or appointing a receiver, liquidator, assignee, or sequestrator (or other similar official) of the Issuer or of any substantial part of its property; 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 90 consecutive days; or

(h)

the institution by the 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, 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 of any substantial part of its property, respectively, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of any action by the Issuer in furtherance of any such action.

If the Issuer shall obtain actual knowledge that an Event of Default shall have occurred and be continuing, the Issuer shall (unless the Trustee shall have provided notice of such Event of Default pursuant to Section 6.2) promptly notify the Trustee, the Rated Noteholders, the Hedge Counterparty, the Collateral Manager and each Rating Agency in writing of such Event of Default. 5.2.

ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT (a)

If an Event of Default occurs and is continuing, the Trustee may or, if so directed by the Holders of a Majority in aggregate principal amount of the Outstanding Notes of the Controlling Class, will declare the principal of and accrued interest on all Notes to be immediately due and payable (except that in the case of an Event of Default described in Section 5.1(g) or 5.1(h) above, such an acceleration will occur automatically).

(b)

Any Hedge Agreement existing on or after such acceleration may not be terminated by the Issuer unless and until liquidation of the Collateral has commenced and annulment of such acceleration may no longer be affected.

(c)

At any time after such acceleration of maturity has been made and before a judgment or decree for payment of the amount due has been obtained by the Trustee as hereinafter provided in this Section 5, the Trustee may reverse such acceleration and its consequences if the Trustee determines that: (1)

the Issuer has paid or deposited with the Trustee funds sufficient to pay: (i)

all overdue installments of principal of and interest on the Notes (including interest upon the Class C Cumulative Applicable Periodic 84

Processed and formatted by SEC Watch - Visit SECWatch.com

Interest Shortfall Amount, the Class D Cumulative Applicable Periodic Interest Shortfall Amount and the Class E Cumulative Applicable Periodic Interest Shortfall Amount, respectively, at the Applicable Periodic Interest Rate and, to the extent that payment of such interest is lawful, upon Defaulted Interest at the Applicable Periodic Interest Rate); (ii)

any accrued and unpaid amounts (including termination payments, if any) payable by the Issuer pursuant to the Hedge Agreement;

(iii)

all unpaid taxes and Administrative Expenses, any accrued and unpaid Senior Collateral Management Fee, and other sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and

(2)

the Trustee has determined that all Events of Default of which it has actual knowledge, other than the nonpayment of the principal of or interest on the Rated Notes that have become due solely by such acceleration, have been cured; and

(3)

the Hedge Agreement in effect immediately prior to such acceleration shall remain in effect,

provided that the Trustee shall have obtained (and shall be entitled to rely upon) a certification of an Independent accounting firm of national reputation as to the sufficiency of the amounts in Section 5.2(c)(1) above, which certification shall be conclusive evidence as to such sufficiency. In addition, the Trustee may, but is not required to, obtain, at the Issuer’s expense (and may rely upon), an Opinion of Counsel as to the matters in Sections 5.2(c)(2) and (3) above. At any such time as the Trustee shall reverse such acceleration and its consequences, the Trustee shall preserve the Collateral in accordance with the provisions of Section 5.5; provided that, if the conditions for liquidation of the Collateral are satisfied pursuant to Section 5.5, the Rated Notes may be accelerated pursuant to Section 5.2(a), notwithstanding any previous reversal of acceleration pursuant to this Section 5.2(b). No such reversal of acceleration shall affect any subsequent Default or impair any right consequent thereon. 5.3.

COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE

The Issuer covenants that if a Default shall occur in respect of the payment of any principal of or interest on any Class A-1 Note, the payment of principal of or interest on any Class A-2 Note (but with respect to interest, only after the Class A-1 Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class A-3 Note (but with respect to interest, only after the Class A-1 Notes and Class A-2 Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class B Note (but with respect to interest, only after the Class A Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class C Note (but with respect to interest, only after the Class A Notes and Class B Notes and all interest accrued thereon have been paid in full) the payment of principal of or interest on any Class D Note (but with respect to interest, only after the Class A Notes, the Class B Notes and the Class C Notes and all interest accrued thereon have been paid in full) or the payment of principal of or interest on any Class E Note (but with respect to interest, only after the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes and all interest accrued thereon have been paid in full), the Issuer will, upon demand of 85

Processed and formatted by SEC Watch - Visit SECWatch.com

the Trustee or any affected Rated Noteholder, pay to the Trustee, for the benefit of the Holder of such Rated Note, the whole amount, if any, then due and payable on such Rated Note for principal and interest, with interest upon the overdue principal and, to the extent that payments of such interest shall be legally enforceable, upon overdue installments of interest, at the Applicable Periodic Interest Rate and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee and such Rated Noteholder and their respective agents and counsel. If the Issuer fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may, and shall, upon the direction by a the Holders of Majority of the then Aggregate Outstanding Amount of the Notes of Controlling Class (and, if the action of the Issuer pursuant to such direction would have a material adverse effect on the Hedge Counterparty, the Initial Hedge Counterparty), prosecute such Proceeding to judgment or final decree, and may enforce the same against the Issuer or any other obligor upon the Rated Notes and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the Collateral; provided that a Holder of a Rated Note may institute any proceeding if (i) such Holder previously has given to the Trustee written notice of an Event of Default, (ii) except in the case of a default in the payment of principal or interest, the Holders of at least 25% of the then Aggregate Outstanding Amount of the Notes of the Controlling Class have made a written request upon the Trustee to institute such proceedings in its own name as Trustee and such Holders have offered the Trustee reasonable indemnity, (iii) the Trustee has, for 30 days after receipt of notice, request and offer of such indemnity, failed to institute any such proceeding and (iv) no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Secured Parties by such appropriate Proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law. The Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class may, in certain cases, waive any default with respect to such Notes, except (i) a default for more than five Business Days in the payment, when due and payable, of any interest on any Note, (ii) a default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date, (iii) the failure on any Payment Date to disburse amounts available in the Collection Account in accordance with Section 11.1 and continuation of such failure for a period of three Business Days, (iv) certain events of bankruptcy or insolvency with respect to the Issuer or (v) a default in respect of any provision of the Indenture that cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby. In case there shall be pending Proceedings relative to the Issuer or any other obligor upon the Rated Notes or Hedge Agreement under the Bankruptcy Code or any other applicable bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its respective property or such other obligor or its property, or in case of any other comparable Proceedings relative to the Issuer or other obligor upon the Rated Notes or Hedge Agreement, or the creditors or property of the Issuer or such other obligor, the Trustee, regardless of whether the principal of any Rated Notes or Hedge Agreement shall then be due and payable as therein expressed or by declaration or otherwise and regardless of whether the Trustee shall have made any demand pursuant to 86

Processed and formatted by SEC Watch - Visit SECWatch.com

the provisions of this Section 5.3, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (a)

to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Rated Notes or Hedge Agreement upon direction by a Majority of the Controlling Class, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee) and of the Rated Noteholders allowed in any Proceedings relative to the Issuer or other obligor upon the Rated Notes or to the creditors or property of the Issuer or such other obligor;

(b)

unless prohibited by applicable law and regulations, to vote on behalf of the Holders of the Rated Notes, upon the direction of such Holders, in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency Proceedings or person performing similar functions in comparable Proceedings; and

(c)

to collect and receive any amounts or other property payable to or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Rated Noteholders and of the Trustee on behalf of the Rated Noteholders and the Trustee; and any trustee, receiver or liquidator, custodian or other similar official is hereby authorized by each of the Rated Noteholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Rated Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other reasonable expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Rated Noteholder or the Initial Hedge Counterparty, any plan of reorganization, arrangement, adjustment or composition affecting the Rated Notes, the Initial Hedge Agreement or the rights of any Holder thereof or the Initial Hedge Counterparty, or to authorize the Trustee to vote in respect of the claim of any Rated Noteholder or the Initial Hedge Counterparty in any such Proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. In any Proceedings brought by the Trustee on behalf of the Holders, the Trustee shall be held to represent, subject to Section 6.17, all the Secured Parties if applicable, pursuant to Section 6.17. Notwithstanding anything in this Section 5.3 to the contrary, the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to this Section 5.3 except in accordance with Section 5.5(a). 5.4.

REMEDIES (a)

If an Event of Default shall have occurred and be continuing, and the Notes have been declared due and payable and such declaration and its consequences have not been rescinded and annulled, the Issuer agrees that, in addition to the requirements of Section 5.5(a), the Trustee may, after giving notice to the Noteholders, the Collateral 87

Processed and formatted by SEC Watch - Visit SECWatch.com

Manager, the Initial Hedge Counterparty and each Rating Agency, and with the consent of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class, and shall, upon written direction by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class, to the extent permitted by applicable law, exercise one or more of the following rights, privileges and remedies: (1)

institute Proceedings for the collection of all amounts then payable on the Notes or otherwise payable under this Indenture, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Collateral any amounts adjudged due;

(2)

institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Collateral;

(3)

exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Secured Parties hereunder; and

(4)

subject to Section 5.4(d) below, exercise any other rights and remedies that may be available at law or in equity;

provided that the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to this Section 5.4 except in accordance with Section 5.5(a). The Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking firm of national reputation as to the feasibility of any action proposed to be taken in accordance with this Section 5.4 and as to the sufficiency of the proceeds and other amounts receivable with respect to the Collateral to make the required payments of principal of and interest on the Notes and amounts due to the Initial Hedge Counterparty, which opinion shall be conclusive evidence as to such feasibility or sufficiency. (b)

If an Event of Default as described in Section 5.1(f) shall have occurred and be continuing, the Trustee may, and at the request of at least 25% of the Holders of the then Aggregate Outstanding Amount of the Notes of the Controlling Class shall, institute a Proceeding solely to compel performance of the covenant or agreement or to cure the representation or warranty, the breach of which gave rise to the Event of Default under such Section, and enforce any equitable decree or order arising from such proceeding; provided that (i) such request does not conflict with any provision in the Indenture, (ii) the Trustee determines that such action will not involve the Trustee incurring any liability (unless the Trustee is indemnified to its satisfaction against any such liability) and (iii) the Trustee may take other action deemed proper by the Trustee, that is not inconsistent with such direction.

(c)

Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the Placement Agents, any Hedge Counterparty, any Noteholder or Noteholders may bid for and purchase the Collateral or any part thereof and, upon compliance with the terms of sale, may hold, retain, possess or dispose of such property in its or their own absolute right without accountability. 88

Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the receipt of the Trustee, or of the Officer making a sale under judicial proceedings, shall be a sufficient discharge to the purchaser or purchasers at any sale for its or their purchase price, and such purchaser or purchasers shall not be obliged to see to the application thereof. Any such sale, whether under any power of sale hereby given or by virtue of judicial proceedings, shall bind the Issuer, the Trustee and the Noteholders, shall operate to divest all right, title and interest whatsoever, either at law or in equity, of each of them in and to the property sold, and shall be a perpetual bar, both at law and in equity, against each of them and their successors and assigns, and against any and all Persons claiming through or under them. (d)

5.5.

Notwithstanding any other provision of this Indenture, the Trustee may not, prior to the date which is one year and one day, or if longer the applicable preference period then in effect, after the payment in full of all Notes, institute against, or join any other Person in instituting against, the Issuer any bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceedings, or other proceedings under federal or state bankruptcy or similar laws (of any jurisdiction). Nothing in this Section 5.4 shall preclude, or be deemed to stop, the Trustee (i) from taking any action prior to the expiration of the aforementioned one year and one day period, or if longer the applicable preference period then in effect, in (A) any case or proceeding voluntarily filed or commenced by the Issuer or (B) any involuntary insolvency proceeding filed or commenced by a Person other than the Trustee, or (ii) from commencing against the Issuer or any of its properties any legal action which is not a bankruptcy, reorganization, arrangement, insolvency, moratorium, liquidation or similar proceeding.

PRESERVATION OF COLLATERAL (a)

If an Event of Default shall have occurred and be continuing when any Class of Rated Notes is Outstanding, the Trustee

Processed and formatted by SEC Watch - Visit SECWatch.com

shall retain the Collateral securing the Rated Notes and the Hedge Agreement intact, collect and cause the collection of the proceeds thereof and make all payments and deposits and maintain all accounts in respect of the Collateral and the Rated Notes and the Hedge Agreement in accordance with Section 11.1 and the provisions of Sections 10, 12 and 13 unless: (1)

the Trustee, pursuant to Section 5.5(c), determines (such determinations may be based upon a certificate from the Collateral Manager) that the anticipated proceeds of a sale or liquidation of the Collateral (after deducting reasonable expenses relating to such sale or liquidation) would be sufficient to discharge in full the Redemption Prices then due on the Rated Notes, any amounts required to be paid under the Hedge Agreement, all unpaid Administrative Expenses and any accrued and unpaid Senior Collateral Management Fee (to the extent not waived by the Collateral Manager) and the Holders of a Majority of the then Aggregate Outstanding Amount of Notes of the Controlling Class agrees with such determination; or

(2)

the Holders of at least 662/3% of the Aggregate Outstanding Amount of the Rated Notes of the Controlling Class (and, unless it will be paid in full all amounts owing to it by the Issuer, the Initial Hedge Counterparty), subject to the provisions hereof, and subject to the Trustee determining that such action will not 89

Processed and formatted by SEC Watch - Visit SECWatch.com

involve the Trustee incurring any liability, (unless the Trustee is indemnified to its satisfaction against any such liability) direct the sale and liquidation of the Collateral. For purposes of Section 5.5(a)(2), if the Initial Hedge Counterparty shall fail to vote to direct the sale and liquidation of the Collateral within three Business Days after written notice from the Issuer or the Trustee requesting a vote pursuant to such Section 5.5(a)(2), the Initial Hedge Counterparty shall not be entitled to participate in the vote requested by such notice. The Trustee shall give written notice of the retention of the Collateral to the Issuer with a copy to each Holder of the Controlling Class of Notes and the Initial Hedge Counterparty. So long as such Event of Default is continuing, any such retention pursuant to this Section 5.5(a) may be rescinded at any time when the conditions specified in clause Section 5.5(a)(1) or (2) exist. (b)

Nothing contained in Section 5.5(a) shall be construed to require the Trustee to preserve the Collateral securing the Rated Notes if prohibited by applicable law.

(c)

In determining whether the condition specified in Section 5.5(a)(1) exists, the Trustee shall obtain bid prices with respect to each security contained in the Collateral from two nationally recognized dealers (or if it is unable in good faith to obtain such bid prices from two nationally recognized dealers, one nationally recognized dealer), as specified by the Collateral Manager in writing, which are Independent from each other and the Collateral Manager, at the time making a market in such securities and shall compute the anticipated proceeds of sale or liquidation on the basis of the lower of such bid prices for each such security. In addition, for the purposes of determining issues relating to the execution of a sale or liquidation of the Pledged Securities and the execution of a sale or other liquidation thereof in connection with a determination whether the condition specified in Section 5.5(a)(1) exists, the Trustee may retain and rely on an opinion of an Independent investment banking firm of national reputation. The Trustee shall deliver to the Noteholders, the Initial Hedge Counterparty, the Rating Agencies and the Issuer a report stating the results of any determination required pursuant to Section 5.5(a)(1) no later than ten days after making such determination but in any event prior to the sale or liquidation of the Collateral. The Trustee shall make the determinations required by Section 5.5(a)(1) within 30 days after an Event of Default and at the request of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class at any time during which the Trustee retains the Collateral pursuant to Section 5.5(a)(1). In the case of each calculation made by the Trustee pursuant to Section 5.5(a)(1), the Trustee shall obtain a letter of an Independent certified public accountant confirming the accuracy of the computations of the Trustee and certifying their conformity to the requirements of this Indenture. In determining whether the Holders of the requisite percentage of any Class of Rated Notes or the requisite percentage of Income Noteholders have given any direction or notice or have agreed pursuant to Section 5.5(a), any Holder of a Rated Note of a Class or Income Notes who is also a Holder of Rated Notes of another Class or of Income Notes or any Affiliate of any such Holder shall be counted as a Holder of each such Rated Note and/or Income Note for all purposes.

(d)

If an Event of Default shall have occurred and be continuing at a time when no Rated Note is Outstanding, the Trustee shall retain the Collateral securing the Hedge Agreements and the Rated Notes intact, collect and cause the collection of the proceeds 90

Processed and formatted by SEC Watch - Visit SECWatch.com

thereof and make and apply all payments and deposits and maintain all accounts in respect of the Collateral and the Rated Notes in accordance with Section 11.1 and the provisions of Section 10 and Section 12 unless a Majority of the Income Noteholders direct the sale and liquidation of the Collateral. 5.6.

TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION

All rights of action and of asserting claims under this Indenture, or under any of the Rated Notes, may be enforced by the Trustee without the possession of any of Hedge Agreements or the Rated Notes or the production thereof in any trial or other Proceedings relative thereto, and any action or Proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the reasonable expenses, disbursements and compensation of the Trustee, each predecessor trustee and their respective agents and attorneys and counsel, shall be for the benefit of the Secured Parties and shall be applied as set forth in Section 5.7. 5.7.

APPLICATION OF FUNDS COLLECTED

Any funds collected by the Trustee with respect to the Hedge Agreements or the Rated Notes pursuant to this Section 5 and any funds that may then be held or thereafter received by the Trustee with respect to the Hedge Agreements or the Rated Notes hereunder shall be applied subject to Section 13.1 and in accordance with the provisions of Section 11.1(c), at the date or dates fixed by the Trustee. 5.8.

LIMITATION ON SUITS

Only the Trustee may pursue remedies available hereunder and no Holder of any Note shall have any right to institute any Proceedings, judicial or otherwise, with respect to this Indenture, or its Note or otherwise, for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a)

such Holder has previously given to the Trustee written notice of a continuing Event of Default;

(b)

except in the case of a default in the payment of principal or interest, the Holders or Holders of at least 25% of the then Aggregate Outstanding Amount of the Rated Notes of the Controlling Class shall have made a written request to the Trustee to institute Proceedings in respect of such Event of Default in its own name as Trustee hereunder and such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

(c)

the Trustee for 30 days after its receipt of such notice, request and offer of indemnity has failed to institute any such Proceeding; and

(d)

no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class;

it being understood and intended that no one or more Holders of Rated Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders of the Notes of the same Class or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders of Notes of the same 91

Processed and formatted by SEC Watch - Visit SECWatch.com

Class. In addition, any action taken by any one or more of the Holders of Notes shall be subject to and in accordance with Sections 13.1 and 11.1(d). Notwithstanding any other provisions of this Indenture but subject to Section 5.8(d), if the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of the Notes of the Controlling Class, each representing less than a Majority of the then Aggregate Outstanding Amount of Notes of this Controlling Class, the Trustee shall follow the instructions of the group representing the higher percentage of aggregate principal amount of Outstanding Notes of the Controlling Class. 5.9.

UNCONDITIONAL RIGHTS OF RATED NOTEHOLDERS TO RECEIVE PRINCIPAL AND INTEREST

Notwithstanding any other provision in this Indenture (other than Section 2.6(i)), the Holder of any Rated Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest (if any) on such Rated Note as such principal and/or interest become due and payable in accordance with Sections 13.1 and 11.1(c) and, subject to the provisions of Section 5.8, to institute proceedings for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. Holders of the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes shall have no right to institute proceedings for the enforcement of any such payment until such time as no Class of Rated Note that is senior to such Class of them remains Outstanding, which right shall be subject to the provisions of Section 5.8, and shall not be impaired without the consent of any such Holder. 5.10.

RESTORATION OF RIGHTS AND REMEDIES

If the Trustee or any Rated Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Rated Noteholder, then and in every such case the Issuer, the Trustee and the Rated Noteholder shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Secured Parties shall continue as though no such Proceeding had been instituted. 5.11.

RIGHTS AND REMEDIES CUMULATIVE

No right or remedy herein conferred upon or reserved to the Trustee or to the Rated Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing by law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 5.12.

DELAY OR OMISSION NOT WAIVER

No delay or omission of the Trustee or any Rated Noteholder or the Initial Hedge Counterparty to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Section 5 or by law to the Trustee, the Rated Noteholders or the Initial Hedge Counterparty may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Rated Noteholders or the Initial Hedge Counterparty, as the case may be. 92

Processed and formatted by SEC Watch - Visit SECWatch.com

5.13.

CONTROL BY CONTROLLING CLASS

Notwithstanding any other provision of this Indenture (but subject to the proviso in the definition of “Outstanding” in Section 1.1(a), the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class shall have the right to cause the institution of and direct the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or of any sale of the Collateral, in whole or in part, provided that:

5.14.

(a)

such direction shall not conflict with any rule of law or with this Indenture;

(b)

the Trustee may take any other action deemed proper by it that is not inconsistent with such direction; provided that, subject to Section 6.1, the Trustee need not take any action that it determines might involve it in liability (unless the Trustee has received an indemnity reasonably satisfactory to it against such liability as set forth below);

(c)

the Trustee shall have been provided with an indemnity reasonably satisfactory to it; and

(d)

any direction to the Trustee to undertake a Sale of the Collateral shall be made only pursuant to, and in accordance with, Sections 5.4 and 5.5.

WAIVER OF PAST DEFAULTS

The Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class may, in certain cases waive any past Default and its consequences, except: (a)

a Default for more than five Business Days in the payment, when due and payable, of any interest on any Rated Note; or

(b)

a Default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date; or

(c)

the failure on any Payment Date to disburse amounts available in the Collection Account in accordance with Section 11.1 and the continuation of such failure for a period of three Business Days; or

(d)

a Default arising under Section 5.1(g) or 5.1(h); or

(e)

a Default in respect of any provision of this Indenture that under Section 8.2 cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby.

In the case of any such waiver, (i) the Issuer, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto, and (ii) the Trustee shall promptly give written notice of any such waiver to the Collateral Manager and each Holder of Rated Notes. The Rating Agencies shall be notified by the Issuer of any such waiver. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. 93

Processed and formatted by SEC Watch - Visit SECWatch.com

5.15.

UNDERTAKING FOR COSTS

All parties to this Indenture agree, and each Holder of any Rated Note by its acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.15 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Rated Noteholder, or group of Rated Noteholders, holding in the aggregate more than 10% in Aggregate Outstanding Amount of the Controlling Class, or to any suit instituted by any Rated Noteholder for the enforcement of the payment of the principal of or interest on any Rated Note on or after the Stated Maturity Date expressed in such Rated Note (or, in the case of redemption, on or after the applicable Redemption Date). 5.16.

WAIVER OF STAY OR EXTENSION LAWS

The Issuer covenants (to the extent that they may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force (including but not limited to filing a voluntary petition under Chapter 11 of the Bankruptcy Code and by the voluntary commencement of a proceeding or the filing of a petition seeking winding up, liquidation, reorganization or other relief under any bankruptcy, insolvency, receivership or similar law now or hereafter in effect), which may affect the covenants, the performance of or any remedies under this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 5.17.

SALE OF COLLATERAL (a)

The power to effect any sale (a Sale) of any portion of the Collateral pursuant to Sections 5.4 and 5.5 shall not be exhausted by any one or more Sales as to any portion of such Collateral remaining unsold, but shall continue unimpaired until the entire Collateral shall have been sold or all amounts secured by the Collateral shall have been paid. The Trustee hereby expressly waives its rights to any amount fixed by law as compensation for any Sale; provided that the Trustee shall be authorized to deduct the reasonable costs, charges and expenses incurred by it in connection with such Sale from the proceeds thereof notwithstanding the provisions of Section 6.7.

(b)

The Trustee may bid for and acquire any portion of the Collateral in connection with a public Sale thereof, by crediting all or part of the net proceeds of such Sale after deducting the reasonable costs, charges and expenses incurred by the Trustee in connection with such Sale notwithstanding the provisions of Section 6.7. The Rated Notes and the Hedge Agreement need not be produced in order to complete any such Sale, or in order for the net proceeds of such Sale to be credited against amounts owing on the Rated Notes. The Trustee may hold, lease, operate, manage or otherwise deal with any property so acquired in any manner permitted by law in accordance with this Indenture.

(c)

If any portion of the Collateral consists of securities not registered under the Securities Act (Unregistered Securities), the Trustee may, but shall not be required to, seek an 94

Processed and formatted by SEC Watch - Visit SECWatch.com

Opinion of Counsel, or, if no such Opinion of Counsel can be obtained, with the consent of a Majority of the Controlling Class seek, a no-action position from the Commission or any other relevant federal or state regulatory authorities, regarding the legality of a public or private sale of such Unregistered Securities. In no event will the Trustee be required to register Unregistered Securities under the Securities Act. (d)

5.18.

The Trustee shall execute and deliver an appropriate instrument of conveyance transferring its interest in any portion of the Collateral in connection with a sale thereof. In addition, the Trustee is hereby irrevocably appointed the agent and attorneyin-fact of the Issuer to transfer and convey its interest in any portion of the Collateral in connection with a sale thereof, and to take all action necessary to effect such sale. No purchaser or transferee at such a sale shall be bound to ascertain the Trustee’s authority, to inquire into the satisfaction of any conditions precedent or see to the application of any funds.

ACTION ON THE RATED NOTES

The Trustee’s right to seek and recover judgment on the Rated Notes or under this Indenture shall not be affected by the seeking or obtaining of or application for any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Secured Parties shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer. ARTICLE VI THE TRUSTEE 6.1.

CERTAIN DUTIES AND RESPONSIBILITIES (a)

(b)

Except during the continuance of an Event of Default: (1)

the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2)

in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided that, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they substantially conform to the requirements of this Indenture and shall promptly, but in any event within three Business Days in the case of an Officer’s certificate furnished by the Issuer, notify the party delivering the same if such certificate or opinion does not conform. If a corrected form shall not have been delivered to the Trustee within 15 days after such notice from the Trustee, the Trustee shall promptly notify the Rated Noteholders and the Initial Hedge Counterparty.

In case an Event of Default actually known to the Trustee has occurred and is continuing, the Trustee shall, prior to the receipt of directions, if any, from a Majority of the Controlling Class, exercise such of the rights and powers vested in it by this Indenture, 95

Processed and formatted by SEC Watch - Visit SECWatch.com

and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs. (c)

(d)

No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1)

This Section 6.1(c) shall not be construed to limit the effect of Section 6.1(a);

(2)

the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it shall be proven that the Trustee was negligent in ascertaining the pertinent facts;

(3)

the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Issuer in accordance with this Indenture and/or a Majority (or such other percentage as may be required by the terms hereof) of the Aggregate Outstanding Amount of the Controlling Class (or other Class if required or permitted by the terms hereof) relating to the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;

(4)

no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers contemplated hereunder, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it (if the amount of such funds or risk or liability does not exceed the amount payable to the Trustee pursuant to Section 11.1(a)(1) net of the amounts specified in Section 6.8(a)(1), the Trustee shall be deemed to be reasonably assured of such repayment) unless such risk or liability relates to performance of its ordinary services, including under Section 5, under this Indenture; and

(5)

the Trustee shall not be liable to the Rated Noteholders for any action taken or omitted by it at the direction of the Issuer, the Collateral Manager and/or the Holders of the Rated Notes under the circumstances in which such direction is required or permitted by the terms of this Indenture.

For all purposes under this Indenture, the Trustee shall not be deemed to have notice or knowledge of any Event of Default described in Section 5.1(e), 5.1(f), 5.1(g) or 5.1(h) unless a Trust Officer assigned to and working in the Corporate Trust Office has actual knowledge thereof or unless written notice of any event which is in fact such an Event of Default or such a Default, as the case may be, is received by the Trustee at the Corporate Trust Office. For purposes of determining the Trustee’s responsibility and liability hereunder, whenever reference is made in this Indenture to such an Event of Default or such a Default, as the case may be, such reference shall be construed to refer only to such an Event of Default or such a Default, as the case may be, of which the Trustee is deemed to have notice as described in this Section 6.1(d). 96

6.2.

(e)

Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.

(f)

The Trustee shall, upon receipt of reasonable (but no less than three Business Days) prior written notice, permit any representative of a Holder of a Rated Note or the Initial Hedge Counterparty, during the Trustee’s normal business hours, to examine all books of account, records, reports and other papers of the Trustee relating to the Rated Notes or the Hedge Agreement, to make copies and extracts therefrom (the reasonable out-of-pocket expenses incurred in making any such copies or extracts to be reimbursed to the Trustee by such Holder) and to discuss the Trustee’s actions, as such actions relate to the Trustee’s duties with respect to the Rated Notes or the Hedge Agreement, with the Trustee’s officers and employees responsible for carrying out the Trustee’s duties with respect to the Rated Notes; provided that under no circumstances shall the Initial Hedge Counterparty be permitted to review any documentation containing the names or other indicia of identity of any of the Noteholders unless any such information (including the number of shares held by such Noteholder) has been redacted from such documentation.

(g)

With respect to the security interests created hereunder, the Trustee acts as a fiduciary for the Rated Noteholders only, and serves as a collateral agent for the other Secured Parties.

NOTICE OF DEFAULT

Promptly (and in no event later than three Business Days) after the occurrence of any Default actually known to a Trust Officer of the Trustee or after acceleration has been made pursuant to Section 5.2, the Trustee shall send to the Issuer, the Income Note Paying Agent, each Rating Agency (for so long as any Class of Rated Notes is Outstanding), the Collateral Manager, the Initial Hedge Counterparty and to all Holders of Rated Notes, as their names and addresses appear on the Note Register, notice of all Defaults hereunder known to the Trustee, unless such Default shall have been cured or waived. 6.3.

CERTAIN RIGHTS OF TRUSTEE

Processed and formatted by SEC Watch - Visit SECWatch.com

Except as otherwise provided in Sections 6.1 and 8: (a)

the Trustee may rely and shall be protected in acting or refraining from acting in good faith and in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b)

any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or Issuer Order, as the case may be;

(c)

whenever in the administration of this Indenture the Trustee shall (i) deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer’s certificate or (ii) be required to determine the value of any Collateral or funds hereunder or the cashflows projected to be received therefrom, the Trustee may, in the absence of bad faith on its part, rely on reports of nationally recognized accountants, investment bankers or other Persons 97

Processed and formatted by SEC Watch - Visit SECWatch.com

qualified to provide the information required to make such determination, including nationally recognized dealers in securities of the type being valued and securities quotation services; (d)

as a condition to the taking or omitting of any action by it hereunder, the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in reliance thereon;

(e)

the Trustee shall be under no obligation to exercise or to honor any of the rights or powers vested in it by this Indenture at the request or direction of any of the Rated Noteholders pursuant to this Indenture, unless such Rated Noteholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might reasonably be incurred by it in compliance with such request or direction;

(f)

the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper documents, but the Trustee, in its discretion, may and, upon the written direction of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of any Class, the Initial Hedge Counterparty or any Rating Agency shall make such further inquiry or investigation into such facts or matters as it may see fit or as it shall be directed, and, the Trustee shall be entitled, on reasonable prior notice to the Issuer, to examine the books and records of the Issuer or the Collateral Manager relating to the Rated Notes and the Collateral, personally or by agent or attorney at a time acceptable to the Issuer or the Collateral Manager in their reasonable judgment during normal business hours; provided that the Trustee shall, and shall cause its agents, to hold in confidence all such information, except (i) to the extent disclosure may be required by law by any regulatory authority and (ii) to the extent that the Trustee, in its sole judgment, may determine that such disclosure is consistent with its obligations hereunder;

(g)

the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys; provided that the Trustee shall not be responsible for any misconduct or negligence on the part of any agent (other than any Affiliate of the Trustee) appointed and supervised, or attorney appointed, with due care by it hereunder;

(h)

the Trustee shall not be liable for any action it takes or omits to take in good faith that it reasonably and, after the occurrence and during the continuance of an Event of Default, prudently believes to be authorized or within its rights or powers hereunder;

(i)

nothing herein shall be construed to impose an obligation on the part of the Trustee to recalculate, evaluate or verify any report, certificate or information received from the Issuer or Collateral Manager (unless and except to the extent otherwise expressly set forth herein or upon the request of the Initial Hedge Counterparty, a Rating Agency or a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class);

(j)

the Trustee shall not be responsible or liable for the actions or omissions of, or any inaccuracies in the records of, any nonAffiliated custodian, clearing agency, common 98

Processed and formatted by SEC Watch - Visit SECWatch.com

depository, Euroclear or Clearstream or for the acts or omissions of the Collateral Manager or the Issuer;

6.4.

(k)

to the extent any defined term hereunder, or any calculation required to be made or determined by the Trustee hereunder, is dependent upon or defined by reference to generally accepted accounting principles in the United States (GAAP), the Trustee shall be entitled to request and receive (and rely upon) instruction from the Issuer or the accountants appointed pursuant to 10.13 as to the application of GAAP in such connection, in any instance;

(1)

to the extent permitted by law, the Trustee shall not be required to give any bond or surety in respect of the execution of this Indenture or otherwise; and

(m)

the permissive right of the Trustee to take or refrain from taking any actions enumerated in this Indenture shall not be construed as a duty.

AUTHENTICATING AGENTS

If the Trustee so chooses the Trustee may appoint one or more Authenticating Agents with power to act on its behalf and subject to its direction in the authentication of Rated Notes in connection with issuance, transfers and exchanges under Sections 2.4, 2.5 and 8.5, as fully to all intents and purposes as though each such Authenticating Agent had been expressly authorized by those Sections to authenticate such Rated Notes. For all purposes of this Indenture, the authentication of Rated Notes by an Authenticating Agent pursuant to this Section 6.4 shall be deemed to be the authentication of Rated Notes “by the Trustee”. Any entity into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any entity succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, without the execution or filing of any further act on the part of the parties hereto or such Authenticating Agent or such successor entity. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and the Issuer. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Issuer. Upon receiving such notice of resignation or upon such a termination, the Trustee shall promptly appoint a successor Authenticating Agent and shall give written notice of such appointment to the Issuer. The Issuer agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services (provided, however, that, so long as an Authenticating Agent is the Trustee, or an Affiliate thereof, such compensation shall be payable by the Trustee, rather than by the Issuer), and reimbursement for its reasonable expenses relating thereto and the Trustee shall be entitled to be reimbursed for such payments, subject to Section 6.8. The provisions of Sections 2.8, 6.5 and 6.6 shall be applicable to any Authenticating Agent. 6.5.

NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF RATED NOTES

The recitals contained herein and in the Rated Notes, other than the Certificate of Authentication thereon, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or sufficiency of this Indenture 99

Processed and formatted by SEC Watch - Visit SECWatch.com

(except as may be made with respect to the validity of the Trustee’s obligations hereunder), of the Collateral or of the Rated Notes. The Trustee shall not be accountable for the use or application by the Issuer of the Rated Notes or the proceeds thereof or any amounts paid to the Issuer pursuant to the provisions hereof. 6.6.

MAY HOLD RATED NOTES

The Trustee, any Note Paying Agent, the Note Registrar or any other agent of the Issuer, in its individual or any other capacity, may become the owner or pledgee of Rated Notes and, may otherwise deal with the Issuer or any of its Affiliates, with the same rights it would have if it were not Trustee, Note Paying Agent, Note Registrar or such other agent. 6.7.

FUNDS HELD IN TRUST

Funds held by the Trustee hereunder shall be held in trust to the extent required herein. The Trustee shall be under no liability for interest on any funds received by it hereunder except as otherwise agreed upon with the Issuer and except to the extent of income or other gain on investments which are deposits in or certificates of deposit of the Trustee in its commercial capacity and income or other gain actually received by the Trustee on Eligible Investments. 6.8.

COMPENSATION AND REIMBURSEMENT (a)

The Issuer agrees: (1)

to pay the Trustee on each Payment Date the Trustee Fee and reasonable compensation for all other services, including custodial services, rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

(2)

except as otherwise expressly provided herein, to reimburse the Trustee (subject to any written agreement between the Issuer and the Trustee) in a timely manner upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture or in the enforcement of any provision hereof and expenses related to the maintenance and administration of the Collateral (including securities transaction charges and the reasonable compensation and expenses and disbursements of its agents and legal counsel and of any accounting firm or investment banking firm employed by the Trustee pursuant to Section 5.2, 5.4, 5.5, 6.3(c), 6.3(k), 10.11 or 10.13, except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith but only to the extent any such securities transaction charges have not been waived during a Due Period due to the Trustee’s receipt of a payment from a financial institution with respect to certain Eligible Investments);

(3)

to indemnify the Trustee and its Officers, directors, employees and agents for, and to hold them harmless against, any loss, liability or expense incurred by it without negligence, willful misconduct or bad faith on their part, arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs and expenses (including reasonable counsel fees) of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties hereunder; and 100

Processed and formatted by SEC Watch - Visit SECWatch.com

(4)

to pay the Trustee reasonable additional compensation together with its expenses (including reasonable counsel fees) for any collection action taken pursuant to Section 6.14.

(b)

The Issuer may remit payment for such fees and expenses to the Trustee or, in the absence thereof, the Trustee may from time to time deduct payment of its fees and expenses hereunder from funds on deposit in the Expense Account pursuant to Section 11.1.

(c)

The Trustee hereby agrees not to cause the filing of a petition in bankruptcy against the Issuer for the non-payment to the Trustee of any amounts provided by this Section 6.8 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 Rated Notes issued under this Indenture.

(d)

The amounts payable to the Trustee pursuant to Sections 6.8(a)(2) through (4) (other than amounts received by the Trustee from financial institutions under Section 6.8(a)(2) above) shall not, except as provided by Section 11.1(a)(21), exceed on any Payment Date the limitation described in Section 11.1(a)(1) for such Payment Date; provided that (A) the Trustee shall not institute any proceeding for enforcement of such lien except in connection with an action pursuant to Section 5.3 or 5.4 for the enforcement of the lien of this Indenture for the benefit of the Secured Parties and (B) the Trustee may only enforce such a lien in conjunction with the enforcement of the rights of the Secured Parties in the manner set forth in Section 5.4.

The Trustee shall, subject to the Priority of Payments, receive amounts pursuant to this Section 6.8 and Section 11.1 only to the extent that the payment thereof will not result in an Event of Default and the failure to pay such amounts to the Trustee will not, by itself, constitute an Event of Default. Subject to Section 6.10, the Trustee shall continue to serve as Trustee under this Indenture notwithstanding the fact that the Trustee shall not have received amounts due it hereunder and hereby agrees not to cause the filing of a petition in bankruptcy against the Issuer for the nonpayment to the Trustee of any amounts provided by this Section 6.8 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 Rated Notes issued under this Indenture. No direction by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class shall affect the right of the Trustee to collect amounts owed to it under this Indenture. The indemnifications in favor of the Trustee in this Section 6.8 shall (i) survive any resignation or removal of any Person acting as Trustee (to the extent of any indemnified liabilities, costs, expenses and other amounts arising or incurred prior to, or arising out of actions or omissions occurring prior to, such resignation or removal) and (ii) apply to the Trustee in its capacities as Custodian, Note Paying Agent, Rated Note Calculation Agent and Authenticating Agent. 6.9.

CORPORATE TRUSTEE REQUIRED; ELIGIBILITY

There shall at all times be a Trustee hereunder which shall be a bank, corporation or trust company 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.$250,000,000, subject to supervision or examination by federal or state banking authorities, having a rating of at least “BBB+” by S&P and having an office within the United States. If such entity publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.9, the combined capital and 101

Processed and formatted by SEC Watch - Visit SECWatch.com

surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.9, it shall resign immediately in the manner and with the effect hereinafter specified in this Section 6. 6.10.

RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR (a)

No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Section 6 shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11.

(b)

The Trustee may resign at any time by giving 90 days prior written notice thereof to the Issuer, the Rated Noteholders, the Initial Hedge Counterparty, the Collateral Manager and each Rating Agency. Upon receiving such notice of resignation, or if the Trustee is removed or becomes incapable of acting, or if a vacancy shall occur in the office of the Trustee for any reason, the Issuer shall (after consultation with the Collateral Manager) promptly propose a successor trustee for approval by the Holders of 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes. A proposed successor trustee approved in accordance with the preceding sentence shall be appointed by the Issuer as successor trustee by written instrument, in duplicate, executed by an Authorized Officer of the Issuer, one copy of which shall be delivered to the Trustee so resigning and one copy to the successor trustee or trustees, together with a copy to each Rated Noteholder. If no successor trustee shall have been appointed and an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee or any Holder of a Rated Note or the Initial Hedge Counterparty on behalf of itself and all others similarly situated, subject to Section 5.15, may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c)

The Trustee may be removed at any time by an Act of the Holders of at least 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes delivered to the Trustee and to the Issuer.

(d)

If at any time: (1)

the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by any Holder; or

(2)

the Trustee shall become incapable of acting or shall be adjudged as bankrupt or insolvent or a receiver or liquidator of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case (subject to Section 6.10(a)), (A) the Issuer, by Issuer Order shall remove the Trustee, or (B) subject to Section 5.15, any Holder or the Initial Hedge Counterparty may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e)

The Issuer shall give prompt notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first class mail, postage prepaid, to each Rating Agency, the Initial Hedge Counterparty, 102

Processed and formatted by SEC Watch - Visit SECWatch.com

the Collateral Manager and the Holders as their names and addresses appear in the Note Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. If the Issuer fails to mail such notice within ten days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Issuer. 6.11.

ACCEPTANCE OF APPOINTMENT BY SUCCESSOR

Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer and the retiring Trustee (with copies to the Initial Hedge Counterparty and the Collateral Manager) an instrument accepting such appointment. Upon delivery of the required instruments, the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any other act, deed or conveyance, shall become vested with all the rights, powers, trusts, duties and obligations of the retiring Trustee; but, on request of the Issuer or a Majority of the then Aggregate Outstanding Amount of the Notes of any Class of Notes, the Initial Hedge Counterparty or the successor Trustee, such retiring Trustee shall, upon payment of its charges, fees, indemnities and expenses then unpaid, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and funds held by such retiring Trustee hereunder, subject nevertheless to its lien, if any, provided for in Section 6.8(d). Upon request of any such successor Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless (a) at the time of such acceptance such successor shall be qualified and eligible under Section 6.9 and the other provisions of this Section 6 and (b) a Rating Agency Confirmation shall have been obtained with respect to the appointment of such successor Trustee shall have been satisfied. No appointment of a successor Trustee shall become effective if the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class objects to such appointment; and no appointment of a successor Trustee shall become effective until the date ten days after notice of such appointment has been given to each Rated Noteholder and each Rating Agency. 6.12.

MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF TRUSTEE

Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided such Person shall be otherwise qualified and eligible under this Section 6, without the execution or filing of any paper or any further act on the part of any of the parties hereto. The successor Trustee will notify each Rating Agency of any such merger, conversion or consolidation. In case any of the Rated Notes have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Rated Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Rated Notes. 6.13.

CO-TRUSTEES

At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any part of the Collateral may at the time be located, the Trustee shall have power to appoint one or more Persons to act as Co-trustee, jointly with the Trustee of all or any part of the Collateral, with the power to file such proofs of claim and take such other actions pursuant to Section 5.6 and to make such 103

Processed and formatted by SEC Watch - Visit SECWatch.com

claims and enforce such rights of action on behalf of the Holders of the Rated Notes subject to the other provisions of this Section 6.13. The Issuer shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint a Co-trustee. If the Issuer does not join in such appointment within 15 days after the receipt by them of a request to do so, the Trustee shall have power to make such appointment. Should any written instrument from the Issuer be required by any Co-trustee so appointed for more fully confirming to such Co-trustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Issuer. The Issuer agrees to pay (subject to the Priority of Payments) for any reasonable fees and expenses in connection with such appointment. Every Co-trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms:

6.14.

(a)

the Rated Notes shall be authenticated and delivered and all rights, powers, duties and obligations hereunder in respect of the custody of securities, funds and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely by the Trustee;

(b)

the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by the appointment of a Co-trustee shall be conferred or imposed upon and exercised or performed by the Trustee or by the Trustee and such Co-trustee jointly, as shall be provided in the instrument appointing such Co-trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by a Co-trustee;

(c)

the Trustee at any time, by an instrument in writing executed by it, may accept the resignation of or remove any Co-trustee appointed under this Section 6.13. A successor to any Co-trustee so resigned or removed may be appointed in the manner provided in this Section 6.13;

(d)

no Co-trustee hereunder shall be personally liable by reason of any act or omission of the Trustee or any other Co-trustee hereunder;

(e)

the Trustee shall not be liable by reason of any act or omission of a Co-trustee;

(f)

any Act of Rated Noteholders delivered to the Trustee shall be deemed to have been delivered to each Co-trustee; and

(g)

each Co-trustee hereunder shall at the time of such acceptance satisfy the qualification required of a Trustee under Section 6.9 and the other provisions of this Section 6.

CERTAIN DUTIES RELATED TO DELAYED PAYMENT OF PROCEEDS; OTHER NOTICES

In the event that the Trustee shall not have received a payment with respect to any Pledged Security within two Business Days after its Due Date, the Trustee shall (i) notify the Issuer and Collateral 104

Processed and formatted by SEC Watch - Visit SECWatch.com

Manager in writing and (ii) promptly request the issuer of such Pledged Security, the trustee under the related Underlying Instrument or paying agent designated by either of them, as the case may be, to make such payment as soon as practicable after such request but in no event later than three Business Days after the date of such request. In the event that such payment is not made within such time period, the Trustee, subject to the provisions of Section 6.1(c)(4), shall, subject to the restrictions on the sale of Collateral Debt Securities set forth in Section 12.1, take such action as the Collateral Manager shall direct in writing. Any such action shall be without prejudice to any right to claim a Default under this Indenture. The Trustee will promptly notify the Issuer if the Collateral Manager has determined that (i) any Collateral Debt Security has become a Defaulted Security, a Deferred Interest PIK Bond, a Credit Risk Security or a Written Down Security or (ii) the Trustee has received an Equity Security in connection with any Collateral Debt Security. 6.15.

6.16.

REPRESENTATIONS AND WARRANTIES OF THE BANK (a)

Organization. The Bank has been duly organized and is validly existing as a national banking association under the laws of the United States and has the power to conduct its business and affairs as a trustee.

(b)

Authorization; Binding Obligations. The Bank has the power and authority to perform the duties and obligations of Trustee, Note Registrar and Note Transfer Agent or any other capacity to which it is appointed under this Indenture. The Bank has taken all necessary action to authorize the execution, delivery and performance of this Indenture, and all of the documents required to be executed by the Bank pursuant hereto. This Indenture has been duly executed and delivered by the Bank. Upon execution and delivery by the Issuer, this Indenture will constitute the legal, valid and binding obligation of the Bank enforceable in accordance with its terms.

(c)

Eligibility. The Bank is eligible under Section 6.9 to serve as Trustee hereunder.

(d)

No Conflict. Neither the execution, delivery and performance of this Indenture, nor the consummation of the transactions contemplated by this Indenture, (i) is prohibited by, or requires the Bank to obtain any consent, authorization, approval or registration under, any law, statute, rule, regulation, judgment, order, writ, injunction or decree that is binding upon the Bank or any of its properties or assets, or (ii) will violate any provision of, result in any default or acceleration of any obligations under, result in the creation or imposition of any lien pursuant to, or require any consent under, any agreement to which the Bank is a party or by which it or any of its property is bound.

(e)

No Proceedings. There are no proceedings pending, or to the best knowledge of the Bank, threatened against the Bank before any federal, state or other governmental agency, authority, administrator or regulatory body, arbitrator, court or other tribunal, foreign or domestic, that could have a material adverse effect on the Collateral or any action taken or to be taken by the Bank under this Indenture.

EXCHANGE OFFERS, PROPOSED AMENDMENTS ETC.

The Collateral Manager may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, take any of the following actions with respect to a Collateral Debt Security or Equity Security as to which an Offer has been made or as to which any consent, waiver, vote or exercise has been requested: (i) exchange such instrument for other securities or a mixture of securities and other consideration pursuant to such Offer (and in making a determination whether or not to exchange 105

Processed and formatted by SEC Watch - Visit SECWatch.com

any security, none of the restrictions set forth in Section 12 shall be applicable); and (ii) give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Debt Security or Equity Security. In the event that the Trustee does not receive instruction from the Collateral Manager, the Trustee shall have no obligation to take action with respect to such exchange or such request for consent, waiver, vote or exercise. In the event that the Trustee receives written notice of any proposed amendment, consent or waiver under the Underlying Instruments of any Collateral Debt Securities (before or after any default), the Trustee shall promptly deliver copies of such notice to the Issuer and the Collateral Manager. The Collateral Manager may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, with respect to a Collateral Debt Security as to which a consent or waiver under the Underlying Instruments of such Collateral Debt Security (before or after any default) has been proposed, give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Debt Security only in accordance with such Issuer Order. In the absence of any instruction from the Collateral Manager, the Trustee shall not engage in any vote with respect to such Collateral Debt Security. 6.17.

FIDUCIARY FOR RATED NOTEHOLDERS ONLY; AGENT FOR OTHER SECURED PARTIES

With respect to the security interests created hereunder, the pledge of any portion of the Collateral to the Trustee is to the Trustee as representative of the Rated Noteholders and agent for other Secured Parties. In furtherance of the foregoing, the possession by the Trustee of any portion of the Collateral and the endorsement to or registration in the name of the Trustee of any portion of the Collateral (including without limitation as entitlement holder of the Collateral Account) are all undertaken by the Trustee in its capacity as representative of the Rated Noteholders and as agent for the other Secured Parties. The Trustee shall not by reason of this Indenture be deemed to be acting as fiduciary for the Initial Hedge Counterparty or the Collateral Manager, provided that the foregoing shall not limit any of the express obligations of the Trustee under this Indenture. 6.18.

WITHHOLDING

If any withholding tax is imposed on the Issuer’s payment (or allocations of income) under the Rated Notes to any Rated Noteholder, such tax shall reduce the amount otherwise distributable to such Rated Noteholder. The Trustee is hereby authorized and directed to retain from amounts otherwise distributable to any Rated Noteholder sufficient funds for the payment of any tax that is required to be withheld or deducted by the Issuer (but such authorization shall not prevent the Trustee from contesting any such tax in appropriate proceedings and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding tax imposed with respect to any Rated Noteholder shall be treated as Cash distributed to such Rated Noteholder at the time it is withheld by the Trustee and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution, the Trustee may in its sole discretion withhold such amounts in accordance with this Section 6.18. If any Rated Noteholder wishes to apply for a refund of any such withholding tax, the Trustee shall reasonably cooperate with such Rated Noteholder in making such claim so long as such Rated Noteholder agrees to reimburse the Trustee for any out-of-pocket expenses incurred. Nothing herein shall impose an obligation on the part of the Trustee to determine the amount of any tax or withholding obligation on the part of the Issuer or in respect of the Income Notes. 106

ARTICLE VII COVENANTS 7.1.

PAYMENT OF PRINCIPAL AND INTEREST

The Issuer will duly and punctually pay all principal (including the Class C Cumulative Periodic Interest Shortfall Amount, the Class D Cumulative Periodic Interest Shortfall Amount and the Class E Cumulative Periodic Interest Shortfall Amount, interest (including Defaulted Interest and interest thereon, if any) in accordance with the terms of the Rated Notes and this Indenture and amounts due under the Hedge Agreement in accordance with this Indenture. Amounts properly withheld under the Code or other applicable law by any Person from a payment to any Rated Noteholder of principal and/or interest shall be considered as having been paid by the Issuer to such Rated Noteholder for all purposes of this Indenture. The Trustee shall, unless prevented from doing so for reasons beyond its reasonable control, give notice to each Rated Noteholder and each Rating Agency of any such withholding requirement no later than ten days prior to the date of the payment from which amounts are required to be withheld; provided that despite the failure of the Trustee to give such notice, amounts withheld pursuant to applicable tax laws shall be considered as having been paid by the Issuer as provided above. 7.2.

MAINTENANCE OF OFFICE OR AGENCY

The Issuer hereby appoints the Trustee as Note Paying Agent for the payment of principal of and interest on the Rated Notes. Rated Notes may be surrendered for registration of transfer or exchange at the Corporate Trust Office. The Issuer hereby appoints NCB Stockbroker Limited, 3 George’s Dock, Dublin 1, Ireland, as offshore Note Paying Agent and as the Issuer’s agent where notices and demands to or upon the Issuer in respect of any Rated Notes listed on the Irish Stock Exchange may be served and where such Rated Notes may be surrendered for registration of transfer or exchange. The Issuer may at any time and from time to time, terminate the appointment of any such agent or appoint any additional agents for any or all of such purposes; provided that (A) the Issuer will maintain in the Borough of Manhattan, The City of New York, an office or agency

Processed and formatted by SEC Watch - Visit SECWatch.com

where notices and demands to or upon the Issuer in respect of the Rated Notes and this Indenture may be served, (B) no Note Paying Agent shall be appointed in a jurisdiction which subjects payments on the Rated Notes to withholding tax and (C) the Issuer may not terminate the appointment of any Note Paying Agent without the consent of each Income Noteholder. The Issuer shall give prompt written notice to the Trustee and each Rating Agency and the Rated Noteholders of the appointment or termination of any such agent and of the location and any change in the location of any such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency in the Borough of Manhattan, The City of New York or shall fail to furnish the Trustee with the address thereof, presentations and surrenders may be made at and notices and demands may be served on the Issuer and Rated Notes may be presented and surrendered for payment to the Note Paying Agent at its office in Illinois (and the Issuer hereby appoints the same as its agent to receive such respective presentations, surrenders, notices and demands). For so long as any Class of Rated Notes is listed on the Irish Stock Exchange and such exchange shall so require, the Issuer shall maintain a listing agent, a paying agent and an agent where notices and demands to or upon the Issuer in respect of any Rated Notes listed on the Irish Stock Exchange may be served and where such Rated Notes may be surrendered for registration of transfer or exchange. 107

Processed and formatted by SEC Watch - Visit SECWatch.com

7.3.

FUNDS FOR RATED NOTE PAYMENTS TO BE HELD IN TRUST

All payments of amounts due and payable with respect to any Rated Notes that are to be made from amounts withdrawn from the Payment Account shall be made on behalf of the Issuer by the Trustee or a Note Paying Agent with respect to payments on the Rated Notes. When the Issuer shall have a Note Paying Agent that is not also the Note Registrar, it shall direct the Note Registrar to furnish, no later than the fifth calendar day after each Record Date a list, if necessary, in such form as such Note Paying Agent may reasonably request, of the names and addresses of the Holders and of the certificate numbers of individual Rated Notes held by each such Holder. The initial Note Paying Agent shall be as set forth in Section 7.2. Any additional or successor Paying Agents shall be appointed by Issuer Order with written notice thereof to the Trustee and the Rating Agencies; provided that so long as any Class of Rated Notes is rated by the Rating Agencies and with respect to any additional or successor Note Paying Agent for the Rated Notes, (a) the Note Paying Agent for the Rated Notes has a rating of not less than “AA-” and not less than “A-1+” by S&P or (b) a Rating Agency Confirmation from S&P shall have been obtained with respect to the appointment of such Note Paying Agent. In the event that (i) the Issuer has actual knowledge that such successor Note Paying Agent ceases to have a rating of at least “AA-” and of “A-1+” by S&P or (ii) a Rating Agency Confirmation from S&P shall not have been obtained with respect to the appointment of such Note Paying Agent, the Issuer shall promptly remove such Note Paying Agent and appoint a successor Note Paying Agent. The Issuer shall not appoint any Note Paying Agent (other than an initial Note Paying Agent) that is not, at the time of such appointment, a depository institution or trust company subject to supervision and examination by federal and/or state and/or national banking authorities. The Issuer shall cause each Note Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Note Paying Agent shall agree with the Trustee (and if the Trustee acts as Note Paying Agent, it hereby so agrees), subject to the provisions of this Section 7.3, that such Note Paying Agent will: (a)

allocate all sums received for payment to the Holders of Rated Notes for which it acts as Note Paying Agent on each Payment Date and Redemption Date among such Holders in the proportion specified in the instructions set forth in the applicable Note Valuation Report or Redemption Date Statement or as otherwise provided herein, in each case to the extent permitted by applicable law;

(b)

hold all amounts held by it for the payment of amounts due with respect to the Rated Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided;

(c)

if such Note Paying Agent is not the Trustee, immediately resign as a Note Paying Agent and forthwith pay to the Trustee all amounts held by it in trust for the payment of Rated Notes if at any time it ceases to meet the standards set forth above required to be met by a Note Paying Agent at the time of its appointment;

(d)

if such Note Paying Agent is not the Trustee, immediately give the Trustee notice of any Default by the Issuer (or any other obligor upon the Rated Notes) in the making of any payment required to be made; and 108

Processed and formatted by SEC Watch - Visit SECWatch.com

(e)

if such Note Paying Agent is not the Trustee at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all amounts so held in trust by such Note Paying Agent.

If the Issuer shall have appointed a Note Paying Agent other than the Trustee, the Trustee shall deposit on or prior to the Business Day next preceding each Payment Date or Redemption Date, as the case may be, with such Note Paying Agent, if necessary, an aggregate amount sufficient to pay the amounts then becoming due (to the extent funds are then available for such purpose in the Collection Account, as the case may be), such amount to be held in trust for the benefit of the Persons entitled thereto. Any funds deposited with a Note Paying Agent (other than the Trustee) in excess of an amount sufficient to pay the amounts then becoming due on the Rated Notes with respect to which such deposit was made shall be paid over by such Note Paying Agent to the Trustee for application in accordance with Section 11. The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, direct any Note Paying Agent to pay to the Trustee all amounts held in trust by such Note Paying Agent, such amounts to be held by the Trustee upon the same trusts as those upon which such amounts were held by such Note Paying Agent; and, upon such payment by any Note Paying Agent to the Trustee, such Note Paying Agent shall be released from all further liability with respect to such amounts. Except as otherwise required by applicable law, any funds deposited with the Trustee or any Note Paying Agent in trust for the payment of the principal of or interest on any Rated Note and remaining unclaimed for two years after the same has become due and payable shall be paid to the Issuer on Issuer Request; and the Holder of such Rated Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment of such amounts and all liability of the Trustee or such Note Paying Agent with respect to such trust funds (but only to the extent of the amounts so paid to the Issuer) shall thereupon cease. The Trustee or such Note Paying Agent, before being required to make any such release of payment, may, but shall not be required to, adopt and employ, at the expense of the Issuer, any reasonable means of notification of such release of payment, including mailing notice of such release to Holders whose Rated Notes have been called but have not been surrendered for redemption or whose right to or interest in amounts due and payable but not claimed is determinable from the records of any Note Paying Agent, at the last address of record of each such Holder. 7.4.

EXISTENCE OF ISSUER

The Issuer shall maintain in full force and effect its existence and rights as an exempted company incorporated and registered under the laws of the Cayman Islands and shall obtain and preserve its qualification to do business in each jurisdiction in which such qualifications are or shall be necessary to protect the validity and enforceability of this Indenture, the Rated Notes or any of the Collateral. The Issuer shall ensure that all corporate or other formalities regarding its existence (including holding regular board of directors’ and shareholders’, or other similar, meetings) or registrations are followed. The Issuer shall not take any action, or conduct its affairs in a manner, that is likely to result in its separate existence being ignored or in its assets and liabilities being substantively consolidated with any other Person in a bankruptcy, reorganization or other insolvency proceeding. At least one director of the Issuer shall be Independent of other parties to the Transaction Documents. Without limiting the foregoing, (a) the Issuer shall not have any subsidiaries (other than any Tax Subsidiary), and (b) the Issuer shall not (i) have any employees, (ii) engage in any transaction with any shareholder that would constitute a conflict of interest or (iii) pay dividends, provided that the foregoing shall not prohibit the Issuer from entering into the transactions contemplated by the Corporate Services Agreement with the Administrator. 109

Processed and formatted by SEC Watch - Visit SECWatch.com

7.5.

PROTECTION OF COLLATERAL (a)

The Issuer shall from time to time, execute and deliver all such supplements and amendments hereto and all such Financing Statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action as may be necessary or advisable or desirable to secure the rights and remedies of the Secured Parties hereunder and to: (1)

Grant more effectively all or any portion of the Collateral;

(2)

maintain, preserve and perfect the lien (and the first priority nature thereof) of this Indenture or to carry out more effectively the purposes hereof;

(3)

perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations);

(4)

enforce any of the Pledged Securities or other instruments or property included in the Collateral;

(5)

preserve and defend title to the Collateral and the rights therein of the Trustee, the Initial Hedge Counterparty and the Holders of the Rated Notes against the claims of all Persons and parties; or

(6)

pay or cause to be paid any and all taxes levied or assessed upon all or any part of the Collateral.

The Issuer hereby designates the Trustee its agent and attorney-in-fact to execute any Financing Statement, continuation statement or other instrument delivered to it pursuant to this Section 7.5, and the Trustee, as agent of the Issuer, agrees to file such continuation statements as are necessary to maintain perfection of the Collateral perfected by the filing of Financing Statements, provided that the Issuer retains ultimate responsibility to maintain the perfection of the Collateral perfected by the filing of Financing Statements and any failure of the Trustee to file continuation statements pursuant to this undertaking shall not result in any liability of the Trustee and the Trustee shall be entitled to indemnification pursuant to Section 6.8(a) with respect to any claim, loss, liability or expense incurred by the Trustee with respect to the filing of such continuation statements. The Trustee agrees that it will from time to time, at the direction of any Secured Party, execute and cause to be filed Financing Statements and continuation statements. The Issuer shall otherwise cause the perfection and priority of the security interest in the Collateral and the maintenance of such security interest at all times. Notwithstanding anything to the contrary herein, the right of a Secured Party to provide direction to the Trustee shall not impose upon the Trustee, as Secured Party, any obligation to provide any such direction. The Issuer agrees that a carbon, photographic, photostatic or other reproduction of this Indenture or of a Financing Statement is sufficient as an Indenture or a Financing Statement as the case may be. (b)

The Trustee shall not (i) except in accordance with Section 10.13(a) or (b), as applicable, remove any portion of the Collateral that consists of Cash or is evidenced by an Instrument, certificate or other writing (A) from the jurisdiction in which it was held at the date the most recent Opinion of Counsel was delivered pursuant to Section 7.6 (or 110

Processed and formatted by SEC Watch - Visit SECWatch.com

from the jurisdiction in which it was held as described in the Opinion of Counsel delivered at the Closing Date pursuant to Section 3.1(c), if no Opinion of Counsel has yet been delivered pursuant to Section 7.6) or (B) from the possession of the Person who held it on such date or (ii) cause or permit ownership or the pledge of any portion of the Collateral that consists of book-entry securities to be recorded on the books of a Person (A) located in a different jurisdiction from the jurisdiction in which such ownership or pledge was recorded at such date or (B) other than the Person on whose books such ownership or pledge was recorded at such date, unless the Trustee shall have first received an Opinion of Counsel to the effect that the lien and security interest created by this Indenture with respect to such property will continue to be maintained after giving effect to such action or actions.

7.6.

(c)

The Issuer shall pay or cause to be paid taxes, if any, levied on account of the beneficial ownership by the Issuer of any Pledged Securities that secure the Rated Notes; provided that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which disputed amounts or adequate reserves have been made or the failure of which to pay or discharge could not reasonably be expected to have a material adverse effect upon the ability of the Issuer to timely and fully perform any of its payment or other material obligations under this Indenture or upon the interests of the Rated Noteholders in the Collateral.

(d)

The Issuer shall enforce all of its material rights and remedies under the Transaction Documents to which it is a party.

(e)

Without at least 30 days’ prior written notice to the Trustee, the Issuer shall not change its name, or the name under which it does business, from the name shown on the signature pages hereto.

OPINIONS AS TO COLLATERAL

On or before 30 days prior to the Payment Date in June of each calendar year, commencing in 2007, the Issuer shall furnish to the Trustee and each Rating Agency (with copies to the Initial Hedge Counterparty) an Opinion of Counsel (which shall include assumptions and qualifications substantially similar to those set forth in Exhibit E-1) stating that, in the opinion of such counsel, as of the date of such opinion, the lien and security interest created by this Indenture with respect to the Collateral remains a valid and perfected first priority lien and describing the manner in which such security interest shall remain perfected. 7.7.

PERFORMANCE OF OBLIGATIONS (a)

The Trustee shall notify the Issuer, the Initial Hedge Counterparty and each Rated Noteholder of any request for an amendment, waiver or supplement to any Underlying Instrument included in the Collateral or of any other notice of a vote in respect of any Collateral Debt Security included in the Collateral. The Issuer shall not enter into any such amendment, waiver or supplement; provided that, notwithstanding anything in this Section 7.7(a) to the contrary, the Issuer may enter into any amendment or waiver of or supplement to any such Underlying Instrument if such amendment, supplement or waiver: 111

Processed and formatted by SEC Watch - Visit SECWatch.com

(1)

is required by the provisions of any Underlying Instrument or by applicable law (other than pursuant to an Underlying Instrument);

(2)

is necessary to cure any ambiguity, inconsistency or formal defect or omission in such Underlying Instrument; or

(3)

(x) is deemed necessary by the Issuer or the Collateral Manager and does not materially and adversely affect the Secured Parties or (y) is effected pursuant to Section 6.16.

The Issuer shall be entitled to rely on an Opinion of Counsel as to material adverse effect and as to whether the entry into an amendment, supplement or waiver is permitted pursuant to this Indenture. (b)

The Issuer may, with the prior written consent of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes and the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes and the Initial Hedge Counterparty, contract with other Persons, including the Collateral Administrator, the Collateral Manager and the Bank, for the performance of actions and obligations to be performed by the Issuer hereunder by such Persons. Notwithstanding any such arrangement, the Issuer shall remain liable for all such actions and obligations. In the event of such contract, the performance of such actions and obligations by such Persons shall be deemed to be performance of such actions and obligations by the Issuer and the Issuer will punctually perform, and use its best efforts to cause such other Person to perform, all of their obligations and agreements contained in related agreement.

(c)

The Issuer shall treat all acquisitions of Collateral Debt Securities as a “purchase” for tax, accounting and reporting purposes.

(d)

The Issuer shall file, or cause to be filed, any tax returns, including information tax returns, required by any governmental authority.

(e)

In the event that (i) the ownership of a Collateral Debt Security or property acquired in respect of a Collateral Debt Security would result in the Issuer being or becoming subject to U.S. tax on a net income basis or being or becoming subject to the U.S. branch profits tax (in either case, such Collateral Debt Security becoming a “Taxed Collateral Debt Security” and such property becoming a “Taxed Property”), and (ii) the Issuer does not sell or otherwise dispose of all or a portion of such Taxed Collateral Debt Security or Taxed Property in accordance with the provisions of the Indenture, the Collateral Manager on behalf of the Issuer shall, prior to such Collateral Debt Security becoming a Taxed Collateral Debt Security or such property becoming a Taxed Property, (a) set up a special purpose subsidiary meeting S&P’s then current published criteria for bankruptcy remote special purpose entities (a “Tax Subsidiary”) to receive and hold any such Taxed Collateral Debt Security or Taxed Property or transfer such Taxed Collateral Debt Security or Taxed Property to the Tax Subsidiary or (b) contribute such taxed Collateral Debt Security or Taxed Property to a REMIC or other pass-through entity, unless the Issuer has received an opinion of nationally recognized counsel to the effect that the Issuer can hold such Taxed Collateral Debt Security directly without causing the Issuer to be treated as engaged in a trade or business in the United States for United States federal income tax purposes. The Issuer shall cause the purposes and permitted activities of any 112

Processed and formatted by SEC Watch - Visit SECWatch.com

such Tax Subsidiary to be restricted solely to the acquisition, holding and disposition of such Taxed Collateral Debt Security or Taxed Property and shall require such subsidiary to distribute 100% of the proceeds of any sale of such Taxed Collateral Debt Security or Taxed Property, net of any tax liabilities, to the Issuer. 7.8.

NEGATIVE COVENANTS (a)

The Issuer will not: (1)

intentionally operate so as to be subject to U.S. federal income taxes on its net income;

(2)

sell, assign, participate, transfer, exchange or otherwise dispose of, or pledge, mortgage, hypothecate or otherwise encumber (or permit such to occur or suffer such to exist), any part of the Collateral, except as expressly permitted by this Indenture;

(3)

claim any credit on, make any deduction from, or dispute the enforceability of, the payment of the principal or interest (or any other amount) payable in respect of the Rated Notes (other than amounts required to be paid, deducted or withheld in accordance with any applicable law or regulation of any governmental authority) or assert any claim against any present or future Rated Noteholder by reason of the payment of any taxes levied or assessed upon any part of the Collateral;

(4)

(A) incur or assume or guarantee any indebtedness, other than the Rated Notes and this Indenture and the transactions contemplated hereby; (B) issue any additional class of securities other than the Income Notes; or (C) issue any additional shares of stock;

(5)

(A) take any action that would impair the validity or effectiveness of this Indenture or any Grant hereunder or the lien of this Indenture, amend hypothecate, subordinate, terminate, discharge or release any Person from any covenants or obligations with respect to this Indenture or the Rated Notes, except as may be permitted hereby, (B) create or extend any lien, charge, adverse claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) on or to the Collateral or any part thereof, any interest therein or the proceeds thereof, or (C) take any action that would cause the lien of this Indenture not to constitute a valid first priority security interest in the Collateral;

(6)

use any of the proceeds of the Rated Notes issued hereunder (A) to extend “purpose credit” within the meaning given to such term in Regulation U or (B) to purchase or otherwise acquire any Margin Stock;

(7)

permit the aggregate book value of all Margin Stock held by the Issuer on any date to exceed the net worth of the Issuer on such date (excluding any unrealized gains and losses) on such date;

(8)

dissolve or liquidate in whole or in part, except as permitted hereunder; or 113

Processed and formatted by SEC Watch - Visit SECWatch.com

(9)

(b)

7.9.

except for any agreements involving the purchase and sale of Collateral Debt Securities having customary purchase or sale terms and documents with customary loan trading documentation (but not excepting the Hedge Agreement), enter into any agreements unless such agreements contain “non-petition” and “limited recourse” provisions with respect to the Issuer, nor shall the Issuer amend any such “non-petition” or “limited recourse” provisions without first obtaining Rating Agency Confirmation from S&P.

Except as permitted by this Indenture, the Issuer will not do business under any other name other than the name set forth in the Articles and neither the Issuer nor the Trustee shall acquire any Collateral after the Closing Date, sell, transfer, exchange or otherwise dispose of Collateral, or enter into or engage in any business with respect to any part of the Collateral.

STATEMENT AS TO COMPLIANCE

On or before the Payment Date in June of each calendar year commencing in 2007, or immediately if there has been a Default in the fulfillment of an obligation under this Indenture, the Issuer shall deliver to the Trustee, the Income Note Paying Agent, each Rated Noteholder making a written request therefor, the Irish Paying Agent, the Initial Hedge Counterparty, the Collateral Manager and each Rating Agency a certificate of the Issuer stating, as to each signer thereof, that:

7.10.

(a)

the Officer executing such certificate has conducted a review of the activities of the Issuer and of the Issuer’s performance under this Indenture during the 12-month period ending on December 31 of such year (or from the Closing Date until December 31, 2006, in the case of the first such certificate) based on reports and other information delivered to such Officer by the Trustee, the Collateral Manager and the Collateral Administrator and a review of the Accountant’s Reports prepared pursuant to Section 10.12 and such other materials as such Officer deems appropriate; and

(b)

to the best of knowledge of the Issuer, based on such review, the Issuer has fulfilled all of its material obligations under this Indenture throughout the period, or, if there has been a Default in the fulfillment of any such obligation, specifying each such Default known to such Officer and the nature and status thereof, including actions undertaken to remedy the same.

ISSUER MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS (a)

The Issuer shall not consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any Person, unless permitted by Cayman Islands law and unless: (1)

the Issuer shall be the surviving entity, or the Person (if other than the Issuer) formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall be an exempted limited liability company organized and existing under the laws of the Cayman Islands or such other jurisdiction outside the United States as may be approved by a Majority of each Class and the Initial Hedge Counterparty, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, the Initial Hedge Counterparty and each Rated Noteholder, the due and punctual payment of the principal of and interest on all 114

Processed and formatted by SEC Watch - Visit SECWatch.com

Rated Notes and the performance of every covenant of this Indenture and the Hedge Agreement on the part of the Issuer to be performed or observed, all as provided herein; (2)

each Rating Agency and the Initial Hedge Counterparty shall have received written notification from the Issuer of such consolidation, merger, transfer or conveyance and the identity of the surviving entity and a Rating Agency Confirmation shall have been obtained with respect to the consummation of such transaction;

(3)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have agreed with the Trustee (A) to observe the same legal requirements for the recognition of such formed or surviving entity as a legal entity separate and apart from any of its Affiliates as are applicable to the Issuer with respect to its Affiliates and (B) not to consolidate or merge with or into any other Person or transfer or convey the Collateral or all or substantially all of its assets to any other Person except in accordance with the provisions of this Section 7.10;

(4)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have delivered to the Trustee, the Initial Hedge Counterparty and each Rating Agency an Officer’s certificate and an Opinion of Counsel each stating that such Person shall be duly organized, validly existing and (if applicable) in good standing in the jurisdiction in which such Person is organized; that such Person has sufficient power and authority to assume the obligations set forth in Section 7.10(a)(1) above and to execute and deliver an indenture supplemental hereto for the purpose of assuming such obligations; that such Person has duly authorized the execution, delivery and performance of an indenture supplemental hereto for the purpose of assuming such obligations and that such supplemental indenture is a valid, legal and binding obligation of such Person, enforceable in accordance with its terms, subject only to bankruptcy, reorganization, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); that, immediately following the event which causes such Person to become the successor to the Issuer, (A) such Person has good and marketable title, free and clear of any lien, security interest or charge, other than the lien and security interest of this Indenture, to the Collateral; (B) the Trustee continues to have a valid perfected first priority security interest in the Collateral securing all of the Rated Notes; (C) such Person has received an Opinion of Counsel to the effect that such Person will not be subject to net income tax or be treated as engaged in a trade or business within the United States for U.S. federal income tax purposes and such other matters as the Trustee, the Initial Hedge Counterparty or any Rated Noteholder may reasonably require;

(5)

immediately after giving effect to such transaction, no Default shall have occurred and be continuing; 115

Processed and formatted by SEC Watch - Visit SECWatch.com

(6)

(7)

7.11.

the Issuer shall have delivered to the Trustee, the Initial Hedge Counterparty and each Rated Noteholder an Officer’s certificate and an Opinion of Counsel each stating that such consolidation, merger, transfer or conveyance and such supplemental indenture comply with this Section 7, that all conditions precedent in this Section 7 provided for relating to such transaction have been complied with and that no adverse tax consequences will result therefrom to any Rated Noteholder or the Initial Hedge Counterparty; and the Issuer shall have delivered to the Trustee an Opinion of Counsel stating that after giving effect to such transaction, the Issuer will not be required to register as an investment company under the Investment Company Act.

SUCCESSOR SUBSTITUTED

Upon any consolidation or merger, or transfer or conveyance of all or substantially all of the assets of the Issuer or the Issuer, in accordance with Section 7.10, the Person formed by or surviving such consolidation or merger (if other than the Issuer), or, the Person to which such transfer or conveyance is made, shall succeed to, and be substituted for, and may exercise every right and power of, and shall be bound by each obligation or covenant of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein. In the event of any such consolidation, merger, transfer or conveyance, the Person named as the “Issuer” in the first paragraph of this Indenture or any successor which shall theretofore have become such in the manner prescribed in this Section 7 may be dissolved, wound-up and liquidated at any time thereafter, and such Person thereafter shall be released from its liabilities as obligor and maker on all the Rated Notes and from its obligations under this Indenture. 7.12.

NO OTHER BUSINESS

The Issuer shall not engage in any business or activity other than (i) issuing and selling the Rated Notes pursuant to this Indenture, (ii) issuing and selling the Income Notes in accordance with the Income Note Paying Agency Agreement (iii) issuing the Ordinary Shares pursuant to the Issuer Charter, (iv) acquiring, pledging, holding and disposing of, solely for its own account, Collateral Debt Securities, Eligible Investments and other Collateral described in clauses (a) to (e) of the granting clauses hereof, and (v) such other activities that are incidental thereto and connected therewith. The Issuer shall not hold itself out as a derivatives dealer willing to enter into either side of, or to offer to enter into, assume, offset, assign or otherwise terminate positions in (i) interest rate, currency, equity or commodity swaps or caps or (ii) derivative financial instruments (including options, forward contracts, short positions and similar instruments) in any commodity, currency, share of stock, partnership or trust, note, bond, debenture or other evidence of indebtedness, swap or cap. The foregoing shall not limit the ability of the Issuer to enter into Hedge Agreements. Furthermore, the Issuer shall not hold itself out, whether through advertising or otherwise, as a bank, insurance company or finance company, or as originating loans, lending funds, making a market in loans or other assets or selling loans or other assets to customers. The Issuer will not amend the Issuer Charter, if such amendment would result in the rating (including any private or confidential rating) of any Class of Rated Notes being reduced or withdrawn. The Issuer shall not engage in any business or activity or hold any asset that would cause the Issuer to be engaged in a U.S. trade or business for U.S. federal income tax purposes, except as the result of ownership of Equity Securities or securities received in an Offer in accordance with the provisions of this Indenture. 116

7.13.

CHANGE OR WITHDRAWAL OF RATING

The Issuer shall promptly notify the Trustee in writing and upon receipt of such notice the Trustee shall promptly notify the Rated Noteholders and the Initial Hedge Counterparty if at any time the rating of any Class of Rated Notes has been, or is known will be, changed or withdrawn. 7.14.

REPORTING

At any time when the Issuer is not subject to Section 13 or 15(d) of the Exchange Act and is not exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, upon the request of a Holder or Beneficial Owner of a Rated Note or Income Note, the Issuer shall promptly furnish or cause to be furnished Rule 144A Information to such Holder or Beneficial Owner, to a prospective purchaser of such Rated Note or Income Note designated by such Holder or Beneficial Owner or to the Trustee for delivery to such Holder or Beneficial Owner or a prospective purchaser designated by such Holder or Beneficial Owner, as the case may be, in order to permit compliance by such Holder or Beneficial Owner with Rule 144A in connection with the resale of such Rated Note or Income Note by such Holder or Beneficial Owner. 7.15.

RATED NOTE CALCULATION AGENT (a)

The Issuer hereby agrees that for so long as any of the Rated Notes remain Outstanding the Issuer will at all times cause there to be an agent appointed to calculate LIBOR in respect of each Interest Period in accordance with the terms of Schedule B (the Rated Note Calculation Agent), which agent shall be a financial institution, subject to supervision or examination by federal or state authority, having a rating of at least “BBB+” by S&P and having an office within the United States. Whenever the Note Calculation Agent is required to act or exercise judgment, it will do so in good faith and in a commercially reasonable manner. The Issuer has initially appointed the Trustee as Rated Note Calculation Agent for purposes of determining LIBOR for each Interest Period. If the Rated Note Calculation Agent is unable or unwilling to act as

Processed and formatted by SEC Watch - Visit SECWatch.com

such or is removed by the Issuer, the Issuer (after consultation with the Collateral Manager) will propose a leading bank which is engaged in transactions in Dollar deposits in the international Eurodollar market and which does not control or is not controlled by or under common control with the Issuer or any of its Affiliates as a replacement Rated Note Calculation Agent for approval by Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes. The Rated Note Calculation Agent may not resign its duties without a successor having been duly appointed. (b)

As soon as possible after 11:00 a.m. (London time) on each LIBOR Calculation Date, but in no event later than 11:00 a.m. (New York time) on the Business Day immediately following each LIBOR Calculation Date, the Rated Note Calculation Agent will calculate LIBOR for the next Interest Period and the Periodic Interest payable for such Interest Period in respect of the Outstanding Rated Notes, rounded to the nearest cent, with half a cent being rounded upward, on the related Payment Date to be given to the Issuer, the Trustee, the Collateral Manager, the Depositary, Euroclear, Clearstream, the Note Paying Agent and the Irish Paying Agent. The Rated Note Calculation Agent will also specify to the Issuer and the Collateral Manager the quotations upon which the Applicable Periodic Interest Rate for each Class of Rated Notes is based, and in any event the Rated Note Calculation Agent must notify the Issuer and the Collateral Manager before 5:00 p.m. (New York time) on each applicable LIBOR Calculation Date if it has not determined and is not in the process of determining LIBOR with respect to the Rated Notes and the 117

Processed and formatted by SEC Watch - Visit SECWatch.com

Periodic Interest with respect to each Class of Rated Notes, together with its reasons for the delay. The Irish Paying Agent also will cause the Applicable Periodic Interest Rate for each Interest Period for each Class of Rated Notes listed on the Irish Stock Exchange, the amount of interest payable in respect of each Class of Rated Notes listed on the Irish Stock Exchange and each Payment Date to be delivered to the Company Announcements Office of the Irish Stock Exchange as soon as possible after the Irish Paying Agent has received notice from the Rated Note Calculation Agent of such Applicable Periodic Interest Rates and amounts. 7.16.

LISTING

The Issuer will use its commercially reasonable efforts to obtain and maintain the listing of each Class of Rated Notes on the Irish Stock Exchange. 7.17.

AMENDMENT OF CERTAIN DOCUMENTS

The Issuer will not agree to any amendment to or modification of the Corporate Services Agreement, the Collateral Management Agreement, the Account Control Agreement or the Hedge Agreement at any time without obtaining Rating Agency Confirmation with respect to any such modification and will not amend, modify or waive any “non-petition” or “limited recourse” provisions of any Transaction Document to which it is a party without obtaining a Rating Agency Confirmation with respect to such modification. The Trustee shall provide each of the Initial Hedge Counterparty, the Holders of Rated Notes of the Controlling Class, the Collateral Manager and the Rating Agencies with a copy of any such amendment or modification at least ten Business Days before effecting such amendment or modification. Prior to entering into any waiver in respect of the any of the foregoing agreements, the Issuer will provide to each Rating Agency and the Trustee with written notice of such waiver. 7.18.

PURCHASE OF COLLATERAL; INFORMATION REGARDING COLLATERAL; RATING CONFIRMATION (a)

The Issuer will use reasonable efforts to purchase or enter into agreements to purchase, on or before the Effective Date, Collateral Debt Securities having an aggregate Principal Balance, together with the aggregate Principal Balance of all Eligible Investments purchased with Collateral Principal Collections, of not less than U.S.$550,000,000 (assuming, for these purposes, settlement (in accordance with customary settlement procedures in the relevant markets) of all agreements entered into by the Issuer to acquire Collateral Debt Securities scheduled to settle on or following the Effective Date).

(b)

The Issuer (or the Collateral Manager on behalf of the Issuer) shall cause to be delivered to the Trustee on the Effective Date an amended Schedule A listing all Collateral Debt Securities purchased on or before the Effective Date, which schedule will supersede any prior Schedule A delivered to the Trustee.

(c)

On or before the Effective Date, the Issuer (or the Collateral Manager on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Rated Notes of the Controlling Class, the Initial Hedge Counterparty and each Rating Agency (in addition to any such Officer’s Certificate, the information set forth in such Officer’s Certificate shall also be provided to S&P in a form that complies with and includes the information required by S&P’s Preferred Format) demonstrating compliance by the Issuer with its obligations under Section 7.18(a) and satisfaction of each applicable Collateral Quality Test (with the exception of S&P’s CDO Monitor Test), and Coverage Test or, if on the 118

Processed and formatted by SEC Watch - Visit SECWatch.com

Effective Date, the Issuer shall be in default in the performance of its obligations under this Section 7.18 or any of the Collateral Quality Tests (with the exception of S&P’s CDO Monitor Test), the Collateral Concentration Limitations or the specified Coverage Tests shall fail to be satisfied, the Issuer (or the Collateral Manager on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Rated Notes of the Controlling Class, the Initial Hedge Counterparty and each Rating Agency specifying the details of such default or failure; provided that the failure to satisfy any of the Collateral Quality Tests, Collateral Concentration Limitations or Coverage Tests does not constitute an Event of Default but such failure may result in a Rating Confirmation Failure. (d)

No later than 15 Business Days after the Effective Date, the Issuer (or the Collateral Manager on its behalf) shall deliver or cause to be delivered to the Trustee an accountant’s certificate (the Accountant’s Certificate) (i) confirming the information with respect to each Collateral Debt Security set forth on the amended schedule delivered pursuant to Section 7.18(b) as of the Effective Date, and the information provided by the Issuer with respect to every other asset included in the Collateral, (ii) certifying as of the Effective Date the procedures applied and their associated findings with respect to the Coverage Tests, the Collateral Concentration Limitations and the Collateral Quality Tests and (iii) specifying the procedures undertaken to review data and computations relating to the foregoing clause (ii) held by the Issuer on the Effective Date.

(e)

The Issuer (or the Collateral Manager on its behalf) shall request in writing that each of the Rating Agencies confirm in writing (a Rating Confirmation), within 30 Business Days after the Effective Date (or, in the case of each Rating Agency, any such later date (in no event longer than 60 Business Days after the Effective Date) that shall be acceptable to such Rating Agency), the ratings (including any private or confidential ratings) assigned by it on the Closing Date to the Rated Notes. In the event that the Issuer fails to obtain a Rating Confirmation within such time period (a Rating Confirmation Failure), Collateral Interest Collections and, to the extent Collateral Interest Collections are insufficient therefor, Collateral Principal Collections shall be applied on the next Payment Date and any succeeding Payment Dates, as applicable as provided in Section 11.1 to the extent necessary for each of the Rating Agencies to provide a Rating Confirmation.

(f)

Notwithstanding the foregoing, if (i) the Issuer (or the Collateral Manager on its behalf) has requested in writing that each of the Rating Agencies provide Rating Confirmation within five Business Days after the Effective Date, (ii) the Issuer (or the Collateral Manager on its behalf) has obtained confirmation by electronic mail, facsimile or telephone that each of the Rating Agencies has received such request and has promptly delivered to the applicable Rating Agency any additional information reasonably requested by such Rating Agency, and (iii) any of the Rating Agencies fails to respond to such request within 30 Business Days after the Effective Date, then such failure to respond will not immediately constitute a Rating Confirmation Failure but shall not constitute receipt of Rating Confirmation; provided that Rating Confirmation Failure shall thereafter occur immediately upon receipt from the Rating Agencies of an actual notice of Rating Confirmation Failure.

(g)

No later than 15 Business Days following the Effective Date, the Trustee shall (i) run the S&P CDO Monitor and report to S&P whether or not the S&P CDO Monitor Test has been satisfied and (ii) report the S&P scenario default and break-even default rate for each Class of Notes. 119

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE VIII SUPPLEMENTAL INDENTURES 8.1.

SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF RATED NOTEHOLDERS

Without the consent of the Holders of any Rated Notes, the Initial Hedge Counterparty (except as specified below) or the Income Noteholders, but with Rating Agency Confirmation for so long as any Class of Notes are rated as such time by any Rating Agency, the Issuer, when authorized by Board Resolutions, and the Trustee, at any time and from time to time subject to the requirement provided below in this Section 8.1 with respect to the ratings of the Rated Notes and subject to Section 8.3, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for certain limited purposes including, inter alia, to: (a)

evidence the succession of another Person to the Issuer and the assumption by any such successor Person of the covenants of the Issuer herein and in the Rated Notes pursuant to Section 7.10 or 7.11;

(b)

add to the covenants of the Issuer or the Trustee for the benefit of the Holders of all of the Rated Notes;

(c)

pledge any additional property to the Trustee;

(d)

add to the conditions, limitations or restrictions on the authorized amount, terms and purposes of the issue, authentication and delivery of the Rated Notes;

(e)

effect the appointment of a successor;

(f)

reduce the permitted minimum denomination of the Rated Notes;

(g)

take any action necessary or advisable to prevent the Issuer, any Note Paying Agent or the Trustee from being subject to withholding or other taxes, fees or assessments, to prevent the Issuer (without adverse effect to the Issuer) from failing to qualify as a Qualified REIT Subsidiary or to prevent the Issuer from being treated as engaged in a U.S. trade or business or otherwise being subjected to U.S. federal, state or local income tax on a net income tax basis; provided that such action will not cause the Noteholders to experience any material change to the timing, character or source of income from the Notes and will not be considered a significant modification resulting in an exchange for purposes of section 1.1001-3 of the U.S. Treasury regulations;

(h)

modify the restrictions on and procedures for resale and other transfer of the Rated Notes in accordance with any change in any applicable law or regulation (or the interpretation thereof) or to enable the Issuer to rely upon any less restrictive exemption from registration under the Securities Act or the Investment Company Act (in addition to that provided under Section 3(c)(7) thereunder) or to remove restrictions on resale and transfer to the extent not required thereunder;

(i)

grant, convey, transfer, assign, mortgage or pledge any property to or with the Trustee for the benefit of the Secured Parties; 120

Processed and formatted by SEC Watch - Visit SECWatch.com

(j)

correct or amplify the description of any property at any time subject to the lien of this Indenture, or to better assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations) or to subject to the lien of this Indenture any additional property;

(k)

make any change required by the stock exchange on which any Class of Rated Note is listed, if any, in order to permit or maintain such listing;

(l)

correct, amend, cure any manifest error, inconsistency, defect or ambiguity or correct any typographical error in this Indenture;

(m)

modify this Indenture to conform the terms herein to the terms set forth in the then current Offering Circular;

(n)

modify any provision (other than in respect of a Reserved Matter), with respect to restrictions upon the Issuer’s rights to acquire and dispose of Collateral Debt Securities and other assets, that the Issuer or the Collateral Manager determines to be necessary or desirable in order for the Issuer to maintain any desired exemption from registration of the Issuer under the Investment Company Act or of the Notes under the Securities Act;

(o)

with the consent of the Collateral Manager, modify the calculation of the Collateral Quality Tests and the definitions applicable thereto to correspond with published or written changes in the guidelines, methodology or standards established by the Rating Agencies;

(p)

with the consent of the Collateral Manager and the consent of not less than a majority of the aggregate principal amount of the Controlling Class, to modify the calculation of the Coverage Tests and the definitions applicable thereto to correspond with published or written changes in the guidelines, methodology or standards established by the Rating Agencies; or

(q)

agree to any modification of the Indenture or any other Transaction Document (other than in respect of a Reserved Matter), which is, in the opinion of the Trustee, proper to make if, in the opinion of the Trustee (based upon an opinion of counsel), such modification will not have a material adverse effect on the interests of Holders of any Class or Classes of Notes or the Initial Hedge Counterparty and which is of a formal, minor or technical nature or is to correct a manifest error.

In addition, the Trustee may, but is not obligated to, without the consent of the Rated Noteholders or of the Holders of any relevant Class or Classes of Rated Notes, agree to any modification of any other Transaction Document which is of a formal, minor or technical nature or is to correct a manifest error and which is, in the opinion of the Trustee (based upon an opinion of counsel as described in Section 8.3), proper to make; provided such modification will not have a material adverse effect on the interests of the Initial Hedge Counterparty or the Holders of any Class or Classes of Notes. For so long as any Rated Notes are Outstanding, no such supplemental indenture shall be effective unless and until Rating Agency Confirmation has been received. The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s 121

Processed and formatted by SEC Watch - Visit SECWatch.com

own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. No modification to the Indenture will be effective until the Collateral Manager has received written notice of such amendment and, if such amendment affects the rights, obligations or compensation of the Collateral Manager, the Collateral Manager has consented in writing to the terms of the proposed amendment. In addition, the consent of any predecessor Collateral Manager will be required to implement any such supplemental indenture that would change any provision of the Indenture entitling such predecessor Collateral Manager to any fee or other amount payable to it under the Indenture or to reduce or delay the right of such predecessor to such payment. Without obtaining the requisite consents of the applicable parties pursuant to this Section 8.1, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of the Initial Hedge Counterparty, any Holder of Rated Notes or the Income Notes would be materially and adversely affected thereby. In determining whether or not the interests of any Holder of Rated Notes or Income Notes will be materially and adversely affected, the Trustee shall be entitled to rely upon an Opinion of Counsel or a certificate of the Issuer or the Collateral Manager as to whether the interests of any Holder of Rated Notes or of Income Notes would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the Income Note Paying Agent). The Collateral Manager will not be bound by any supplemental indenture that affects the obligations of the Collateral Manager unless the Collateral Manager has consented thereto in writing (which consent will not be unreasonably withheld). The Issuer will not consent to any supplemental indenture that would have a material adverse effect on the Initial Hedge Counterparty without the consent of the Initial Hedge Counterparty. At the cost of the Issuer, the Trustee shall provide to the Rated Noteholders, the Collateral Manager, the Income Note Paying Agent, the Initial Hedge Counterparty and each Rating Agency a copy of any proposed supplemental indenture at least ten days prior to the execution thereof by the Trustee and, for so long as any Rated Notes are Outstanding, request a Rating Agency Confirmation from each Rating Agency with respect to such supplemental indenture. As soon as practicable after the execution by the Trustee and the Issuer of any such supplemental indenture, the Trustee shall provide to the Rated Noteholders, the Collateral Manager, the Income Note Paying Agent, the Initial Hedge Counterparty and each Rating Agency a copy of the executed supplemental indenture. For so long as any Rated Notes are Outstanding and rated by either of the Rating Agencies, no supplemental indenture shall be effective unless and until a Rating Agency Confirmation from each Rating Agency has been received. 8.2.

SUPPLEMENTAL INDENTURES WITH CONSENT OF RATED NOTEHOLDERS

Except as provided below, with the prior written consent of the Initial Hedge Counterparty (but only if the right of the Initial Hedge Counterparty to payments in accordance with the Priority of Payments is adversely affected), the Holders of not less than a majority of the aggregate principal amount of the Outstanding Rated Notes of each Class (in principal amount) adversely affected thereby and the written consent of Holders of not less than 662/3 % of the aggregate principal amount of the Outstanding Income Notes (if materially and adversely affected thereby), the Trustee and the Issuer may execute a supplemental indenture to add provisions to, or change in any manner or eliminate any provisions of, the Indenture or modify in any manner the rights of the Holders of the Rated Notes of such Class or of the Income Notes or the Hedge Counterparty under the Indenture. With the written consent of the Holders of not less than 75% of the then Aggregate Outstanding Amount of each adversely affected Class of Rated Notes and the written consent of 75% of the Holders of the aggregate principal amount of the Outstanding Income Notes if materially and adversely affected 122

Processed and formatted by SEC Watch - Visit SECWatch.com

thereby (which consent shall be evidenced by an Officer’s certificate of the Issuer certifying that such consent has been obtained), Rating Agency Confirmation and the written consent of the Initial Hedge Counterparty (which shall be required only if the right of the Initial Hedge Counterparty to payments in accordance with the Priority of Payments is adversely affected), the Trustee and Issuer may, subject to Section 8.3, enter into one or more indentures supplemental hereto in order to: (a)

change the applicable Stated Maturity Date of the Rated Notes or scheduled redemption of the principal of or the due date of any installment of interest on the Rated Notes, reduce the principal amount thereof or the rate of interest thereon, or the Redemption Price with respect thereto, or change the earliest date on which Rated Notes 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 the Rated Notes or change any place where, or the coin or currency in which, Rated Notes or the principal thereof or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity Date thereof (or, in the case of redemption, on or after the Redemption Date);

(b)

reduce the percentage, in principal amount, of Holders of Rated Notes of each Class, or the percentage of Income Noteholders, whose consent is required for the authorization of any supplemental indenture or for any waiver of compliance with certain provisions of the Indenture or certain defaults thereunder or their consequences;

(c)

impair or adversely affect the Collateral other than as permitted by the Indenture;

(d)

permit the creation of any security interest ranking prior to or on a parity with the security interest of the Indenture with respect to any part of the Collateral or terminate such security interest on any property at any time subject thereto (other than in accordance with the Indenture) or deprive the Holder of any Rated Note or the Initial Hedge Counterparty of the security afforded by the security interest of the Indenture;

(e)

reduce the percentage of the aggregate principal amount of Holders of Rated Notes of each Class whose consent is required to request the Trustee to preserve the Collateral or rescind the Trustee’s election to preserve the Collateral pursuant to Section 5.5 or to sell or liquidate the Collateral pursuant to Section 5.4 or 5.5;

(f)

modify any of the provisions of this Section 8.2, except to increase the percentage of the aggregate principal amount of Outstanding Rated Notes of each Class whose Holders’ consent is required for any such action or to provide that other provisions of the Indenture cannot be modified or waived without the written consent of the Holders of 75% of the then Aggregate Outstanding Amount of each affected Class of Rated Notes Outstanding or the Initial Hedge Counterparty;

(g)

modify the definition of the term “Outstanding” or Section 11.1;

(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 or principal of any Rated Note on any Payment Date or to affect the right of the Holders of Rated Notes or the Initial Hedge Counterparty to the benefit of any provisions for the redemption of such Rated Notes contained therein;

(i)

modify provisions related to the bankruptcy or insolvency of the Issuer; or 123

Processed and formatted by SEC Watch - Visit SECWatch.com

(j)

modify provisions stating that the obligations of the Issuer are limited recourse obligations of the Issuer payable solely from the Collateral in accordance with the terms of the Indenture (Section 8.2(a) through (j) collectively, the Reserved Matters).

The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. Not later than 15 Business Days prior to the execution of any proposed supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Issuer, shall mail to the Rated Noteholders, Income Note Paying Agent, the Initial Hedge Counterparty, the Collateral Manager and each Rating Agency a copy of such proposed supplemental indenture (or a description of the substance thereof) and shall request Rating Agency Confirmation with respect to such supplemental indenture. If any Class of Rated Notes is then rated by any Rating Agency, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, Rating Agency Confirmation would not be received with respect to such supplemental indenture, unless each Holder of Rated Notes of each Class whose rating will be reduced or withdrawn has, after notice that the proposed supplemental indenture would result in such reduction or withdrawal of the rating of the Class of Rated Notes held by such Holder, consented to such supplemental indenture. Without having obtained the consent of the applicable parties pursuant to this Section 8.2, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of the Initial Hedge Counterparty, any Holder of Rated Notes or of the Income Noteholders would be materially and adversely affected thereby. Unless notified by (i) the Holders of a Majority of the then Aggregate Outstanding Amount of any Class of Rated Notes that such Class will be materially and adversely affected or (ii) the Holders of a Majority of aggregate principal amount of the Income Notes that the Income Noteholders will be materially and adversely affected, the Trustee shall be entitled to rely upon an Opinion of Counsel or certificate of the Issuer or the Collateral Manager as to whether the interests of any Holder of Rated Notes or of the Income Noteholders would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the Income Note Paying Agent). It shall not be necessary for any Act of Rated Noteholders or any consent of Income Noteholders under this Section 8.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act or consent shall approve the substance thereof. Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Issuer, shall mail or make available to the Rated Noteholders, the Income Note Paying Agent (for forwarding to the Income Noteholders), the Initial Hedge Counterparty, the Collateral Manager and each Rating Agency a copy thereof. Any failure of the Trustee to publish or mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. In addition, the Issuer shall cause to be delivered a copy of the executed supplemental indenture to the Repository for posting on the Repository in the manner described in Section 14.3. 8.3.

EXECUTION OF SUPPLEMENTAL INDENTURES

In executing or accepting the additional trusts created by any supplemental indenture permitted by this Section 8 or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Sections 6.1 and 6.3) shall be fully protected in relying in good faith upon an Opinion of Counsel (which may rely on an Officer’s certificate of the Issuer or Collateral 124

Processed and formatted by SEC Watch - Visit SECWatch.com

Manager), stating that the execution of such supplemental indenture is authorized, or permitted by this Indenture and that all conditions precedent thereto have been complied with. Any such Opinion of Counsel may be supported as to factual (including financial and capital markets) matters by such relevant certificates and other documents as may be necessary or advisable in the judgment of counsel delivering such Opinion of Counsel. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or indemnities under this Indenture or otherwise. Such supplemental indenture will not be binding on the Collateral Manager to the extent that it reduces the rights or increases the obligations of the Collateral Manager, unless such supplemental indenture is consented to in writing by the Collateral Manager. 8.4.

EFFECT OF SUPPLEMENTAL INDENTURES

Upon the execution of any supplemental indenture under this Section 8, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Rated Notes theretofore and thereafter authenticated and delivered hereunder shall be bound thereby. 8.5.

REFERENCE IN RATED NOTES TO SUPPLEMENTAL INDENTURES

Rated Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Section 8 may, and if required by the Trustee shall, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Issuer shall so determine, new Rated Notes, so modified as to conform in the opinion of the Trustee and the Issuer to any such supplemental indenture, may be prepared and executed by the Issuer and authenticated and delivered by the Trustee in exchange for Outstanding Rated Notes. ARTICLE IX REDEMPTION OF RATED NOTES 9.1.

REDEMPTION OF RATED NOTES

The Rated Notes will be subject to redemption in whole but not in part at their respective Redemption Prices, in each case, in accordance with the procedures, and subject to the satisfaction of the conditions, in Section 9.2 below, in the following circumstances: (a)

on or after the Payment Date occurring in June 2011 and continuing until the Stated Maturity Date (the Call Period), at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes (an Optional Redemption);

(b)

on any Payment Date following the occurrence and during the continuation of a Tax Event, (i) at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes or (ii) subject to the satisfaction of the Income Note Redemption Approval Condition, at the direction of the Holders of a Majority of the then Aggregate Outstanding Amount of the Controlling Class (such a redemption, a Tax Redemption); and

(c)

automatically and without any direction by any Person, (i) if the Notes have not been redeemed in full on or after the Payment Date occurring in June 2018, and (ii) if any of the conditions set forth in Sections 9.2(a) through (d) below have not been met or if the 125

Processed and formatted by SEC Watch - Visit SECWatch.com

highest bidder fails to pay the purchase price within six Business Days following such Payment Date, the Payment Date thereafter, unless the Notes are redeemed in full prior to the next Auction Date (such a redemption, an Auction Call Redemption). 9.2.

REDEMPTION PROCEDURES; AUCTION

In connection with any Redemption, the Trustee and the Collateral Manager will, in accordance with the procedures set forth in Schedule E (the Auction Procedures) and at the expense of the Issuer, conduct an auction (an Auction) of the Collateral Debt Securities included in the Collateral on a date (each such date, an Auction Date) occurring no later than ten Business Days prior to any scheduled Redemption Date. Any of the Placement Agents, the Collateral Manager, the Income Noteholders, the Trustee or their respective Affiliates may, but will not be required to, bid at the Auction. (a)

(b)

Any Redemption will be subject to the satisfaction of each of the following conditions: (1)

the related Auction has been conducted in accordance with the Auction Procedures;

(2)

the Trustee has received bids for the Collateral Debt Securities (or for each of the related Subpools) from at least two Qualified Bidders (including the winning Qualified Bidder) identified on a list of qualified bidders provided by the Collateral Manager to the Trustee;

(3)

the Collateral Manager certifies that the Highest Auction Price would result in the Sale Proceeds from the Collateral Debt Securities (or the related Subpools) for a purchase price (paid in cash) plus the Balance of all Eligible Investments and cash held by the Issuer plus any termination payments payable by a Hedge Counterparty to the Issuer (in excess of any amounts payable by the Issuer to a Hedge Counterparty) resulting from the termination of the Hedge Agreement pursuant to the Redemption being at least equal to the sum of (i) the aggregate Redemption Prices of the Notes plus (ii) any accrued but unpaid fees and expenses of the Issuer pursuant to Section 11.1(b)(1), (15) and (16) (including any termination payments payable by the Issuer resulting from the termination of the Hedge Agreement pursuant to the Redemption) plus (iii) (a) in connection with a Tax Redemption at the direction of the Controlling Class and (b) an Auction Call Redemption, any additional amounts necessary to satisfy the Income Note Redemption Approval Condition; and

(4)

the bidder(s) who offered the Highest Auction Price for the Collateral Debt Securities (or the related Subpools) enter(s) into a written agreement with the Issuer (which the Issuer will execute if the conditions set forth above and in the Indenture are satisfied, which execution will constitute certification by the Issuer that such conditions have been satisfied) that obligates the highest bidder(s) (or the highest bidder for each Subpool) to purchase all of the Collateral Debt Securities (or the relevant Subpool) and provides for payment in full (in Cash) of the purchase price to the Trustee on or prior to the sixth Business Day following the relevant Auction Date.

In addition, any Optional Redemption requires the occurrence of the following: 126

(1)

at least four Business Days before the scheduled Redemption Date, the Collateral Manager has furnished to the Trustee evidence, in form satisfactory to the Trustee, that the Collateral Manager on behalf of the Issuer has entered into a binding agreement or agreements with an institution or institutions (or guarantor or guarantors of the obligations): (A) with regard to which Rating Agency Confirmation has been received; or (B) whose long-term unsecured debt obligations (other than such obligations whose rating is based on the credit of a person other than such institution) have a credit rating from Moody’s, if rated by Moody’s, of “P-1,” Fitch of “Fl” and of at least “A1” from S&P; and in each case, to sell, not later than the Business Day immediately preceding the scheduled Redemption Date, in immediately available funds, all or part of the Collateral Debt Securities at an aggregate purchase price at least equal to an amount sufficient together with the balance of all Eligible Investments maturing on or prior to the scheduled Redemption Date and any termination payments received by the Issuer under any Hedge Agreements on or prior to the scheduled redemption date, to pay all administrative and other fees and expenses, the Collateral Management Fee and any other amount payable under Section 11.1(b)(1), (15) and (16), to pay any amounts payable under each Hedge Agreement, if any, and to redeem all of the Notes on the scheduled redemption date at the applicable Redemption Price; or

(2)

prior to selling any Collateral Debt Securities or any other collateral, the Collateral Manager certifies that the expected proceeds from such sale will, in the aggregate, equal or exceed, in each case, the sum of (a) the Redemption Prices of the Notes plus (b) all expenses of such redemption and all other administrative fees and expenses payable on the related Redemption Date.

Provided that all of the conditions set forth in Section 9.2(a) through (d) have been met, the Trustee will sell and transfer the Collateral Debt Securities (or each related Subpool), without representation, warranty or recourse, to the bidder(s) who offered the Highest Auction Price for the Collateral Debt Securities (or the related Subpools) in accordance with and upon completion of the Auction Procedures. If any of the

Processed and formatted by SEC Watch - Visit SECWatch.com

conditions set forth in Section 9.2(a) through (d) are not met, (i) the Redemption will not occur on the Payment Date following the relevant Auction Date, (ii) the Trustee will give notice of the withdrawal of the Redemption, (iii) subject to clause (iv) below, the Trustee will decline to consummate such sale and may not solicit any further bids or otherwise negotiate any further sale of Collateral Debt Securities in relation to such Auction and (iv) unless the Rated Notes are redeemed in full prior to the next succeeding Auction Date, the Trustee will conduct another Auction on the next succeeding Auction Date. The Trustee will deposit the purchase price for the Collateral Debt Securities in the Collection Account, and the Rated Notes and, to the extent funds are available therefor, the Income Notes, will be redeemed on the Payment Date immediately following the relevant Auction Date in the order of priorities set forth in Section 11.1. Any Redemption will only be effected on a Payment Date. Installments of principal and interest due on or prior to a Redemption Date shall continue to be payable to the Holders of such Rated Notes as of the relevant Record Dates according to their terms. 9.3.

RECORD DATE; NOTICE TO TRUSTEE OF REDEMPTION (a)

The Issuer shall set the Redemption Date and the applicable Record Date and give notice thereof to the Trustee pursuant to Section 9.3(b) below and shall issue an Issuer Request 127

Processed and formatted by SEC Watch - Visit SECWatch.com

to the Trustee for the provision of the information necessary for the Issuer to compile the Redemption Date Statement in accordance with Section 10.12(b). (b)

9.4.

In the event of any Redemption, the Issuer shall, at least 45 days (but not more than 90 days) prior to the Redemption Date, notify the Trustee and the Initial Hedge Counterparty of such Redemption Date, the applicable Record Date, the principal amount of each Class of Notes to be redeemed on such Redemption Date and the Redemption Price of such Notes.

NOTICE OF REDEMPTION

Notice of Redemption will be given by first-class mail, postage prepaid, mailed not less than eight Business Days prior to the applicable Redemption Date, to the Initial Hedge Counterparty, each Rating Agency and each Holder of Rated Notes at such Holder’s address in the Note Register maintained by the Note Registrar in accordance with the provisions of this Indenture and to the Collateral Manager. Rated Notes called for Redemption must be surrendered at the office of any Note Paying Agent appointed pursuant to this Indenture in order to receive the Redemption Price. The Issuer will also deliver notice of Redemption to the Irish Paying Agent if and so long as any Class of Rated Notes to be redeemed is listed on the Irish Stock Exchange. All notices of redemption shall state: (a)

the applicable Redemption Date;

(b)

the applicable Record Date;

(c)

the Redemption Price;

(d)

that all the Notes of the relevant Class are being redeemed in full and that interest on the applicable principal amount of Notes shall cease to accrue on the date specified in the notice; and

(e)

the place or places where such Rated Notes are to be surrendered for payment of the Redemption Price, which shall be the office or agency of the Note Paying Agent to be maintained as provided in Section 7.2.

Notice of redemption shall be given by the Issuer or, at the Issuers’ request, by the Trustee in the name and at the expense of the Issuer. Failure to give notice of redemption, or any defect therein, to any Holder of any Note selected for redemption shall not impair or affect the validity of the redemption of any other Notes. 9.5.

NOTICE OF WITHDRAWAL

With regard to an Optional Redemption or a Tax Redemption, any notice of redemption may be withdrawn by the Issuer up to the fourth Business Day prior to the Redemption Date by written notice to the Trustee and the Collateral Manager only if the Collateral Manager is unable to deliver such sale agreement or agreements or certifications, as the case may be, in form satisfactory to the Trustee. With regard to any Redemption, notice of any withdrawal pursuant to Section 9.2 shall be given by the Trustee to each Holder of Rated Notes at such Holder’s address in the Note Register maintained by the Note Registrar by overnight courier guaranteeing next day delivery (or second day delivery outside the United States) sent not later than the third Business Day prior to such Redemption Date. In addition, the Trustee 128

Processed and formatted by SEC Watch - Visit SECWatch.com

will, if any Class of Rated Notes to have been redeemed is listed on the Irish Stock Exchange, deliver a notice of such withdrawal to the Irish Stock Exchange not less than three Business Days prior to such Redemption Date. 9.6.

RATED NOTES PAYABLE ON REDEMPTION DATE

Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after the Redemption Date (unless the Issuer shall default in the payment of the Redemption Price) such Rated Notes shall cease to bear interest. Upon final payment on a Note to be redeemed, the Holder shall present and surrender such Note at the place specified in the notice of redemption on or prior to such Redemption Date; provided that if there is delivered to the Issuer (i) such security or indemnity as may be required by it to save it harmless and (ii) an undertaking thereafter to surrender such Note, then, in the absence of notice to the Issuer that the applicable Note has been acquired by a bona fide purchaser, such fmal payment shall be made without presentation or surrender. Installments of interest on Rated Notes of a Class so to be redeemed whose Stated Maturity Date is on or prior to the Redemption Date shall be payable to the Holders of such Rated Notes, or one or more predecessor Rated Notes, registered as such at the close of business on the relevant Record Date according to the terms and provisions of Section 2.6(e). If any Rated Note called for redemption shall not be paid upon surrender thereof for redemption, the principal thereof shall, until paid, bear interest from the Redemption Date at the Applicable Periodic Interest Rate for each successive Interest Period the Rated Note remains Outstanding. 9.7.

SPECIAL AMORTIZATION

If the Collateral Manager notifies the Trustee in writing that it has determined, in its sole discretion, that investments in additional Collateral Debt Securities would either be impractical or not beneficial, the amount of such Collateral Principal Collections available pursuant to Section 11.1(b)(12)(a), as determined by the Collateral Manager (the Special Amortization Amount), shall be applied to the payment of principal on the Notes on the next succeeding Payment Date (a Special Amortization) in accordance with Section 11.1(b)(12). In order for amounts to be applied for a Special Amortization on any Payment Date, the Collateral Manager is required to deliver, to each of the Trustee and each Rating Agency, advance written notice (which may be included in the related Note Report) (each, a Special Amortization Notice) specifying the identity and principal amount of each Class of Rated Notes to be paid pursuant to such Special Amortization and that the Collateral Manager has been unable to identify for purchase by the Issuer Substitute Collateral Debt Securities that comply with the Reinvestment Criteria and the other applicable requirements of the Indenture. On each Payment Date on which a Special Amortization occurs, each related Hedge Agreement, to the extent provided for therein, will be terminated in part in accordance with the terms and conditions thereof, including compliance with any applicable requirement that the Issuer receive Rating Agency Confirmation from S&P, and any amounts due and payable pursuant to such Hedge Agreement in connection with such termination thereof will be paid on such Payment Date in accordance with the terms thereof subject to the Indenture. 129

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE X ACCOUNTS, ACCOUNTINGS AND RELEASES 10.1.

10.2.

COLLECTION OF FUNDS (a)

Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all funds and other property payable to or receivable by the Trustee pursuant to this Indenture, including all payments due on the Pledged Securities, in accordance with the terms and conditions of such Pledged Securities. The Trustee shall segregate and hold all such funds and property received by it in trust for the Secured Parties and shall apply such funds as provided in this Indenture.

(b)

Each of the parties hereto hereby agrees to cause the Custodian or any other Securities Intermediary that holds any funds or other property for the Issuer in an Account to agree with the parties hereto that (1) each Account is a Securities Account in respect of which the Trustee is the Entitlement Holder, (2) each Account is held by a financial institution that has a combined capital and surplus of at least U.S.$250,000,000 and being subject to supervision or examination by federal or state banking authority, (3) the Cash, Securities and other property credited to any Account is to be treated as a Financial Asset under Article 8 of the UCC and (4) the securities intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC) for that purpose will be the State of New York. In no event may any Financial Asset held in any Account be registered in the name of, payable to the order of, or specially Indorsed to, the Issuer unless such Financial Asset has also been Indorsed in blank or to the Custodian or other Securities Intermediary that holds such Financial Asset in such Account. Each Account shall be held and maintained at an office located in Chicago, Illinois.

GENERAL PROVISIONS APPLICABLE TO ACCOUNTS

The Payment Account, Collateral Account, Uninvested Proceeds Account, Collection Account (including each Collateral SubAccount therein), Expense Reserve Account, each Hedge Counterparty Collateral Account, Ramp-Up Interest Reserve Account and NonMonthly Pay Asset Interest Reserve Account shall remain at all times with a fmancial institution having a long-term debt rating of at least “BBB+” by S&P. (a)

The Trustee agrees to give the Issuer prompt notice (with a copy to the Hedge Counterparty, the Collateral Manager, each Rating Agency and the Income Note Paying Agent) if any Account or any funds on deposit therein, or otherwise standing to the credit of any Account, shall become subject to any writ, order, judgment, warrant of attachment, execution or similar process.

(b)

The Collateral Manager shall direct the Trustee to invest and reinvest any funds on deposit in any of the Accounts (other than the Payment Account). In the event that the Collateral Manager has not delivered investment instructions to the Trustee or after the occurrence of an Event of Default, the Trustee shall invest and reinvest any funds on deposit in any Account (other than the Payment Account) as fully as practicable in investments described in clause (iii) of the definition of Eligible Investments maturing not later than the earlier of (i) 30 days after the date of such investment or (ii) the Business Day immediately preceding the next Payment Date. With respect to each 130

Processed and formatted by SEC Watch - Visit SECWatch.com

Account, all interest and other income from Eligible Investments purchased with funds on deposit in such Account shall be deposited in such Account, any gain realized from such investments shall be credited to such Account, and any loss resulting from such investments shall be charged to such Account. Any gain or loss with respect to an Eligible Investment shall be allocated in such a manner as to increase or decrease, respectively, Collateral Principal Collections and/or Collateral Interest Collections in the proportion that the amount of Collateral Principal Collections and/or Collateral Interest Collections used to acquire such Eligible Investment bears to the purchase price thereof. The Trustee shall not in any way be held liable by reason of any insufficiency of any such Account resulting from any loss relating to any such investment. Nothing herein shall be deemed to relieve the Bank or its Affiliates from any duties or liabilities with respect to investments in obligations of the Bank or any Affiliate thereof. (c)

10.3.

All funds deposited from time to time in the Collection Account, the Uninvested Proceeds Account, the Payment Account, the Expense Reserve Account, the Ramp-Up Interest Reserve Account or the Non-Monthly Pay Asset Interest Reserve Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided.

COLLATERAL ACCOUNT

The Trustee shall, prior to the Closing Date, cause the Custodian to establish a Securities Account which shall be designated as the “Collateral Account”, which shall be in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties and into which the Trustee shall from time to time deposit Collateral. All Collateral from time to time deposited in, or otherwise standing to the credit of, the Collateral Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided. The Issuer shall not have any legal, equitable or beneficial interest in the Collateral Account other than in accordance with the Priority of Payments. 10.4.

UNINVESTED PROCEEDS ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Uninvested Proceeds Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties, into which the Trustee shall deposit all Uninvested Proceeds (other than the organizational and structuring fees and expenses of the Issuer (including, without limitation, the legal fees and expenses of counsel to the Issuer, the Placement Agents and the Collateral Manager), the expenses of offering the Rated Notes and the Income Notes and amounts deposited in the Expense Reserve Account on such date). On or prior to the Effective Date, the Collateral Manager on behalf of the Issuer may direct the Trustee to, and upon such direction the Trustee shall, apply funds in the Uninvested Proceeds Account to purchase additional Collateral Debt Securities and, pending such investment in additional Collateral Debt Securities, such funds will be invested in Eligible Investments, as directed by the Collateral Manager, with stated maturities no later than the Business Day immediately preceding the next Payment Date. The Trustee shall transfer any Uninvested Proceeds remaining on deposit in the Uninvested Proceeds Account on the Effective Date to the Collection Account to be treated as Collateral Principal Collections on the first Payment Date and distributed in accordance with the Priority of Payments. 131

Processed and formatted by SEC Watch - Visit SECWatch.com

10.5.

10.6.

COLLECTION ACCOUNT (a)

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Collection Account” (and which may be a sub-account of the Collateral Account), which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. The Trustee shall cause to be established two sub-accounts of the Collection Account. The Trustee shall deposit Collateral Principal Collections into one sub-account (the Collateral Principal Collections Sub-Account) and Collateral Interest Collections into the other sub-account. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Collection Account (including the Collateral Principal Collection Sub-Account) in Eligible Investments or Substitute Collateral Debt Securities in accordance with the requirements and limitations contained in Section 12.1(c).

(b)

The Trustee, within one Business Day after receipt of any Distribution or other proceeds that are not Cash shall so notify the Issuer and the Issuer shall sell such Distribution or other proceeds for Cash in accordance with Section 12.1.

(c)

The Trustee shall transfer to the Payment Account for application pursuant to Section 11.1(a) and in accordance with the calculations and the instructions contained in the Note Valuation Report prepared by the Issuer pursuant to Section 10.12(a), on or prior to the Business Day prior to each Payment Date, funds on deposit in the Collection Account (including reinvestment income) other than Collections received after the end of the Due Period with respect to such Payment Date.

(d)

The Trustee shall withdraw and apply amounts on deposit in the Collection Account in accordance with any Redemption Date Statement delivered to the Trustee in connection with the redemption of Rated Notes pursuant to Section 9.1.

EXPENSE RESERVE ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Expense Reserve Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. On the Closing Date, the Trustee shall deposit into the Expense Reserve Account an amount equal to U.S.$75,000 together with an amount sufficient to pay any outstanding fees and expenses of the Issuer in relation to the offering of the Rated Notes and the Income Notes which are not paid on the Closing Date. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Expense Reserve Account in Eligible Investments. Any amounts held in the Expense Reserve Account in excess of U.S.$25,000 on the day which is subsequent to the Effective Date (or, if such day is not a Business Day, the next following Business Day) shall be transferred by the Trustee into the Uninvested Proceeds Account. Thereafter, the Trustee shall transfer to the Expense Reserve Account from the Payment Account amounts required to be deposited therein pursuant to Section 11.1(a) and in accordance with the calculations and the instruction contained in the Note Valuation Report prepared by the Issuer pursuant to Section 10.12(a). Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be to pay (on any day other than a Payment Date) accrued and unpaid Administrative Expenses of the Issuer; provided that the Trustee shall deposit all amounts remaining on deposit in the Expense Reserve Account at the time when substantially 132

Processed and formatted by SEC Watch - Visit SECWatch.com

all of the Issuer’s assets have been sold or otherwise disposed of into the Collections Account for application as Collateral Interest Collections on the immediately succeeding Payment Date. 10.7.

NON-MONTHLY PAY ASSET INTEREST RESERVE ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “NonMonthly Pay Asset Interest Reserve Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Non-Monthly Pay Asset Interest Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Non-Monthly Pay Asset Interest Reserve Account in Eligible Investments. On each Payment Date, in accordance with the Priority of Payments, the Trustee will deposit the Non-Monthly Pay Asset Interest Reserve Amount into the Non-Monthly Pay Asset Interest Reserve Account. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Non-Monthly Pay Asset Interest Reserve Account shall be to deposit into the Payment Account, on the Business Day prior to each Payment Date, the Balance of the Non-Monthly Pay Asset Interest Reserve Account with such amount to be distributed as Collateral Interest Collections in accordance with the Priority of Payments on the related Payment Date. 10.8.

RAMP-UP INTEREST RESERVE ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Ramp-Up Interest Reserve Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Ramp-Up Interest Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Ramp-Up Interest Reserve Account in Eligible Investments. On the Closing Date, the Trustee will deposit the Ramp-Up Interest Reserve Amount into the Ramp-Up Interest Reserve Account. Prior to the first Payment Date after the Effective Date, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Ramp-Up Interest Reserve Account shall be to deposit into the Payment Account, on the Business Day prior to each Payment Date, an amount, if any, equal to the lesser of (a) the Balance of the Ramp-Up Interest Reserve Account or (b) the Rated Notes Interest Shortfall Amount, with such amount to be distributed as Collateral Interest Collections in accordance with the Priority of Payments on the related Payment Date. On the first Payment Date after the Effective Date, the Balance of the Ramp-Up Interest Reserve Account shall be deposited into the Payment Account to be distributed as Collateral Interest Collections in accordance with the Priority of Payments on the related Payment Date. 10.9.

PAYMENT ACCOUNT

The Trustee shall, prior to the Closing Date, establish a Securities Account which shall be designated as the “Payment Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Payment Account shall be held in trust by the Trustee for the benefit of the Secured Parties. Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Payment Account shall be to pay the interest on and the principal of the Rated Notes in accordance with their terms and the provisions of this Indenture and, upon Issuer Order, to pay Administrative Expenses and other amounts specified 133

Processed and formatted by SEC Watch - Visit SECWatch.com

therein, each in accordance with the Priority of Payments. The Issuer shall not have any legal, equitable or beneficial interest in the Payment Account other than in accordance with the Priority of Payments. 10.10.

DERIVATIVE CONTRACT COUNTERPARTY ACCOUNTS

For each Derivative Contract, the Trustee shall establish a segregated trust account in respect of each such Derivative Contract, which shall be designated as a Derivative Contract Counterparty Account and shall be held in trust in the name and for the benefit of and pledged to the related Derivative Contract Counterparty (the Pledgee Counterparty) and over which the Trustee shall have exclusive control and the sole right of withdrawal in accordance with the applicable Derivative Contract and this Indenture. Each Derivative Contract Counterparty Account (including any subaccount) shall be a securities account established with the Securities Intermediary in the name of the Trustee in accordance with Section 6.17. The Derivative Contract Counterparty Account shall remain at all times with the Trustee or a financial institution having a combined capital and surplus of at least U.S.$200,000,000 and a long-term debt rating by each Rating Agency at least equal to “Baa2” by Moody’s and “BBB” by S&P or its equivalent. Funds in the Derivative Contract Counterparty Account are to be held as security for and applied to pay amounts due the Pledgee Counterparty and shall not be available to pay amounts due the Noteholders unless and to the extent such funds are released as Collateral Interest Collections or Collateral Principal Collections in accordance with this Section 10.9, the applicable Derivative Contract and applicable law. The Issuer shall not have any right to withdraw money from any Derivative Contract Counterparty Account other than in accordance with this Section 10.9, the applicable Derivative Contract and applicable law. As directed by the Collateral Manager, the Trustee shall deposit into each Derivative Contract Counterparty Account all amounts which are required to secure the obligations of the Issuer to the Pledgee Counterparty in accordance with the terms of the related Derivative Contract. The Collateral Manager shall direct any such deposit only to the extent that monies are available therefor as provided herein. As directed by the Collateral Manager in writing and in accordance with the applicable Derivative Contract, amounts on deposit in a Derivative Contract Counterparty Account shall be invested in Eligible Investments. In the absence of direction from the Collateral Manager, the Trustee shall invest such amounts in Eligible Investments of the type described in paragraph (iii) of the definition of Eligible Investments. Income on and proceeds of Eligible Investments on deposit in each Derivative Contract Counterparty Account shall be applied, as directed by the Collateral Manager, to the extent required by the Derivative Contract, to the payment of any periodic amounts owed by the Issuer to the Pledgee Counterparty on the date any such amounts are due. Any income on or proceeds of Eligible Investments in a Derivative Contract Counterparty Account not required to pay amounts due the Pledgee Counterparty will be withdrawn from such account at the end of each Due Period and deposited in the Collection Account for distribution as Collateral Interest Collections or Collateral Principal Collections, as the case may be. Upon the occurrence of the designation of an Early Termination Date, Scheduled Termination Date or Termination Date under (and as each of those terms are defined in) the applicable Derivative Contract, amounts contained in the related Derivative Contract Counterparty Account shall be applied by the Trustee, as directed by the Collateral Manager, to pay any amounts then due the Pledgee Counterparty. 134

Processed and formatted by SEC Watch - Visit SECWatch.com

Any excess amounts held in a Derivative Contract Counterparty Account after payment of all amounts owing from the Issuer to the Pledgee Counterparty in accordance with the terms of the Derivative Contract (other than any Defaulted Derivative Contract Counterparty Termination Payment) shall be withdrawn from such Derivative Contract Counterparty Account and, in the case of (a) any Cash or Eligible Investment readily convertible into Cash, deposited in the Collection Account for application as Collateral Principal Collections (or to the extent constituting income on an Eligible Investment, Collateral Interest Collections), and (b) any security which satisfies the definition of a Collateral Obligation, the inclusion of which in the Collateral would satisfy the Collateral Concentration Limitations, shall be retained by the Issuer as Collateral, subject to the terms of this Indenture or otherwise sold by the Collateral Manager. No property other than Eligible Investments and funds in the Derivative Contract Counterparty Account shall be available to pay amounts due the Pledgee Counterparty; provided that, to the extent funds in the Derivative Contract Counterparty Account are insufficient, Termination Payments shall be paid solely from amounts available therefor in accordance with the Priority of Payments. Amounts contained in any Derivative Contract Counterparty Account shall not be considered to be an asset of the Issuer for purposes of any of the Collateral Quality Tests, the Collateral Concentration Limitations or the Coverage Tests, but the Derivative Contract which relates to such Derivative Contract Counterparty Account shall be so considered an asset of the Issuer. 10.11.

DERIVATIVE CONTRACT ISSUER ACCOUNT

If and to the extent that any Derivative Contract requires the Derivative Contract Counterparty (a Pledgor Counterparty) to secure its obligations to the Issuer with respect to such Derivative Contract, the Trustee shall, on or prior to the date such Derivative Contract is entered into, establish a segregated trust account, which shall be designated as a Derivative Contract Issuer Account. Each Derivative Contract Issuer Account (including any subaccount) shall be a securities account established with the Securities Intermediary in the name of the Trustee in accordance with Section 6.17. The Derivative Contract Issuer Account shall remain at all times with the Trustee or a financial institution having a combined capital and surplus of at least U.S.$200,000,000 and a long-term debt rating by each Rating Agency at least equal to “Baa2” by Moody’s and “BBB” by S&P or its equivalent. The Trustee shall deposit into each Derivative Contract Issuer Account all amounts which are required to secure the obligations of the Pledgor Counterparty to the Issuer in accordance with the terms of such Derivative Contract. A Pledgor Counterparty shall not have any right to withdraw money from a Derivative Contract Issuer Account. As directed by the Collateral Manager in writing, in accordance with the applicable Derivative Contract, amounts on deposit in a Derivative Contract Issuer Account shall be invested in Eligible Investments. Income received on amounts on deposit in each Derivative Contract Issuer Account shall be withdrawn from such account and, to the extent required by the related Derivative Contract, released to the applicable Pledgor Counterparty or otherwise retained in the Derivative Contract Issuer Account. In the absence of direction from the Collateral Manager, the Trustee shall invest such amounts in Eligible Investments of the type described in paragraph (iii) of the definition of Eligible Investments. Upon the occurrence of the designation of an “Early Termination Date,” “Scheduled Termination Date” or “Termination Date” under (and as each of those terms are defined in) the applicable Derivative Contract, amounts contained in the related Derivative Contract Issuer Account shall be applied by the Trustee, as directed by the Collateral Manager, in accordance with the terms of the Derivative Contract, to pay any amounts then due the Issuer. Any excess amounts held in a Derivative Contract Issuer Account, after payment of all amounts owing from the Pledgor Counterparty to the Issuer in accordance with the terms of the Derivative Contract shall be withdrawn from such Derivative Contract Counterparty Account and released to the Pledgor Counterparty in accordance with the terms of the Derivative Contract. 135

Amounts contained in any Derivative Contract Issuer Account shall not be considered to be an asset of the Issuer for purposes of any of the Collateral Quality Tests, the Collateral Concentration Limitations or the Coverage Tests, but the Derivative Contract which relates to such Derivative Contract Counterparty Account shall be so considered an asset of the Issuer. 10.12.

REPORTS BY TRUSTEE

The Trustee shall supply, in a timely fashion to each Rating Agency (so long as any Rated Notes are rated by such Rating Agency), the Initial Hedge Counterparty, the Holders of Rated Notes of the Controlling Class, the Collateral Manager, the Income Note Paying Agent, the Placement Agents and the Issuer any information regularly maintained by the Trustee that each such Person may from time to time request with respect to the Pledged Securities or the Accounts reasonably needed to complete the Note Valuation Report or to provide any other information reasonably available to the Trustee by reason of its acting as Trustee hereunder and required to be provided by Section 10.12. The Trustee shall forward to the Collateral Manager, the Holders of Rated Notes of the Controlling Class, or upon request therefor, any Holder of a Rated Note shown on the Note Register, the Placement Agents, the Initial Hedge Counterparty or the Income Note Paying Agent, copies of notices and other writings received by it from the issuer of any Collateral Debt Security or from any Clearing Agency with respect to any Collateral Debt Security advising the holders of such security of any rights that the holders might have with respect thereto (including notices of calls and redemptions of securities) as well as all periodic financial reports received from such issuer and Clearing Agencies with respect to such issuer; provided that the Trustee shall not disclose any unpublished S&P Rating assigned by S&P with respect to any Collateral Debt Security without the prior consent of S&P. So long as any Class of Rated Notes is listed on the Irish Stock Exchange, the Irish Paying Agent shall notify the Irish Stock Exchange not later than the Business Day preceding each Payment Date of the amount of principal payments to be made on the Rated Notes

Processed and formatted by SEC Watch - Visit SECWatch.com

of each Class on such Payment Date, any Class C Cumulative Periodic Interest Shortfall Amount, any Class D Cumulative Periodic Interest Shortfall Amount, any Class E Cumulative Periodic Interest Shortfall Amount and the Aggregate Outstanding Amount of the Rated Notes of each Class and as a percentage of the original Aggregate Outstanding Amount of the Rated Notes of such Class after giving effect to the principal payments, if any, on such Payment Date. As promptly as possible following the delivery of each Note Valuation Report to the Trustee pursuant to Section 10.12(a) or (b), as applicable, the Issuer shall cause a copy of such report to be delivered the Repository for posting on the Repository in the manner described in Section 14.3. In connection therewith, the Issuer acknowledges and agrees that each Note Valuation Report shall be posted to the Repository for use in the manner described in the section headed “Terms of Use” on the Repository. 10.13.

ACCOUNTINGS (a)

Payment Date Accounting. The Issuer shall, not later than the related Payment Date and after the reconciliation process described in this Section 10.12, render an accounting (a Note Valuation Report), determined as of each Calculation Date, and deliver the Note Valuation Report to each Rating Agency, the Trustee and the Collateral Manager and make available via the Trustee’s internet website, initially located at www.cdotrustee.net to the Trustee, the Irish Paying Agent, the Initial Hedge Counterparty, the Income Note Paying Agent, each Note Transfer Agent, the Placement Agents and, upon written request therefor, any Holder of a Rated Note shown on the Note Register. The Note Valuation 136

Processed and formatted by SEC Watch - Visit SECWatch.com

Report shall contain the following information (which shall, in the case of any Note Valuation Report delivered to S&P, be presented in a form that complies with and includes the information required by S&P’s Preferred Format) determined, unless otherwise specified below, as of the related Calculation Date: (1)

the calculation showing compliance with each of the Coverage Tests, accompanied by a list setting forth the applicable maximum or minimum value, percentage or ratio which must be maintained pursuant to this Agreement with respect to each of the Coverage Tests and a list setting forth the results of the calculation of each of the Coverage Tests with respect to the Collateral Debt Securities, the calculation showing whether the S&P CDO Monitor Test is satisfied (including the weighted average rating, the default measure, variability measure and correlation measure, the scenario default rate and/or such other information required to be computed with respect to the S&P CDO Monitor Test), and the calculation showing the Fitch Weighted Average Rating Factor, the Weighted Average Fixed Rate Coupon, the Weighted Average Spread, the Weighted Average Life, the S&P Weighted Average Recovery Rate for each Class of Notes, the Moody’s Recovery Rate Test and the Moody’s WARF Test;

(2)

the estimated remaining Average Life of each of the Collateral Debt Securities;

(3)

the Applicable Periodic Interest Rate in respect of each Class of Notes and the amount of Periodic Interest payable to the Holders of the Notes for such Payment Date (in the aggregate and by Class);

(4)

the amount (if any) payable to each Hedge Counterparty pursuant to the related Hedge Agreement;

(5)

the amount (if any) payable by each Hedge Counterparty pursuant to the related Hedge Agreement:

(6)

the Aggregate Fees and Expenses payable on the next Payment Date on an itemized basis;

(7)

the Aggregate Fees and Expenses paid during a period of 12 months ending on the next Payment Date on an itemized basis;

(8)

for the Collection Account: (i)

the Balance on deposit in the Collection Account and the Collateral Principal Collections Sub-Account at the end of the related Due Period;

(ii)

the nature and source of any Collections in the Collection Account and the Collateral Principal Collections Sub-Account, including Collections received since the date of the last Note Valuation Report;

(iii)

the amounts payable from the Collection Account in accordance with the priority set forth in Section 11.1 on the next Payment Date; and

(iv)

the Balance remaining in the Collection Account immediately after all payments and deposits to be made on such Payment Date; and 137

Processed and formatted by SEC Watch - Visit SECWatch.com

(v) (9)

the Balance on deposit in the Collateral Principal Collections Sub-Account;

for the Non-Monthly Pay Asset Interest Reserve Account: (i)

the balance on deposit in the Non-Monthly Pay Asset Interest Reserve Account at the end of the related Due Period;

(ii)

the amount payable from the Non-Monthly Pay Asset Interest Reserve Account pursuant to the Priority of Payments on the next Payment Date;

(iii)

the Non-Monthly Pay Asset Interest Reserve Amount to be paid into the Non-Monthly Pay Asset Interest Reserve Account on the next Payment Date; and

(iv)

the Balance remaining in the Non-Monthly Pay Asset Interest Reserve Account immediately after all payments and deposits to be made on such Payment Date;

(10)

for the Ramp-Up Interest Reserve Account prior to the Payment Date after the Effective Date, the balance on deposit in the Ramp-Up Interest Reserve Account at the end of the related Due Period;

(11)

for the Expense Reserve Account: (i)

the amount to be paid into the Expense Reserve Account on the next Payment Date; and

(ii)

the Balance remaining in the Expense Reserve Account immediately after all payments and deposits to be made on such Payment Date;

(12)

the nature, source and amount of any proceeds in the Derivative Contract Issuer Account and any sub-accounts thereof;

(13)

the Hedge Receipt Amount or the Hedge Payment Amount for the related Payment Date, and for each Hedge Agreement, the outstanding notional amount of such Hedge Agreement and the amounts, if any, scheduled to be received or paid, as the case may be, by the Issuer pursuant to such Hedge Agreement for the related Payment Date, separately stating the portion payable in accordance with Section 11.1;

(14)

the amount of Income Note Excess Funds on the related Payment Date;

(15)

the amount of the Senior Collateral Management Fee and the amount of the Subordinate Collateral Management Fee;

(16)

such other information as the Collateral Manager, the Placement Agents, the Trustee, S&P, Fitch or any Hedge Counterparty may reasonably request;

(17)

with respect to each Collateral Debt Security, the Principal Balance, the annual coupon rate or spread to the relevant floating rate index, the frequency of coupon 138

Processed and formatted by SEC Watch - Visit SECWatch.com

payments, the amount of principal payments received, the maturity date, the issuer, the country in which the issuer is incorporated or organized, the S&P Industry Classification Group, the Fitch Industry Classification Group, the S&P Recovery Rate, the S&P Rating and the Fitch Rating (provided that if any Fitch Rating for any Collateral Debt Security is an “estimated” or “shadow” rating, such rating shall be identified as “estimated” or “shadow rated”, shall be disclosed with an asterisk in the place of the applicable estimated or shadow rating and shall include the date as of which such rating was first provided by Fitch to the Issuer); and any S&P Rating which is determined from an implied rating, a credit estimate, a confidential rating or another non-public rating, shall not be distinguished and shall either (i) be reported in a single column with the public ratings of S&P (without distinguishing the source) or (ii) be reported in a separate column labeled “Non-public and Implied S&P Rating”; (18)

the identity and current ratings of each Derivative Contract Counterparty and, unless the Derivative Security is a Synthetic CDO Security, the Reference Obligation(s) of such related Derivative Security;

(19)

the Principal Balance, the maturity date, the S&P Rating, the Fitch Rating and the issuer of each Eligible Investment included in the Collateral;

(20)

(A) the identity and Principal Balance of each Collateral Debt Security that became a Credit Risk Security, a Defaulted Security, an Equity Security, a Written Down Security, a Withholding Tax Security, a Deferred Interest PIK Bond, (B) the date, as provided by the Collateral Manager, on which any Collateral Debt Security became a Credit Risk Security, a Defaulted Security, an Equity Security, a Written Down Security or a Withholding Tax Security, (C) the date by which the Issuer or the Collateral Manager is required to declare its intention to sell or to hold such Collateral Debt Security, (D) whether the Collateral Manager has directed the Issuer to sell or not to sell such Collateral Debt Security, and (E) the date by which any such sale must occur;

(21)

the identity of each Collateral Debt Security that was upgraded or downgraded or placed on watch for upgrade or downgrade by any Rating Agency since the date of the last Note Valuation Report;

(22)

the Principal Balance and identity of each Collateral Debt Security that was released for sale indicating the reason for such sale and the amount and identity of each Collateral Debt Security that was granted since the date of the last Note Valuation Report;

(23)

the identity and Principal Balance of each Collateral Debt Security that was a Credit Risk Security, a Defaulted Security, an Equity Security, a Written Down Security, a Withholding Tax Security or a Deferred Interest PIK Bond;

(24)

the purchase price of each Pledged Security granted and the sale price of each Pledged Security subject to a sale since the date of the last Note Valuation Report; and whether such Pledged Security is a Collateral Debt Security, an Eligible Investment or proceeds in the Collection Account;

(25)

the amount of Purchased Accrued Interest; 139

Processed and formatted by SEC Watch - Visit SECWatch.com

(26)

a description of any transactions with the Collateral Manager, the Issuer, the Collateral Administrator and the Trustee and any Affiliates thereof;

(27)

the Class A Note Break-Even Default Rate, the Class B Note Break-Even Default Rate, the Class C Note Break-Even Default Rate, the Class D Note Break-Even Default Rate and the Class E Note Break-Even Default Rate;

(28)

the Class A Note Default Differential, the Class B Note Default Differential, the Class C Note Default Differential, the Class D Note Default Differential and the Class E Note Default Differential; and

(29)

the Class A Note Scenario Default Rate, the Class B Note Scenario Default Rate, the Class C Note Scenario Default Rate, the Class D Note Scenario Default Rate, and the Class E Note Scenario Default Rate.

Upon receipt of each Note Valuation Report, the Trustee and the Collateral Manager shall compare the information contained therein to the information contained in their respective records with respect to the Collateral and shall, within two Business Days after receipt of such Note Valuation Report, notify each of the Issuer, the Initial Hedge Counterparty, the Collateral Manager, the Trustee, Fitch and S&P if the information contained in the Note Valuation Report does not conform to the information maintained by the Trustee or the Collateral Manager as applicable, with respect to the Collateral, and detail any discrepancies. In the event that any discrepancy exists, the Trustee and the Issuer, or the Collateral Manager shall attempt to promptly resolve the discrepancy. If such discrepancy cannot be promptly resolved, the Trustee shall within five Business Days after discovery of such discrepancy cause the Independent Accountants of recognized international reputation to review such Note Valuation Report and the Trustee’s and the Collateral Manager’s records to determine the cause of such discrepancy. If such review reveals an error in the Note Valuation Report or the records of the Trustee or the Collateral Manager, as the case may be, such item shall be revised accordingly and, as so revised, shall be utilized in making further calculations. Subject to the terms of this Agreement, the Trustee shall be entitled to rely on the information supplied by the Collateral Manager in relation to the preparation of the Note Valuation Report and shall not be liable for the accuracy or completeness of such information or the lack thereof. In addition to the foregoing information, each Note Valuation Report shall include a statement to the following effect: “The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act), or under any state securities laws, and the Issuer has not been and will not be registered under the United States Investment Company Act of 1940, as amended (the 1940 Act). Each Holder of the Notes, other than those Holders that are not “U.S. persons” (U.S. Person) within the meaning of Regulation S (Regulation S) under the Securities Act and have acquired their Notes outside the United States pursuant to Regulation S, is required to be both (i) (A) with respect to any Rated Note, a “qualified institutional buyer” as defined in Rule 144A under the Securities Act (Qualified Institutional Buyer), (B) solely with respect to the Class E Notes, either (1) an “accredited investor” as defined in paragraphs (1), (2), (3) or (7) of Rule 501(A) under the Securities Act (each an Institutional Accredited Investor) or (2) any of NorthStar OS VII, LLC, NS Advisors, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(A) under the Securities Act (each of the foregoing, a Permitted NS Purchaser) or (C) solely with respect to the Income Notes, a Permitted NS Purchaser and a “qualified purchaser” (Qualified Purchaser) within the meaning of Section 3(c)(7) of the 1940 Act, purchasing for its own 140

Processed and formatted by SEC Watch - Visit SECWatch.com

account or for the account of another Qualified Purchaser, that can make all of the representations in the Indenture applicable to a holder that is a U.S. Person. The beneficial interest in the Notes may be transferred only to a transferee that meets both of the criteria in clauses (i) and (ii) above and can make all of the representations in the Indenture applicable to a Holder that is a U.S. Person, except that any such transfer in reliance on Regulation S can be made only to a transferee that is not a U.S. Person. The Issuer has the right to compel any Holder that does not meet the qualifications and the transfer restrictions set forth in the Indenture to sell its interest in the Notes, or may sell such interest on behalf of such owner, pursuant to the Indenture.” (b)

(c)

Redemption Date Instructions. Not less than five Business Days after receiving an Issuer Request requesting information regarding a redemption pursuant to Section 9.1 of the Rated Notes of a Class as of a proposed Redemption Date set forth in such Issuer Request, the Trustee shall provide the necessary information (to the extent it is available to the Trustee) to the Issuer, and the Issuer shall compute the following information and provide such information in a statement (the Redemption Date Statement) delivered to the Trustee: (1)

the Aggregate Outstanding Amount of the Rated Notes of the Class or Classes to be redeemed as of such Redemption Date;

(2)

the amount of accrued interest due on such Rated Notes as of the last day of the Interest Period immediately preceding such Redemption Date; and

(3)

the amount in the Collection Account available for application to the redemption of such Rated Notes.

If the Trustee shall not have received any accounting provided for in this Section 10.12 on the first Business Day after the date on which such accounting is due to the Trustee, the Trustee shall use reasonable efforts to cause such accounting to be made by the applicable Payment Date or Redemption Date. To the extent the Trustee is required to provide any information or reports pursuant to this Section 10.12 as a result of the failure of the Issuer to provide such information or reports, the Trustee shall be entitled to retain an Independent certified public accountant in connection therewith and the reasonable costs incurred by the Trustee for such Independent certified public accountant shall be reimbursed pursuant to Section 6.8. The Trustee will make the Note Valuation Report available via its internet website initially located at www.cdotrustee.net. All information made available on the Trustee’s website will be restricted and the Trustee will only provide access to such reports to those parties entitled thereto pursuant to the Indenture. In connection with providing access to its website, the Trustee may require registration and the acceptance of a disclaimer.

10.14.

RELEASE OF SECURITIES (a)

If no Event of Default has occurred and is continuing and subject to Section 12, the Issuer shall, in connection with any sale required pursuant to Section 12.1, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the settlement date for any sale of a security certifying that the conditions set forth in Section 12.1 are satisfied, direct the Trustee to release such security from the lien of this Indenture against receipt of payment therefor. 141

Processed and formatted by SEC Watch - Visit SECWatch.com

10.15.

(b)

The Issuer shall, if notified that the issuer of the Pledged Security requires delivery of such Pledged Security as a condition to redemption or payment in full, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the date set for redemption or payment in full of a Pledged Security, certifying that such security is being redeemed or paid in full, direct the Trustee or, at the Trustee’s instructions, the Custodian, to deliver such security, if in physical form, duly endorsed, or, if such security is a Clearing Corporation Security, to cause it to be presented, to the appropriate paying agent therefor on or before the date set for redemption or payment, in each case against receipt of the redemption price or payment in full thereof.

(c)

The Trustee shall deposit any proceeds received by it from the disposition of a Pledged Security in the Collection Account.

(d)

The Trustee shall, upon receipt of an Issuer Order at such time as there are no Rated Notes Outstanding and all obligations of the Issuer hereunder have been satisfied, release the Collateral from the lien of this Indenture.

(e)

The Issuer may retain agents (including the Collateral Manager) to assist the Issuer in preparing any notice or other report required under this Section 10.13.

REPORTS BY INDEPENDENT ACCOUNTANTS (a)

At the Closing Date the Issuer (or the Collateral Manager on its behalf) shall appoint a firm of Independent certified public accountants of recognized national reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Indenture. Upon any resignation by such firm, the Issuer shall (after consultation with the Collateral Manager) propose a replacement firm meeting the criteria set forth in the preceding sentence for approval by a Majority of the Controlling Class. Upon approval by a Majority of the Controlling Class, the Issuer shall promptly appoint such firm by Issuer Order delivered to the Trustee, the Initial Hedge Counterparty, the Collateral Manager and each Rating Agency. If the Issuer shall fail to appoint a successor to a firm of Independent certified public accountants which has resigned within 30 days after such resignation, the Issuer shall promptly notify the Trustee of such failure in writing. The fees of such Independent certified public accountants and its successor shall be payable by the Issuer as provided in Section 11.1.

(b)

On or before June 25 of each year (commencing with June 25, 2007), the Issuer shall cause to be delivered to the Trustee, the Income Note Paying Agent and each Rating Agency an Accountants’ Report specifying the procedures applied and their associated findings with respect to the Note Valuation Reports and any Redemption Date Statements prepared in the preceding year. At least 60 days prior to the Payment Date in June 2007 (and, if at any time a successor firm of Independent certified public accountants is appointed, prior to the Payment Date in May following the date of such appointment), the Issuer shall deliver to the Trustee an Accountant’s Report specifying in advance the procedures that such firm will apply in making the aforementioned findings throughout the term of its service as accountants to the Issuer. The Trustee shall promptly forward a copy of such Accountant’s Report to the Initial Hedge Counterparty, the Rating Agencies, the Income Note Paying Agent and each Holder of Class A Notes (or, if no Class A Notes are Outstanding, each Holder of Class B Notes or, if no Class B Notes are Outstanding, each Holder of Class C Notes or, if no Class C Notes are Outstanding, each Holder of 142

Processed and formatted by SEC Watch - Visit SECWatch.com

Class D Notes or, if no Class D Notes are Outstanding, each Holder of Class E Notes), at the address shown on the Note Register. The Issuer shall not approve the institution of such procedures if a Majority of the Controlling Class or the Collateral Manager, by notice to the Issuer and the Trustee within 30 days after the date of the related notice to the Trustee, object thereto. (c)

10.16.

Any statement delivered to the Trustee pursuant to Section 10.14(b) above shall be made available by the Trustee to any Holder of a Rated Note shown on the Note Register upon written request therefor.

REPORTS TO RATING AGENCIES

In addition to the information and reports specifically required to be provided to the Rating Agencies, the Income Note Paying Agent, the Holders of Rated Notes of the Controlling Class, and the Initial Hedge Counterparty pursuant to the terms of this Indenture, the Income Note Paying Agency Agreement or the Hedge Agreement (as the case may be), the Issuer shall provide or procure to provide the Rating Agencies and the Initial Hedge Counterparty with (a) all information or reports delivered to the Trustee hereunder and (b) such additional information as the Rating Agencies, the Income Note Paying Agent or the Initial Hedge Counterparty may from time to time reasonably request and such information may be obtained and provided without unreasonable burden or expense. The Issuer shall promptly notify the Trustee, the Income Note Paying Agent and the Initial Hedge Counterparty if the rating of any Class of Rated Notes has been, or it is known by the Issuer that such rating will be, changed or withdrawn. The Issuer shall notify each Rating Agency in the case of (i) termination or amendment of any Transaction Document or organizational document of the Issuer, (ii) termination or change of party to any of the Transaction Documents or (iii) material breach of any of the Transaction Documents by any party thereto. From time to time Fitch may request information or reports from the Collateral Manager on the properties underlying the Collateral, including, without limitation, information on underwritten cash flow and occupancy. With respect to any Collateral Debt Security that is a Trust Preferred Security, for so long as Fitch is rating any Class of Outstanding Rated Notes, the Issuer shall provide to Fitch via email to [email protected] the following report or information (if available) with respect to the issuing entity of the related Trust Preferred Security: (a) if the issuing entity of such Trust Preferred Security is a private company, the financials for such company; (b) annual audited financials; (c) quarterly financials; and (d) quarterly compliance certificates. 10.17.

TAX MATTERS

The Issuer agrees to treat, and hereby notify the Trustee to treat, and, by accepting a Rated Note, each Holder of the Rated Notes agrees to treat, the Rated Notes, for U.S. federal, state and local income tax purposes, as indebtedness of the Issuer, to report all income (or loss) in accordance with such treatment and not to take any action inconsistent with such treatment except as otherwise required by any taxing authority under applicable law. The Issuer agrees not to elect to be treated as other than a corporation for U.S. federal income tax purposes. 10.18.

TAX INFORMATION

The Issuer shall provide on a timely basis to any holder of a beneficial interest in Rule 144A Definitive Notes (or its designee), Rule 144A Global Notes (or its designee) and Definitive Class E Notes (or its designee), upon written request therefor certifying that it is such a holder, (i) all information that a U.S. shareholder making a “qualified electing fund” election (as defined in the Code) is required to obtain for U.S. federal income tax purposes and (ii) a “PFIC Annual Information Statement” as described in Treasury Regulation 1.1295-1 (or any successor Internal Revenue Service release or Treasury 143

Processed and formatted by SEC Watch - Visit SECWatch.com

Regulation), including all representations and statements required by such statement, and will take any other steps necessary to facilitate such election by a holder of a beneficial interest in any Rule 144A Definitive Notes, Rule 144A Global Notes and Definitive Class E Notes. The Issuer shall also provide, upon request of a Holder of, or a holder of a beneficial interest in, any Rule 144A Definitive Notes, Rule 144A Global Notes and Definitive Class E Notes, any information that such Holder or holder of a beneficial interest reasonably requests to assist such Holder or holder of a beneficial interest with regard to any filing requirements the Holder or holder of a beneficial interest may have as a result of the controlled foreign corporation rules under the Code. The cost and expense of the preparation and delivery of the PFIC Annual Information Statement shall be at the expense of the Issuer. ARTICLE XI APPLICATION OF MONIES 11.1.

DISBURSEMENTS OF FUNDS FROM PAYMENT ACCOUNT; PRIORITY OF PAYMENTS (a)

Collateral Interest Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Rated Notes in connection with an Event of Default, in accordance with a Note Valuation Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Interest Collections, to the extent of Available Funds in the Collection Account, will be applied by the Trustee in the following order of priority: (1)

to pay, in the following order: (i)

taxes and filing fees and registration fees (including, without limitation, annual return fees) payable by the Issuer, if any; and then,

(ii)

the amount of any due and unpaid Trustee Fee; and then,

(iii)

the amount of any due and unpaid fees to the Administrator; and then,

(iv)

the amount of any due and unpaid Trustee Expenses; and then,

(v)

the amount of any due and unpaid fees and expenses of the Rating Agencies; and then,

(vi)

the amount of any due and unpaid expenses of the Administrator and any due and unpaid Administrative Expenses not included in (iii), (iv) and (v) above, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee; and then,

(vii)

to deposit to the Expense Reserve Account the amount needed to bring the amount on deposit therein to U.S.$25,000 (unless the Collateral Manager directs that a lesser amount be deposited to the Expense Reserve Account);

provided that the cumulative amount paid under (iii) through (vii) above (excluding any Administrative Expenses due or accrued with respect to the 144

Processed and formatted by SEC Watch - Visit SECWatch.com

actions taken on or prior to the Closing Date and accounting fees that the Trustee is required to pay (other than certain accountants’ fees related to annual reviews) and fees the Trustee pays in connection with any Event of Default and any default of the Collateral Debt Securities) may not exceed U.S.$250,000 in the aggregate in any consecutive 12-month period; (2)

to pay the Senior Collateral Management Fee with respect to such Payment Date and any Senior Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date (excluding any interest payable on such Senior Collateral Management Fee);

(3)

to pay first, any Hedge Counterparty, any amounts due to such Hedge Counterparty under any Hedge Agreement, excluding any termination payments where such Hedge Counterparty is the Defaulting Party or the sole Affected Party and second, to the extent funds in the related Derivative Contract Counterparty Account are insufficient, any Synthetic Security Counterparty, any amounts due to such Synthetic Security Counterparty, excluding any termination payments where such Synthetic Security Counterparty is the Defaulting Party or the sole Affected Party;

(4)

to pay Periodic Interest on the Class A-1 Notes and any Defaulted Interest;

(5)

to pay Periodic Interest on the Class A-2 Notes and any Defaulted Interest;

(6)

to pay Periodic Interest on the Class A-3 Notes and any Defaulted Interest;

(7)

to pay Periodic Interest on the Class B Notes and any Defaulted Interest;

(8)

if either of the Class A/B Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal of the most senior Class of Notes then Outstanding until such Class A/B Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class A/B Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class A/B Coverage Test is satisfied or until the Class B Notes are paid in full; provided that for purposes of determining if the Class A/B Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(8), the denominator of the Class A/B Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to any of the clauses above and pursuant to this Section 11.1(a)(8) on the related Payment Date;

(9)

to pay an amount equal to the Non-Monthly Pay Asset Interest Reserve Amount for deposit into the Non-Monthly Pay Asset Interest Reserve Account;

(10)

if a Ratings Confirmation Failure occurs, on each Payment Date commencing with the Payment Date following the Calculation Date following such Ratings Confirmation Failure, to pay principal on the Class A-1 Notes, the Class A2 Notes, the Class A-3 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, in that order, in the amounts necessary for each 145

Processed and formatted by SEC Watch - Visit SECWatch.com

Rating Agency to confirm its respective ratings of the Notes assigned on the Closing Date or until each Class of Notes is paid in full; (11)

to pay Periodic Interest on the Class C Notes and, if no Class A Notes and no Class B Notes are Outstanding, any Defaulted Interest on the Class C Notes;

(12)

if either of the Class C Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount) of the most senior Class of Notes then Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class C Coverage Test is satisfied or until the Class C Notes, are paid in full; provided that for purposes of determining if the Class C Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(12), the denominator of the Class C Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes pursuant to any of the clauses above and pursuant to this Section 11.1(a)(12) on the related Payment Date; provided, further, that with respect to the Class C Notes, payment of principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal not constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(13)

to pay the Class C Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(14)

to pay Periodic Interest on the Class D Notes and, if no Class A Notes, no Class B Notes and no Class C Notes are Outstanding, any Defaulted Interest on the Class D Notes;

(15)

if either of the Class D Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class D Cumulative Applicable Periodic Interest Shortfall Amount) of the most senior Class of Notes then Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class D Coverage Test is satisfied or until the Class D Notes are paid in full; provided that for purposes of determining if the Class D Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(15), the denominator of the Class D Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes pursuant to any of the clauses above and pursuant to this Section 11.1(a)(15) on the related Payment Date; provided, further, that with respect to (i) the Class C Notes, payment of principal not constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (ii) the Class D Notes, payment of principal constituting the Class D Cumulative Applicable Periodic 146

Processed and formatted by SEC Watch - Visit SECWatch.com

Interest Shortfall Amount shall be paid before principal not constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any; (16)

to pay the Class D Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(17)

to pay Periodic Interest on the Class E Notes and, if no Class A Notes, no Class B Notes, no Class C Notes and no Class D Notes are Outstanding, any Defaulted Interest on the Class E Notes;

(18)

if either of the Class E Coverage Tests is not satisfied as of the preceding Calculation Date to pay principal (including any Class E Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class E Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class E Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class E Coverage Test is satisfied or until the Class E Notes are paid in full; provided that for purposes of determining if the Class E Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(18), the denominator of the Class E Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes pursuant to any of the clauses above and pursuant to this Section 11.1(a)(18) on the related Payment Date; provided, further, that with respect to (i) the Class C Notes, payment of principal not constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any; (ii) the Class D Notes, payment of principal not constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (iii) the Class E Notes, payment of principal constituting the Class E Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal not constituting the Class E Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(19)

to pay the Class E Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(20)

to pay first, any termination payments payable by the Issuer under any Hedge Agreement upon the termination of the related Hedge Agreement, and second, any Synthetic Security upon the termination of the related Synthetic Security, in each case if such termination occurred solely as the result of an event of default or a termination event with respect to which any Hedge Counterparty or Synthetic Security Counterparty is the Defaulting Party or the sole Affected Party, as the case may be;

(21)

to pay, in the following order: (i)

any due and unpaid Trustee Fee, Trustee Expenses and unpaid Administrative Expenses, including amounts payable to the Collateral 147

Processed and formatted by SEC Watch - Visit SECWatch.com

Manager under the Collateral Management Agreement but excluding the Collateral Management Fee, in each case, in the same order of priority as provided in Section 11.1(a)(1) above and to the extent not paid in full under Section 11.1(a)(1) above without regard to any limitation on any maximum amounts payable on such date contained therein; and (ii)

(b)

on a pro rata basis, any due and unpaid expenses and other liabilities of the Issuer to the extent not paid under clause (1) above, whether as a result of an amount limitation imposed thereunder or otherwise;

(22)

to pay, first, the Subordinate Collateral Management Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date, and second, any accrued and unpaid interest on the then-due and unpaid Collateral Management Fee; and

(23)

all Income Note Excess Funds to the Income Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Income Note Paying Agency Agreement.

Collateral Principal Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Rated Notes in connection with an Event of Default, in accordance with a Note Valuation Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Principal Collections, to the extent of Available Funds in the Collection Account, will be applied by the Trustee in the following order of priority: (1)

to the payment of the amounts referred to in Section 11.1(a)(1) through (7), in the same order of priority specified therein, but only to the extent not paid in full thereunder;

(2)

if either of the Class A/B Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(8) are insufficient to cause the Class A/B Coverage Tests to be satisfied, to pay principal of the most senior Class of Notes then Outstanding until such Class A/B Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class A/B Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class A/B Coverage Test is satisfied or until the Class B Notes are paid in full; provided that for purposes of determining if the Class A/B Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(2), the denominator of the Class A/B Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to any clause or subclause of Section 11.1(a) on the related Payment Date and pursuant to Section 11.1(b)(1) above and this clause (2); provided, further, that the numerator of the Class A/B Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections applied pursuant to any of the clauses above and pursuant to this Section 11.1(b)(2) on the related Payment Date; 148

(3)

if the Class A Notes and the Class B Notes are no longer Outstanding, to pay Periodic Interest on the Class C Notes and any Defaulted Interest on the Class C Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(11) are insufficient to pay such amounts in full thereunder;

(4)

if either of the Class C Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(12) are insufficient to cause the Class C Coverage Tests to be satisfied, to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount) of the most senior Class of Notes then Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class C Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class C Coverage Test is satisfied or until the Class C Notes are paid in full; provided that for purposes of determining if the Class C Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(4), the denominator of the Class C Principal Coverage Ratio shall be determined after giving effect to any payments of principal on the Notes made pursuant to any clause or subclause of Section 11.1(a) on the related Payment Date and pursuant to any clause above and this Section 11.1(b)(4); provided, further, that for purposes of determining if the Class C Principal Coverage Test is satisfied, the numerator of the Class C Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections to be applied pursuant to any clause above and this Section 11.1(b)(4) on the related Payment Date; and provided, further, that with respect to the Class C Notes, payment of principal constituting Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal not constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any;

(5)

if the Class A Notes and the Class B Notes are no longer Outstanding, to pay the Class C Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that the amounts paid pursuant to Section 11.1(a)(13) are

Processed and formatted by SEC Watch - Visit SECWatch.com

insufficient to pay such amounts in full thereunder; (6)

if the Class A Notes, the Class B Notes and the Class C Notes are no longer Outstanding, to pay Periodic Interest on the Class D Notes and any Defaulted Interest on the Class D Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(14) are insufficient to pay such amounts in full thereunder;

(7)

if either of the Class D Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that amounts paid pursuant to Section 11.1(a)(15) are insufficient to cause the Class D Coverage Tests to be satisfied, to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount or Class D Cumulative Applicable Periodic Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class D Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class D Coverage Test is satisfied or until the Class D Notes are paid in full; provided that for purposes of determining if the Class D Principal Coverage 149

Processed and formatted by SEC Watch - Visit SECWatch.com

Test is satisfied after giving effect to any payments under this Section 11.1(b)(7), the denominator of the Class D Principal Coverage Ratio shall be determined after giving effect to any payment of principal on the Notes made pursuant to any clause or subclause of Section 11.1(a) on the related Payment Date and pursuant to any clause or subclause above and this Section 11.1(b)(7); provided, further, that for purposes of determining if the Class D Principal Coverage Test is satisfied, the numerator of the Class D Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections to be applied pursuant to any clause or subclause above and this Section 11.1(b)(7) on the related Payment Date; and provided, further, that with respect to (i) the Class C Notes, payment of principal constituting Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal not constituting the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (ii) the Class D Notes, payment of principal constituting Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal not constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any; (8)

if the Class A Notes, the Class B Notes, and the Class C Notes are no longer Outstanding, to pay the Class D Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that amounts paid pursuant to Section 11.1(a)(16) are insufficient to pay such amounts in full thereunder;

(9)

if the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes are no longer Outstanding, to pay Periodic Interest on the Class E Notes and any Defaulted Interest on the Class E Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(17) are insufficient to pay such amounts in full thereunder;

(10)

if either of the Class E Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that amounts paid pursuant to Section 11.1(a)(18) are insufficient to cause the Class E Coverage Tests to be satisfied, to pay principal (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount or Class E Cumulative Applicable Period Interest Shortfall Amount, as applicable) of the most senior Class of Notes then Outstanding until such Class E Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class E Coverage Test is satisfied or until the Class E Notes are paid in full; provided that for purposes of determining if the Class E Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(10), the denominator of the Class E Principal Coverage Ratio shall be determined after giving effect to any payment of principal on the Notes made pursuant to any clause or subclause of Section 11.1(a) on the related Payment Date and pursuant to any clause or subclause above and this Section 11.1(b)(10); provided, further, that for purposes of determining if the Class D Principal Coverage Test is satisfied, the numerator of the Class E Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections to be applied pursuant to any clause or subclause above and this Section 11.1(b)(10) on the related Payment Date; and provided, further, that with respect to (i) the Class C Notes, payment of principal constituting Class C Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal not constituting the Class C 150

Processed and formatted by SEC Watch - Visit SECWatch.com

Cumulative Applicable Periodic Interest Shortfall Amount, if any; (ii) the Class D Notes, payment of principal constituting Class D Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal not constituting the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any; and (iii) the Class E Notes, payment of principal constituting Class E Cumulative Applicable Periodic Interest Shortfall Amount shall be paid before principal not constituting the Class E Cumulative Applicable Periodic Interest Shortfall Amount, if any; (11)

if the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes are no longer Outstanding, to pay the Class E Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that amounts paid pursuant to Section 11.1(a)(19) are insufficient to pay such amounts in full thereunder;

(12)

(i)

to the purchase of Collateral Debt Securities or to the Collection Account for reinvestment in Eligible Investments pending investment in Substitute Collateral Obligations in accordance with the Reinvestment Criteria; or:

(ii)

upon the occurrence of a Special Amortization, Collateral Principal Collections in an amount determined by the Collateral Manager (notice of which shall be provided to the Trustee on or prior to the related Calculation Date) will be applied as follows: (A)

if the Special Amortization Pro-Rata Condition is satisfied, to pay principal of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes pro rata; or

(B)

if the Special Amortization Pro-Rata Condition is not satisfied, the following payments in the following order of priority: 1)

to pay principal of any outstanding Class A-1 Notes;

2)

if the principal balance of the Class A-1 Notes has been repaid in full, to pay principal of the Class A-2 Notes;

3)

if the principal balance of the Class A-2 Notes has been repaid in full, to pay principal of the Class A-3 Notes;

4)

if the principal balance of the Class A-3 Notes has been repaid in full, to pay principal of the Class B Notes;

5)

if the principal balance of the Class B Notes has been repaid in full, to pay principal of the Class C Notes;

6)

if the principal balance of the Class C Notes has been repaid in full, to pay principal of the Class D Notes; and

7)

if the principal balance of the Class D Notes has been repaid in full, to pay principal of the Class E Notes; 151

Processed and formatted by SEC Watch - Visit SECWatch.com

(13)

after the end of the Reinvestment Period, to pay each Class of Rated Notes: (i)

first, to the Class A-1 Notes, until the Class A-1 Notes have been paid in full;

(ii)

second, to the Class A-2 Notes, until the Class A-2 Notes have been paid in full;

(iii)

third, to the Class A-3 Notes, until the Class A-3 Notes have been paid in full;

(iv)

fourth, to the Class B Notes, until the Class B Notes have been paid in full;

(v)

fifth, to the Class C Notes, until the Class C Notes have been paid in full;

(vi)

sixth, to the Class D Notes, until the Class D Notes have been paid in full; and

(vii)

seventh, to the Class E Notes, until the Class E Notes have been paid in full;

(14)

to pay, first, termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, if such termination occurred solely as the result of an event of default or a termination event with respect to any Hedge Counterparty as the Defaulting Party or the sole Affected Party, as the case may be, to the extent that the amounts paid pursuant to Section 11.1(a)(20) are insufficient to pay such amounts in full thereunder, and second, termination payments to any Synthetic Security Counterparty if such termination occurred solely as a result of an event of default or a termination event with respect to the Synthetic Security Counterparty as the Defaulting Party or the sole Affected Party, as the case may be, to the extent funds in the related Derivative Contract Counterparty Account are insufficient;

(15)

to pay any due and unpaid Trustee Fee, Trustee Expenses, and any other unpaid Administrative Expenses, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee, in each case, in the same order of priority as provided in Section 11.1(b)(1) above and to the extent not paid in full under clause (1) above and to the extent that the amounts paid pursuant to Section 11.1(a)(1) and (21) are insufficient to pay such amounts in full thereunder;

(16)

to pay, first, the Subordinate Collateral Management Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date, and second, any accrued and unpaid interest on the then-due and unpaid Collateral Management Fee, to the extent that the amounts paid pursuant to Section 11.1(a)(22) are insufficient to pay such amounts in full thereunder; and 152

Processed and formatted by SEC Watch - Visit SECWatch.com

(17)

(c)

all Income Note Excess Funds to the Income Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Income Note Paying Agency Agreement.

If an Event of Default has occurred and is continuing, on the date or dates determined by the Trustee, the Trustee will pay, from all collections from, and proceeds of the sale or liquidation of, the Collateral, in the following order: (1)

amounts corresponding to the amounts set forth in clauses Section 11.1(a)(1) through (3), and (to the extent not covered by Section 11.1(a)(1) through (3)) Section 11.1(b)(1);

(2)

the Periodic Interest on the Class A-1 Notes (including Defaulted Interest on such Class A-1 Notes, if any);

(3)

outstanding principal on the Class A-1 Notes until paid in full;

(4)

the Periodic Interest on the Class A-2 Notes (including Defaulted Interest on such Class A-2 Notes, if any);

(5)

outstanding principal on the Class A-2 Notes until paid in full;

(6)

the Periodic Interest on the Class A-3 Notes (including Defaulted Interest on such Class A-3 Notes, if any);

(7)

outstanding principal on the Class A-3 Notes until paid in full;

(8)

the Periodic Interest on the Class B Notes (including Defaulted Interest on the Class B Notes, if any) and then outstanding principal on the Class B Notes until paid in full;

(9)

the Periodic Interest on the Class C Notes (including Defaulted Interest on the Class C Notes, if any) and then outstanding principal on the Class C Notes (including Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(10)

the Periodic Interest on the Class D Notes (including Defaulted Interest on the Class D Notes, if any) and then outstanding principal on the Class D Notes (including Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(11)

the Periodic Interest on the Class E Notes (including Defaulted Interest on the Class E Notes, if any) and then outstanding principal on the Class E Notes (including Class E Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(12)

amounts corresponding to the amounts set forth in Section 11.1(a)(20) through (22), and Section 11.1(b)(12) and (13); and

(13)

to the Income Note Paying Agent, any remaining amounts for distributions on the Income Notes as set forth in Section 11.1(a)(23) and Section 11.1(b)(17). 153

Processed and formatted by SEC Watch - Visit SECWatch.com

(d)

Not later than 12:00 p.m., New York time, on or before the Business Day preceding each Payment Date, the Issuer shall, pursuant to Section 10, remit or cause to be remitted to the Trustee for deposit in the Payment Account an amount of Cash sufficient to pay the amounts described in Section 11.1(a) and 11.1(b) required to be paid on such Payment Date.

(e)

If, on any Payment Date, the amount available in the Payment Account from amounts received in the related Due Period is insufficient to make the full amount of the disbursements required by the statements furnished by the Issuer pursuant to Section 10.13(b), the Trustee shall make the disbursements called for in the order and according to the priority set forth under Section 11.1(a) and 11.1(b), subject to Section 13.1, to the extent funds are available therefor.

(f)

Except as otherwise expressly provided in this Section 11.1, if on any Payment Date the amount of funds is insufficient to make the full amount of the disbursements required by any clause or subclause of Section 11.1(a) or 11.1(b) to different Persons, the Trustee shall make the disbursements called for by such clause or subclause ratably in accordance with the respective amounts of such disbursements then due and payable to the extent funds are available therefor.

(g)

Any amounts to be paid to the Income Note Paying Agent pursuant to Section 11.1(a)(23) or to Section 11.1(b)(17) will be released from the lien of this Indenture.

(h)

No Collateral Principal Collections will be paid to a Class of Rated Notes in accordance with the Priority of Payments on a Payment Date if, after giving effect to such payment, any Principal Coverage Test for a more Senior Class of Rated Notes would have failed. ARTICLE XII PURCHASE AND SALE OF COLLATERAL DEBT SECURITIES

12.1.

SALE OF COLLATERAL DEBT SECURITIES (a)

Sale of Collateral Debt Securities. (1)

Subject to the satisfaction of the conditions specified in Section 10.13 as applicable, if the Collateral Manager, on behalf of the Issuer, pursuant to this Article 12, shall direct the Trustee to sell any Temporary Ramp-Up Security, Defaulted Security, Equity Security, Credit Risk Security, Written Down Security or Withholding Tax Security, the Trustee shall sell in the manner directed by the Collateral Manager, any Temporary Ramp-Up Security, Defaulted Security, Equity Security, Credit Risk Security, Written Down Security or Withholding Tax Security.

(2)

During the Ramp-Up Period, and in any event, no later than the Effective Date, the Collateral Manager shall direct the Issuer to sell or otherwise dispose of all Temporary Ramp-Up Securities. Sale Proceeds received with respect to Temporary Ramp-Up Securities shall be reinvested only in Ramp-Up Collateral Debt Securities that are Fixed Rate Collateral Debt Securities, provided that any Sale Proceeds received with respect to Temporary Ramp-Up Securities that are not reinvested in Fixed Rate Collateral Debt Securities, other than not more than 154

Processed and formatted by SEC Watch - Visit SECWatch.com

U.S.$500,000 of such Sale Proceeds that may be reinvested in Substitute Collateral Debt Securities that are not Fixed Rate Collateral Debt Securities, shall be treated as Collateral Principal Collections and shall be applied by the Issuer to the making of payments on the Notes, subject to and in accordance with the Priority of Payments, on the Payment Date immediately following the Effective Date. (b)

Reinvestment Criteria. Following the Closing Date, Sale Proceeds received at any time on Collateral Debt Securities that are Defaulted Securities, Equity Securities, Credit Risk Securities, Written Down Securities or Withholding Tax Securities, as well as Sale Proceeds from Discretionary Sales and Collateral Principal Payments, are expected to be reinvested in Substitute Collateral Debt Securities with an aggregate purchase price up to the amount of the Sale Proceeds from such sale, in each case during the Ramp-Up Period and thereafter during the Reinvestment Period, subject to complying with the Eligibility Criteria and the Reinvestment Criteria described below, or shall be temporarily reinvested in the Eligible Investments pending such reinvestment in Substitute Collateral Debt Securities in accordance with the Priority of Payments. Such Sale Proceeds and Collateral Principal Payments will be eligible to be reinvested in Substitute Collateral Debt Securities by the Issuer and pledged to the Trustee if such Substitute Collateral Debt Securities meet each of the Reinvestment Criteria. If the Collateral Manager determines, in its sole discretion, that investments in additional Collateral Debt Securities would either be impractical or not beneficial, an amount of Collateral Principal Collections available for reinvestment pursuant to the Priority of Payments as determined by the Collateral Manager will be applied to principal on the Notes in a Special Amortization. Collateral Principal Collections (including Sale Proceeds) will not be reinvested following the Reinvestment Period. Notwithstanding the foregoing restrictions, the Collateral Manager will direct the Trustee to sell, and, the Trustee will sell in accordance with such direction, all Collateral Debt Securities in connection with a Redemption of the Notes, subject to the satisfaction of the conditions set forth in Article 9 herein. During the Reinvestment Period, principal of the Notes will be payable on any Payment Date in a Special Amortization if the Collateral Manager has notified the Trustee in writing on or before the related Calculation Date that it has determined, in its sole discretion, that investments in additional Collateral Debt Securities would not be practical or beneficial. During the Ramp-Up Period, Substitute Collateral Debt Securities will be purchased with Uninvested Proceeds, if sufficient Uninvested Proceeds are available, and only if sufficient Uninvested Proceeds are not available, with Collateral Principal Collections.

(c)

Discretionary Sales. So long as no Event of Default has occurred and is continuing, the Collateral Manager, on behalf of the Issuer, may, during the Reinvestment Period, direct the Trustee to sell, and the Trustee will sell in the manner directed by the Collateral Manager, any Collateral Debt Security (in addition to sales of any Defaulted Securities, Credit Risk Securities, Withholding Tax Securities, Equity Securities and Written Down Securities) so long as each of the following applies: (1)

the aggregate Principal Balance of all Collateral Debt Securities sold pursuant to such Discretionary Sales for a given calendar year does not exceed 10% of the 155

Processed and formatted by SEC Watch - Visit SECWatch.com

CDS Principal Balance at the beginning of that year (or, with respect to calendar year 2006, as of the Closing Date);

12.2.

(2)

the Collateral Manager believes in good faith that Sale Proceeds from such sale can be reinvested within 60 Business Days after the sale of such Collateral Debt Security in one or more Substitute Collateral Debt Securities having an aggregate Principal Balance of not less than 100% of the Principal Balance of the Collateral Debt Security being sold;

(3)

after giving effect to such sale and to the purchase of Substitute Collateral Debt Securities with the Sale Proceeds thereof, the Reinvestment Criteria will be met; and

(4)

such Collateral Manager has not been removed, or voted to be removed, for “cause” as set forth in the Collateral Management Agreement.

PORTFOLIO CHARACTERISTICS

Except as provided in Section 12.3(c), a security will be eligible for inclusion in the Collateral as a Pledged Collateral Debt Security only if, as evidenced by an Officer’s certificate from the Collateral Manager to the Trustee, each of the following eligibility criteria is satisfied immediately after the Issuer Grants such Collateral Debt Security to the Trustee (collectively, the Eligibility Criteria): (a)

it is issued by an issuer incorporated or organized under the laws of the United States, the Bahamas, Bermuda, the Cayman Islands, the British Virgin Islands, the Netherlands Antilles, Jersey, Guernsey or Luxembourg or, it is issued by a Qualifying Foreign Obligor;

(b)

it is U.S. Dollar-denominated, and it is not convertible into, or payable in, any other currency;

(c)

it is one (or in the case of a Synthetic Security or a CMBS Re-REMIC Security, references at least one of) of the Specified Types of Collateral Debt Securities;

(d)

it has an S&P Rating (which rating does not include a “p”, “pi”, “q”, “t” or “r” subscript), a Moody’s Rating and a Fitch Rating;

(e)

the acquisition, ownership, enforcement and disposition of such security will not cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or otherwise to be subject to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation (other than as attributable to property received in connection with a foreclosure, as permitted under the Transaction Documents);

(f)

the payments on such security are not subject to withholding tax unless the issuer thereof or the obligor thereon is required to make additional payments sufficient to cover any withholding tax imposed at any time on payments made to the Issuer with respect thereto;

(g)

its acquisition would not cause the Issuer or the pool of Collateral to be required to register as an investment company under the Investment Company Act; 156

Processed and formatted by SEC Watch - Visit SECWatch.com

(h)

it is not a security that is ineligible under its Underlying Instruments to be purchased by the Issuer and pledged to the Trustee;

(i)

it is not an insurance-linked debt instrument containing a provision pursuant to which the issuer’s obligation to pay interest or principal is deferred or forgiven in the event of loss due to certain natural catastrophes specified in the Underlying Instruments;

(j)

it is not a security that provides for the payment of principal upon maturity at less than the par amount thereof;

(k)

unless it is a Derivative Contract, its Underlying Instruments do not obligate the Issuer to make any future advances or any other payment except the purchase price thereof;

(l)

it is not a security with respect to which, in the reasonable judgment of the Collateral Manager, the timely repayment of principal and interest is subject to substantial non-credit related risks;

(m)

it is not an Interest Only Security;

(n)

it is not a security issued by an Emerging Market Issuer;

(o)

it is not a security that has an Actual Rating from Moody’s lower than “B3”, an Actual Rating from S&P lower than “B-” or an Actual Rating from Fitch lower than “B-” at the time of purchase;

(p)

it is not a security that has, at the time of purchase, any deferred or capitalized interest;

(q)

it is not a security that, at the time it is purchased, is a Credit Risk Security, a Defaulted Security, a Written Down Security or a Deferred Interest PIK Bond;

(r)

(a) if it is a Derivative Contract, the Derivative Contract Counterparty, at the time of entry into such Derivative Contract, has a short term rating of at least “A-1+” by S&P (or “A-1” by S&P if the premium (and any other relevant amount (such as coupon) required under the related Derivative Contract) to be paid by such Derivative Contract Counterparty is posted one payment period in advance for the term of the Derivative Contract) and is not on negative watch or (b) in the case of any Synthetic Security other than a Derivative Contract, such Synthetic Security Counterparty has a short term rating of at least “A-1” by S&P or, if no such short term rating is available, a long term rating of at least “A” by S&P;

(s)

it is not a Real Estate Interest with a loan-to-value ratio of greater than 85% on the underlying collateral; provided that, if such Real Estate Interest is a Mezzanine Loan, it will have a Rating of at least “B-” (or its equivalent) from a Rating Agency; provided further that all such Mezzanine Loans with a Rating of less than “BB-” (or its equivalent) from a Rating Agency will not exceed 5% of the CDS Principal Balance;

(t)

it is not a REIT Debt Security that has a Moody’s Rating lower than “Ba3”, an S&P Rating lower than “BB-” or a Fitch Rating lower than “BB-” at the time of purchase;

(u)

it is not a Real Estate CDO Security that has a Moody’s Rating lower than “Ba3”, an S&P Rating lower than “BB-” or a Fitch Rating lower than “BB-” at the time of purchase; 157

(v)

it is not a CMBS Credit Tenant Lease Security that has a Moody’s Rating lower than “Ba3”, an S&P Rating lower than “BB-” or a Fitch Rating lower than “BB-” at the time of purchase;

(w)

at the time the security is purchased by the Issuer: (1)

it is not a security issued by an issuer located in a country that imposes foreign exchange controls that effectively limit the availability or use of U.S. Dollars to make when due the scheduled payments of principal and interest on such security;

(2)

it is not, and does not provide for conversion or exchange into, Margin Stock at any time over its life;

(3)

it is not an obligation which (1) was incurred in connection with a merger, acquisition, consolidation or sale of all or substantially all of the assets of a person or entity or similar transaction and (2) by its terms is required to be repaid within one year of the incurrence thereof with proceeds from additional borrowings or other refinancing;

(4)

it is not the subject of (1) any offer by the issuer of such security or by any other person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related underlying instruments) or to convert or exchange such security into or for

Processed and formatted by SEC Watch - Visit SECWatch.com

cash, securities or any other type of consideration or (2) any solicitation by an issuer of such security or any other person to amend, modify or waive any provision of such security or any related underlying instrument, and has not been called for redemption; (5)

it is not an Equity Security;

(6)

it is not a security that by the terms of its underlying instruments provides for conversion or exchange (whether mandatory or at the option of the issuer or the holder thereof) into equity capital at any time prior to its maturity;

(7)

it is not a financing by a debtor-in-possession in any insolvency proceeding;

(8)

it is not a first loss tranche of any securitization that does not have an S&P Rating (as defined in clause (i) of the definition of S&P Rating) or a Moody’s Rating (as defined in clause (i) of the definition of Moody’s Rating) that addresses the obligation of the obligor (or guarantor, if applicable) to pay principal of and interest on the relevant Collateral Debt Security in full, which ratings are monitored on an ongoing basis by the relevant Rating Agency;

(9)

it is not a security that provides for the payment of interest (or in the case of a Synthetic Security which is in the form of a Derivative Contract, the periodic payment of a floating amount or a fixed amount based on its notional or equivalent amount) in cash less frequently than semi-annually;

(10)

if it is a Mezzanine Loan, (a) the Mezzanine Loan is subject to servicing, custodial and/or similar arrangements customary for Mezzanine Loans as 158

Processed and formatted by SEC Watch - Visit SECWatch.com

determined by the Collateral Manager in its reasonable discretion, (b) the requirements set forth in the Indenture regarding the representations and warranties with respect to the underlying mortgaged property and the Mezzanine Loan have been met and the terms of the Underlying Instruments are consistent with the terms of similar Underlying Instruments with respect to Mezzanine Loans as determined by the Collateral Manager in its reasonable discretion; (11)

if it is a Deemed Floating Rate Collateral Debt Security, the Deemed Floating Asset Hedge entered into with respect to such Deemed Floating Rate Collateral Debt Security conforms to all requirements set forth in the definition of “Deemed Floating Asset Hedge”; and

(12)

it is not a Prohibited Asset.

provided that notwithstanding anything to the contrary herein, the Issuer may, while attempting to dispose of property acquired in foreclosure or similar circumstances, make an election under Section 882(d) of the Code to treat the income related to real property located in the United States as income that is effectively connected with a U.S. trade or business; provided further that except for property acquired by the Issuer in foreclosure or similar circumstances and for property expressly permitted to be acquired by the Issuer, the Issuer may not purchase, acquire or hold (whether as part of a unit with a Collateral Debt Security, in exchange for a Collateral Debt Security or otherwise) any asset unless the underlying documents for such asset specify, or the Issuer has received advice of tax counsel of nationally recognized standing in the United States experienced in such matters to the effect that, under the relevant facts and circumstances with respect to such transaction, for U.S. federal income tax purposes, (i) the obligation or security is indebtedness, (ii) all obligors and issuers of the assets are classified as corporations (and no elections have been made to the contrary), (iii) no obligor on or issuer of the asset is engaged in the conduct of a trade or business within the United States, or (iv) all obligors and issuers of the assets qualify as “grantor trusts”, and all of the assets of the obligors and issuers consist of obligations or securities that the Issuer could have directly acquired and held as assets (but for restrictions related to withholding taxes) and, notwithstanding anything to the contrary herein, the Issuer shall not purchase, acquire or hold any asset the gain from the disposition of which will be subject to U.S. federal income or withholding tax under Section 897 or Section 1445 of the Code and the Treasury regulations promulgated thereunder other than United States real property interests that the Issuer acquires in foreclosure and with respect to which has made a Section 882(d) election. 12.3.

CONDITIONS APPLICABLE TO ALL TRANSACTIONS INVOLVING SALE OR GRANT (a)

Any transaction effected under Section 5, Section 9, Section 10.2 or Section 12.1 shall be conducted on an arms’ length basis and if effected with the Issuer, the Trustee, the Collateral Manager or any Affiliate of any of the foregoing, shall be effected in a secondary market transaction on terms at least as favorable to the Rated Noteholders as would be the case if such Person were not so Affiliated; provided that any disposition of a Collateral Debt Security in accordance with Section 12.1 shall be deemed to comply with this Section 12.3(a). The Trustee shall have no responsibility to oversee compliance with this clause by the other parties.

(b)

Upon any purchase or substitution pursuant to this Section 12, all of the Issuer’s right, title and interest to the Pledged Security or Securities shall be, and hereby is, Granted to the Trustee pursuant to this Indenture, such Pledged Security or Securities shall be registered in the name of the Trustee, and, if applicable, the Trustee shall receive such Pledged Security or Securities. The Trustee shall receive, not later than the date of 159

Processed and formatted by SEC Watch - Visit SECWatch.com

delivery of any Pledged Security pursuant to a purchase under this Section 12, (a) an Officer’s Certificate of the Collateral Manager certifying (1) compliance with the Reinvestment Criteria in accordance with Section 12.1(d), (2) that the Collateral Debt Security to be sold constitutes an Equity Security, a Defaulted Security, a Credit Risk Security, a Withholding Tax Security or a Written Down Security and (3) that any security to be purchased satisfies the definition of Collateral Debt Security and (b) an Officer’s Certificate of the Collateral Manager on behalf of the Issuer containing the statements set forth in Section 3.2(b)(2) through (4), (6) and (7). (c)

Notwithstanding anything contained in this Section 12 to the contrary, the Issuer shall, subject to Section 12.3(d), have the right to effect any transaction to which the Initial Hedge Counterparty and Holders of Rated Notes evidencing 100% of the Aggregate Outstanding Amount of each Class of Rated Notes, and each Income Noteholder has consented, and of which each Rating Agency has been notified in advance.

(d)

Except as specifically provided in this Indenture, in no event may the Issuer (i) engage in any business or activity that would cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or (ii) acquire or hold any asset that is an equity interest in an entity that is treated as a partnership engaged in a U.S. trade or business for U.S. federal income tax purposes or the acquisition or ownership of which otherwise would subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation. The foregoing shall not, however, preclude the Issuer from holding Equity Securities or securities received in an Offer pending their sale in accordance with Section 12.1(a)(1). ARTICLE XIII SECURED PARTIES’ RELATIONS

13.1.

SUBORDINATION (a)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Rated Notes agree for the benefit of the Initial Hedge Counterparty that the Rated Notes and the Issuer’s rights in and to the Collateral (solely with respect to all amounts payable to such Initial Hedge Counterparty pursuant to Section 11.1(a)(3)), the Subordinate Interests) shall be subordinate and junior to the rights of such Hedge Counterparty with respect to payments to be made to such Initial Hedge Counterparty pursuant to the Initial Hedge Agreement to the extent and in the manner set forth in Section 11.1(a)(3) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived all amounts payable to the Initial Hedge Counterparty pursuant to Section 11.1(a)(3) shall be paid in Cash or, to the extent the Initial Hedge Counterparty consents, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests.

(b)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class A-2 Notes, the Class A-3 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes agree for the benefit of the Holders of the Class A-1 Notes that the Class A-2 Notes, the Class A-3 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A-1 Notes, the Subordinate Interests) shall be 160

Processed and formatted by SEC Watch - Visit SECWatch.com

subordinate and junior to the Class A-1 Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A-1 Notes shall be paid in full in Cash or, to the extent a Majority of the Class A-1 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A-1 Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A-1 Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (c)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class A-3 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes agree for the benefit of the Holders of the Class A-1 Notes and the Class A-2 Notes that the Class A-3 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A-1 Notes and the Class A-2 Notes, the Subordinate Interests) shall be subordinate and junior to the Class A-1 Notes and the Class A-2 Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A-1 Notes and the Class A-2 Notes shall be paid in full in Cash or, to the extent a Majority of the Class A-1 Notes and the Class A-2 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A-1 Notes and the Class A-2 Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A-1 Notes and the Class A-2 Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(d)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes agree for the benefit of the Holders of the Class A Notes that the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in 161

Processed and formatted by SEC Watch - Visit SECWatch.com

full of the Class A Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (e)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class C Notes, the Class D Notes and the Class E Notes agree for the benefit of the Holders of the Class A Notes and the Class B Notes that the Class C Notes, the Class D Notes and the Class E Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes and the Class B Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes and the Class B Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A Notes and the Class B Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes and the Class B Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A Notes and the Class B Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes and the Class B Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(f)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class D Notes and the Class E Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes and the Class C Notes that the Class D Notes and the Class E Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes and the Class C Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes and the Class C Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes and the Class C Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, the Class B Notes and the Class C Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes and the Class C Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes and the Class C Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(g)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class E Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes that the Class E Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the 162

Processed and formatted by SEC Watch - Visit SECWatch.com

Class B Notes, the Class C Notes and the Class D Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes shall be paid in full in Cash or, to the extent a Majority of each of Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (h)

In the event that notwithstanding the provisions of this Indenture, any Holder of any Subordinate Interests shall have received any payment or distribution in respect of such Subordinate Interests contrary to the provisions of this Indenture, then, unless and until all amounts payable to the Initial Hedge Counterparty pursuant to Section 11.1(a)(3) or to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes or the Class E Notes, as the case may be, shall have been paid in full in Cash or, to the extent the Initial Hedge Counterparty or a Majority of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes or the Class E Notes, as the case may be, consent, other than in Cash in accordance with this Indenture, such payment or distribution shall be received and held in trust for the benefit of, and shall forthwith be paid over and delivered to, the Trustee, which shall pay and deliver the same to such Initial Hedge Counterparty or the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes or the Class E Notes, as the case may be, in accordance with this Indenture; provided that, if any such payment or distribution is made other than in Cash, it shall be held by the Trustee as part of the Collateral and subject in all respects to the provisions of this Indenture, including this Section 13.1.

(i)

Each Holder of Subordinate Interests agrees with the Initial Hedge Counterparty and all Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes or the Class E Notes, as the case may be, that such Holder of Subordinate Interests shall not demand, accept, or receive any payment or distribution in respect of such Subordinate Interests in violation of the provisions of this Indenture including this Section 13.1; provided that after all amounts payable pursuant to Section 11.1(a)(3) and all amounts payable in respect of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes or the Class E Notes, as the case may be, have been paid in full, the Holders of Subordinate Interests shall be fully subrogated to the rights of the Initial Hedge Counterparty or the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes or the Class E Notes, as the case may be. Nothing in this Section 13.1 shall affect the obligation of the Issuer to pay Holders of Subordinate Interests. 163

Processed and formatted by SEC Watch - Visit SECWatch.com

13.2.

STANDARD OF CONDUCT

In exercising any of its or their voting rights, rights to direct and consent or any other rights as a Secured Party under this Indenture, subject to the terms and conditions of this Indenture, including Section 5.9, a Secured Party or Secured Parties shall not have any obligation or duty to any Person or to consider or take into account the interests of any Person and shall not be liable to any Person for any action taken by it or them or at its or their direction or any failure by it or them to act or to direct that an action be taken, without regard to whether such action or inaction benefits or adversely affects any Secured Party, the Issuer, or any other Person. ARTICLE XIV MISCELLANEOUS 14.1.

FORM OF DOCUMENTS DELIVERED TO TRUSTEE

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer or the Collateral Manager may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Authorized Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer of the Issuer or the Collateral Manager or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer, the Collateral Manager or any other Person, stating that the information with respect to such factual matters is in the possession of the Issuer, the Collateral Manager or such other Person, unless such Authorized Officer of the Issuer or the Collateral Manager or such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Any Opinion of Counsel may also be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer or the Collateral Manager, stating that the information with respect to such matters is in the possession of the Issuer or the Collateral Manager, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture it is provided that the absence of the occurrence and continuation of a Default is a condition precedent to the taking of any action by the Trustee at the request or direction of the Issuer, then notwithstanding that the satisfaction of such condition is a condition precedent to the Issuer’s rights to make such request or direction, the Trustee shall be protected in acting in accordance with such request or direction if it does not have actual knowledge of the occurrence and continuation of such Default as provided in Section 6.1(d). 164

14.2.

14.3.

ACTS OF RATED NOTEHOLDERS (a)

Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Rated Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Rated Noteholders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action or actions embodied therein and evidenced thereby) are herein sometimes referred to as the Act of the Rated Noteholders, signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section 14.2.

(b)

The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Trustee deems sufficient.

(c)

The principal amount and registered numbers of Rated Notes held by any Person, and the date of his holding the same, shall be proved by the Note Register.

(d)

Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Rated Notes shall bind the Holder (and any transferee thereof) of such Rated Note and of every Rated Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Rated Note.

NOTICES, ETC., TO TRUSTEE, THE ISSUER AND THE RATING AGENCIES

Processed and formatted by SEC Watch - Visit SECWatch.com

Any request, demand, authorization, direction, notice, consent, waiver or Act of Rated Noteholders or other documents provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a)

the Trustee or the Income Note Paying Agent by any Rated Noteholder or by the Issuer shall be sufficient for every purpose hereunder if in writing and sent by facsimile in legible form and confirmed by overnight courier service guaranteed next day delivery to the Trustee or the Income Note Paying Agent addressed to it at 181 West Madison Street, 32nd Floor, Chicago, Illinois 60602, Attention: CDO Trust Services Group — N-Star Real Estate CDO VII Ltd., telephone number 312-9044047, fax number 312-602-3935, or at any other address previously furnished in writing to the Issuer or Rated Noteholder by the Trustee or Income Note Paying Agent;

(b)

the Issuer by the Trustee or by any Rated Noteholder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, to the Issuer addressed to it at c/o Walkers SPV Limited, P.O. Box 908 GT, Walker House, Mary Street, George Town, Grand Cayman, Cayman Islands, Attention: The Directors, or at any other address previously furnished in writing to the Trustee by the Issuer; 165

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

the Rating Agencies by the Issuer or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, (i) in the case of Fitch, addressed to Fitch Ratings, One State Street Plaza, New York, New York 10041, facsimile no. 212-558-2618, Attention: CDO Surveillance (e-mail: [email protected]); (ii) in the case of Moody’s, addressed to Moody’s Investors Service, 99 Church Street, New York, New York 10007, facsimile no. (212) 5530355, Attention: CDO Monitoring (e-mail: [email protected]) and (iii) in the case of S&P, addressed to S&P, 55 Water Street, 41st Floor, New York, New York, 10041, Attention: CDO Surveillance and all Note Valuation Reports shall be sent to S&P electronically at [email protected]; or

(d)

the Initial Hedge Counterparty by the Issuer or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, hand delivered or sent by overnight courier service or by facsimile in legible form to the Initial Hedge Counterparty addressed to it at the address specified in the Initial Hedge Agreement or at any other address previously furnished in writing to the Issuer or the Trustee by the Initial Hedge Counterparty;

(e)

the Collateral Manager by the Issuer or by the Trustee or a Majority of the Controlling Class, or by the Collateral Administrator shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and sent by facsimile in legible form and confirmed by overnight courier service guaranteed next day delivery, or by electronic mail (where expressly provided herein) to the Collateral Manager addressed to it at the address specified in the Collateral Management Agreement or at any other address previously furnished in writing to the Issuer or the Trustee by the Collateral Manager;

(f)

the Income Note Paying Agent by the Trustee in writing sent by facsimile confirmed by overnight courier guaranteed next day delivery;

(g)

the Placement Agents by the Issuer, the Collateral Manager or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by telecopy in legible form, (i) to BAS addressed to Banc of America Securities LLC, 214 North Tryon Street, 14th Floor, Charlotte, North Carolina 28255, telecopy no. 704-386-0688, Attention: Global Structured Products and (ii) to Morgan Stanley addressed to Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036, telecopy no. 212-507-4011, Attention: Securitized Products Group; and

(h)

to the Repository by the Issuer pursuant to this Indenture shall be made available to the Repository by electronic mail as a pdf (portable document format) file to CDO Library, c/o The Bond Market Association, 360 Madison Avenue (18th Floor), New York, NY 10017; Electronic mail address: [email protected].

Delivery of any request, demand, authorization, direction, notice, consent, waiver or Act of Rated Noteholders or other documents made as provided above will be deemed effective: (i) if in writing and delivered in person or by overnight courier service, on the date it is delivered; (ii) if sent by facsimile transmission, on the date that transmission is received by the recipient in legible form (as evidenced by the sender’s written record of a telephone call to the recipient in which the recipient acknowledged receipt 166

Processed and formatted by SEC Watch - Visit SECWatch.com

of such facsimile transmission); and (iii) if sent by mail, on the date that mail is delivered or its delivery is attempted; in each case, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Business Day. 14.4.

NOTICES AND REPORTS TO RATED NOTEHOLDERS; WAIVER

Except as otherwise expressly provided herein, where this Indenture provides for a report to Holders or for a notice to Holders of Rated Notes of any event, such notice shall be sufficiently given to Holders of Rated Notes if in writing and mailed, first-class postage prepaid, to each Holder of a Rated Note affected by such event, at the address of such Holder as it appears in the Note Register, not earlier than the earliest date and not later than the latest date, prescribed for the giving of such report or notice and such report or notice shall be in the English language. Notwithstanding any provision to the contrary contained herein or in any agreement or document related hereto, any report, statement or other information to be provided by the Trustee may be provided by providing access to the Trustee’s website containing such information. Such reports and notices will be deemed to have been given on the date of such mailing. The Trustee will deliver to the Holder of any Rated Note shown on the Note Register any readily available information or notice requested to be so delivered, at the expense of the Issuer. In addition, for so long as any Class of Rated Notes is listed on the Irish Stock Exchange and so long as the rules of such exchange so require, notices to the Holders of such Rated Notes shall also be given by the Trustee to the Irish Paying Agent for delivery to the Company Announcements Office of the Irish Stock Exchange. Neither the failure to mail any notice, nor any defect in any notice so mailed, to any particular Holder of a Rated Note shall affect the sufficiency of such notice with respect to other Holders of Rated Notes. Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Rated Noteholders shall be filed with the Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In the event that, by reason of the suspension of the regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Rated Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. 14.5.

EFFECT OF HEADINGS AND TABLE OF CONTENTS The Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

14.6.

SUCCESSORS AND ASSIGNS

All covenants and agreements in this Indenture by the Issuer shall bind its respective successors and assigns, whether so expressed or not. Written notice of any assignment shall be promptly provided 167

Processed and formatted by SEC Watch - Visit SECWatch.com

by the Issuer to the Initial Hedge Counterparty, the Holders of Notes of the Controlling Class and each Rating Agency. 14.7.

SEVERABILITY

In case any provision in this Indenture or in the Rated Notes shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 14.8.

BENEFITS OF INDENTURE

The Rated Noteholders, the Initial Hedge Counterparty and each Income Noteholder is an express third-party beneficiary of this Indenture. Nothing in this Indenture or in the Rated Notes, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the Rated Noteholders, the Initial Hedge Counterparty and each Income Noteholder, any benefit or any legal or equitable right, remedy or claim under this Indenture. 14.9.

GOVERNING LAW This Indenture and each Rated Note shall be governed by, and construed in accordance with, the law of the State of New York.

14.10.

SUBMISSION TO JURISDICTION

The Issuer hereby irrevocably submits to the non-exclusive jurisdiction of the Supreme Court of the State of New York sitting in Manhattan and the U.S. District Court for the Southern District of New York, and any court of appeal therefrom, in any action or proceeding arising out of or relating to the Rated Notes or this Indenture, and the Issuer hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State or federal court. The Issuer hereby irrevocably waives, to the fullest extent that it may legally do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The Issuer hereby irrevocably appoints and designates CT Corporation, 111 Eighth Avenue, 13th Floor, New York, New York 10011, or any other Person having and maintaining a place of business in the State of New York whom the Issuer may from time to time hereafter designate as the true and lawful attorney and duly authorized agent for acceptance of service of legal process of the Issuer. The Issuer agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 14.11.

COUNTERPARTS

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 14.12.

WAIVER OF JURY TRIAL

EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING. Each party hereby (i) certifies that no representative, agent or attorney of the other has represented, expressly or otherwise, that the other would not, in the event of a Proceeding, seek to 168

Processed and formatted by SEC Watch - Visit SECWatch.com

enforce the foregoing waiver and (ii) acknowledges that it has been induced to enter into this Indenture by, among other things, the mutual waivers and certifications in this paragraph. 14.13.

JUDGMENT CURRENCY

This is an international financing transaction in which the specification of Dollars (the Specified Currency), and the specification of the place of payment, as the case may be (the Specified Place), is of the essence, and the Specified Currency shall be the currency of account in all events relating to payments of or on the Rated Notes. The payment obligations of the Issuer under this Indenture and the Rated Notes shall not be discharged by an amount paid in another currency or in another place, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on conversion to the Specified Currency and transfer to the Specified Place under normal banking procedures does not yield the amount of the Specified Currency at the Specified Place. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder or the Rated Notes in the Specified Currency into another currency (the Second Currency), the rate of exchange which shall be applied shall be that at which in accordance with normal banking procedures the Trustee could purchase the Specified Currency with the Second Currency on the Business Day next preceding that on which such judgment is rendered. The obligation of the Issuer in respect of any such sum due from the Issuer hereunder shall, notwithstanding the rate of exchange actually applied in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by the Trustee of any sum adjudged to be due hereunder or under the Rated Notes in the Second Currency the Trustee may in accordance with normal banking procedures purchase and transfer to the Specified Place the Specified Currency with the amount of the Second Currency so adjudged to be due; and the Issuer hereby, as a separate obligation and notwithstanding any such judgment (but subject to the Priority of Payments as if such separate obligation in respect of each Class of Rated Notes constituted additional principal owing in respect of such Class of Rated Notes), agrees to indemnify the Trustee and each Rated Noteholder against, and to pay the Trustee or such Rated Noteholder, as the case may be, on demand in the Specified Currency, any difference between the sum originally due to the Trustee or such Rated Noteholder, as the case may be, in the Specified Currency and the amount of the Specified Currency so purchased and transferred. 14.14.

CONFIDENTIAL TREATMENT OF DOCUMENTS

Except as otherwise provided in this Indenture or as required by law or as required to maintain the listing of the Class A Notes, Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes on the Irish Stock Exchange, this Indenture and the Hedge Agreement shall be treated by the Trustee and the Collateral Manager as confidential. The Trustee shall provide a copy of this Indenture to the Income Note Paying Agent and to any Holder of a beneficial interest in any Rated Note upon written request therefor certifying that it is such a Holder. ARTICLE XV ASSIGNMENT OF AGREEMENTS, ETC. 15.1.

ASSIGNMENT

The Issuer, in furtherance of the covenants of this Indenture and as security for the Rated Notes and amounts payable to the Rated Noteholders hereunder and the performance and observance of the provisions hereof, hereby assigns, transfers, conveys and sets over to the Trustee, for the benefit of the Secured Parties, all of the Issuer’s estate, right, title and interest in, to and under the Corporate Services Agreement, the Collateral Management Agreement and the Hedge Agreement, including (i) the right to give all notices, consents and releases thereunder, (ii) the right to give all notices of termination, including 169

Processed and formatted by SEC Watch - Visit SECWatch.com

the commencement, conduct and consummation of proceedings at law or in equity, (iii) the right to receive all notices, accountings, consents, releases and statements thereunder and (iv) the right to do any and all other things whatsoever that the Issuer is or may be entitled to do thereunder; provided that nothing herein shall obligate the Trustee to determine independently whether “cause” exists for the removal of the Collateral Manager pursuant to the Collateral Management Agreement. For the avoidance of doubt, in no event shall the Trustee be required to perform the obligations of the Collateral Manager under the Collateral Management Agreement. 15.2.

NO IMPAIRMENT

The assignment made hereby is executed as collateral security, and the execution and delivery hereby shall not in any way impair or diminish the obligations of the Issuer under the provisions of the Corporate Services Agreement, the Collateral Management Agreement or the Hedge Agreement. 15.3.

TERMINATION, ETC.

Upon the redemption and cancellation of the Rated Notes and the payment of all other Secured Obligations and the release of the Collateral from the lien of this Indenture, this assignment and all rights herein assigned to the Trustee for the benefit of the Secured Parties shall cease and terminate and all the estate, right, title and interest of the Trustee in, to and under the Corporate Services Agreement, the Collateral Management Agreement and the Hedge Agreement shall revert to the Issuer and no further instrument or act shall be necessary to evidence such termination and reversion. 15.4.

ISSUER AGREEMENTS, ETC.

The Issuer represents that it has not executed any other assignment of the Collateral Administration Agreement, the Collateral Management Agreement or any Hedge Agreement. The Issuer agrees that this assignment is irrevocable, and that it will not take any action which is inconsistent with this assignment or make any other assignment inconsistent herewith. The Issuer will, from time to time upon the request of the Trustee, execute all instruments of further assurance and all such supplemental instruments with respect to this assignment as the Trustee may reasonably specify. ARTICLE XVI HEDGE AGREEMENT 16.1.

HEDGE AGREEMENTS The Issuer will, on or prior to the Closing Date, enter into the Initial Hedge Agreements with the Initial Hedge Counterparty for the purpose of managing the Issuer’s interest rate risk exposure relating to the variable rate of interest applicable to certain Classes of Rated Notes and/or the cashflow timing mismatch with respect to particular Collateral Debt Securities. On the Closing Date (or any date on which the Issuer enters into a replacement Hedge Agreement), (i) the Hedge Counterparty entering into such Hedge Agreement shall satisfy the Hedge Counterparty Ratings Requirement and (ii) the Issuer shall assign such Hedge Agreement to the Trustee pursuant to this Indenture and the Collateral Assignment of Hedge Agreement. (a)

The Trustee shall, on behalf of the Issuer and in accordance with the Note Valuation Report, pay amounts due to the Hedge Counterparty under the Hedge Agreement on any Payment Date in accordance with Section 11.1. 170

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

If a Collateralization Event occurs, the Hedge Counterparty shall within 30 days of the occurrence of such Collateralization Event either (i) enter into a Credit Support Annex and post collateral of such types, in such amounts and at such times as are sufficient to maintain the then-current rating of each Class of Rated Notes by each Rating Agency, (ii) find a replacement Hedge Counterparty as permitted under the Hedge Agreement that satisfies the Hedge Counterparty Ratings Requirement, (iii) obtain a guarantor for the obligations of the Hedge Counterparty under the Hedge Agreement which satisfies the Hedge Counterparty Ratings Requirement or (iv) take such other steps as each Rating Agency that has downgraded the Hedge Counterparty may require (as confirmed to the Collateral Manager in writing) to ensure that the then-current ratings on the Rated Notes by either Rating Agency are not reduced or withdrawn. If the Hedge Counterparty has not, within 30 days of the occurrence of such Collateralization Event, taken any of the actions required above, an additional termination event with respect to which the Hedge Counterparty shall be the sole “affected party” will be deemed to have occurred and the Issuer shall have the right to terminate the Hedge Agreement (with all costs and expenses in connection with any such termination to be paid by the Hedge Counterparty).

(c)

If at any time a Substitution Event has occurred and is continuing, then the Hedge Counterparty will, (x) in the case of a Substitution Event referred to in sub-clause (i) or sub-clause (iii) of the definition thereof, within 30 days following such Substitution Event or (y) in the case of a Substitution Event referred to in sub-clause (ii) of the definition thereof, within ten Business Days following such Substitution Event, assign its rights and obligations under the Hedge Agreement, at no cost to the Issuer, to a party (the Substitute Party) selected by the Hedge Counterparty that (i) satisfies the Hedge Counterparty Ratings Requirement, (ii) with respect to which a Rating Agency Confirmation has been obtained and (iii) that assumes all of the Hedge Counterparty’s obligations under the Hedge Agreement pursuant to an agreement satisfactory to the Issuer. If the Hedge Counterparty fails to assign its rights and obligations under the Hedge Agreement to a Substitute Party within 30 days following such Substitution Event (in the case of a Substitution Event referred to in sub-clauses (i) or (iii) of the defmition thereof) or within ten Business Days following such Substitution Event (in the case of a Substitution Event referred to in sub-clause (i) of the definition thereof), then (x) the Hedge Counterparty shall, while it continues in good faith to search for an eligible Substitute Party, post and maintain, or continue to maintain, as the case may be, collateral in accordance with a Credit Support Annex of such types, in such amounts and at such times as are sufficient to maintain the then-current rating of each Class of Rated Notes by each Rating Agency, and (y) the Issuer shall have the right to terminate the Hedge Agreement with all costs of such termination to be paid by the Hedge Counterparty.

(d)

The Issuer may, after the Closing Date, enter into additional Hedge Agreements (including one or more Deemed Floating Asset Hedges) with additional Hedge Counterparties as the Issuer may elect in its sole discretion, in each case (i) subject to Rating Agency Confirmation, (ii) in the event a proposed additional Hedge Agreement has an initial notional amount which exceeds U.S.$25,000,000, with the prior consent of Bank of America, N.A. (so long as it continues to act as the Initial Hedge Counterparty), and (iii) in the case of additional Hedge Counterparties, with the delivery to the Issuer of an Opinion of Counsel to the additional Hedge Counterparty; provided that the Issuer will not be required to obtain Rating Agency Confirmation in connection with entering into any Deemed Floating Asset Hedges which are Form-Approved Hedge Agreements with a Hedge Counterparty that satisfies the Hedge Counterparty Ratings Requirement. 171

Processed and formatted by SEC Watch - Visit SECWatch.com

(e)

The Trustee shall, prior to the Closing Date in respect of the Initial Hedge Agreement, cause the Custodian to establish a segregated, non-interest bearing Securities Account which shall be designated as a “Hedge Counterparty Collateral Account” with respect to the Hedge Counterparty in respect of which the Trustee shall be the Entitlement Holder and which the Trustee shall hold in trust for the benefit of the Secured Parties. The Trustee shall deposit all collateral received from such Hedge Counterparty under the Hedge Agreement in such Hedge Counterparty Collateral Account. Any and all funds at any time on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be held in trust by the Trustee for the benefit of the Secured Parties. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be (i) for application to obligations of the Hedge Counterparty to the Issuer under the Hedge Agreement that are not paid when due (whether when scheduled or upon early termination) or (ii) to return collateral to the Hedge Counterparty when and as required by the Hedge Agreement in each case upon the direction of the Issuer pursuant to an Issuer Order. No assets credited to any Hedge Counterparty Collateral Account shall be considered an asset of the Issuer for purposes of any of the Coverage Tests unless and until the Issuer or the Trustee on its behalf is entitled to foreclose on such assets in accordance with the terms of the Hedge Agreement.

(f)

Upon its receipt of notice that the Hedge Counterparty has defaulted in the payment when due of its obligations to the Issuer under any Hedge Agreement (or, if earlier, when the Trustee becomes aware of such default) the Trustee shall make a demand on such Hedge Counterparty, or any guarantor, if applicable, demanding payment forthwith. The Trustee shall give notice to the Rated Noteholders and each Rating Agency upon the continuance of the failure by such Hedge Counterparty to perform its obligations for two Business Days following a demand made by the Trustee on such Hedge Counterparty.

(g)

If at any time the Hedge Agreement becomes subject to early termination due to the occurrence of an “event of default” or a “termination event” (each as defined in the Hedge Agreement) solely attributable to the Hedge Counterparty or other comparable event, the Issuer and the Trustee shall take such actions (following the expiration of any applicable grace period) to enforce the rights of the Issuer and the Trustee thereunder and under the Collateral Assignment of Hedge Agreement as may be permitted by the terms of such Hedge Agreement and consistent with the terms hereof, and shall apply any proceeds of any such actions (including the proceeds of the liquidation of any collateral pledged by the Hedge Counterparty) to enter into a replacement Hedge Agreement on substantially identical terms or on such other terms as to which each Rating Agency shall have provided a Rating Agency Confirmation with a Substitute Party with respect to which the Hedge Counterparty Ratings Requirement is satisfied and each Rating Agency shall have provided a Rating Agency Confirmation. If the Issuer is the sole non-Affected Party or the sole non-Defaulting Party with respect to such “event of default” or “termination event”, the Issuer will (with the assistance of the Collateral Manager) obtain quotations with respect to such replacement Hedge Agreement from five prospective counterparties Independent from the Issuer, the Collateral Manager and each other that satisfy the Hedge Counterparty Ratings Requirement and with respect to which a Rating Agency Confirmation shall have been obtained and enter into a replacement Hedge Agreement with the prospective counterparty that provides the lowest quotation (if the Issuer is required to make a payment to such replacement counterparty) or the highest quotation (if such replacement counterparty is required to make a payment to the Issuer). 172

Processed and formatted by SEC Watch - Visit SECWatch.com

(h)

The Issuer shall notify each Rating Agency if at any time the Hedge Counterparty is required to post collateral or assign its rights and obligations in and under the Hedge Agreement.

(i)

The Hedge Agreement may not be amended or modified at any time other than to effect the appointment of a substitute Hedge Counterparty or to effect a modification which is of a formal, minor or technical nature or is to correct a manifest error and which, in the opinion of the Trustee (based upon an Opinion of Counsel) would not have a material adverse effect on the interests of Holders of the Rated Notes or of Holders of any Class or Classes of Rated Notes or the Holders of the Income Notes; provided that the Issuer has obtained Rating Agency Confirmation with respect to any such modification. The Trustee shall provide the Collateral Manager and the Rating Agencies with a copy of any such modification within 10 Business Days before effecting such modification.

(j)

The Issuer shall enter into a Hedge Agreement only if the payments from the Hedge Counterparty thereunder are not subject to withholding tax or if the Hedge Counterparty shall be required in accordance with the terms of the Hedge Agreement to pay additional amounts to the Issuer sufficient to cover any withholding tax due on payments made by the Hedge Counterparty to the Issuer under such Hedge Agreement, subject to the Issuer making customary payee tax representations and providing customary tax documentation. The Issuer shall not enter into any Hedge Agreement the acquisition (including the manner of acquisition), ownership, enforcement or disposition of which would subject the Issuer to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation.

(k)

The Issuer will not terminate or amend any Hedge Agreement without receiving Rating Agency Confirmation with respect to such termination or amendment. 173

Processed and formatted by SEC Watch - Visit SECWatch.com

IN WITNESS WHEREOF, we have set our hands as of the date first above written.

Executed as a Deed by N-STAR REAL ESTATE CDO VII LTD., as Issuer By: /s/ Derrie Boggess Name: Derrie Boggess Title: Director

In the presence of: /s/ Jesse Hydes Witness Name: Jesse Hydes

LASALLE BANK NATIONAL ASSOCIATION, as Trustee By: Name: Title: [INDENTURE]

Processed and formatted by SEC Watch - Visit SECWatch.com

IN WITNESS WHEREOF, we have set our hands as of the date first above written.

Executed as a Deed by N-STAR REAL ESTATE CDO VII LTD., as Issuer By: Name: Title: LASALLE BANK NATIONAL ASSOCIATION, as Trustee By: /s/ Thomas O’Connor Name: Thomas O’Connor Title: Vice President [INDENTURE]

Exhibit 10.23 EXECUTION COPY Dated as of December 7, 2006

N-STAR REL CDO VIII LTD., as Issuer N-STAR REL CDO VIII LLC, as Co-Issuer NS ADVISORS, LLC, as Advancing Agent and WELLS FARGO BANK, NATIONAL ASSOCIATION as Trustee

INDENTURE

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS S e ction

Page

PRELIMINARY STATEMENT

1

GRANTING CLAUSES

1

ARTICLE I Definitions and Interpretation 1.1. Definitions 1.2. Assumptions as to Collateral Interests, Fees, Etc. 1.3. Rules of Construction

4 4 69 73

ARTICLE II The Indenture Issued Notes 2.1. Forms Generally 2.2. Authorized Amount; Applicable Periodic Interest Rate; Stated Maturity Date; Denominations 2.3. Execution, Authentication, Delivery and Dating 2.4. Registration, Transfer and Exchange of Indenture Issued Notes 2.5. Mutilated, Defaced, Destroyed, Lost or Stolen Indenture Issued Notes 2.6. Payment of Principal and Interest; Rights Preserved

73 73 75 76 77 90 91

ARTICLE III Conditions Precedent 3.1. General Provisions 3.2. Security for the Indenture Issued Notes 3.3. Custodianship; Transfer of Collateral Interests and Eligible Investments

102 102 105 107

ARTICLE IV Satisfaction and Discharge 4.1. Satisfaction and Discharge of Indenture 4.2. Application of Trust Money 4.3. Repayment of Funds Held by Note Paying Agent

110 110 112 112

ARTICLE V Events of Default; Remedies 5.1. Events of Default 5.2. Acceleration of Maturity; Rescission and Annulment 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee 5.4. Remedies 5.5. Preservation of Collateral 5.6. Trustee May Enforce Claims Without Possession 5.7. Application of Funds Collected 5.8. Limitation on Suits 5.9. Unconditional Rights of Rated Noteholders (other than the Class N Noteholders) to Receive Principal and Interest 5.10. Restoration of Rights and Remedies 5.11. Rights and Remedies Cumulative 5.12. Delay or Omission Not Waiver 5.13. Control by the Controlling Party 5.14. Waiver of Past Defaults

112 112 115 116 120 122 124 124 125 125 126 126 126 126 127

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

5.15. 5.16. 5.17. 5.18.

Page

Undertaking for Costs Waiver of Stay or Extension Laws Sale of Collateral Action on the Rated Notes

128 128 128 129

ARTICLE VI The Trustee 6.1. Certain Duties and Responsibilities 6.2. Notice of Default 6.3. Certain Rights of Trustee 6.4. Authenticating Agents 6.5. Not Responsible for Recitals or Issuance of Rated Notes 6.6. May Hold Rated Notes 6.7. Funds Held in Trust 6.8. Compensation and Reimbursement 6.9. Corporate Trustee Required; Eligibility 6.10. Resignation and Removal; Appointment of Successor 6.11. Acceptance of Appointment by Successor 6.12. Merger, Conversion, Consolidation or Succession to Business of Trustee 6.13. Co-Trustees 6.14. Certain Duties Related to Delayed Payment of Proceeds; Other Notices 6.15. Representations and Warranties of the Bank 6.16. Exchange Offers, Proposed Amendments etc. 6.17. Fiduciary for Rated Noteholders Only; Agent For Other Secured Parties 6.18. Withholding

129 129 132 132 134 135 135 135 135 137 137 139 139 140 141 141 142 143 143

ARTICLE VII Covenants 7.1. Payment of Principal and Interest 7.2. Maintenance of Office or Agency 7.3. Funds for Rated Note Payments to be Held in Trust 7.4. Existence of Co-Issuers 7.5. Protection of Collateral 7.6. Opinions as to Collateral 7.7. Performance of Obligations 7.8. Negative Covenants 7.9. Statement as to Compliance 7.10. Co-Issuers May Consolidate, Etc., Only on Certain Terms 7.11. Successor Substituted 7.12. No Other Business 7.13. Change or Withdrawal of Rating 7.14. Reporting 7.15. Rated Note Calculation Agent 7.16. Listing 7.17. Amendment of Certain Documents 7.18. Purchase of Collateral; Information Regarding Collateral; Rating Confirmation 7.19. Liquidity Tests

143 143 144 145 146 147 149 149 151 152 152 156 156 157 157 157 158 158 158 161

ii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

ARTICLE VIII Supplemental Indentures 8.1. Supplemental Indentures Without Consent of Rated Noteholders 8.2. Supplemental Indentures with Consent of Rated Noteholders 8.3. Execution of Supplemental Indentures 8.4. Effect of Supplemental Indentures 8.5. Reference in Indenture Issued Notes to Supplemental Indentures

162 162 165 168 168 168

ARTICLE IX Redemption of Rated Notes 9.1. Redemption of Rated Notes 9.2. Redemption Procedures; Auction 9.3. Record Date; Notice to Trustee of Redemption 9.4. Notice of Redemption 9.5. Notice of Withdrawal 9.6. Rated Notes Payable on Redemption Date 9.7. Special Amortization

169 169 169 171 172 172 173 173

ARTICLE X Accounts, Accountings and Releases 10.1. Collection of Funds 10.2. General Provisions Applicable to Accounts 10.3. Collateral Account 10.4. Uninvested Proceeds Account 10.5. Collection Account 10.6. Expense Reserve Account 10.7. Interest Reserve Account 10.8. Future Funding Asset Account 10.9. Payment Account 10.10. Reports by Trustee 10.11. Accountings 10.12. Release of Securities 10.13. Reports by Independent Accountants 10.14. Reports to Rating Agencies 10.15. Tax Matters 10.16. [Reserved] 10.17. Interest Advances 10.18. Cure Advances 10.19. Future Funding Reserve Account 10.20. Suspense Account

174 174 175 176 176 176 178 178 179 180 180 181 187 187 189 189 190 190 194 194 195

ARTICLE XI Application of Monies 11.1. Disbursements of Funds from Payment Account; Priority of Payments

195 195

ARTICLE XII Purchase and Sale of Collateral Interests 12.1. Sale of Collateral Interests 12.2. Portfolio Characteristics 12.3. Conditions Applicable to all Transactions Involving Sale or Grant

212 212 216 222

iii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

ARTICLE XIII Secured Parties’ Relations 13.1. Subordination 13.2. Standard of Conduct

223 223 232

ARTICLE XIV Miscellaneous 14.1. Form of Documents Delivered to Trustee 14.2. Acts of Rated Noteholders 14.3. Notices, Etc., to Trustee, the Co-Issuers and the Rating Agencies 14.4. Notices and Reports to Rated Noteholders; Waiver 14.5. Effect of Headings and Table of Contents 14.6. Successors and Assigns 14.7. Severability 14.8. Benefits of Indenture 14.9. Governing Law 14.10. Submission to Jurisdiction 14.11. Counterparts 14.12. Waiver of Jury Trial 14.13. Judgment Currency 14.14. Confidential Treatment of Documents

233 233 234 234 236 237 237 237 237 238 238 238 238 238 239

ARTICLE XV Assignment of Agreements, Etc. 15.1. Assignment 15.2. No Impairment 15.3. Termination, Etc. 15.4. Issuer Agreements, Etc.

239 239 240 240 240

ARTICLE XVI Hedge Agreements 16.1. Hedge Agreements

240 240

ARTICLE XVII Class A-R Notes 17.1. Draws on the Class A-R Notes and Class A-R Commitment 17.2. Class A-R Interest and Class A-R Commitment Fee 17.3. Prepayments of Class A-R Notes 17.4. Class A-R Rating Criteria 17.5. Class A-R Holder Collateral Account

243 243 244 245 246 246 iv

Processed and formatted by SEC Watch - Visit SECWatch.com

Schedules Schedule A Schedule B Schedule C Schedule D Schedule E-1 Schedule E-2 Schedule E-3

Schedule of Collateral Interests as of the Closing Date LIBOR Formula Moody’s Recovery Rate Matrix Auction Procedures Form of representations, warranties and covenants Mortgage Loan Interests, Subordinate Mortgage Loan Interests and Mezzanine Loans Form of representations, warranties and covenants for Credit Lease Loans and Tenant Lease Loan Interests Form of representations, warranties and covenants for Preferred Equity Securities

Exhibits Exhibit A-1 Exhibit A-2 Exhibit B Exhibit C-1 Exhibit C-2 Exhibit C-3 Exhibit C-4 Exhibit D Exhibit E- 1 Exhibit E-2 Exhibit F Exhibit G Exhibit H Exhibit I

Form of Regulation S Global Note Form of Rule 144A Global Note Form of Certificated Note Form of Rule 144A Transfer Certificate Form of Regulation S Transfer Certificate Form of Certificated Note Transfer Certificate Form of ERISA Restriction Certificate Form of Funding Certificate Form of Opinion of Thacher Proffitt & Wood LLP Form of Opinion of Walkers Form of Opinion of Kennedy Covington Lobdell & Hickman, L.L.P. Form of Opinion of Thacher Proffitt & Wood LLP Rated Noteholder’s Certificate Form of Class L Note or Class M Note Tax Transfer Certificate v

THIS INDENTURE dated as of December 7, 2006 among: N-STAR REL CDO VIII LTD., an exempted company incorporated and existing under the law of the Cayman Islands; N-STAR REL CDO VIII LLC, a limited liability company organized and existing under the law of the State of Delaware; NS ADVISORS, LLC a limited liability company organized and existing under the law of the State of Delaware; and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, organized under the law of the United States, as trustee. PRELIMINARY STATEMENT The Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) and the Issuer (in the case of the Class L Notes and the Class M Notes) are duly authorized to execute and deliver this Indenture to provide for the issuance of the Indenture Issued Notes as provided in this Indenture. All covenants and agreements made by the Co-Issuers herein are for the benefit and security of the Secured Parties. The Co-Issuers are entering into this Indenture, and the Trustee is accepting the trusts created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. All things necessary to make this Indenture a valid agreement of the Co-Issuers in accordance with its terms have been done. GRANTING CLAUSES The Issuer hereby Grants to the Trustee, for the benefit and security of the Secured Parties, all of its right, title and interest in, to and under, in each case, whether now owned or existing, or hereafter acquired or arising, the following property (other than the Excepted Property): (a) the Collateral Interests listed on Schedule A, the Collateral Interests acquired after the Closing Date and any Equity Interests which, in each case, are delivered to the Trustee (directly or through a Securities Intermediary) after the Closing Date pursuant to the terms hereof and all payments thereon or with respect thereto, (b) the Collection Account (including each Sub-Account established therein), the Interest Reserve Account, the Payment Account, the Expense Reserve Account, the Collateral Account, the Uninvested Proceeds Account, the Future Funding Asset Account, the Class A-R Holder Collateral Account, all amounts credited to such accounts, and Eligible Investments purchased with funds credited to such accounts and all income from the investment of funds therein, (c) the rights of the Issuer under each of the Transaction Documents to which the Issuer is a party and all payments to the Issuer thereunder or with respect thereto, (d) all Cash or other property delivered to the Trustee (directly or through a Securities Intermediary) and (e) all proceeds, whether voluntary or involuntary, of and to any of the property of the Issuer described in the preceding clauses (collectively, the Collateral); provided, that such security interest shall not extend to (i) any property, cash or other amounts specifically released from the lien of this Indenture or otherwise to be paid to the Issuer in accordance with the terms hereof or (ii) any Retained Rights. Such Grants are made to the Trustee to hold in

Processed and formatted by SEC Watch - Visit SECWatch.com

trust, to secure the Indenture Issued Notes equally and ratably without prejudice, priority or distinction between any such Indenture Issued Note and any other such Indenture Issued Note by reason of difference in time of issuance or otherwise, except as expressly provided in this Indenture, and to secure (i) the payment of all amounts due on the Indenture Issued Notes and under any Hedge Agreement and the Collateral Management Agreement in accordance with their respective terms, (ii) the payment of all other sums payable under this Indenture and (iii) compliance with the provisions of this Indenture, any Hedge Agreement, the Class A-R Note Purchase Agreement and the Collateral Management Agreement, all as provided in this Indenture (collectively, the Secured Obligations). For the avoidance of doubt, amounts on deposit in the Future Funding Reserve Account and the Suspense Account will not be included in the Collateral. Except to the extent otherwise provided in this Indenture, the Issuer does hereby constitute and irrevocably appoint the Trustee as the true and lawful attorney of the Issuer, with full power (in the name of the Issuer or otherwise), to exercise all rights of the Issuer with respect to the Collateral held for the benefit and security of the Secured Parties and to ask, require, demand, receive, settle, compromise, compound and give acquittance for any and all moneys and claims for moneys due and to become due under or arising out of any of the Collateral held for the benefit and security of the Secured Parties, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Trustee may deem to be necessary or advisable in the premises. The power of attorney granted pursuant to this Indenture and all authority hereby conferred are granted and conferred solely to protect the Trustee’s interest in the Collateral held for the benefit and security of the Secured Parties and shall not impose any duty upon the Trustee to exercise any power. This power of attorney shall be irrevocable as one coupled with an interest prior to the payment in full of all the obligations secured hereby. Except to the extent otherwise provided in this Indenture, this Indenture shall constitute a security agreement under the law of the State of New York. Upon the occurrence of any Event of Default and in addition to any other rights available under this Indenture or any other instruments included in the Collateral held for the benefit and security of the Secured Parties or otherwise available at law or in equity, the Trustee shall have all rights and remedies of a secured party on default under the laws of the State of New York and other applicable law to enforce the assignments and security interests contained herein and, in addition, shall have the right, subject to compliance with any mandatory requirements of applicable law and the terms of this Indenture, to sell or apply any rights and other interests assigned or pledged hereby in accordance with the terms hereof at public or private sale. It is expressly agreed that anything therein contained to the contrary notwithstanding, the Issuer shall remain liable under any instruments included in the Collateral to perform all the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and except as otherwise expressly provided herein, the Trustee shall not have any obligations or liabilities under such instruments by reason of or arising out of this Indenture, nor shall the Trustee be required or obligated in any manner to perform or fulfill any obligations of the Issuer under or pursuant to such instruments or to make any payment, to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim, or to take 2

Processed and formatted by SEC Watch - Visit SECWatch.com

any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. The designation of the Trustee in any transfer document or record is intended and shall be deemed, first, to refer to the Trustee as custodian on behalf of the Issuer and second, to refer to the Trustee as secured party on behalf of the Secured Parties, provided that the Grant made by the Issuer to the Trustee pursuant to the granting clauses hereof shall apply to any Collateral bearing such designation. The Trustee acknowledges such Grants, accepts the trust hereunder in accordance with the provisions hereof, and agrees to perform the duties herein in accordance with the required standard of care set forth herein such that the interests of the Secured Parties may be protected. Each of the Secured Parties hereby agrees and acknowledges that it shall not have any claim on the funds and property from time to time deposited in or credited to the Income Note Distribution Account and the proceeds thereof (unless funds are deposited or credited to such Account in error or in violation of this Indenture). 3

Processed and formatted by SEC Watch - Visit SECWatch.com

ARTICLE I DEFINITIONS AND INTERPRETATION 1.1.

DEFINITIONS

Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Indenture. Whenever any reference is made to an amount the determination of which is governed by Section 1.2, the provisions of Section 1.2 shall be applicable to such determination or calculation, whether or not reference is specifically made to Section 1.2, unless some other method of calculation or determination is expressly specified in the particular provision. In the case of Preferred Equity Securities, whenever any reference is made to payments of interest with respect to a Collateral Interest, payments of dividends or other distributions not attributable to the return of capital by the related Underlying Instruments, shall be applicable to such determination or calculation. In the case of Preferred Equity Securities, whenever any reference is made to payments of principal with respect to a Collateral Interest, distributions attributable to the return of capital by their Underlying Instruments shall be applicable to such determination or calculation. In addition, terms defined in Article 9 of the UCC and used but not capitalized herein have the meanings assigned thereto in Article 9 of the UCC. Account means any of the Collection Account (including each Collateral Sub-Account established therein), the Collateral Account, the Uninvested Proceeds Account, the Payment Account, the Interest Reserve Account, the Future Funding Asset Account, the Class A-R Holder Collateral Account and the Expense Reserve Account (including each Collateral Sub-Account established therein). Account Control Agreement means that certain Account Control Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, among the Issuer, the Trustee and the Custodian. Accountant’s Report means a report of a firm of Independent certified public accountants of recognized national reputation appointed by the Issuer (or the Collateral Manager on its behalf) on the Closing Date pursuant to Section 10.13(a), which may be the firm of Independent accountants that reviews or performs procedures with respect to the financial reports prepared by the Issuer. Act has the meanings specified in Section 14.2. Administrative Expenses means amounts (including any applicable indemnities) due from or accrued for the account of the Co-Issuers with respect to any Payment Date to (i) the Trustee and the Underlying Trustee pursuant to this Indenture and the Master Trust Agreement, respectively; (ii) the PAA Issued Note Paying Agent pursuant to the Paying Agency Agreement; (iii) the Collateral Administrator pursuant to the Collateral Administration Agreement; (iv) the independent accountants, agents and counsel of the Co-Issuers for fees and expenses (including, without limitation, tax reports); (v) the Rating Agencies for fees and expenses in connection with any Class of Notes rated by each such Rating Agency (including, without limitation, expenses 4

Processed and formatted by SEC Watch - Visit SECWatch.com

for credit estimates and ongoing surveillance of the ratings of the Notes); (vi) the Administrator pursuant to the Corporate Services Agreement; (vii) the Collateral Manager and its counsel for fees, expenses and indemnities under the Transaction Documents to the extent set forth therein (including, without limitation, amounts payable under the Collateral Management Agreement but excluding the Collateral Management Fee); (viii) any Servicer pursuant to the Servicing Agreements for expenses and indemnities set forth therein and any servicing fees or other servicing fees not paid out of collections received pursuant to the terms of the related Servicing Agreement, (ix) any other Person in respect of any governmental fee, charge or tax (including all filing, registration, and annual return fees payable to the Cayman Islands’ government and registered office fees, (x) to the Advancing Agent for the Advancing Agent Fee pursuant to the Indenture, (xi) the Class A-R Note Agent pursuant to the Class A-R Note Purchase Agreement and (xii) any other Person in respect of any other fees or expenses permitted under this Indenture and the documents delivered pursuant to or in connection with this Indenture, the Paying Agency Agreement, the Collateral Management Agreement and the Notes; provided that Administrative Expenses may not include (i) any amounts due or accrued with respect to the actions taken on or prior to the Closing Date and any Class A-R Commitment Fees, Class A-R Increased Costs or Class A-R Breakage Costs, (ii) any amounts due as reimbursement for Interest Advances, servicing advances or Cure Advances, or (iii) any indemnities, servicing fees or other fees or expenses actually paid in accordance with any Servicing Agreement. Administrator means Walkers SPV Limited and any successor thereto appointed under the Corporate Services Agreement. Advancing Agent means NS Advisors, LLC and any successor or successors thereto. Advancing Agent Fee means, a per annum fee payable to the Advancing Agent on each Payment Date in accordance with the Priority of Payments equal to 0.00125% of the outstanding principal amount of the Class A Notes (assuming for the purposes of this calculation that the Class A-R Notes are fully drawn), the Class B Notes, the Class C Notes and the Class D immediately prior to such Payment Date. Affected Party has the meaning given to such term in the standard form 1992 ISDA Master Agreement (Multicurrency-Cross Border). Affiliate means any person, directly or indirectly through one or more intermediaries, controlling, controlled by or under common control with the person; provided that (i) with respect to the Issuer, “Affiliate” shall be deemed not to include Walkers SPV Limited or any entity which Walkers SPV Limited controls and (ii) control of a person shall mean the power, direct or indirect, (a) to vote more than 50% of the securities having ordinary voting power for the election of directors of such person or (b) to direct or cause the direction of the management and policies of such person whether by contract or otherwise. Agency MBS Security means obligations of (A) the Federal National Mortgage Association, (B) the Federal Home Loan Mortgage Corporation or (C) the Government National Mortgage Association, in each case with a stated maturity that does not exceed the Stated Maturity Date. Agent Members means members of, or participants in, the Clearing Agencies. 5

Processed and formatted by SEC Watch - Visit SECWatch.com

Aggregate Class A-R Undrawn Amount means at any time, the excess, if any, of the aggregate amount of the Class A-R Commitments over the Aggregate Outstanding Amount of the Class A-R Notes. Aggregate Fees and Expenses means, on any Payment Date, the sum of (i) the Trustee Fee with respect to such Payment Date and any unpaid Trustee Fee accrued with respect to a previous Payment Date, (ii) the PAA Issued Note Paying Agent Fee with respect to such Payment Date and any unpaid PAA Issued Note Paying Agent Fee accrued with respect to a previous Payment Date, (iii) the Senior Collateral Management Fee and all expenses of the Collateral Manager payable by the Issuer pursuant to the Collateral Management Agreement with respect to such Payment Date and any unpaid Senior Collateral Management Fee and unpaid expenses of the Collateral Manager accrued with respect to a previous Payment Date, (iv) the Trustee Expenses and other expenses (including other Administrative Expenses) of the Co-Issuer (including the fees to be paid to the Cayman Islands Stock Exchange), (v) taxes payable by the Co-Issuers, if any, (vi) the Underlying Trust Expenses and (vii) all other expenses of the Co-Issuers (including, without limitation, Administrative Expenses) payable on such Payment Date pursuant to Sections 11.1(a)(1) and 11.1(b)(1) (in each case to the extent not included in clauses (i) through (vi) above). Aggregate Non-Transitional Asset Base means an amount, calculated as of the most recent Quarterly Measurement Date, equal to the aggregate, with respect to each Other Loan that is a Non-Transitional Asset, of 50% of the lesser of (a)

the greater of

(1)

the product of (A)

the quotient of (i) the aggregate outstanding amounts and remaining unfunded commitments of such Other Loans, its Related Future Advance Loan and any other components of the related financing divided by (ii) the Moody’s Stressed LTV Percentage with respect to such credit facility and

(B)

the Moody’s Stressed LTV Percentage of such financing minus 75% and

(2)

zero and

(b)

the aggregate remaining unfunded commitments of such Other Loans and Related Future Advance Loan.

For purposes of this definition, the Moody’s Stressed LTV Percentage of any credit facility related to a Related Future Advance Loan that is a Non-Transitional Asset shall be the percentage assigned thereto by Moody’s upon request by the Collateral Manager on behalf of the Issuer. Until Moody’s responds to such request, the Moody’s Stressed LTV Percentage for any 6

Processed and formatted by SEC Watch - Visit SECWatch.com

Other Loan that is a Non-Transitional Asset shall be deemed to equal 75% until Moody’s provides the Collateral Manager notice of an alternative. Aggregate Outstanding Amount means, when used with respect to any of the Rated Notes (other than the Class A-R Notes) at any time, the aggregate principal amount of such Rated Notes Outstanding at such time and, with respect to the Class A-R Notes, the Average Drawn Class A-R Note Portion of the Class A-R Notes with respect to the related Interest Period; provided, that with respect to any action, consent, vote or waiver by any Class or Classes of Noteholders, the Aggregate Outstanding Amount of the Class A-R Notes shall include any unfunded Class A-R Commitments (except as provided in the foregoing sentence and as otherwise provided herein, the Aggregate Outstanding Amount of the Notes at any time shall not include any unfunded Class A-R Commitments). Except as otherwise provided herein, (i) the Aggregate Outstanding Amount of any Class E Notes at any time shall include the Class E Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class E Notes at such time, (ii) the Aggregate Outstanding Amount of any Class F Notes at any time shall include the Class F Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class F Notes at such time, (iii) the Aggregate Outstanding Amount of any Class G Notes at any time shall include the Class G Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class G Notes at such time, (iv) the Aggregate Outstanding Amount of any Class H Notes at any time shall include the Class H Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class H Notes at such time, (v) the Aggregate Outstanding Amount of any Class J Notes at any time shall include the Class J Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class J Notes at such time, (vi) the Aggregate Outstanding Amount of any Class K Notes at any time shall include the Class K Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class K Notes at such time, (vii) the Aggregate Outstanding Amount of any Class L Notes at any time shall include the Class L Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class L Notes at such time, (viii) the Aggregate Outstanding Amount of any Class M Notes at any time shall include the Class M Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class M Notes at such time and (ix) the Aggregate Outstanding Amount of any Class N Notes at any time shall include the Class N Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class N Notes at such time. Applicable Periodic Interest Rate means, for any Interest Period, (i) with respect to the Class A-1 Notes, the applicable Class A-1 Note Interest Rate, (ii) with respect to the Class A-R Notes, the applicable Class A-R Note Interest Rate, (iii) with respect to the Class A-2 Notes, the applicable Class A-2 Note Interest Rate, (iv) with respect to the Class B Notes, the applicable Class B Note Interest Rate, (v) with respect to the Class C Notes, the applicable Class C Note Interest Rate, (vi) with respect to the Class D Notes, the applicable Class D Note Interest Rate, (vii) with respect to the Class E Notes, the applicable Class E Note Interest Rate, (viii) with respect to the Class F Notes, the applicable Class F Note Interest Rate, (ix) with respect to the Class G Notes, the applicable Class G Note Interest Rate, (x) with respect to the Class H Notes, the applicable Class H Note Interest Rate, (xi) with respect to the Class J Notes, the applicable Class J Note Interest Rate, (xii) with respect to the Class K Notes, the applicable Class K Note Interest Rate, (xiii) with respect to the Class L Notes, the applicable Class L Note Interest Rate, (xiv) with respect to the Class M Notes, the applicable Class M Note Interest Rate and (xv) with respect to the Class N Notes, the applicable Class N Note Interest Rate. 7

Processed and formatted by SEC Watch - Visit SECWatch.com

Applicable Recovery Rate means, with respect to any Collateral Interest on any Measurement Date, the lesser of the Moody’s Recovery Rate and the Fitch Recovery Rate applicable to such Collateral Interest on such date. Articles means the Amended and Restated Memorandum and Articles of Association of the Issuer, filed under the Companies Law (2004 Revision) of the Cayman Islands, as modified and supplemented and in effect from time to time. Approved Lender has the meaning specified in Section 12.2(y). Approved Replacement Person means a replacement or additional Key Manager appointed in accordance with the procedures described in Section 16 of the Collateral Management Agreement. Asset-Backed Securities are debt securities that entitle the holders thereof to receive payments that depend primarily on the cash flow from (i) a specified pool of financial assets, either static or revolving, that by their terms convert into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities (including, for the avoidance of doubt, leases) or (ii) real estate mortgages, either fixed or revolving, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to the holders of such securities. Asset Transfer Agreement means either Asset Transfer Agreement, dated as of December 7, 2006, as the same may be amended or supplemented from time to time, among the related Seller, the Depositor and NorthStar Realty Finance Corp. Assumed Reinvestment Rate means, with respect to any Account or fund securing the Indenture Issued Notes, the greater of (i) LIBOR minus 1.0% and (ii) zero. Auction has the meaning specified in Section 9.2. Auction Call Redemption has the meaning specified in Section 9.1(c). Auction Date has the meaning specified in Section 9.2; provided that, for the purposes of Section 5.5, “Auction Date” means the date upon which an Auction of the Collateral Interests is conducted in connection with an Event of Default. Auction Procedures has the meaning specified in Section 9.2. Auction Purchase Agreement has the meaning specified in Schedule D. Authenticating Agent means, with respect to the Indenture Issued Notes or any Class of the Indenture Issued Notes, the Person designated by the Trustee, if any, to authenticate such Indenture Issued Notes on behalf of the Trustee pursuant to Section 6.4. Authorized Officer means (i) with respect to the Issuer, any Officer of the Issuer who is authorized to act for the Issuer in matters relating to, and binding upon, the Issuer or any duly appointed attorney-in-fact of the Issuer, (ii) with respect to the Co-Issuer, any Officer who is 8

Processed and formatted by SEC Watch - Visit SECWatch.com

authorized to act for the Co-Issuer in matters relating to, and binding upon, the Co-Issuer, (iii) with respect to the Collateral Manager, any officer of the Collateral Manager who is authorized to act for the Collateral Manager in matters relating to, and binding upon, the Collateral Manager, (iv) with respect to the Trustee or any other bank or trust company acting as trustee of an express trust or as custodian, a Trust Officer, (v) with respect to the PAA Issued Note Paying Agent, any officer who is authorized to act for the PAA Issued Note Paying Agent in matters relating to, and binding upon, the PAA Issued Note Paying Agent and (vi) with respect to the Advancing Agent, any Officer of the Advancing Agent who is authorized to act for the Advancing Agent in matters relating to, and binding upon, the Advancing Agent. 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. Available Aggregate Class A-R Undrawn Amount means, as of any date, the (i) the Aggregate Class A-R Undrawn Amount, less (ii) the Total Unfunded Future Advance Amount, plus (iii) the amount on deposit in the Future Funding Asset Account. Available Funds means, with respect to any Payment Date, the amount of any positive balance of Cash or Eligible Investments in the Collection Account as of the Calculation Date relating to such Payment Date and, with respect to any other date, such amount as of that date. Average Drawn Class A-R Note Portion means, with respect to any Payment Date or Class A-R Prepayment Date, the average daily Aggregate Outstanding Amount of the Class A-R Notes during the related Interest Period. Average Life means, on any Calculation Date with respect to any Collateral Interest, the quotient obtained by the Collateral Manager by dividing (i) the sum of the products of (a) the number of years (rounded to the nearest one tenth thereof) from such Calculation Date to the respective dates of each successive distribution of principal of such Collateral Interest (assuming that (1) no Collateral Interests default or are sold and (2) any optional redemption of the Collateral Interests occurs in accordance with their respective terms) and (b) the respective amounts of principal of such scheduled distributions by (ii) the sum of all successive scheduled distributions of principal on such Collateral Interest. Balance means at any time, with respect to Cash or Eligible Investments in any Account at such time, the aggregate of the (i) current balance of Cash, demand deposits, time deposits, certificates of deposit and federal funds; (ii) principal amount of interest-bearing corporate and government securities, money market accounts and repurchase obligations; and (iii) purchase price (but not greater than the face amount) of non-interest-bearing government and corporate securities and commercial paper. Bank means Wells Fargo Bank, National Association, a national banking association organized under the laws of the United States, in its individual capacity and not as Trustee. Bankruptcy Code means the U.S. Bankruptcy Code, Title 11 of the United States Code, as amended or where the context requires, the applicable insolvency provisions of the laws of the Cayman Islands. 9

Processed and formatted by SEC Watch - Visit SECWatch.com

Beneficial Owner means, with respect to any Global Note, each Person that appears on the records of a Clearing Agency (other than each such Clearing Agency to the extent that it is an accountholder with the other Clearing Agency for the purpose of operating the “bridge” between them) as entitled to a particular amount of Indenture Issued Notes by reason of an interest in a Global Note (for all purposes other than with respect to the payment of principal of and interest on the Indenture Issued Notes, the right to which will be vested, as against the Issuer and the Trustee, solely in the Person in whose name the Global Note is registered in the Note Register (in the case of the Rated Notes) or the PAA Issued Note Register (in the case of the Class Notes or the Income Notes)); provided that the Trustee and the PAA Issued Note Paying Agent may conclusively rely upon the certificate of a Clearing Agency as to the identity of such Persons holding an interest in a Global Note. Benefit Plan Investor means (i) an “employee benefit plan” (as defined in Section 3(3) of ERISA), subject to Title I of ERISA, (ii) a “plan” (as defined in Section 4975(e)(1) of the Code), subject to Section 4975 of the Code, including, without limitation, individual retirement accounts and Keogh plans or (iii) an entity whose underlying assets include plan assets by reason of such an employee benefit plan’s or plan’s investment in such entity, including, without limitation, as applicable, an insurance company general account. Bill of Sale means that certain Bill of Sale, dated as of December 7, 2006, as the same may be amended or supplemented from time to time, between the Depositor and the Issuer. Board of Directors means, with respect to the Issuer, the directors of the Issuer duly appointed in accordance with the Articles. Board Resolution means, with respect to the Issuer, a resolution of the Board of Directors of the Issuer. Business Day means any day that is not a Saturday, Sunday or other day on which commercial banking institutions in New York, New York, Minneapolis, Minnesota, Columbia, Maryland or any other cities in which the Corporate Trust Office of the Trustee or the Advancing Agent is located are authorized or obligated by law or executive order to be closed; provided that, if any action is required of the Issuer (or of the Administrator on its behalf), solely for purposes of determining when such action of the Issuer is required, days on which commercial banking institutions in the Cayman Islands are authorized or obligated by law or executive order to be closed will also be considered in determining whether such day is a “Business Day.” Buy/Sell Interest means a Collateral Interest for which one of the participants has exercised its right to purchase its corresponding participant’s interest, or sell its interest to such corresponding participant for the same price, in accordance with the related Underlying Instrument Calculation Date means, with respect to any Payment Date, the last day of the related Due Period. Call Period has the meaning specified in Section 9.1(a) hereof. 10

Cash means such funds denominated with currency of the United States as at the time shall be legal tender for payment of all public and private debts, including funds credited to a deposit account or a Securities Account. Certificate of Authentication has the meaning specified in Section 2.3(f). Certificated Class A -K Note has the meaning specified in Section 2.1(c). Certificated Class L Note has the meaning specified in Section 2.1(d). Certificated Class L Note Transfer Certificate has the meaning specified in Section 2.4(c)(1). Certificated Class M Note has the meaning specified in Section 2.1(d). Certificated Class M Note Transfer Certificate has the meaning specified in Section 2.4(c)(1). Certificated Note means any Rated Note or Income Note issued in the form of physical certificates in certificated, fully registered form. Certificated Security has the meaning specified in Section 8-102(a)(4) of the UCC. Class means any class of the Notes, consisting of the Class A-1 Notes, Class A-R Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes, Class N Notes and Income Notes. Class A Notes means the Class A-1 Notes, Class A-R Notes and Class A-2 Notes. Class A Principal Coverage Ratio means a percentage based on the ratio of (x) to (y), where (x) is the Principal Coverage Amount as of such

Processed and formatted by SEC Watch - Visit SECWatch.com

Measurement Date and (y) is the sum of the aggregate principal amount of the then Outstanding Class A Notes (assuming for purposes of this calculation that the Class A-R Commitments are fully drawn) as of such Measurement Date. Class A Senior Notes means the Class A-1 Notes and the Class A-R Notes. Class A Senior Pro Rata Allocation means, with respect to any Payment Date, the allocation based on the Aggregate Outstanding Amount of the Class A-1 Notes and the aggregate principal amount of the Class A-R Commitments as of the related Measurement Date, and in the case of a Redemption of the Notes in full or the acceleration of the Notes following an Event of Default, the allocation based on the Aggregate Outstanding Amount of the Class A-1 Notes and the Aggregate Outstanding Amount of the Class A-R Notes as of the related Calculation Date. Class A/B/C/D Coverage Tests means the Interest Coverage Test and the Principal Coverage Test applied with respect to the Class A Notes, Class B Notes, Class C Notes and Class D Notes taken together. Class A-1 Note Interest Rate means LIBOR plus 0.290%. 11

Processed and formatted by SEC Watch - Visit SECWatch.com

Class A-1 Notes means the U.S.$100,000,000 aggregate principal amount of Class A-1 Floating Rate Notes due 2041. Class A-2 Note Interest Rate means LIBOR plus 0.360%. Class A-2 Notes means the U.S.$103,050,000 aggregate principal amount of Class A-2 Floating Rate Notes due 2041. Class A-R Breakage Costs means, with respect to any Due Period, the amount of “breakage costs” as set forth in a certificate of a Class A-R Noteholder delivered to the Issuer and the Trustee on or prior to the related Calculation Date, if any, incurred by Class A-R Noteholders as a result of (a) a prepayment of amounts under the Class A-R Notes on a day other than a Payment Date and calculated as provided in the Class A-R Note Purchase Agreement or (b) a failure by the Issuer to effect a Class A-R Draw on the scheduled date therefor after having submitted a request for a Class A-R Draw to the Class A-R Note Agent in accordance with the provisions of the Class A-R Note Purchase Agreement. Class A-R Commitment means, the maximum aggregate outstanding principal amount of advances (whether at the time funded or unfunded) that the Holder of such Class A-R Note (or the related Liquidity Provider) is obligated to make to the Issuer from time to time under the Class A-R Note Purchase Agreement. Class A-R Commitment Fee means, in respect of the Class A-R Noteholders and an Interest Period, the fee payable to such Class A-R Noteholder in arrears, on each Payment Date, being the amount accrued in respect of that Interest Period at a rate per annum equal to 0.220% (calculated on the average daily Aggregate Class A-R Undrawn Amount during such Interest Period on the basis of a 360-day year and the actual number of days elapsed). Class A-R Defaulted Interest Amount means, with respect to the Class A-R Notes as of each Payment Date, the accrued and unpaid amount due to Holders of the Class A-R Notes on account of any shortfalls in the payment of the related Periodic Interest with respect to any preceding Payment Date or Payment Dates, together with interest accrued thereon (to the extent lawful). Class A-R Draw means an advance by a Holder of a Class A-R Note made in accordance with Section 17.1(a) hereof. Class A-R Draw Date has the meaning specified in Section 17.1(a) hereof. Class A-R Eligible Investments has the meaning specified in Section 17.5(f) hereof. Class A-R Holder Collateral Account means the Securities Account designated the “Class A-R Holder Collateral Account” and established in the name of the Trustee pursuant to Section 17.5. Class A-R Increased Costs means, with respect to any Payment Date, the amount as set forth in a certificate of a Class A-R Noteholder delivered to the Issuer and the Trustee on or prior to the Calculation Date of the related Payment Date, necessary to compensate such Noteholder or any Funding Entity for (a) any increase in cost to a Funding Entity of making or maintaining any loan or asset purchase under the Class A-R Note Purchase Agreement or such Liquidity Facility 12

Processed and formatted by SEC Watch - Visit SECWatch.com

(or maintaining its obligation to make any such loan or asset purchase) resulting from a change in law applicable to such Funding Entity, (b) any reduction in any amount received or receivable by a Funding Entity under the Class A-R Note Purchase Agreement or such Liquidity Facility resulting from a change in law applicable to such Funding Entity or (c) any reduction in the rate of return on the capital of a Funding Entity or its parent/holding company resulting from a change in law applicable to such Funding Entity or parent/holding company to a level below that which such Funding Entity or parent/holding company could have achieved but for such change in law. The Class A-R Note Agent, the Issuer, the Trustee and the Collateral Manager shall in each instance be entitled to rely conclusively (in the absence of manifest error) on any such certificate and all calculations and data therein (and the Class A-R Note Agent, the Issuer, the Trustee and the Collateral Manager shall have no duty or obligation to investigate, verify or recalculate any information or conclusion set forth therein). Class A-R Interest Allocation Percentage means, for each Interest Period and with respect to each Holder of Class A-R Notes, a fraction, expressed as a percentage, (i) the numerator of which is the Average Drawn Class A-R Note Portion of such Holder and (ii) the denominator of which is the Average Drawn Class A-R Note Portion of all of the Class A-R Noteholders. Class A-R Note Agent means Wells Fargo Bank, National Association, and any successors or assigns. Class A-R Note Agent Fee means $10,000 per annum. Class A-R Note Draw Date has the meaning specified in Section 17.1(a) hereof. Class A-R Note Interest Rate means LIBOR plus 0.320%. Class A-R Note Purchase Agreement means the agreement to be dated December 7, 2006, entered into among the Issuer, the Co-Issuer, the Class A-R Note Agent and the Holders from time to time of the Class A-R Notes, as amended, supplemented or otherwise modified from time to time in accordance with its terms. Class A-R Note Rating Criteria means the criteria set forth below, which if satisfied with respect to any Holder of Class A-R Notes (or prospective transferee) at the time such Class A-R Notes are purchased (or transferred), will make such Holder (or prospective transferee) eligible to purchase (or receive) such Class A-R Notes, will be satisfied on any date with respect to any Holder of Class A-R Notes (or prospective transferee) if: (i) either (x) the long-term and short-term debt, deposit or similar obligations of such Class A-R Noteholder (or prospective transferee) are rated “A1” and “P-1”, respectively, by Moody’s (other than the Initial Class A-R Noteholder, who is not required to maintain a long-term Moody’s Rating) or (y) if such long-term and short-term debt, deposit or similar obligations of such Class A-R Noteholder (or prospective transferee) are not rated by Moody’s, the long-term debt, deposit or similar obligations of such Class A-R Noteholder (or prospective transferee) are rated “Aa3” by Moody’s; 13

Processed and formatted by SEC Watch - Visit SECWatch.com

(ii) the obligations of such Class A-R Noteholder (or prospective transferee) under the Class A-R Note Purchase Agreement are guaranteed by an entity meeting the Class A-R Rating Criteria set forth in (i) above; or (iii) such Class A-R Noteholder (or prospective transferee) is then entitled under a Liquidity Facility to borrow from, or sell an interest in assets or assign its obligations (as described in the Class A-R Note Purchase Agreement), to a Liquidity Provider so long as: (1) either (x) long-term and the short-term debt, deposit or similar obligations of each such Liquidity Provider are on such date rated “A1” and “P1”, respectively, by Moody’s, at least “F1” by Fitch or (y) if such long-term and shortterm debt, deposit or similar obligations of each such Liquidity Provider are not rated by Moody’s or Fitch, the long-term debt, deposit or similar obligations of each such Liquidity Provider are rated “Aa3” by Moody’s, at least “A+” by Fitch, as applicable; and (2) the aggregate amount of commitments to make loans or purchase interests in assets under such Liquidity Facility are held by Liquidity Providers whose either (x) long-term and short-term debt, deposit or similar obligations are on such date rated “A1” and “P-1”, respectively by Moody’s and at least “F1” by Fitch or (y) if such short-term debt, deposit or similar obligations are not rated by Moody’s or Fitch, the long-term debt, deposit or similar obligations are on such date rated “Aa3” by Moody’s or at least “A+” by Fitch, as applicable, and such amounts are not less than the Class A R Commitment in respect of the Class A-R Notes held by such Class A-R Noteholder (or prospective transferee). Class A-R Notes means the up to U.S.$260,000,000 aggregate principal amount of Class A-R Revolving Floating Rate Notes due 2041. Class A-R Prepayment means any payment of principal of the Class A-R Notes prior to the Stated Maturity Date of the Class A-R Notes. Class A-R Prepayment Date means the date of any Class A-R Prepayment. Class A-R Proportion is equal to the percentage based on the ratio of (x) the initial aggregate principal amount of the Class A-R Notes (assuming for purposes of this calculation that the Class A-R Commitments are fully drawn) to (y) the initial aggregate principal amount of the Class A-1 Notes. Class B Note Interest Rate means LIBOR plus 0.420%. Class B Notes means the U.S.$60,300,000 aggregate principal amount of Class B Floating Rate Notes Due 2041. Class C Note Interest Rate means LIBOR plus 0.470%. 14

Processed and formatted by SEC Watch - Visit SECWatch.com

Class C Notes means the U.S.$24,300,000 aggregate principal amount of Class C Floating Rate Notes Due 2041. Class D Note Interest Rate means LIBOR plus 0.550%. Class D Notes means the U.S.$17,100,000 aggregate principal amount of Class D Floating Rate Notes Due 2041. Class E Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class E Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class E Notes. Class E Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class E Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments, to reduce such sum. Class E Note Interest Rate means LIBOR plus 0.750%. Class E Notes means the U.S.$22,050,000 aggregate principal amount of Class E Floating Rate Deferrable Interest Notes Due 2041. Class E/F/G Coverage Tests means the Interest Coverage Test and the Principal Coverage Test applied to the Class E Notes, Class F Notes and Class G Notes, taken together. Class F Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class F Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class F Notes. Class F Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class F Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments, to reduce such sum. Class F Note Interest Rate means LIBOR plus 0.850%. Class F Notes means the U.S.$25,200,000 aggregate principal amount of Class F Floating Rate Deferrable Interest Notes Due 2041. Class G Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class G Notes and paid thereafter in accordance with the Priority of Payments in 15

Processed and formatted by SEC Watch - Visit SECWatch.com

the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class G Notes. Class G Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class G Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates, pursuant to the Priority of Payments, to reduce such sum. Class G Note Interest Rate means LIBOR plus 0.950%. Class G Notes means the U.S.$26,100,000 aggregate principal amount of Class G Floating Rate Deferrable Interest Notes Due 2041. Class H Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class H Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes or Class G Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class H Notes. Class H Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class H Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class H Note Interest Rate means LIBOR plus 1.330%. Class H Notes means the U.S.$20,700,000 aggregate principal amount of Class H Floating Rate Deferrable Interest Notes due 2041. Class H/J/K Coverage Tests means the Interest Coverage Test and the Principal Coverage Test applied to the Class H Notes, Class J Notes and Class K Notes, taken together. Class J Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class J Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class J Notes. Class J Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class J Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. 16

Processed and formatted by SEC Watch - Visit SECWatch.com

Class J Note Interest Rate means LIBOR plus 1.650%. Class J Notes means the U.S.$26,100,000 aggregate principal amount of Class J Floating Rate Deferrable Interest Notes due 2041. Class K Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class K Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes or Class J Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class K Notes. Class K Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class K Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class K Note Interest Rate means LIBOR plus 1.950%. Class K Notes means the U.S.$18,900,000 aggregate principal amount of Class K Floating Rate Deferrable Interest Notes due 2041. Class L Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class L Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes or Class K Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class L Notes. Class L Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class L Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class L Note Interest Rate means LIBOR plus 3.250%. Class L Note Tax Transfer Certificate has the meaning specified in Section 2.4(c)(3). Class L Notes means the U.S.$22,050,000 aggregate principal amount of Class L Floating Rate Subordinated Deferrable Interest Notes due 2041. Class M Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class M Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes or Class L Notes are 17

Processed and formatted by SEC Watch - Visit SECWatch.com

Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class M Notes. Class M Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class M Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class M Note Interest Rate means LIBOR plus 3.750%. Class M Note Tax Transfer Certificate has the meaning specified in Section 2.4(c)(3). Class M Notes means the U.S.$14,850,000 aggregate principal amount of Class M Floating Rate Subordinated Deferrable Interest Notes due 2041. Class N Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class N Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes or Class M Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class N Notes. Class N Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class N Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class N Note Interest Rate means LIBOR plus 4.250%. Class N Notes means the U.S.$22,500,000 aggregate principal amount of Class N Floating Rate Subordinated Deferrable Interest Notes due 2041. Clean-up Call has the meaning specified in Section 9.1(b) hereof. Clearing Agency means DTC, Euroclear or Clearstream. Clearing Corporation has the meaning specified in Section 8-102(a)(5) of the UCC. Clearstream means Clearstream Banking, société anonyme. Closing Date means December 7, 2006. CMBS means commercial mortgage-backed securities issued pursuant to a transaction in which one or more classes of such securities have been (and are) rated “AAA” or its equivalent by one or more of S&P, Moody’s or Fitch (unless Rating Confirmation is received), which securities are backed by obligations (including certificates of participations in obligations) that are 18

Processed and formatted by SEC Watch - Visit SECWatch.com

principally secured by mortgages on real property or interests therein having a multifamily or commercial use. Code means the Internal Revenue Code of 1986, as amended. Co-Issuer means N-Star REL CDO VIII LLC, a limited liability company organized under the law of the State of Delaware, unless a successor Person shall have become the Co-Issuer pursuant to the applicable provisions of this Indenture, and thereafter Co-Issuer shall mean such successor Person. Co-Issuers means the Issuer and Co-Issuer. Collateral has the meaning specified in the Granting Clauses. Collateral Administration Agreement means the Collateral Administration Agreement, dated as of December 7, 2006, by and among the Issuer, the Collateral Manager and the Collateral Administrator, as the same may be amended and modified from time to time in accordance with its terms. Collateral Administrator means Wells Fargo Bank, National Association, solely in its capacity as Collateral Administrator under the Collateral Administration Agreement, unless a successor Person shall have become the Collateral Administrator pursuant to the applicable provisions of Collateral Administration Agreement, in which case Collateral Administrator shall mean such successor Person. Collateral Interest means an item of Collateral which satisfies the Eligibility Criteria specified in Section 12.2. Collateral Interest Collections means, with respect to any Due Period and the related Payment Date, without duplication, the sum of (i) all cash payments of interest or dividends and other distributions (but excluding distributions on Preferred Equity Securities attributable to the return of capital by governing documents) with respect to any Collateral Interests and Eligible Investments included in the Collateral ((A) including any Sale Proceeds of a Collateral Interest representing unpaid interest (or dividends or other distributions) accrued thereon to the date of the sale thereof to the extent not treated as Collateral Principal Collections at the option of the Collateral Manager, but (B) excluding all funds received on an Impaired Interest (including any unpaid interest) and any unpaid interest accrued on a Deferred Interest PIK Bond or a Written Down Interest to the date of sale) which are received during the related Due Period (excluding any Purchased Accrued Interest) and (C) excluding any servicing fees and other fees, expenses or indemnities paid to any Servicer pursuant to any Servicing Agreement and any other amounts paid out of collections of interest pursuant to any Servicing Agreement to reimburse the related Servicer for servicing advances made by it thereunder) which are received during the related Due Period, (ii) all payments on Eligible Investments purchased with Collateral Interest Collections, (iii) payments received or scheduled to be received from a Hedge Counterparty under any Hedge Agreement on the related Payment Date, excluding any payments received from a Hedge Counterparty upon reduction of the notional amount and any termination payments (provided that so long as the Notes are Outstanding, any termination payments received from a Hedge Counterparty will be used to enter into a substitute Hedge Agreement to the extent required to 19

Processed and formatted by SEC Watch - Visit SECWatch.com

maintain the then-current rating of the Notes by each Rating Agency), (iv) all amendment and waiver fees, all late payment fees and all other fees and commissions received during the related Due Period (other than fees and commissions received in connection with the sale, restructuring, workout or default of Collateral Interests or in connection with Impaired Interests or Written Down Interests) (provided, further, that Collateral Interest Collections shall not include any other proceeds related to any Retained Rights), (v) the Principal Balance of any Eligible Investments purchased with Collateral Interest Collections, (vi) all interest (or dividends or other distributions) accrued on the Closing Date on Collateral Interests included in the Collateral, (vii) any amounts on deposit in the Interest Reserve Account, (viii) at the option of the Collateral Manager, any amount on deposit in the Expense Reserve Account in excess of U.S.$50,000, (ix) commitment fees on unfunded amounts and other similar fees (in each case, net of applicable withholding taxes) actually received by the Issuer during the related Due Period in respect of any Future Funding Assets, (x) any Uninvested Proceeds remaining on deposit in the Uninvested Proceeds Account on the Effective Date, provided that a Rating Confirmation Failure has not occurred and (xi) all proceeds from the foregoing; provided, however, that Collateral Interest Collections shall not include the funds and other property (including, without limitation, the paid-up share capital of the Issuer) with respect to the Income Notes and the bank account in which such funds and the proceeds thereof are held); provided, further, that Collateral Interest Collections shall not include principal of any Collateral Interest representing capitalized interest after the date of purchase thereof by the Issuer. Collateral Interest Principal Balance means, prior to the Effective Date, U.S.$900,000,000 and thereafter, the aggregate Principal Balance of the sum of (i) Collateral Interests included in the Collateral (including any Collateral Interests that have become Impaired Interests or Written Down Interests), (ii) Eligible Investments, in each case, purchased with the proceeds of the issuance of the Notes or thereafter with Collateral Principal Collections, (iii) Eligible Investments held in the Future Funding Asset Account (without duplication) and (iv) the Aggregate Class A-R Undrawn Amount (without duplication). Collateral Management Agreement means the Collateral Management Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, between the Issuer and the Collateral Manager. Collateral Management Fee means the Senior Collateral Management Fee and the Subordinate Collateral Management Fee. Collateral Manager means NS Advisors, LLC, a Delaware limited liability company, unless a successor Person shall have become Collateral Manager pursuant to the applicable provisions of the Collateral Management Agreement, in which case Collateral Manager shall mean such successor Person. Collateral Principal Collections means, (i) with respect to any Due Period and the related Payment Date, all amounts received by the Issuer during such Due Period that do not constitute Collateral Interest Collections (including all distributions on Preferred Equity Securities attributable to the return of capital by their governing documents) (provided, that Collateral Principal Collections shall not include any other proceeds related to any Retained Rights) minus (ii) any amounts paid out of collections of principal pursuant to any Servicing Agreement to 20

Processed and formatted by SEC Watch - Visit SECWatch.com

reimburse the related Servicer for servicing advances made by it and other amounts due to any Servicer and not paid out of Collateral Interest Collections; provided, however, that Collateral Principal Collections shall include principal of any Collateral Interest representing capitalized interest after the date of purchase thereof by the Issuer and any Uninvested Proceeds which have not been invested or treated as Collateral Interest Collections on or prior to the Effective Date. Collateral Principal Collections Sub-Account has the meaning specified in Section 10.5(a)(1) hereof. Collateral Principal Payments means, with respect to any Due Period and the related Payment Date, Collateral Principal Collections other than Sale Proceeds and any amounts received in respect of Eligible Investments. Collateral Quality Tests will be satisfied after the Effective Date if, as of any Measurement Date, the Collateral Interests comply, in the aggregate, with all of the requirements set forth below (collectively, the Collateral Quality Tests): (1) the aggregate Principal Balance of all Collateral Interests that are CMBS (other than Rake Bonds) does not exceed the greater of (A) 15% of the Collateral Interest Principal Balance and (B) $135,000,000; provided that (i) the aggregate Principal Balance, by single Issue of Collateral Interests that are CMBS that are rated below “BBB” shall not exceed 2% of the Collateral Interest Principal Balance and (ii) the aggregate Principal Balance, by single Issue, of Collateral Interests that are CMBS that are rated “BBB” or above shall not exceed 3% of the Collateral Interest Principal Balance; (2) the aggregate Principal Balance of all Collateral Interests that are Real Estate CDO Securities does not exceed the greater of (A) 15% of the Collateral Interest Principal Balance and (B) $135,000,000; provided that the aggregate Principal Balance of all Collateral Interests that are Real Estate CDO Securities managed by the Collateral Manager or any of its Affiliates does not exceed the greater of (A) 7.5% of the Collateral Interest Principal Balance and (B) $67,500,000. (3) the maximum property concentration limits for Collateral Interests (on a look-through basis), other than Real Estate CDO Securities and REIT Debt Securities, are as follows: (i) the aggregate Principal Balance of such Collateral Interests which relate to Mortgaged Properties which are office properties may not exceed the greater of (A) 65% of the Collateral Interest Principal Balance and (B) $585,000,000; (ii) the aggregate Principal Balance of such Collateral Interests which relate to Mortgaged Properties which are each of retail, multifamily, industrial and hospitality properties may not exceed the greater of (A) 45% of the Collateral Interest Principal Balance and (B) $405,000,000; 21

(iii) the aggregate Principal Balance of such Collateral Interests which relate to Mortgaged Properties which are condominium conversion properties may not exceed the greater of (A) 20% of the Collateral Interest Principal Balance and (B) $180,000,000; (iv) the aggregate Principal Balance of such Collateral Interests which relate to Mortgaged Properties which are self-storage properties may not exceed the greater of (A) 15% of the Collateral Interest Principal Balance and (B) $135,000,000; (v) the aggregate Principal Balance of such Collateral Interests which relate to Mortgaged Properties which are healthcare properties may not exceed the greater of (A) 15% of the Collateral Interest Principal Balance and (B) $135,000,000; and (vi) the aggregate Principal Balance of such Collateral Interests which relate to Mortgaged Properties which in the aggregate are any property type other than those specified in clauses (i) through (vi) above may not exceed the greater of (A) 10% of the Collateral Interest Principal Balance and (B) $90,000,000. (4) the aggregate Principal Balance of all Collateral Interests (on a look-through basis), other than Real Estate CDO Securities and REIT Debt Securities, backed or otherwise invested in Mortgaged Properties located in any single U.S. state does not exceed the greater of (A) 25% of the Collateral Interest Principal Balance and (B) $225,000,000, except that (i) up to the greater of (A) 60% of the Collateral Interest Principal Balance and (B) $540,000,000 may consist of Collateral Interests backed or otherwise invested in Mortgaged Properties located in California, (ii) up to the greater of (A) 60% of the Collateral Interest Principal Balance and (B) $540,000,000 may consist of Collateral Interests backed or otherwise invested in Mortgaged Properties located in New York, (iii) up to the greater of (A) 50% of the Collateral Interest Principal Balance and (B) $450,000,000 may consist of Collateral Interests backed or otherwise invested in Mortgaged Properties located in Texas, (iv) up to the greater of (A) 40% of the Collateral Interest Principal Balance and (B) $360,000,000 may consist of Collateral Interests backed or otherwise invested in Mortgaged Properties located in Florida and (v) up to the greater of (A) 35% of the Collateral Interest Principal Balance and (B) $315,000,000 may consist of Collateral Interests backed or otherwise invested in Mortgaged Properties located in Washington D.C.; (5)

(i) the aggregate Principal Balance of all Collateral Interests that are Mortgage Loan Interests does not exceed the

Processed and formatted by SEC Watch - Visit SECWatch.com

greater of (A) 13.5% of the Collateral Interest Principal Balance and (B) 121,500,000 and (ii) the aggregate Principal Balance of all Collateral Interests (other Mortgage Loan Interests, CMBS or Real Estate Securities) that represent obligations of any single obligor or group of affiliated obligors does not exceed the greater of (A) 10% of the Collateral Interest Principal Balance and (B) $90,000,000; 22

Processed and formatted by SEC Watch - Visit SECWatch.com

(6) the aggregate Principal Balance of all Collateral Interests that are REIT Debt Securities does not exceed the greater of (A) 7.5% of the Collateral Interest Principal Balance and (B) $67,500,000; (7) the aggregate Principal Balance of all Fixed Rate Collateral Interests does not exceed the greater of (A) 5% of the Collateral Interest Principal Balance and (B) $45,000,000; provided that no more than the greater of (A) 40% of the Collateral Interests and (B) $360,000,000 shall consist of Fixed Rate Collateral Interests if (i) the Issuer enters into corresponding Deemed Floating Asset Hedges or (ii) Rating Confirmation is obtained with respect to an additional Fixed Rate Collateral Interest acquired without a corresponding Deemed Floating Asset Hedge; (8) the aggregate Principal Balance of all Collateral Interests that provide for the payment of interest less frequently than quarterly does not exceed the greater of (A) 20% of the Collateral Interest Principal Balance and (B) $180,000,000; (9) the aggregate Principal Balance of all Collateral Interests that have a stated maturity later than the Stated Maturity Date does not exceed the greater of (A) 5% of the Collateral Interest Principal Balance and (B) $45,000,000; provided that such 5% limitation may be increased after the Closing Date if the Rating Confirmation has been obtained with respect thereto; (10) the aggregate Principal Balance of all Collateral Interests that are Undeveloped Real Estate Collateral Interests does not exceed the greater of (A) 15% of the Collateral Interest Principal Balance and (B) $135,000,000; (11) the aggregate Principal Balance of Collateral Interests which relate to Mortgaged Properties which are construction properties does not exceed the greater of (A) 25% of the Collateral Interest Principal Balance and (B) $225,000,000; provided that the aggregate Principal Balance of all Collateral Interests described in clauses (10) (11) and (3)(iii) of this definition does not exceed 45% of the Collateral Interest Principal Balance and (B) $405,000,000; (12) the aggregate Principal Balance of Collateral Interests that are Credit Tenant Leases does not exceed the greater of (A) 10% of the Collateral Interest Principal Balance and (B) $90,000,000; provided that Credit Tenant Leases rated below BBB- by Moody’s or Fitch may not exceed the greater of (A) 7.5% or (B) $67,500,000 of the Collateral Interest Principal Balance; (13) the aggregate Principal Balance of Collateral Interests that are CRE Debt Obligations does not exceed the greater of (A) 15% of the Collateral Interest Principal Balance and (B) $135,000,000; (14) the aggregate Principal Balance of Collateral Interests primarily backed by or otherwise primarily invested in Mortgaged Properties located in any Qualifying Foreign Jurisdiction does not exceed the greater of (A) 10% of the Collateral Interest Principal Balance and (B) $90,000,000; provided that such Mortgaged Properties may 23

Processed and formatted by SEC Watch - Visit SECWatch.com

only comprise office properties, retail properties, multi-family properties, industrial properties or hospitality properties; (15)

the Moody’s Maximum Weighted Average Rating Factor Test is satisfied;

(16) (i) the Weighted Average Fixed Rate Coupon as of such date equals or exceeds 6% and (ii) the Weighted Average Spread Test is satisfied; (17)

the Herfindahl Score of the Collateral Interests is at least 22;

(18)

the Moody’s Weighted Average Initial Maturity Test is satisfied;

(19)

the Moody’s Weighted Average Extended Maturity Test is satisfied;

(20)

the Fitch Loan Diversity Index Test is satisfied;

(21)

the Fitch Poolwide Expected Loss Test is satisfied; and

(22)

the Moody’s Minimum Average Recovery Rate Test is satisfied.

At all times, the dollar amount limitation set forth in any individual Collateral Quality Test will be disregarded for the purposes of the Reinvestment Criteria, but each such dollar amount limitation will be taken into account solely for purposes of any reports to be prepared pursuant to this Indenture. Collateral Sub-Account means any sub-account established within a Collection Account. Collection Account means the Securities Account designated the “Collection Account” and established in the name of the Trustee pursuant to Section 10.5, including the Collateral Principal Collections Sub-Account. Collections means, with respect to any Payment Date, the sum of (i) the Collateral Interest Collections collected during the applicable Due Period and (ii) the Collateral Principal Collections collected during the applicable Due Period. Commission means the United States Securities and Exchange Commission. Commitment Termination Time means the date on which any of the following first occurs: (i) the date on which the Future Advance Amounts are reduced to zero and the Collateral Manager has notified the Trustee in writing that it will not cause the Issuer to acquire any further Future Funding Assets; (ii) the date on which the aggregate principal amount of the Class A-1 Notes and the Class A-R Notes have been paid in full; (iii) the Mandatory Class A-R Draw Date; (iv) the occurrence of an Event of Default specified in clause (d), (g) or (h) of the definition thereof or (v) the Redemption Date. Controlling Class means the Class A Senior Notes voting as a single Class, so long as any Class A Senior Notes are Outstanding, then the Class A-2 Notes, so long as any Class A-2 Notes are Outstanding, then the Class B Notes, so long as any Class B Notes are Outstanding, then the 24

Processed and formatted by SEC Watch - Visit SECWatch.com

Class C Notes voting as a single Class, so long as any Class C Notes are Outstanding, then the Class D Notes, so long as any Class D Notes are Outstanding, then the Class E Notes, so long as any Class E Notes are Outstanding, then the Class F Notes, so long as any Class F Notes are Outstanding, then the Class G Notes, so long as any Class G Notes are Outstanding, then the Class H Notes, so long as any Class H Notes are Outstanding, then the Class J Notes, so long as any Class J Notes are Outstanding, and then the Class K Notes, so long as any Class K Notes are Outstanding, then the Class L Notes, so long as any Class L Notes are Outstanding, then the Class M Notes, so long as any Class M Notes are Outstanding, and then the Class N Notes, so long as any Class N Notes are Outstanding, in each case, based on the aggregate principal amount thereof. Controlling Party means MBIA with the right to exercise the rights of the Controlling Party unless (i) MBIA or each of the Class A Senior Noteholders gives written notice to the Trustee and MBIA and the Issuer that MBIA is no longer providing credit enhancement with respect to any of the Class A Senior Notes, whether in the form of a negative basis swap, a standby letter of credit, a surety bond, an insurance policy, a credit default swap or any other form of credit insurance or risk management product or instrument or (ii) a Protection Provider Default has occurred and is continuing with respect to MBIA. Following delivery of any such notice by MBIA or each of the Class A Senior Noteholders, the Controlling Party will be 66 2/3% of the aggregate principal amount of the Outstanding Notes of the Controlling Class; provided, however, if an alternative percentage of the Noteholders of the Controlling Class is specified in connection with any action in this Indenture or any other Transaction Document, then such alternative percentage shall govern. Controlling Party Objection means written notice to the Collateral Manager by the Controlling Party objecting in their reasonable discretion to a proposed replacement Key Manager. Controlling Person any person (other than a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of the Issuer, a person who provides investment advice for a fee (direct or indirect) with respect to the assets of the Issuer, or any “affiliate” (within the meaning of 29 C.F.R. Section 2510.3-101(f)(3)) of any such person. Corporate Services Agreement means that certain Corporate Services Agreement, dated as of December 6, 2006, as the same may be amended or supplemented from time to time, between the Issuer and the Administrator. Corporate Trust Office means the designated corporate trust office of the Trustee, currently located at: (i) for note transfer purposes, Wells Fargo Center, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: CDO Trust Services — N-Star REL CDO VIII and (ii) for all other purposes, 9062 Old Annapolis Road, Columbia, Maryland 21045. Attention: CDO Trust Services — N-Star REL CDO VIII, telephone number 410-884-2000, fax number 410-715-3748, or such other address as the Trustee may designate from time to time by notice to the Rated Noteholders, the Income Noteholders, the Collateral Manager, each Hedge Counterparty and the Co-Issuers or the principal corporate trust office of any successor Trustee. Coverage Tests means the Class A/B/C/D Coverage Tests, the Class E/F/G Coverage Tests and the Class H/J/K Coverage Tests. 25

Processed and formatted by SEC Watch - Visit SECWatch.com

CRE Debt Obligations means interests in a secured or unsecured, senior or senior subordinated term bank or non-bank loans or other debt obligations, whether in loan or security form, or participations (senior or subordinate) therein, that are obligations (direct or by way of guarantee) of corporations, partnerships or other entities organized under the laws of the United States (or any State thereof) whose business is significantly related to real estate, real estate management and/or real estate ownership; provided that no Mortgage Loan Interests, Mezzanine Loans, Subordinate Mortgage Loan Interests, CMBS, Real Estate CDO Securities, Credit Lease Loans, Tenant Lease Loans, Preferred Equity Securities or REIT Debt Securities shall constitute CRE Debt Obligations. Credit Improved Interest means any Collateral Interest that, in the Collateral Manager’s reasonable business judgment, has significantly improved in credit quality or value. Credit Lease Loans means mortgage loans secured by mortgages on commercial real estate properties that are subject to a lease to a single tenant. Credit Risk Interest means any Collateral Interest which, in the Collateral Manager’s reasonable business judgment, has a significant risk of declining in credit quality or over time may become an Impaired Interest. Cumulative Applicable Periodic Interest Shortfall Amount means Class E Cumulative Applicable Periodic Interest Shortfall Amount, Class F Cumulative Applicable Periodic Interest Shortfall Amount, Class G Cumulative Applicable Periodic Interest Shortfall Amount, Class H Cumulative Applicable Periodic Interest Shortfall Amount, Class J Cumulative Applicable Periodic Interest Shortfall Amount, Class K Cumulative Applicable Periodic Interest Shortfall Amount, Class L Cumulative Applicable Periodic Interest Shortfall Amount, Class M Cumulative Applicable Periodic Interest Shortfall Amount and Class N Cumulative Applicable Periodic Interest Shortfall Amount. Cure Advance means, amounts advanced by a Holder of Income Notes pursuant to the Paying Agency Agreement to permit the Issuer to exercise its right to cure payment defaults with respect to any Senior Loan related to a Collateral Interest in accordance with the applicable Underlying Instrument. Current Pay Future Advance Amount means as of any Calculation Date, an amount equal to the Total Unfunded Future Advance Amounts related to the Future Funding Assets held by the Issuer that are currently due and payable, or which the applicable servicer has notified the Collateral Manager and the Trustee in writing that it believes will be payable within one month of the related Payment Date, and which the Collateral Manager has notified the Trustee in writing that the Issuer will fund such Future Advance Amounts. Current Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Interests and the proceeds of the disposition thereof held as Cash and (b) Eligible Investments purchased with proceeds of the disposition of Pledged Collateral Interests, existing immediately prior to the sale, maturity or other disposition of a Pledged Collateral Interest or immediately prior to the acquisition of a Pledged Collateral Interest, as the case may be. Custodian has the meaning specified in Section 3.3(a). 26

Processed and formatted by SEC Watch - Visit SECWatch.com

Deemed Floating Asset Hedge means, with respect to a Fixed Rate Collateral Interest, an interest rate swap having (i) a notional schedule equal to the Principal Balance as it is reduced by expected amortization of such Fixed Rate Collateral Interest over time and (ii) payment dates, with respect to termination payments only, identical to the Payment Dates of the Issuer under this Indenture; provided that, (x) at the time of entry into the Deemed Floating Asset Hedge, (i) the expected principal payments on the Fixed Rate Collateral Interest comprising a Deemed Floating Rate Collateral Interest will not extend beyond 10 years after the effective date of such Deemed Floating Asset Hedge and (ii) the scheduled notional amount of such Deemed Floating Asset Hedge at any time is equal to the expected principal amount of the related Fixed Rate Collateral Interest (as calculated at such time), (y) the Rating Agencies and the Trustee are notified prior to the Issuer’s entry into a Deemed Floating Asset Hedge, and each will be provided with the identity of the proposed hedge counterparty and copies of the hedge documentation and notional schedule and (z) such Deemed Floating Asset Hedge is priced at then-current market rates; provided, however, with respect to Agency MBS Securities, Deemed Floating Asset Hedges may also include put agreements or other investments that require the related Agency MBS Securities to be purchased at par plus accrued interest, as provided therein. In the event any Deemed Floating Asset Hedge is not a Form-Approved Hedge Agreement, the Collateral Manager will provide prior written notice to Fitch of the Issuer’s entry into such Deemed Floating Asset Hedge. Deemed Floating Rate Agency MBS Security means a fixed-rate Agency MBS Security, the interest rate of which is hedged into a floating rate Agency MBS Security using a Deemed Floating Asset Hedge; provided that, at the time of entry into the related Deemed Floating Asset Hedge, the Average Life of such Deemed Floating Rate Agency MBS Security would not increase or decrease by more than one year from its expected average life if it were to prepay at either 50% or 150% of its pricing speed. Deemed Floating Rate Collateral Interest means a Fixed Rate Collateral Interest the interest rate of which is hedged into a Floating Rate Collateral Interest using a Deemed Floating Asset Hedge; provided that, at the time of entry into the related Deemed Floating Asset Hedge, the Average Life of such Deemed Floating Rate Collateral Interest would not increase or decrease by more than one year from its expected average life if it were to prepay at either 50% or 150% of its pricing speed. A Deemed Floating Rate Collateral Interest will be deemed a Floating Rate Collateral Interest with a spread over LIBOR equal to the related Deemed Floating Spread. Deemed Floating Spread means the difference between the stated rate at which interest accrues on each Fixed Rate Collateral Interest that comprises a Deemed Floating Rate Collateral Interest (excluding all Impaired Interests and Deferred Interest PIK Bonds) and the fixed rate that the Issuer agrees to pay to the Hedge Counterparty on the Deemed Floating Asset Hedge at the time such swap is executed. Default means any Event of Default or any occurrence that, with notice or the lapse of time or both, would become an Event of Default. Defaulting Party has the meaning given to such term in the standard form 1992 ISDA Master Agreement (Multicurrency —Cross Border). 27

Processed and formatted by SEC Watch - Visit SECWatch.com

Defaulted Interest means any interest due and payable in respect of any Class A Note or any Class B Note or, if no Class A Notes or Class B Notes are Outstanding, in respect of any Class C Note or, if no Class C Notes are Outstanding, in respect of any Class D Note, or if no Class D Notes are Outstanding, in respect of any Class E Note, or if no Class E Notes are Outstanding, in respect of any Class F Note, or if no Class F Notes are Outstanding, in respect of any Class G Note, or if no Class G Notes are Outstanding, in respect of any Class H Note, or if no Class H Notes are Outstanding, in respect of any Class J Note, or if no Class J Notes are Outstanding, in respect of any Class K Note, or if no Class K Notes are Outstanding, in respect of any Class L Notes, or if no Class L Notes are Outstanding, in respect of any Class M Notes, or if no Class M Notes are Outstanding, in respect of any Class N Notes and any interest on such Defaulted Interest that (in each case) is not punctually paid or duly provided for on the applicable Payment Date (including the applicable Stated Maturity Date) of the applicable Rated Note. Deferred Interest PIK Bond means a PIK Bond with respect to which interest has been deferred or capitalized or does not pay interest when scheduled (other than an Impaired Interest) for each consecutive payment date occurring over a period of (a) the lesser of (i) six months or (ii) three consecutive payment dates (if such Deferred Interest PIK Bond is rated (or privately rated for purposes of the issuance of the Notes) below “Baa3” by Moody’s or “BBB-” by Fitch) or (b) the lesser of (i) one year or (ii) six consecutive payment dates (if such Deferred Interest PIK Bond is rated (or privately rated for purposes of the issuance of the Notes) “Baa3” or higher by Moody’s, and “BBB-” or higher by Fitch), but only until such time as payment of interest on such PIK Bond has resumed and all capitalized and deferred interest and any interest thereon has been paid in cash in accordance with the terms of the Underlying Instruments. Deferred Interest PIK Bond Amount means, with respect to each Deferred Interest PIK Bond in the Collateral, the lesser of (i) the product of the Principal Balance of such Deferred Interest PIK Bond and the Applicable Recovery Rate of such Deferred Interest PIK Bond and (ii) the product of the Principal Balance of such Deferred Interest PIK Bond and the Market Value of such Deferred Interest PIK Bond. Depositary means, with respect to the Indenture Issued Notes issued in the form of one or more Global Notes, the Person designated as Depositary pursuant to Section 2.2(e), or any successor thereto, appointed pursuant to the applicable provisions of this Indenture. Depositary Participant means a broker, dealer, bank or other financial institution or other Person for whom from time to time the Depositary effects book-entry transfers and pledges of notes deposited with the Depositary. Depositor means N-Star REL CDO Depositor Corp. and any successors or assigns, in its capacity as depositor under the Master Trust Agreement. Discretionary Sale has the meaning specified in Section 12.1(a)(7). Distribution means any payment of principal, interest or fee or any dividend or premium payment made on, or any other distribution in respect of, an obligation or security. Dollar or U.S.$ means currency of the United States as at the time shall be legal tender for all debts, public and private. 28

Processed and formatted by SEC Watch - Visit SECWatch.com

DTC means The Depository Trust Company, a New York corporation, and its nominees and their respective successors. Due Date means each date on which a Distribution is due on a Pledged Security. Due Period means, with respect to each Payment Date, the period beginning on the day following the last day of the preceding Due Period relating to the preceding Payment Date (or, in the case of the Due Period that is applicable to the first Payment Date, beginning on the Closing Date) and ending at the close of business on the fourth (4th) Business Day preceding such Payment Date. Effective Date means the date that is the earliest of (i) the 270th day following the Closing Date, (ii) the date on which the Issuer has purchased, with amounts on deposit in the Uninvested Proceeds Account, Collateral Interests having an aggregate Principal Balance (calculated on the respective purchase date for each such Collateral Interest) equal to U.S.$900,000,000 (which amount includes all Future Funding Obligations with respect to Future Funding Assets) or (iii) such earlier date (if any) that is designated by the Collateral Manager by notice to the Trustee pursuant to this Indenture; provided that the Collateral Manager has received Rating Confirmation within 30 Business Days after the Effective Date; provided, further, that in the event that such day does not fall on a Business Day, the Effective Date shall be the next succeeding Business Day. Eligibility Criteria has the meaning specified in Section 12.2. Eligible Investments means any U.S. Dollar-denominated investment that, at the time it is delivered to the Trustee, is one or more of the following obligations or securities, including, without limitation, those investments for which the Trustee or an Affiliate of the Trustee provides services: (i)

cash;

(ii)

direct Registered obligations of, and Registered obligations the timely payment of principal of and interest on which is fully and expressly guaranteed by, the United States of America, or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America;

(iii)

demand and time deposits in, interest bearing trust accounts and certificates of deposit of, bankers’ acceptances issued by, or federal funds sold by any depository institution or trust company (including the Trustee) incorporated under the laws of the United States of America or any state thereof and subject to the supervision and examination by federal and/or state banking authorities so long as the commercial paper and/or debt obligations of such depository institution or trust company (or, in the case of the principal depository institution in a holding company system, the commercial paper or debt obligations of such holding company) at the time of such investment or contractual commitment providing for such investment have a credit rating of: 29

Processed and formatted by SEC Watch - Visit SECWatch.com

(a)

in the case of long-term debt obligations, not less than “Aa2” by Moody’s or “AA” by Fitch; or

(b)

in the case of commercial paper and short-term debt obligations including time deposits, P-1 by Moody’s or “F1+” by Fitch (provided that, in the case of commercial paper and short-term debt obligations with a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment a long-term credit rating and a short- and long-term credit rating of not less than “F1+” and “AA”, respectively, by Fitch and “P-1” and “Aa2”, respectively, by Moody’s);

(iv)

Registered securities other than mortgage-backed securities and interest-only securities bearing interest or sold at a discount issued by any corporation under the laws of the United States of America or any state thereof that have a credit rating of “Aa2” by Moody’s and “AA” by Fitch at the time of such investment or contractual commitment providing for such investment;

(v)

unleveraged repurchase obligations (if treated as debt for tax purposes by the issuer) with respect to any security described in clause (ii) above, entered into with a depository institution or trust company (acting as principal) described in clause (iii) or entered into with broker-dealers registered with the Commission (acting as principal) whose short-term debt has a credit rating of “P-1” by Moody’s and “F1+” by Fitch at the time of such investment in the case of any repurchase obligation for a security having a maturity not more than 183 days from the date of its issuance or whose long-term debt has a credit rating of at least “Aa2” by Moody’s at the time of such investment in the case of any repurchase obligation for a security having a maturity more than 183 days from the date of its issuance;

(vi)

commercial paper or other short-term obligations having at the time of such investment a credit rating of “P-1” by Moody’s and “F1+” by Fitch that are registered and are either bearing interest or are sold at a discount from the face amount thereof and that have a maturity of not more than 183 days from its date of issuance; provided that in the case of commercial paper with a maturity of longer than 91 days, the issuer of such commercial paper (or, in the case of a principal depository institution in a holding company system, the holding company of such system), if rated by the Rating Agencies, must have at the time of such investment a long-term credit rating of at least “Aa2” by Moody’s;

(vii)

money market funds with respect to any investments described in clauses (ii) through (vi) above having, at the time of such investment, a credit rating of not less than “AAA” by Moody’s and the highest rating possible by Fitch (if such funds are rated by Fitch), respectively (including those for which the Trustee is investment manager or advisor), provided that such fund or vehicle is formed and has its principal office outside the United States;

(viii)

prior to the Effective Date, Agency MBS Securities, and on or after the Effective Date, Deemed Floating Rate Agency MBS Securities; and 30

Processed and formatted by SEC Watch - Visit SECWatch.com

(ix)

any other investments for which Rating Confirmation is received;

provided that (a) Eligible Investments (other than Agency MBS Securities) purchased with funds in the Collection Account will be held until maturity except as otherwise specifically provided herein and will include only such obligations or securities as mature no later than the Business Day prior to the Payment Date next succeeding the date of investment in such obligations or securities, unless such Eligible Investments are investments of the type described in clause (i) or (iii) above, in which event such Eligible Investments may mature on such Payment Date and (b) none of the foregoing obligations or securities will constitute Eligible Investments if all, or substantially all, of the remaining amounts payable thereunder will consist of interest and not principal payments, if such security (other than Agency MBS Securities) is purchased at a price in excess of 100% of par, if such security is subject to substantial non-credit related risk, as determined by the Collateral Manager in its judgment, if any income from or proceeds of disposition of the obligation or security is or will be subject to deduction or withholding for or on account of any withholding or similar tax or, from the time, if any, that the Issuer is no longer a Qualified REIT Subsidiary, the acquisition (including the manner of acquisition), ownership, enforcement or disposition of the obligation or security will subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation. Eligible SPV Jurisdiction means Bahamas, Bermuda, the Cayman Islands, the Channel Islands, the Netherlands Antilles, Luxembourg or any other similar jurisdiction (so long as Rating Confirmation is obtained in connection with the inclusion of such other jurisdiction) generally imposing either no or nominal taxes on the income of companies organized under the laws of such jurisdiction. Emerging Market Issuer means a sovereign or non-sovereign issuer located in a country that is in Latin America, Asia, Africa, Eastern Europe or the Caribbean or in a country the dollar-denominated sovereign debt obligations of which are rated lower than “Aa2” by Moody’s; provided that an issuer of Asset-Backed Securities located in any Eligible SPV Jurisdiction shall not be an Emerging Market Issuer for purposes hereof if the underlying collateral of such Asset-Backed Securities consists primarily of obligations of obligors located in the United States and Qualifying Foreign Obligors. Entitlement Holder has the meaning specified in Section 8-102(a)(7) of the UCC. Entitlement Order has the meaning specified in Section 8-102(a)(8) of the UCC. Equity Interest means any security that does not entitle the holder thereof to receive periodic payments of interest and one or more installments of principal acquired by the Issuer as a result of the exercise or conversion of Collateral Interests, in conjunction with the purchase of Collateral Interests or in exchange for a Collateral Interest; provided that the term “Equity Interest” will not include any Preferred Equity Security or any asset-backed security structured as a certificate or other form of beneficial interest. ERISA means the U.S. Employee Retirement Income Security Act of 1974, as amended. ERISA Restriction Certificate means the ERISA Restriction Certificate substantially in the form set forth in Exhibit C-4 hereto. 31

Euroclear means Euroclear Bank S.A/N.V., as operator of the Euroclear system. Event of Default has the meaning specified in Section 5.1. Excepted Property means the U.S.$1,000 of capital contributed to the Issuer in respect of the Issuer’s Ordinary Shares in accordance with the Articles and U.S.$1,000 representing a profit fee to the Issuer. Exchange Act means the United States Securities Exchange Act of 1934, as amended. Expense Reserve Account means the Securities Account designated the “Expense Reserve Account” and established in the name of the Trustee pursuant to Section 10.6. Extended Maturity Date means, with respect to any Collateral Interest, the maturity date of such Collateral Interest, assuming the exercise of all extension options (if any) that are exercisable at the option of the related borrower under the terms of such Collateral Interest. Extended Weighted Average Maturity means, as of any Measurement Date with respect to the Collateral Interests (other than Impaired Interests), the number obtained by (i) summing the products obtained by multiplying (a) the remaining term to maturity (in years, rounded to the nearest one tenth thereof, and based on the Extended Maturity Date) of each Collateral Interest (other than Impaired Interests) by (b) the outstanding Principal Balance at such time of such Collateral Interest and (ii) dividing the sum by the aggregate Principal Balance at such time of all Collateral Interests (other than Impaired Interests). Fee Basis Amount means an amount equal, for any Payment Date, to the average of the aggregate Collateral Interest Principal Balance (including the aggregate Principal Balance of Impaired Interests) on the first day of the related Due Period and the aggregate Collateral Interest Principal Balance (including the aggregate Principal Balance of Impaired Interests) on the last day of such Due Period.

Processed and formatted by SEC Watch - Visit SECWatch.com

Fitch means Fitch Ratings, Inc., Fitch Ratings, Ltd. and their subsidiaries including Derivative Fitch, Inc. and Derivative Fitch Ltd and any successor or successors thereto. Fitch Loan Diversity Index Score means the amount determined by the Collateral Manager on any Measurement Date, by the sum of the series of products obtained for each Collateral Interest, by squaring the quotient of (x) the Principal Balance on such Measurement Date of each such Collateral Interest and (y) the aggregate Principal Balance of all Collateral Interests on such Measurement Date, multiplied by 10,000. In the event that cash has been received in respect of principal proceeds since the immediately preceding Measurement Date but has not been reinvested in additional Collateral Interests as of the current Measurement Date, the aggregate amount then held in cash shall be divided into one or more “Cash Security Exposures.” Each Cash Security Exposure will be sized in an amount equal to the result obtained by averaging the Principal Balance of all Collateral Interests on such Measurement Date; provided that if the cash position as of such Measurement Date is less than such average, or if there is cash remaining in an amount less than such average, the Cash Security Exposure, or the additional Cash Security Exposure, as applicable, represented thereby will be sized in the actual amount of such cash position. The Fitch Loan Diversity Index Score will then mean the amount determined by the 32

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Manager on any Measurement Date, by the sum of the series of products obtained for each Collateral Interest, by squaring the quotient of (x) the Principal Balance on such Measurement Date of each such Collateral Interest and each Cash Security Exposure and (y) the aggregate Principal Balance of all Collateral Interests and all Cash Security Exposures on such Measurement Date, multiplied by 10,000. Fitch Loan Diversity Index Test means a test that will be satisfied if on any Measurement Date the Fitch Loan Diversity Index Score for the Collateral Interests is less than 455. Fitch Poolwide Expected Loss means the output generated using Fitch’s modified CMBS multi- borrower model (as applied to all Collateral Interests that are Mortgage Loan Interests, Subordinate Mortgage Loan Interests, Mezzanine Loans, Participation Interests and Preferred Equity Securities). Fitch Poolwide Expected Loss Test means a test that will be satisfied on any Calculation Date if the Fitch Poolwide Expected Loss of the Collateral Interests is equal to or less than 46.375%. Fitch Rating of any Collateral Interest will be determined as follows: (i)

if such Collateral Interest is rated by Fitch, the Fitch Rating shall be such rating;

(ii)

if such Collateral Interest is not rated by Fitch and a rating is published by both S&P and Moody’s, the Fitch Rating shall be the lower of such ratings; and if a rating is published by only one of S&P and Moody’s, the Fitch Rating shall be that published rating by S&P or Moody’s, as the case may be; and

(iii)

if the Fitch Rating cannot be assigned in accordance with clauses (i) and (ii) above, the Issuer (or the Collateral Manager on behalf of the Issuer) shall apply to Fitch for a credit assessment which thereafter will be the Fitch Rating.

provided that (x) if such Collateral Interest has been put on rating watch negative for possible downgrade by any Rating Agency, then the rating used to determine the Fitch Rating under either of clauses (i) or (ii) above shall be one rating subcategory below such rating by that Rating Agency, and (y) if such Collateral Interest has been put on rating watch positive for possible upgrade by any Rating Agency, then the rating used to determine the Fitch Rating under either of clauses (i) or (ii) above shall be one rating subcategory above such rating by that Rating Agency, and (z) notwithstanding the rating definition described above, Fitch reserves the right to issue a rating estimate for any Collateral Interest at any time which may differ from the one determined pursuant to this definition and such rating estimate shall be the Fitch Rating of such Collateral Interest. Fitch Recovery Rate means, (i) with respect to any Collateral Interest that is a Mortgage Loan Interest on any Measurement Date, the Market Value thereof and (ii) with respect to any Collateral Interest that is a CMBS or a Real Estate CDO Security on any Measurement Date, an amount equal to the percentage corresponding to the domicile, original rating, seniority, and tranche thickness of such Collateral Interest, as applicable, as currently set forth in the Fitch Recovery Rate matrix available in the latest version of Fitch’s Default Vector model that can be 33

Processed and formatted by SEC Watch - Visit SECWatch.com

downloaded from www.derivativefitch.com. Fitch may, from time to time, modify or replace this criteria and Fitch may apply the current criteria which may have modified or replaced this report. Financial Asset has the meaning specified in Section 8-102(a)(9) of the UCC. Financing Statement means a financing statement relating to the Collateral naming the Issuer as debtor and the Trustee on behalf of the Secured Parties as secured party. Fixed Rate Collateral Interest means any Collateral Interest which bears a fixed rate of interest. Floating Rate Collateral Interest means any Collateral Interest that bears interest based upon a floating rate index. Floating Rate Notes means, collectively, the Class A-1 Notes, Class A-R Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes. Form-Approved Hedge Agreement means a Hedge Agreement relating to a specific Hedge Counterparty with respect to which (a) the related Collateral Interest could be purchased by the Issuer without any required action by the Rating Agencies and (b) the documentation of which conforms in all material respects to a form for which Rating Confirmation was previously obtained (as certified to the Trustee by the Collateral Manager) for use of such form by the Issuer; provided that (i) such Form-Approved Hedge Agreement shall not provide for any upfront payments to be made to any Hedge Counterparty, (ii) any revised Form-Approved Hedge Agreement with respect to a particular Hedge Counterparty shall be approved by each of the Rating Agencies at least 10 days prior to the initial use thereof as evidenced by Rating Confirmation, (iii) any Rating Agency may withdraw its consent to the use of a particular Form-Approved Hedge Agreement by written notice to the Trustee, the Collateral Manager and the relevant Hedge Counterparty (provided that such withdrawal of consent shall not affect any existing Hedge Agreement entered into with such Hedge Counterparty) and (iv) the Issuer (or the Collateral Manager on its behalf) shall deliver to the Trustee and each Rating Agency a copy of each Form-Approved Hedge Agreement specifying the Hedge Counterparty to which it relates upon receipt of Rating Confirmation with respect thereto, and the Trustee’s records (when taken together with any correspondence received from the Rating Agencies pursuant to clause (ii)) shall be conclusive evidence of such form. Four-Month Period means, at any time during the Reinvestment Period, the period of four months following the earliest date as of which the number of Key Managers that are employed on a substantially full-time basis in the position of managing director or other management-level employee by the Collateral Manager (or any of its successors or assigns permitted pursuant to Section 16 of the Collateral Management Agreement) becomes less than one. Funding Entity means, with respect to any Class A-R Noteholder, any Liquidity Provider party to a Liquidity Facility entered into by such Holder in connection with the Class A-R Note Purchase Agreement or a guarantor of such Liquidity Provider. 34

Processed and formatted by SEC Watch - Visit SECWatch.com

Future Advance means, with respect to any Future Funding Asset, the requirement of the Issuer to make one or more future advances to the obligor under the Underlying Instruments relating thereto, subject to satisfaction of conditions precedent specified therein. Future Advance Amount means, an amount equal to (1) the sum of (A) amounts on deposit in any Future Funding Reserve Account and the Suspense Account, (B) the Future Funding Letter of Credit Amount, (C) amounts on deposit in a subaccount of the Uninvested Proceeds Account and (D) the Aggregate Class A-R Undrawn Amount and (2) such lesser amount for which Rating Confirmation is received. Future Advance Holder has the meaning specified in Section 12.2(y). Future Funding Asset means, a Collateral Interest that (a) requires the Issuer to make one or more future advances to the obligor under the Underlying Instruments relating thereto, subject to satisfaction of conditions precedent therein, (b) specifies a maximum amount that can be borrowed on one or more fixed borrowing dates and (c) does not permit the re-borrowing of any amount previously repaid by the obligor thereof; provided, however, that any such Future Funding Asset will be an Future Funding Asset only until all commitments by the Issuer to make advances to the obligor thereof expire or are terminated or reduced to zero. Future Funding Asset Account means the Securities Account designated the “Future Funding Asset Account” and established in the name of the Trustee pursuant to Section 10.8. Future Funding Interest means a Collateral Interest that is a Future Funding Asset, and (i) any Class A-R Noteholder defaults in its obligation to fund any portion of a Class A-R Draw and, if applicable, the Liquidity Provider also fails to fund the relevant portion of a Class A-R Draw, (ii) such Class A-R Noteholder and Liquidity Provider, if applicable, is no longer required to fund the relevant portion of a Class A-R Draw or (iii) the Collateral Manager determines that the Issuer’s ownership of such Future Funding Asset is not in the best interests of the Issuer or the Noteholders. Future Funding Letter of Credit Amount means the aggregate amount of all Qualifying Letters of Credit in favor of the Issuer or, subject to certain conditions set forth in the Indenture, any Future Advance Holder and related to the additional funding obligations of Future Advance Holders or other entities in respect of Other Loans or indemnification for losses. Future Funding Reserve Amount means an amount equal to (1) the sum of (A) amounts on deposit in any Future Funding Reserve Account and the Suspense Account, (B) the Future Funding Letter of Credit Amount, (C) amounts on deposit in a subaccount of the Uninvested Proceeds Account and (D) the Aggregate Class A-R Undrawn Amount and (2) such lesser amount for which Rating Confirmation is received. Future Funding Reserve Test means a test that is satisfied on any date if the Future Funding Reserve Amount is equal to or greater than the Required Future Funding Reserve Amount. Future Funding Reserve Test Failure means a failure of the Future Funding Reserve Test. 35

Processed and formatted by SEC Watch - Visit SECWatch.com

Future Funding Obligation means, with respect to any Future Funding Asset, the obligation to make one or more Future Advances retained by the Issuer. GAAP has the meaning specified in Section 6.3(k). Global Notes means the Rule 144A Global Notes and the Regulation S Global Notes. Grant means to grant, bargain, sell, warrant, alienate, remise, demise, release, convey, assign, transfer, mortgage, pledge, create and grant a security interest in and right of set-off against, deposit, set over and confirm. A Grant of the Pledged Securities, or of any other instrument, shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate continuing right to claim for, collect, receive and receipt for principal, interest and fee payments in respect of the Pledged Securities or such other instruments, and all other amounts payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto. Hedge Agreement means the interest rate protection agreement, as amended from time to time, together with any replacement hedge agreement on substantially identical terms (or that otherwise satisfies the conditions of Section 16.1), entered into pursuant to Section 16.1 or a Deemed Floating Asset Hedge. The Hedge Agreement shall provide that any amount payable to the Hedge Counterparty thereunder shall be subject to the Priority of Payments and that any amount payable upon the early termination or liquidation thereof shall be payable only on a Payment Date in accordance with the Priority of Payments. Hedge Counterparty means (a) any hedge counterparty (or any permitted assignee or successor) under a Hedge Agreement that satisfies the Hedge Counterparty Ratings Requirement and (b) any substitute or additional parties therefore appointed in accordance with Section 16.1. Hedge Counterparty Collateral Account means each Securities Account designated the “Hedge Counterparty Collateral Account” and established in the name of the Trustee pursuant to Section 16.1(d). Hedge Counterparty Ratings Requirement means, with respect to any Hedge Ratings Determining Party: (a) (x) a rating on the short-term unsecured, unsubordinated debt obligations of the Hedge Ratings Determining Party of “P-1” by Moody’s and a rating on the long-term unsecured, unsubordinated debt obligations of the Hedge Ratings Determining Party of at least “A1” by Moody’s or (y) if there is no shortterm rating by Moody’s, a rating on the long-term unsecured, unsubordinated debt obligations of the Hedge Ratings Determining Party of at least “Aa3” by Moody’s; provided, that any rating shall be reduced by one subcategory to the extent it is on credit watch with negative implications by Moody’s and (b) the short-term credit rating of such Hedge Counterparty is at least “F1” by Fitch and the long-term credit rating of such Hedge Counterparty is at least “A” by Fitch, provided that, if the credit rating falls below any such applicable ratings, then the Hedge Counterparty shall within 30 days, at its sole option and expense, either (x) cause an entity whose credit ratings equal or exceed the above criteria to issue 36

Processed and formatted by SEC Watch - Visit SECWatch.com

in favor of the Issuer a guaranty acceptable in form and substance to the applicable Rating Agency; (y) cause an entity with a credit rating that equals or exceeds the requisite criteria to enter a replacement Hedge Agreement; or (z) shall post collateral in accordance with the Hedge Agreement. If the credit rating of the then current Hedge Counterparty should fall below (a) (x) “A2” or “P-1” by Moody’s, or (y) if there is no short-term rating by Moody’s, “A1” by “Moody’s”, or (b) “F2” (short-term) or “BBB+” (long-term) by Fitch, then the Hedge Counterparty shall within 30 days, at its sole expense cause an entity with a credit rating that equals or exceeds the requisite criteria to enter a replacement Hedge Agreement. Hedge Payment Amount means, with respect to any Hedge Agreement and any Payment Date, the amount, if any, then payable by the Issuer to such Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement. Hedge Ratings Determining Party means (a) unless clause (b) applies with respect to the Hedge Agreement, the Hedge Counterparty or any transferee thereof or (b) any Affiliate of the Hedge Counterparty or any transferee thereof that unconditionally and absolutely guarantees the obligations of the Hedge Counterparty or such transferee, as the case may be, under the Hedge Agreement. For the purpose of this definition, no direct or indirect recourse against one or more shareholders of the Hedge Counterparty or any such transferee (or against any Person in control of, or controlled by, or under common control with, any such shareholder) shall be deemed to constitute a guarantee, security or support of the obligations of the Hedge Counterparty or any such transferee. Hedge Receipt Amount means, with respect to any Hedge Agreement and any Payment Date, the amount, if any, then payable to the Issuer by the related Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement. Herfindahl Index means an index calculated by the Collateral Manager by dividing (i) one by (ii) the sum of the series of products obtained for each Collateral Interest, by squaring the quotient of (x) the principal balance on such Calculation Date of each such Collateral Interest and (y) the aggregate Principal Balance of all Collateral Interests on such Calculation Date. For purposes of calculating the Herfindahl Index, all Collateral Interests from a single issue of CMBS shall be treated as a single Collateral Interest and each $6,000,000 increment of Cash in any Account and each $6,000,000 increment of the Aggregate Class A-R Undrawn Amount shall each be treated as a single Collateral Interest. Herfindahl Score means a measurement of the diversity of a pool of loans of unequal size calculated in accordance with the Herfindahl Index. Highest Auction Price means, in connection with a Redemption, the bid or bids for the Collateral Interests resulting in the highest auction price of one or more Subpools of Collateral Interests. Holder or Noteholder means (i) with respect to any Rated Note, any Rated Noteholder, (ii) with respect to any Income Note, any Income Noteholder and (iii) with respect to any Indenture Issued Note, any Indenture Issued Noteholder, as the context may require. Holder Sub-Account has the meaning specified in Section 17.5(a) hereof. 37

Processed and formatted by SEC Watch - Visit SECWatch.com

Impaired Interest means any Collateral Interest or any other security included in the Collateral: (i)

with respect to a Preferred Equity Security, (1) with respect to which there has occurred and is continuing a payment default (after giving effect to any applicable grace period but without giving effect to any waiver); provided, however, that notwithstanding the foregoing, a Preferred Equity Security shall not be deemed to be an Impaired Interest as a result of (A) the related issuer’s failure to pay dividends or distributions on the initial due date therefor, if the Collateral Manager or the Issuer consents to extend the due date when such dividend or distribution is due and payable, and such dividend or distribution is paid on or before such extended due date (provided that such dividend or distribution is paid not more than 60 days (or if the due date for such dividend or distribution was previously so extended, not more than 30 days) after the initial date that it was due), or (B) the failure of the issuer or affiliate of the issuer of the Preferred Equity Security to redeem or purchase such Preferred Equity Security on the date when such redemption or purchase is required pursuant to the terms of the agreement setting forth the rights of the holder of that Preferred Equity Security (after giving effect to all extensions of such redemption or purchase date that the issuer or affiliate of the issuer of the Preferred Equity Security had the right to elect and did elect under the terms of the agreement setting forth the rights of the holder of that Preferred Equity Security), if the Collateral Manager or the Issuer consents to extend such redemption or purchase date, provided that such consent does not extend the redemption or purchase date by more than two years after the redemption or purchase date required under such agreement (that is, the original redemption or purchase date under such agreement as extended by all extensions of such date that the issuer or affiliate of the issuer of the Preferred Equity Security had the right to elect and did elect under the terms of such agreement) and the amount required to be paid in connection with such redemption or purchase is paid on or before such ext ended redemption or purchase date, or (2) with respect to which there is known to the Issuer or the Collateral Manager a default (other than any payment default) which default entitles the holders thereof to accelerate the maturity of all or a portion of the principal amount of such obligation and such holders have actually accelerated such obligation; provided, however, in each case, if such default is cured or waived then such asset shall no longer be an Impaired Interest or (3) with respect to which there is known to the Collateral Manager (A) any bankruptcy, insolvency or receivership proceeding has been initiated in connection with the issuer of such Collateral Interest, or (B) there has been proposed or effected any distressed exchange or other debt restructuring where the issuer of such Collateral Interest has offered the debt holders a new security or package of securities that either (x) amounts to a diminished financial obligation or (y) has the purpose of helping the issuer to avoid default, or (4) that has been rated “CC” or below from Fitch or (5) there is known to the Collateral Manager that the issuer thereof is in default (after giving effect to any applicable grace period or waiver) as to payment of principal and/or interest on another obligation (and such default has not been cured or waived) which is senior or pari passu in right of payment to such Collateral Interest, except that a Collateral Interest will not constitute an “Impaired Interest” under this clause (5) if each of the Rating Agencies has confirmed in writing that such event shall not result in the reduction, qualification or withdrawal of any rating of the Notes; 38

Processed and formatted by SEC Watch - Visit SECWatch.com

(ii)

with respect to a Mortgage Loan Interest, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan, if a foreclosure or default (whether or not declared) with respect such Mortgage Loan Interest or otherwise in the case of the related Mortgage Loan Interest has occurred and is continuing for sixty days; provided, however, that notwithstanding the foregoing, a Mortgage Loan Interest, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan shall not be deemed to be an Impaired Interest as a result of (1) the related borrower’s failure to pay interest on such Mortgage Loan Interest, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or on the related commercial mortgage loan on the initial due date therefor, if the related lender or holder of such Mortgage Loan Interest, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan consents to extend the due date when such interest is due and payable, and such interest is paid on or before such extended due date (provided that such interest is paid not more than 60 days (or if the due date for such interest was previously so extended, not more than 30 days) after the initial date that it was due), or (2) the related borrower’s failure to pay principal on such Mortgage Loan Interest, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan on the original maturity date thereof (as defined below), if the related lender or holder of such Mortgage Loan Interest, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan consents to extend such maturity date (so long as the Maturity Extension Requirements are met) and such principal is paid on or before such extended maturity date, or (3) the occurrence of any default other than a payment default with respect to such Mortgage Loan Interest, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan, unless and until the earlier of (A) declaration of default and acceleration of the maturity of the Mortgage Loan Interest, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan by the lender or holder thereof and (B) the continuance of such default uncured for 60 days after such default became known to the Issuer or the Collateral Manager or, upon receipt of Rating Confirmation, such longer period as the Collateral Manager determines. As used herein, the term “original maturity date” means the maturity date of a Mortgage Loan Interest, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan as extended by all extensions thereof which the related borrower had the right to elect and did elect under the terms of the instruments and agreements relating to such Mortgage Loan Interest, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan, but before taking into account any additional extensions thereof that are consented to by the lender or holder of such Mortgage Loan Interest, Subordinate Mortgage Loan Interest, Mezzanine Loan, Participation Interest, Credit Lease Loan or Tenant Lease Loan or the related commercial mortgage loan; and 39

Processed and formatted by SEC Watch - Visit SECWatch.com

(iii)

with respect to a CMBS, Real Estate CDO Security or REIT Debt Security (1) as to which there has occurred and is continuing a principal payment default (after giving effect to any applicable grace period or waiver) or (2) as to which there is known to the Issuer or the Collateral Manager a default (other than any payment default) which default entitles the holders thereof to accelerate the maturity of all or a portion of the principal amount of such obligation and such holders have actually accelerated such obligation; provided, however, in the case of clause (1) or (2), if such default is cured or waived then such asset shall no longer be an Impaired Interest or (3) as to which there is known to the Collateral Manager (A) any bankruptcy, insolvency or receivership proceeding has been initiated in connection with the issuer of such CMBS, Real Estate CDO Security or REIT Debt Security, or (B) there has been proposed or effected any distressed exchange or other debt re-structuring where the issuer of such CMBS, Real Estate CDO Security or REIT Debt Security has offered the debt holders a new security or package of securities that either (x) amounts to a diminished financial obligation or (y) has the purpose of helping the issuer to avoid default, or (4) that has been rated “Ca” or “C” by Moody’s or “CC” or below from Fitch, or; or (5) as to which there is known to the Collateral Manager that the issuer thereof is in default (after giving effect to any applicable grace period or waiver) as to payment of principal and/or interest on another obligation (and such default has not been cured or waived) which is senior or pari passu in right of payment to such CMBS, Real Estate CDO Security or REIT Debt Security; provided, however, upon receipt of Rating Confirmation for such CMBS, Real Estate CDO Security or REIT Debt Security, the Collateral Manager may choose not to treat such a CMBS, Real Estate CDO Security or REIT Debt Security as an “Impaired Interest” under this clause (iii) or (B) as to which there has been a failure to pay interest in whole or in part for the lesser of (x) one year or (y) six consecutive payment periods (if such CMBS, Real Estate CDO Security or REIT Debt Security is rated (or privately rated for purposes of the issuance of the Notes) “BBB” by Fitch or “Baa3” or higher by Moody’s) even if by its terms it provides for the deferral and capitalization of interest thereon;

provided that, for the avoidance of doubt, any Collateral Interest which has sustained a write down of principal balance in accordance with its terms will not necessarily be considered an Impaired Interest solely due to such write-down. For purposes of calculating the Interest Coverage Ratio and Principal Coverage Ratio, an appraisal reduction of a Collateral Interest will be assumed to result in an implied reduction of principal balance for such Collateral Interest only if such appraisal reduction is intended to reduce the interest payable on such Collateral Interest and only in proportion to such interest reduction. For purposes of the Interest Coverage Ratio and Principal Coverage Ratio, any Collateral Interest that has sustained an implied reduction of principal balance due to an appraisal reduction will not be considered an Impaired Interest solely due to such implied reduction. The Collateral Manager will notify the Trustee of any appraisal reductions of Collateral Interests if the Collateral Manager has actual knowledge thereof. For purposes of this definition of “Impaired Interest,” the Maturity Extension Requirements will be satisfied with respect to any extension if the maturity date is extended in the case of Mortgage Loan Interests, Subordinate Mortgage Loan Interests, Mezzanine Loans, Participation Interests, Credit Lease Loans and Tenant Lease Loans, to a new maturity date that is (A) not 40

Processed and formatted by SEC Watch - Visit SECWatch.com

more than two years after the original maturity date and (B) not less than 10 years prior to the Stated Maturity Date; provided, however, that notwithstanding the foregoing requirements, “Maturity Extension Requirements” will be deemed satisfied with respect to any extensions as to which Rating Confirmation has been received. Impaired Interests Amount means the sum, with respect to each Impaired Interest in the Collateral, of the lesser of (i) the product of (A) the Principal Balance of such Impaired Interest and (B) the Applicable Recovery Rate of such Impaired Interest and (ii) the product of (A) the Principal Balance of such Impaired Interest and (B) the Market Value of such Impaired Interest. Income Note Distribution Account means the account designated the “Income Note Distribution Account” and established by the PAA Issued Note Paying Agent in the name of the PAA Issued Note Paying Agent for the benefit of the Issuer pursuant to the Paying Agency Agreement. Income Note Excess Funds means all remaining Collateral Interest Collections and Collateral Principal Collections as set forth in Section 11.1(a)(38) and 11.1(b)(31). Income Noteholder means, with respect to any Income Note, the Person in whose name such Income Note is registered in the Income Note Register. Income Notes means the U.S. $136,800,000 Income Notes Due 2041. Income Note Redemption Approval Condition means, in connection with a Tax Redemption at the direction of the Controlling Party and an Auction Call Redemption, the requirement that, unless and to the extent the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes have waived payment in full of the Income Notes Stated Amount, the Income Noteholders receive in connection with such Tax Redemption or Auction Call Redemption an amount equal to (x) the Income Notes Stated Amount minus (y) the aggregate amount of all cash distributions on the Income Notes (whether in respect of distributions or redemption payments made to the Income Note Paying Agent for distribution to the Income Noteholders) on or prior to the relevant Auction Date. Income Notes Stated Amount means U.S.$136,800,000. Indenture means this instrument and, if from time to time supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, as so supplemented or amended. Indenture Issued Notes means, collectively, the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes. Indenture Issued Noteholder means, with respect to any Indenture Issued Note, the Person in whose name such Note is registered; provided that Beneficial Owners or Agent Members will have no rights under this Indenture with respect to Global Notes, and the Indenture Issued Noteholder may be treated by the Issuer and the Trustee (and any agent of any of the foregoing) as the owner of such Global Notes for all purposes whatsoever. 41

Independent means, as to any Person, any other Person (including, in the case of an accountant, or lawyer, a firm of accountants or lawyers and any member thereof) who (i) does not have and is not committed to acquire any material direct or any material indirect financial interest in such Person or in any Affiliate of such Person, (ii) is not connected with such Person as an Officer, employee, promoter, underwriter, voting trustee, partner, director or Person performing similar functions and (iii) if required to deliver an opinion or certificate to the Trustee pursuant to this Indenture, states in such opinion or certificate that the signer has read this definition and that the signer is Independent within the meaning hereof. “Independent” when used with respect to any accountant may include an accountant who audits the books of such Person if in addition to satisfying the criteria set forth above the accountant is independent with respect to such Person within the meaning of Rule 101 of the Code of Ethics of the American Institute of Certified Public Accountants. Initial Class A-R Noteholder means Variable Funding Capital Company LLC. Initial Hedge Counterparty means Wachovia Bank, National Association. Initial Maturity Date means, with respect to any Collateral Interest, the maturity date of such Collateral Interest without giving effect to any extension options available under the terms of such Collateral Interest. Initial Payment Date means the Payment Date occurring in February 2007. Initial Purchaser means Wachovia Capital Markets, LLC as initial purchaser of the Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes. Initial Weighted Average Maturity means, as of any Measurement Date with respect to the Collateral Interests (other than Impaired

Processed and formatted by SEC Watch - Visit SECWatch.com

Interests), the number obtained by (i) summing the products obtained by multiplying (a) the remaining term to maturity (in years, rounded to the nearest one tenth thereof, and based on the Initial Maturity Date) of each Collateral Interest (other than Impaired Interests) by (b) the outstanding Principal Balance of such Collateral Interest and (ii) dividing the sum by the aggregate Principal Balance at such time of all Collateral Interests (other than Impaired Interests). Instrument has the meaning specified in Section 9-102(a)(47) of the UCC. Interest Advance has the meaning specified in Section 10.17(a). Interest Coverage Amount means, as of any Measurement Date, an amount equal to (i) the amount received or scheduled to be received as Collateral Interest Collections during the related Due Period, less (ii) the amounts scheduled to be paid on the related Payment Date pursuant to Section 11.1(a)(1) through (3) and, for purposes of calculating the Interest Coverage Ratios, any amounts scheduled to be paid to the Interest Reserve Account on the related Payment Date pursuant to Section 11.1(a)(9); provided that (a) following the date on which a Collateral Interest becomes an Impaired Interest, scheduled Collateral Interest Collections shall not include any amount scheduled to be received on Impaired Interests or any amount scheduled to be received on securities that are currently deferring interest until (1) such amounts are actually received in 42

Processed and formatted by SEC Watch - Visit SECWatch.com

Cash or (2) the cumulative aggregate amounts actually received on an Impaired Interest exceed the Principal Balance of such Impaired Interest, (b) the expected interest income on Floating Rate Collateral Interests and Eligible Investments shall be calculated using the then-current interest rate applicable thereto and (c) with respect to any Written Down Interest, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount. Interest Coverage Ratio means, on any Measurement Date for any Class of Notes, the ratio (expressed as a percentage) of (x) to (y), where (x) is equal to the Interest Coverage Amount as of such Measurement Date and where (y) is (1) in the case of the Class A/B/C/D Coverage Test, the sum of the Class A-R Commitment Fee and the Periodic Interest for the Class A Notes, Class B Notes, Class C Notes and Class D Notes for the Payment Date immediately following such Measurement Date (plus any Defaulted Interest and interest thereon), (2) in the case of the Class E/F/G Coverage Test, the amount determined by the foregoing clause (1) plus the sum of the Periodic Interest for the Class E Notes, Class F Notes and Class G Notes for the Payment Date immediately following such Measurement Date (plus any Defaulted Interest and interest thereon) or (3) in the case of the Class H/J/K Coverage Test, the amount determined by the foregoing clause (2) plus the sum of the Periodic Interest for the Class H Notes, Class J Notes and Class K Notes for the Payment Date immediately following such Measurement Date (plus any Defaulted Interest and interest thereon); provided, however, that the Interest Coverage Amount above shall be calculated after giving effect to any scheduled payment to the Interest Reserve Account for the Payment Date immediately following such Measurement Date. Interest Coverage Test means, for any Class of Notes Outstanding, a test that is satisfied as of any Measurement Date when the applicable Interest Coverage Ratio is equal to or greater than the applicable Required Coverage Rates. Interest Only Security means any security that by its terms provides for periodic payments of interest and does not provide for the repayment of a stated principal amount. Interest Period means (i) with respect to the Notes other than the Class A-R Notes, (a) with respect to the Initial Payment Date, the period from and including the Closing Date to but excluding the Initial Payment Date and (b) thereafter with respect to each Payment Date, the period beginning on the first day following the end of the preceding Interest Period and ending on (and including) the day before the next Payment Date and (ii) with respect to the Class A-R Notes and any Class A-R Draw, (a) initially the period from and including the date of any Class A-R Draw to but excluding the earlier of (1) the first Payment Date immediately following such Class A-R Draw and (2) the Class A-R Prepayment Date in respect of such Class A-R Draw and (b) thereafter, each period from and including the immediately preceding Payment Date to but excluding the earlier of (1) the immediately succeeding Payment Date and (2) the Class A-R Prepayment Date Interest Reserve Account means the account established by the Trustee, held in the name of the Trustee for the benefit and on behalf of the Secured Parties and into which the Trustee will deposit, on each Payment Date, the Interest Reserve Amount, if any, in accordance with the Priority of Payments. 43

Processed and formatted by SEC Watch - Visit SECWatch.com

Interest Reserve Amount means, as of any Calculation Date, the sum of (i) the aggregate Quarterly Pay Security Interest Reserve Amounts and (ii) the aggregate amount of Semi-Annual Pay Security Interest Reserve Amounts. Interim Payment Date means a Business Day which is not a Payment Date on which the Class A-R Notes may be prepaid (in whole or in part) in accordance with Section 17.3 hereof. Investment Advisers Act means the United States Investment Advisers Act of 1940, as amended. Investment Company Act means the U.S. Investment Company Act of 1940, as amended, and the rules thereunder. Investment Guidelines Event means the earlier of (i) the date the Issuer or the Collateral Manager has actual knowledge of (A) the Owner REIT’s intent to no longer qualify as a REIT or (B) other event that would cause the circumstances described in the following clause (ii) of this definition and (ii) the date on which the Collateral Manager has actual knowledge that the Issuer has ceased to be disregarded as an entity separate from the Owner REIT for U.S. federal income tax purposes. Issue means Collateral Interests issued by the same issuer secured by the same collateral pool. Issuer means N-Star REL CDO VIII Ltd., an exempted company incorporated and existing under the law of the Cayman Islands, unless a successor Person shall have become the Issuer pursuant to the applicable provisions of this Indenture, and thereafter “Issuer” shall mean such successor Person. Issuer Order and Issuer Request mean, respectively, a written order or a written request, which may be in the form of a standing order or request in each case dated and signed in the name of the Issuer (or, as expressly provided herein, the Collateral Manager on its behalf) by an Authorized Officer of the Issuer (or, as expressly provided herein, the Collateral Manager) and (if appropriate) the Co-Issuer, as the context may require or permit. Key Manager means any of David T. Hamamoto, Daniel R. Gilbert or any such other additional person as may be appointed “Key Managers” in accordance with the Collateral Management Agreement (or if David T. Hamamoto, Daniel R. Gilbert or any such additional Key Managers have been replaced with one or more Approved Replacement Persons, such Approved Replacement Persons). Key Manager Event means any of the following: (a) the failure by the Collateral Manager to propose a replacement Key Manager within the applicable Four-Month Period, (b) the failure by the Collateral Manager, within the Four-Month Period, to propose a different replacement Key Manager following receipt of a Controlling Party Objection or (c) the receipt of another Controlling Party Objection within ten Business Days after delivery of such a proposal for a different replacement Key Manager to the Controlling Party. LIBOR means, with respect to each Interest Period (other than the first Interest Period), a floating rate equal to the London interbank offered rate for one-month U.S. Dollar deposits determined in the manner described in Schedule B. 44

Processed and formatted by SEC Watch - Visit SECWatch.com

LIBOR Calculation Date has the meaning specified in Schedule B. Liquidity means, as of any date of determination, an amount equal to the sum of (i) the cash and cash equivalents of the Future Advance Holders (on a consolidated basis) on such date of determination, (ii) the amounts on deposit in the Suspense Account and the Future Advance Reserve Account, (iii) the total amount of capacity available to the Future Advance Holders under any unsecured facility in effect on such date of determination (determined in accordance with the relevant provisions of each such facility) and (iv) the excess, if any, of (A) the total amount available to be drawn by all Approved Lenders under all Warehouse Facilities over (B) the total amount actually drawn by all Approved Lenders under all Warehouse Facilities, in each case, on such date of determination and in accordance with the terms of such Warehouse Facilities. Liquidity Facility means a liquidity loan agreement, credit facility and/or purchase agreement providing for the several commitments of the Liquidity Providers party thereto in the aggregate to make loans to, or acquire interests in the assets of, a Holder of Class A-R Notes in an aggregate principal amount at any one time outstanding at least equal to the Class A-R Commitments of such Holder. Liquidity Provider means a bank or other institution or entity that a Holder of a Class A-R Note (or prospective transferee) is entitled under a Liquidity Facility to borrow from, or sell an interest in assets to. Liquidity Test has the meaning specified in Section 7.18(a). Liquidity Test Failure has the meaning specified in Section 7.18(a). Listed Bidders has the meaning specified in Schedule D. London Banking Day has the meaning specified in Schedule B. Majority means (a) with respect to any Class or Classes of Rated Notes, the Holders of more than 50% of the Aggregate Outstanding Amount of the Rated Notes of such Class or Classes of Rated Notes, as the case may be and (b) with respect to Income Notes, the Holders of more than 50% Income Notes Stated Amount. Mandatory Class A-R Draw Date means the earliest to occur of (i) the last day of the Reinvestment Period, or (ii) the date of an acceleration of the Notes following the occurrence and continuance of an Event of Default (other than an Event of Default specified in Section 5.1(d), (g) or (h)). Margin Stock means “margin stock” as defined under Regulation U issued by the Board of Governors of the Federal Reserve System. Market Value means, on any date of determination, the average of three or more bid-side prices expressed as a percentage of the par amount, obtained from independent, nationally recognized financial institutions in the relevant market for one or more Collateral Interests, each unaffiliated with each other and the Collateral Manager, as certified by the Collateral Manager (to the extent 45

Processed and formatted by SEC Watch - Visit SECWatch.com

that such bid-side prices may be obtained by the Collateral Manager using its commercially reasonable efforts and commercially reasonable business judgment). If three or more bid-side prices cannot be so obtained, then the Market Value on such date of determination will be the lower of two bid-side prices, if two bid-side prices are obtained in the manner described above, and the sole bid-side price if only one bid-side price is obtained in the manner described above. If no bids can be obtained in the manner described above, the Market Value will be the price, expressed as a percentage of the par amount, determined by the Collateral Manager in its commercially reasonable judgment. Master Trust Agreement means that certain Master Trust Agreement, dated as of December 7, 2006, as the same may be amended or supplemented from time to time, between the Depositor and the Underlying Trustee. Maximum Class A-R Commitment means U.S.$260,000,000. MBIA means MBIA Insurance Corporation or any successor or assigns thereto. Measurement Date means any of the following: (a) the Effective Date; (b) any date after the Effective Date upon which the Issuer disposes or acquires (which date of acquisition shall be deemed to be the date on which the Issuer enters into commitments to acquire such Collateral Interest) any Collateral Interest; (c) each Calculation Date; (d) the last Business Day of each calendar month (other than the calendar month preceding the month in which a Calculation Date occurs and any calendar month prior to and including the month in which the Effective Date occurs); and (e) with reasonable notice to the Issuer, the Collateral Manager and the Trustee, any other Business Day that any Rating Agency or Holders of more than 50% of the aggregate principal amount of any Class of Rated Notes requests to be a “Measurement Date”; 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 day that is a Business Day. Mezzanine Loans means mezzanine loans secured by ownership interests in entities owning commercial properties. Moneyline Telerate Page 3750 means the display page so designated on Moneyline Telerate Service (or such other page as may replace that page on that service, or such other service as may be nominated as the information vendor, for the purposes of displaying rates comparable to LIBOR). Monitoring Fee means, with respect to each Payment Date, an amount equal to 0.10% per annum of the Fee Basis Amount payable to the Collateral Manager pursuant to the Collateral Management Agreement. Moody’s means Moody’s Investors Service, Inc. and any successor or successors thereto. Moody’s Estimated Rating has the meanings specified in Section 12.2(c). Moody’s Maximum Weighted Average Rating Factor Test means a test that will be satisfied on any Measurement Date if the Moody’s Tranched Weighted Average Rating Factor of the Collateral Interests is equal to or less than the number set forth in the row entitled “Maximum 46

Processed and formatted by SEC Watch - Visit SECWatch.com

WARF” in the Rating Factor/Weighted Average Spread/Weighted Average Recovery Rate Matrix based on the scenario chosen by the Collateral Manager as currently applicable to the applicable Collateral Quality Tests and the Collateral Interests in accordance with this Indenture. Moody’s Minimum Average Recovery Rate means, as of any date or determination, a rate expressed as a percentage equal to the number obtained by (i) summing the products obtained by multiplying the Principal Balance of each Collateral Interest by its Moody’s Recovery Rate and (ii) dividing such sum by the Collateral Interest Principal Balance less cash and Eligible Investments representing Collateral Principal Collections and (iii) rounding up to the first decimal place. Moody’s Minimum Average Recovery Rate Test means a test that will be satisfied as of any Measurement Date if the Moody’s Minimum Average Recovery Rate is greater than or equal to the number set forth in the row entitled “Minimum Weighted Average Recovery Rate” in the Rating Factor/Weighted Average Spread/Weighted Average Recovery Rate Matrix based on the scenario chosen by the Collateral Manager as currently applicable to the applicable Collateral Quality Tests and the Collateral Interests in accordance with Section 1.2(l). Moody’s Post-Acquisition Compliance Test means the test that is satisfied if the Moody’s Maximum Weighted Average Rating Factor Test, calculated incorporating any provided Moody’s Estimated Rating, is satisfied, or, if the Moody’s Maximum Weighted Average Rating Factor Test was not satisfied prior to the purchase of the related Substitute Collateral Interest, the Moody’s Maximum Weighted Average Rating Factor Test will be maintained or improved immediately following such purchase. Moody’s Post-Acquisition Compliance Test Failure has the meanings specified in Section 12.1(c). Moody’s Post Acquisition Compliance Test Failure Suspension has the meaning specified in Section 12.1(c). Moody’s Rating means, with respect to any Collateral Interest: (i)

if such Collateral Interest is rated by Moody’s, such rating;

(ii)

if such Collateral Interest does not otherwise have a Moody’s Rating in accordance with clauses (i), (iii) or (iv) of this definition, then the Moody’s Rating of such Collateral Interest shall be deemed to be the rating thereof as may be assigned by Moody’s upon the request of the Issuer or the Collateral Administrator; provided that, so long as Moody’s Post Acquisition Compliance Test Failure Suspension is not in effect pursuant to Section 12.1(c) the Collateral Administrator may, consistent with Moody’s published criteria for underwriting and tranching of commercial real estate loans, use its estimated tranched ratings for Collateral Interests represented by Mortgage Loan Interests, Subordinate Mortgage Loan Interests, Preferred Equity Securities, and Mezzanine Loans (other than such Collateral Interests that are Non-Transitional Assets) representing up to 20% of the Collateral Interest Principal Balance; provided that with respect to such Collateral Interests having estimated ratings (A) no more than 47

Processed and formatted by SEC Watch - Visit SECWatch.com

10% of the Collateral Interest Principal Balance may represent a single Collateral Interest of the type described in clauses (i) through (v), inclusive, of clause (3) of the definition of Collateral Quality Test and (B) no more than 5% of the Collateral Interest Principal Balance may represent a single Collateral Interest of the type described in clause (vi) of clause (3) of the definition of Collateral Quality Test and/or which is not an Undeveloped Real Estate Collateral Interest; provided further that the Collateral Manager shall submit such Collateral Interests to the Collateral Administrator for a Moody’s estimated rating within 10 Business Days of acquisition; (iii)

(iv)

with respect to the CMBS that are CMBS conduit securities (i.e., CMBS representing interests in a pool of commercial mortgage loans), if such Collateral Interest is not rated by Moody’s, and no other security or obligation of the issuer or the obligor is rated by Moody’s and neither the Issuer nor the Collateral Administrator obtains a Moody’s Rating for such Collateral Interest pursuant to clause (ii) above, then the Moody’s Rating of such Collateral Interest may be determined using any one of the following methods: (a)

if such Collateral Interest is rated by both S&P and Fitch or if such Collateral Interest is only rated by either S&P or Fitch but Moody’s has rated other classes in the same transaction then the Moody’s Rating will be 2 subcategories lower than the lowest Moody’s equivalent rating then outstanding on the Collateral Interest; or

(b)

if such Collateral Interest is only rated by one other Rating Agency, then the Issuer or the Collateral Administrator on behalf of the Issuer may request that Moody’s assign a rating for such Collateral Interest, which shall be such Collateral Interest’s Moody’s Rating.

with respect to the Collateral Interests that are REIT Debt Securities or other corporate debt securities, if such Collateral Interest is not rated by Moody’s, and no other security or obligation of the issuer or the obligor is rated by Moody’s and neither the Issuer nor the Collateral Administrator obtains a Moody’s Rating for such Collateral Interest pursuant to clause (ii) above, then the Moody’s Rating of such Collateral Interest may be determined using any one of the following methods: (a)

if such Collateral Interest is rated at least “BBB” by S&P, then the Moody’s Rating of such Collateral Interest will be one subcategory below the Moody’s equivalent of the rating assigned by S&P; or

(b)

if such Collateral Interest is rated “BB+” or below by S&P, then the Moody’s Rating of such Collateral Interest will be two subcategories below the Moody’s equivalent of the rating assigned by S&P.

Notwithstanding the foregoing, Collateral Interests representing no more that 20% of the Collateral Interest Principal Balance may be rated pursuant to clauses (iii) and (iv) above and no 48

Processed and formatted by SEC Watch - Visit SECWatch.com

single Collateral Interest Principal Balance that represents more than 5% of the Collateral Interest Principal Balance can be rated pursuant to clause (iii) or (iv) above. Moody’s Rating Factor means with respect to any Collateral Interest, the number set forth in the table below opposite the Moody’s Rating of such Collateral Interest. Moody’s Rating

Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3

Moody’s Rating Factor

Moody’s Ratin g

Moody’s Rating Factor

1 10 20 40 70 120 180 260 360 610

Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca or lower

940 1,350 1,766 2,220 2,720 3,490 4,770 6,500 8,070 10,000

For purposes of calculating the “Moody’s Tranched Weighted Average Rating Factor Test,” the Rating Factor of cash invested as an “Eligible Investment” and the Aggregate Class A-R Undrawn Amount shall be treated as having a Moody’s Rating of “Aaa” (Moody’s Rating Factor of 1). Moody’s Recovery Rate means, with respect to a Collateral Interest on any Measurement Date, an amount equal to the percentage for such Collateral Interest set forth in the Moody’s Recovery Rate Matrix attached as Schedule C hereto) in (x) the applicable table and (y) the row in such table opposite the Moody’s Rating (determined in accordance with procedures prescribed by Moody’s for such Collateral Interest on the date of its purchase by the Issuer or, in the case of an Impaired Interest, the Moody’s Rating immediately prior to default). Moody’s Tranched Weighted Average Rating Factor means, on any Measurement Date the number obtained by dividing (i) the sum of the series of products obtained for any Collateral Interest that by multiplying (a) the tranched principal balance on such Measurement Date of each such Collateral Interest by (b) its respective Moody’s Rating Factor on such Measurement Date by (ii) the aggregate tranched principal balance on such Measurement Date of all Collateral Interests and rounding the result up to the nearest whole number. For purposes of calculating the “Moody’s Tranched Weighted Average Rating Factor Test,” the Rating Factor of cash invested as an “Eligible Investment” and the Aggregate Class A-R Undrawn Amount shall be treated as having a Moody’s Rating of “Aaa” (Moody’s Rating Factor of 1). Moody’s Weighted Average Extended Maturity Test means a test that will be satisfied on any Measurement Date if the Extended Weighted Average Maturity of the Collateral Interests as of such Measurement Date is (i) 5.6 years up to February 2011 and (ii) 4.1 years thereafter. Moody’s Weighted Average Initial Maturity Test means a test that will be satisfied on any Measurement Date if the Extended Weighted Average Maturity of the Collateral Interests as of such Measurement Date is (i) 5.6 years prior to February 2011 and (ii) 4.1 years thereafter. 49

Processed and formatted by SEC Watch - Visit SECWatch.com

Mortgage Loan Interest means whole commercial mortgage loans or participation interests (including senior and pari passu participation interests). Mortgaged Property means the multifamily or commercial property or properties securing the Commercial Mortgage Loans. Nonrecoverable Advance means any Interest Advance previously made or proposed to be made which, in the judgment of the Advancing Agent or the Trustee, as applicable, will not be ultimately recoverable from subsequent payments or collections with respect to the Collateral Interests. Any determination of recoverability by the Advancing Agent or the Trustee, as applicable, shall be subject to the standard set forth in Section 10.17. Nonrecoverable Cure Advance means a Cure Advance made or proposed to be made that the Collateral Manager has determined in its sole discretion, exercised in good faith, that the amount so advanced or proposed to be advanced will not be recoverable from subsequent collections from the specific Collateral Interest with respect to which such Cure Advance was made or proposed to be made. Non-Transitional Asset means any Future Funding Asset or Other Loan for which the unfunded portion of such loan as of the origination date of the related financing represents more than 35% of the sum of (a) the then outstanding amount of such Future Funding Asset or Other Loan and (b) the remaining amount required to be funded to the borrower pursuant to the terms of such Future Funding Asset or Other Loan; provided, that a Future Funding Asset or Other Loan shall not be classified as a Non-Transitional Asset if Rating Confirmation to such effect is received. Note Paying Agent means any Person authorized by the Issuer to pay the principal of or interest on any Indenture Issued Notes on behalf of the Issuer as specified in Section 7.2. Note Payment Sequence means the application of Collections to pay principal of the Rated Notes in the following order, in each case until paid in full: (i) Class A Senior Notes, pro rata, (ii) Class A-2 Notes, (iii) Class B Notes, (iv) Class C Notes, (v) Class D Notes, (vi) Class E Notes, (vii) Class F Notes, (viii) Class G Notes, (ix) Class H Notes, (x) Class J Notes, (xi) Class K Notes, (xii) Class L Notes, (xiii) Class M Notes and (xiv) Class N Notes. Note Register and Note Registrar have the respective meanings specified in Section 2.4(a). Note Transfer Agent has the meaning specified in Section 2.4(a). Note Valuation Report has the meaning specified in Section 10.11(a). Notes means, collectively, the Rated Notes and the Income Notes. Offer means, with respect to any security, (a) any offer by the issuer of such security or by any other Person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related Underlying Instruments) or to convert or exchange such security into or for Cash, securities or any other type of consideration or (b) any solicitation by the issuer of such security or any other 50

Processed and formatted by SEC Watch - Visit SECWatch.com

Person to amend, modify or waive any provision of such security or any related Underlying Instrument. Offered Notes means, collectively, the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes. Offering means the offering of the Rated Notes (other than the Class L Notes, Class M Notes and Class N Notes) under the Offering Circular. Offering Circular means the Offering Circular, prepared and delivered on or prior to the Closing Date in connection with the offer and sale of the Offered Notes, as amended or supplemented from time to time. Officer means, (a) with respect to the Issuer and any corporation, the Chairman of the Board of Directors (or, with respect to the Issuer, any director), the President, any Vice President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of such entity; (b) with respect to any bank or trust company acting as trustee of an express trust or as custodian, any Trust Officer; and (c) with respect to the Co-Issuer, a manager of such entity. Opinion of Counsel means a written opinion addressed to the Trustee, each Hedge Counterparty and each Rating Agency (each, a Recipient), in form and substance reasonably satisfactory to each Recipient, of an attorney at law admitted to practice before the highest court of any state of the United States or the District of Columbia (or the Cayman Islands, in the case of an opinion relating to the laws of the Cayman Islands), which attorney may, except as otherwise expressly provided in this Indenture, be inside or outside counsel for the Issuer or the CoIssuer, as the case may be, and which attorney shall be reasonably satisfactory to the Trustee. Whenever an Opinion of Counsel is required hereunder, such Opinion of Counsel may rely on opinions of other counsel who are so admitted and so satisfactory which opinions of other counsel shall accompany such Opinion of Counsel and shall either be addressed to each Recipient or shall state that each Recipient shall be entitled to rely thereon. Optional Redemption has the meaning specified in Section 9.1(a). Ordinary Shares means the 1,000 ordinary shares, par value U.S.$1.00 per share issued by the Issuer. Other Loan shall have the meaning set forth in the definition of “Related Future Advance Loan.” Outstanding means with respect to the Notes as of any Measurement Date, any and all Notes theretofore authenticated and delivered under this Indenture and the Paying Agency Agreement other than Notes cancelled, redeemed, exchanged or replaced in accordance with the terms of this Indenture or the Paying Agency Agreement, as applicable; provided that in determining whether the Holders of the requisite percentage of Notes have given any direction, notice, consent, approval or objection, (A) any Notes held or beneficially owned by the Collateral Manager or any of its Affiliates or by an account or fund for which the Collateral Manager or any of its Affiliates acts as the investment advisor with discretionary authority will be disregarded with respect to any vote or consent relating to the removal or termination of the 51

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Manager or the assignment by the Collateral Manager of its rights and obligations under the Collateral Management Agreement, except for any assignments or transfers by the Collateral Manager of its rights and obligations to Affiliates of the Collateral Manager, subject to any applicable requirements under the Investment Advisers Act and (B) the Class A-R Notes will be assumed to be fully drawn. Owner REIT means an entity which qualifies as a REIT for U.S. federal income tax purposes and which owns, directly or indirectly, through one or more Qualified REIT Subsidiaries thereof or one or more entities disregarded as entities separate from such REIT or its Qualified REIT Subsidiaries, 100% of the Class L Notes, the Class M Notes, the Class N Notes, the Income Notes and the Ordinary Shares (other than any Class L Notes, Class M Notes or Class N Notes with respect to which the Issuer has received an Opinion of Counsel rendered by nationally recognized U.S. tax counsel experienced in such matters to the effect that the Class L Notes, Class M Notes or Class N Notes, as applicable, will be treated as indebtedness for U.S. federal income tax purposes). PAA Issued Note Paying Agent means Wells Fargo Bank, National Association, and any successors or assigns in its capacity as PAA Issued Note Paying Agent under the Paying Agency Agreement. PAA Issued Note Paying Agent Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by, or otherwise owing to, the PAA Issued Note Paying Agent during the preceding Due Period in accordance with the Paying Agency Agreement. PAA Issued Note Paying Agent Fee means, with respect to any Payment Date, for so long as any Class N Notes or Income Notes remain Outstanding, the fee payable to the PAA Issued Note Paying Agent in an aggregate amount equal to U.S.$10,000 per annum. PAA Issued Note Register means, with respect to the Income Notes and Class N Notes, the note register maintained by the PAA Issued Note Registrar. PAA Issued Note Registrar means Wells Fargo Bank, National Association, and any successors or assigns in its capacity as PAA Issued Note Registrar under the Paying Agency Agreement. PAA Issued Notes means, together, the Class N Notes and Income Notes. Participation Interests means pari passu participation interests in commercial mortgage loans, Subordinate Mortgage Loan Interests and Mezzanine Loans. Paying Agency Agreement means that certain Paying Agency Agreement, dated as of December 7, 2006, as the same may be amended or supplemented from time to time, between the Issuer and the PAA Issued Note Paying Agent. Paying Agents means, together, the Note Paying Agent and the PAA Issued Note Paying Agent. Payment Account means the Securities Account designated the “Payment Account” and established in the name of the Trustee pursuant to Section 10.9. 52

Payment Date means the 1st day of each month, or if such day is not a Business Day, the next succeeding Business Day, commencing in February 2007 and ending on the applicable Stated Maturity Date (or in the case of the Class A-R Notes, the related repayment date, if sooner). Periodic Interest means the amount of interest payable in respect of each Class of Floating Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of business on the day immediately preceding the relevant Payment Date (and in the case of the Class A-R Notes, each Class A-R Prepayment Date), multiplying the resulting figure by the actual number of days in such Interest Period, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards). Person means any individual, corporation, partnership, limited liability partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof or any similar entity. PIK Bond means any security that, pursuant to the terms of the related Underlying Instruments, permits the payment of interest thereon to be deferred or capitalized as additional principal thereof or not pay interest when scheduled (but without being an Impaired Interest) or that issues identical securities in lieu of payments of interest in Cash. Plan Asset Regulation means the U.S. Department of Labor regulation at 29 C.F.R. Section 2510.3-101. Placement Agent means Wachovia Capital Markets, LLC in its capacity as placement agent of the Class A-R Notes. Pledged Collateral Interest means as of any date of determination, any Collateral Interest that has been Granted to the Trustee and has not

Processed and formatted by SEC Watch - Visit SECWatch.com

been released from the lien of this Indenture pursuant to Section 10.12. Pledged Securities means on any date of determination, (a) the Collateral Interests, Equity Interests and the Eligible Investments that have been Granted to the Trustee and (b) all non-Cash proceeds thereof, in each case, to the extent not released from the lien of this Indenture pursuant hereto. Preferred Equity Security means a security, providing for regular payments of dividends or other distributions, representing an equity interest in an entity (including, without limitation, a partnership or a limited liability company) that is a borrower under a mortgage loan secured by commercial properties (or in an entity operating or controlling, directly or through affiliates, such commercial properties), which is generally senior with respect to the payments of dividends and other distributions, redemption rights and rights upon liquidation to such entity’s common equity. Principal Balance means, with respect to any Collateral Interest or Eligible Investment, as of any date of determination, the outstanding principal amount of such Collateral Interest or Eligible Investment; provided that the Principal Balance of (i) any Collateral Interest which 53

Processed and formatted by SEC Watch - Visit SECWatch.com

permits the deferral or capitalization of interest will not include any outstanding balance of the deferred and/or capitalized interest except in the case of Future Funding Assets that provide for a Future Advance Amount with respect to debt service, if the amount has been capitalized prior to the acquisition by the Issuer and provided the amount did not exceed the amount available for debt service or other Future Advance Amounts, (ii) any Equity Interest will be zero, (iii) any putable Collateral Interest which matures after the Stated Maturity Date will be the lower of the put price and the outstanding principal amount, (iv) any Collateral Interest or Eligible Investment in which the Trustee does not have a first priority perfected security interest shall be deemed to be zero, (v) the Principal Balance of an Future Funding Asset will be the outstanding principal balance of such Future Funding Asset, plus any Future Funding Obligations that have not been irrevocably reduced with respect to such Future Funding Asset and (vi) any Preferred Equity Security will be equal to the component of the liquidation price that is not attributable to the return of capital by its governing documents; provided, further, that for purposes of calculating the Principal Coverage Amount, an appraisal reduction of a Collateral Interest will be assumed to result in an implied reduction of Principal Balance for such Collateral Interest only if such appraisal reduction is intended to reduce the interest payable on such Collateral Interest and only in proportion to such interest reduction. Principal Coverage Amount means, on any Measurement Date, an amount equal to (i) the aggregate Principal Balance of all Collateral Interests (other than Impaired Interests, Written Down Interests and Deferred Interest PIK Bonds) included in the Collateral on such date, plus (ii) the aggregate Principal Balance of the Eligible Investments in the Collateral Account on such date that represent Collateral Principal Collections, plus (iii) the Impaired Interests Amount, plus (iv) with respect to Written Down Interests, the Reduced Principal Balance, plus (v) the Deferred Interest PIK Bond Amount, plus (vi) the Aggregate Class A-R Undrawn Amount (without duplication). For purposes of calculating the Principal Coverage Amount, any Collateral Interest that has sustained an implied reduction of Principal Balance due to an appraisal reduction will not be considered an Impaired Interest solely due to such implied reduction. Principal Coverage Ratio means, on any Measurement Date for any Class of Notes, the ratio (expressed as a percentage) based on the ratio of (x) to (y), where (x) is the Principal Coverage Amount as of such Measurement Date and (y) is (1) in the case of the Class A/B/C/D Coverage Test, the sum of the aggregate principal amount of the then Outstanding Class A Notes, Class B Notes, Class C Note and Class D Notes (assuming for purposes of this calculation that the Class A-R Commitments are fully drawn) as of such Measurement Date, (2) in the case of the Class E/F/G Coverage Test, the amount determined by the foregoing clause (1) plus the sum of the aggregate principal amount (including any Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) then Outstanding of the Class E Notes, Class F Notes and Class G Notes as of such Measurement Date or (3) in the case of the Class H/J/K Coverage Test, the amount determined by the foregoing clause (2) plus the sum of the aggregate principal amount (including any Cumulative Applicable Periodic Interest Shortfall Amount and any interest accrued on such amount) then Outstanding of the Class H Notes, Class J Notes and Class K Notes as of such Measurement Date. Principal Coverage Test means, for any Class of Notes Outstanding, a test satisfied on any Measurement Date if the applicable Principal Coverage Ratio as of such Measurement Date is equal to or greater than the applicable Required Coverage Ratio. 54

Processed and formatted by SEC Watch - Visit SECWatch.com

Priority of Payments means, collectively, the priority of payments specified in Section 11.1(a), (b) and (c). Pro Rata Principal Coverage Ratio means, as of any Measurement Date, the ratio (expressed as a percentage) based on the ratio of (x) to (y), where (x) is the Principal Coverage Amount as of such Measurement Date and (y) is the sum of the aggregate principal amount then Outstanding of the Class A Notes and Class B Notes (assuming for purposes of this calculation that the Class A-R Commitments are fully drawn) as of such Measurement Date. Pro Rata Principal Coverage Test will be met as of any Measurement Date if the Pro Rata Principal Coverage Ratio as of such Measurement Date is equal to or greater than or equal to 144.61%. Proceeding means any suit in equity, action at law or other judicial or administrative proceeding. Proposed Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Interests and the proceeds of disposition thereof held as Cash, (b) Uninvested Proceeds held as Cash and (c) Eligible Investments purchased with Uninvested Proceeds or the proceeds of disposition of Pledged Collateral Interests resulting from the sale, maturity or other disposition of a Pledged Collateral Interest or a proposed purchase of a Collateral Interest, as the case may be. Protection Provider Default means that one of the following events shall have occurred and is continuing: (a) MBIA shall have failed to make a required payment when due under any credit protection arrangement it provides to any Holder of a Class A Senior Note or (b) an event of the type described in Section 5.1(g) or (h) shall have occurred and be continuing with respect to MBIA. Purchase and Placement Agreement means the agreement, dated as of the Closing Date, among the Co-Issuers, the Dealers and the Placement Agent relating to the purchase and placement of the Offered Notes. Purchased Accrued Interest means all payments of interest received, or amounts collected that are attributable to interest received on Collateral Interests and Eligible Investments, to the extent such payments or amounts constitute accrued interest purchased with Collateral Principal Collections except for interest accrued on Collateral Interests prior to the Closing Date. Qualified Bidder List means a list of not less than three Persons that are Independent from one another and the Issuer prepared by the Collateral Manager and delivered to the Trustee prior to an Auction, as may be amended and supplemented by the Collateral Manager from time to time upon written notice to the Trustee; provided that (i) the Qualified Bidder List may include the Collateral Manager as a Qualified Bidder if it is Independent from the other Persons on such list and (ii) any such notice referred to above shall only be effective on any Auction Date if it was received by the Trustee at least two Business Days prior to such Auction Date. Qualified Bidders means the Persons whose names appear from time to time on the Qualified Bidder List. 55

Processed and formatted by SEC Watch - Visit SECWatch.com

Qualified Institutional Buyer has the meaning given in Rule 144A under the Securities Act. Qualified Institutional Lender means a qualified institutional lender of the type typically permitted to acquire subordinate interests in commercial mortgage loans (all or a portion of which will be included in a CMBS transaction) pursuant to the documents creating such interests. Qualified Letter of Credit means a letter of credit issued by a domestic bank or the U.S. agency or branch of a foreign bank with a long-term unsecured debt rating of at least “A3” by Moody’s that is irrevocable and unconditional to the extent usual and customary for such instruments. Qualified Purchaser means (i) a “qualified purchaser” as defined in Section 2(a)(51) of the Investment Company Act and the rules thereunder, (ii) a “knowledgeable employee” with respect to the Issuer as defined in rule 3c-5 under the Investment Company Act or (iii) a company beneficially owned exclusively by one or more “qualified purchasers” and/or “knowledgeable employees” with respect to the Issuer. Qualified REIT Subsidiary means a “Qualified REIT Subsidiary” within the meaning of Section 856(i)(2) of the Code. Qualifying Foreign Obligor means a corporation, partnership or other entity organized or incorporated under the law of any of Australia, Canada, France, Germany, Ireland, Italy, Mexico, New Zealand, Sweden, Switzerland or the United Kingdom, so long as the unguaranteed, unsecured and otherwise unsupported long-term Dollar sovereign debt obligations of such country are rated “Aa2” or better by Moody’s. Qualifying Foreign Jurisdiction means Australia, the Bahamas, Bermuda, Canada, the Cayman Islands, the Channel Islands, Japan, Mexico, the Netherlands Antilles, New Zealand, Switzerland or any Member State of the European Union. Quarterly Measurement Date means (i) in the case of the first Quarterly Measurement Date, the date designated by the Collateral Manager on or prior to the purchase of the initial Related Future Funding Loan by the Issuer (but not more than three months prior thereto), (ii) the third Calculation Date following any previous Quarterly Measurement Date so long as the Issuer owns any Related Future Funding Loan and (iii) in the case of a Related Future Funding Loan purchased following any suspension of Quarterly Measurement Date calculations pursuant to clause (ii) of this definition, the date designated by the CM on or prior to the purchase of such Related Future Funding Loan (but not more than three months prior thereto). Quarterly Pay Security means a security that provides for periodic payments of interest in cash quarterly. Quarterly Pay Security Interest Reserve Amount means with respect to each Collateral Interest that is a Quarterly Pay Security, as of any Calculation Date, the amount equal to (i) the amount of interest paid by the obligor on the most recent payment date (or, if no payment date has occurred, the estimated interest payment due on the first payment date) with respect to such Quarterly Pay Security multiplied by (ii) (A) the number of months until the next payment date with respect to such Quarterly Pay Security minus one (rounded up to the nearest whole number) 56

Processed and formatted by SEC Watch - Visit SECWatch.com

divided by (B) three; provided that for any Quarterly Pay Security with respect to which no scheduled interest payments remain, the Quarterly Pay Security Interest Reserve Amount shall be zero. Rake Bond means a CMBS backed solely by a single promissory note secured by a mortgaged property, which promissory note is subordinate in right of payment to one or more separate promissory notes secured by the same mortgaged property. Ramp-Up Period means the period commencing on the Closing Date and ending on the Effective Date. Rated Note Calculation Agent has the meaning specified in Section 7.15. Rated Notes means, collectively, the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes. Rated Noteholder means, with respect to any Rated Note, the Person in whose name such Note is registered; provided that Beneficial Owners or Agent Members will have no rights under this Indenture with respect to Global Notes, and the Rated Noteholder may be treated by the Issuer and the Trustee (and any agent of any of the foregoing) as the owner of such Global Notes for all purposes whatsoever. Rating means, as the context requires, a Fitch Rating or a Moody’s Rating. Rating Agency means each of (i) Moody’s, for so long as any of the Outstanding Rated Notes are rated by Moody’s (including any private or confidential rating) and (ii) Fitch, for so long as any of the Outstanding Rated Notes are rated by Fitch (including any private or confidential rating), or, with respect to Pledged Securities generally, if at any time Moody’s or Fitch ceases to provide rating services, any other nationally recognized investment rating agency selected by the Issuer (upon consultation with the Collateral Manager) and reasonably satisfactory to a Majority of each Class of Rated Notes. In the event that at any time Moody’s ceases to be a Rating Agency, references to rating categories of Moody’s in this Indenture shall be deemed instead to be references to the equivalent categories of such other rating agency as of the most recent date on which such other rating agency and Moody’s published ratings for the type of security in respect of which such alternative rating agency is used. Rating Confirmation means, with respect to any specified action or determination, for so long as any of the Rated Notes are Outstanding and rated by Moody’s or Fitch, the receipt of written confirmation by each Rating Agency rating any Rated Notes, that such specified action or determination will not result in the reduction or withdrawal or other adverse action with respect to their then-current ratings on the Rated Notes (including any private or confidential rating) unless Rating Confirmation is specified herein to be required by only Moody’s or Fitch, in which case such Rating Confirmation will be sufficient. Rating Confirmation Failure has the meaning specified in Section 7.18(e). 57

Processed and formatted by SEC Watch - Visit SECWatch.com

Rating Factor/Weighted Average Spread/Weighted Average Recovery Rate Matrix means the following table relating to the Moody’s Maximum Weighted Average Rating Factor Test, the Weighted Average Spread Test and the Moody’s Minimum Average Recovery Rate Test: S ce n ario

Maximum WARF Minimum Weighted Average Spread Minimum Weighted Average Recovery Rate

1

2

5,500 2.3500% 40.00%

3

5,465 2.4875% 37.50%

4

5,435 2.6250% 35.00%

5

5,400 2.7625% 32.50%

5,500 2.9000% 30.00%

Real Estate CDO Securities means securities that entitle the holders thereof to receive payments that depend on the cash flow from or the credit exposure to a portfolio consisting primarily of (i) REIT Debt Securities, (ii) commercial mortgage backed securities, (iii) commercial mortgage loans or interests therein or (iv) a combination of the foregoing; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the Real Estate CDO Securities such as a financial guaranty insurance policy. Record Date means the date on which the Holders of Rated Notes entitled to (i) vote with respect to any matters under this Indenture are determined, such date being the 15th day (whether or not a Business Day) prior to the date the Trustee delivers notice with respect to such vote and (ii) receive a payment in respect of principal or interest on the succeeding Payment Date or Redemption Date are determined, such date as to any Payment Date or Redemption Date with respect to any Global Note being the first day (whether or not a Business Day) prior to such Payment Date or Redemption Date and with respect to any Certificated Note being the fifteenth day (whether or not a Business Day) prior to such Payment Date or Redemption Date. Redemption means an Optional Redemption, a Clean-Up Call, an Auction Call Redemption or a Tax Redemption. Redemption Date means the Payment Date upon which the Rated Notes are redeemed pursuant to an Optional Redemption, a Clean-Up Call, an Auction Call Redemption or a Tax Redemption. Redemption Date Statement has the meaning specified in Section 10.11(b). Redemption Price means, (i) with respect to each Class of Rated Notes, (a) their then-outstanding aggregate principal amount plus (b) accrued interest thereon to the date of redemption to the extent not already paid (including, without limitation, any Cumulative Applicable Periodic Interest Shortfall Amount together with interest thereon) plus (c) unreimbursed Interest Advances plus (d) any unreimbursed Cure Advances plus (e) with respect to the Class A-R Notes, any accrued and unpaid Class A-R Breakage Costs, Class A-R Increased Costs and Class A-R Commitment Fee and (ii) if the Income Notes are redeemed, the “Redemption Price” for the Income Notes, means an amount equal to the aggregate of any residual amounts distributable on the Income Notes in respect of such redemption pursuant to Section 11.1(a) and (b). 58

Processed and formatted by SEC Watch - Visit SECWatch.com

Reduced Principal Balance means, with respect to each Written Down Interest, the original Principal Balance of such Written Down Interest minus the Written Down Amount as notified by or on behalf of the related issuer or trustee to the holders of such Written Down Interest (including appraisal reductions on CMBS). Reference Banks has the meaning specified in Schedule B. Registered means in registered form for U.S. federal income tax purposes and issued after July 18, 1984; provided that a certificate of interest in a trust that is treated as a grantor trust for U.S. federal income tax purposes will not be treated as Registered unless each of the obligations or securities held by the trust was issued after that date. Registered Form has the meaning specified in Section 8-102(a)(13) of the UCC. Regulation S means Regulation S under the Securities Act. Regulation S Certificated Note has the meaning specified in Section 2.4(b)(1)(vi). Regulation S Global Note has the meaning specified in Section 2.1(a). Regulation S Note has the meaning specified in Section 2.1(a). Regulation S Transfer Certificate has the meaning specified in Section 2.4(b)(1)(iii). Regulation U means Regulation U of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 221, or any successor regulation. Reimbursement Rate means a per annum rate equal to the “prime rate” as published in the “Money Rates” section of the Wall Street Journal, as such “prime rate” may change from time to time. Reinvestment Asset Information has the meaning specific in Section 12.2(c). Reinvestment Criteria means, with respect to any reinvestment of Collateral Principal Payments, Sale Proceeds, Class A-R Draws and amounts on deposit in the Future Funding Asset Account, the following criteria: (i)

after the Effective Date, the Collateral Quality Tests are satisfied, or, if any Collateral Quality Test was not satisfied immediately prior to such investments, the extent of compliance with such Collateral Quality Test will be maintained or improved immediately following such reinvestment;

(ii)

after the Effective Date, the Coverage Tests are satisfied, or, if any Coverage Test was not satisfied immediately prior to such investments, such Coverage Test will be maintained or improved following such reinvestment; and

(iii)

no Event of Default has occurred and is continuing. 59

Processed and formatted by SEC Watch - Visit SECWatch.com

Reinvestment Period means the period beginning on the Closing Date and ending on and including the Payment Date in February 2012; provided, however that if (i) (A) a Key Manager Event occurs and (B) the Controlling Party directs in writing that the Trustee terminate the Reinvestment Period or (ii) (A) the Collateral Manager shall resign or be removed and (B) the Controlling Party appoints a Static Portfolio Collateral Manager, then the Reinvestment Period shall instead end upon the Trustee’s issuance of written notice of such termination to the Collateral Manager and the Rating Agencies. REIT means a “real estate investment trust” as defined in Section 856 of the Code. REIT Debt Securities means securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities) of a portfolio of real property interests. Related Future Advance Loan means any Collateral Interest acquired by the Issuer by purchase (referred to solely for purposes of this definition as the “Issuer’s Loan”) with respect to which, at the time of such acquisition and for so long as the Issuer owns such loan, there is outstanding and owned by a Person other than the Issuer one or more loans to the same borrower that was made by the maker of the Issuer’s Loan (each an “Other Loan”) if with respect to the Other Loan each of the following criteria are satisfied: (i) either it (A) is secured by the same mortgage or deed of trust on the same underlying mortgaged property as the Issuer’s Loan or (B) if the Issuer’s Loan is a participation interest in a Mezzanine Loan, is secured by the same pledged collateral, (ii) there exists a continuing obligation on the part of the holder of the Other Loan after the Closing Date to provide additional funding to the related borrower, (iii) the long-term unsecured debt rating by Moody’s of the holder of such Other Loan is below “A3”, (iv) the holder of such Other Loan is not a collateralized debt obligation issuer and (v) any rating assigned to such Collateral Interest by any Rating Agency shall be on a “stabilized,” rather than an “as is,” basis. For the avoidance of doubt, (a) to the extent there is only one Other Loan related to a Collateral Interest and such Other Loan does not satisfy each of the criteria set forth in clauses (i) through (v) of the preceding sentence, such Collateral Interest will not be deemed to be a Related Future Advance Loan and (b) to the extent there is more than one Other Loan related to a Collateral Interest and each Other Loan does not satisfy each of the criteria set forth in clauses (i) through (v) of the preceding sentence, such Collateral Interest will be deemed a Related Future Advance Loan but only such Other Loans that do satisfy each of such criteria will be subject to the clause (xxii) of the Eligibility Criteria related thereto. Relevant Jurisdiction means, as to any obligor on any Collateral Interest, any jurisdiction (a) in which the obligor is incorporated, organized, managed and controlled or considered to have its seat, (b) where an office through which the obligor is acting for purposes of the relevant Collateral Interest is located, (c) in which the obligor executes Underlying Instruments or (d) in relation to any payment, from or through which such payment is made. 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 and maintained by the Bond Market Association. 60

Processed and formatted by SEC Watch - Visit SECWatch.com

Required Coverage Ratio means, with respect to the specified Classes of Notes and the related Interest Coverage Test or Principal Coverage Test, as the case may be, as of any Calculation Date, the applicable percentage indicated below opposite such specified Classes: C lass

Prin cipal C ove rage Te st

Class A/B/C/D Class E/F/G Class H/J/K

Inte re st C ove rage Te st

145.36% 132.04% 121.88%

145.36% 132.04% 121.88%

Required Future Funding Reserve Amount means an amount, calculated as of the most recent Quarterly Measurement Date, equal to the greater of (a)

the sum of (1) the projected future funding amount for the next succeeding four calendar months for all Other Loans which are Transitional Loans plus (2) 50% of the projected future funding amount for the next succeeding 12 calendar months for all Other Loans which are Non-Transitional Loans and

(b)

Aggregate Non-Transitional Asset Base.

Requisite Noteholders means the Controlling Party. Reserved Matters has the meaning specified in Section 8.2. Retained Rights means with respect to each Initial Collateral Interest that is a Subordinate Mortgage Loan Interest, Preferred Equity Security, Mortgage Loan Interest, Mezzanine Loan, Participation Interest, CRE Debt Obligation, Credit Lease Loan or Tenant Lease Loan Interest, any right of the holder thereof to receive any exit fees, extension fees or prepayment premiums paid in connection with, comprising or underlying the Collateral Interests. Rule 144A means Rule 144A under the Securities Act. Rule 144A Certificated Note has the meaning specified in Section 2.4(b)(1)(vi). Rule 144A Global Note has the meaning specified in Section 2.1(b). Rule 144A Information means such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto). Rule 144A Note has the meaning specified in Section 2.1(b). Rule 144A Transfer Certificate has the meaning specified in Section 2.4(b)(1)(ii). S&P or Standard & Poor’s means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor or successors thereto. 61

Processed and formatted by SEC Watch - Visit SECWatch.com

Sale has the meaning specified in Section 5.17(a). Sale Proceeds means all proceeds (including accrued interest) received with respect to Collateral Interests and Equity Interests as a result of sales of such Collateral Interests and Equity Interests pursuant to this Indenture, net of any reasonable amounts expended by the Collateral Manager or the Trustee in their good faith determination in connection with such sale or disposition. Schedule of Collateral Interests means the list of Collateral Interests securing the Indenture Issued Notes that is attached as Schedule A. Scheduled Distribution means, with respect to any Pledged Security, for each Due Date, the scheduled payment in Cash of principal and/or interest and/or fees due on such Due Date with respect to such Pledged Security, determined in accordance with the assumptions specified in Section 1.2. Second Currency has the meaning specified in Section 14.13. Secured Parties means the Trustee, for the benefit of the Rated Noteholders (other than the Class N Noteholders), each Hedge Counterparty and the Collateral Manager. Securities Account has the meaning specified in Section 8-501(a) of the UCC. Securities Act means the U.S. Securities Act of 1933, as amended. Securities Intermediary has the meaning specified in Section 8-102(a)(14) of the UCC. Security has the meaning specified in Section 8-102(a)(15) of the UCC. Seller or Sellers means individually or together, NRFC WA Holdings, LLC, NRFC WA Holdings II, LLC, NRFC WA Holdings III, LLC, NRFC WA Holdings IV, LLC and NRFC WA Holdings V, LLC and other Affiliates as individual sellers and their successors or assigns, in their capacity as sellers under the Asset Transfer Agreements or any other seller of Collateral Interests acquired by the Issuer or the Underlying Trustee after the Closing Date. Semi-Annual Pay Security means a security that provides for periodic payments of interest in Cash semi-annually. Semi-Annual Pay Security Interest Reserve Amount means, with respect to each Collateral Interest that is a Semi-Annual Pay Security, as of any Calculation Date, the amount equal to (i) the amount of interest paid by the obligor on the most recent payment date (or if no payment date has occurred, the estimated interest payment due on the first payment date) with respect to such Semi-Annual Pay Security multiplied by (ii) (A) the number of months until the next payment date with respect to such Semi-Annual Pay Security minus one (rounded up to the nearest whole number) divided by (B) six; provided that for any Semi-Annual Pay Security with respect to which no scheduled interest payments remain, the Semi-Annual Pay Security Interest Reserve Amount shall be zero. 62

Senior Collateral Management Fee means with respect to each Payment Date, a senior fee equal to the sum of (a) the Monitoring Fee and (b) the Senior Structuring Fee payable to the Collateral Manager pursuant to the Collateral Management Agreement; provided that the Senior Collateral Management Fee will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Senior Collateral Management Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Senior Collateral Management Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Senior Collateral Management Fee accrued but not paid prior to the resignation or removal of the Collateral Manager shall continue to be payable to the Collateral Manager on the Payment Date immediately following the effectiveness of such resignation or removal. Senior Interests means the interests in a commercial mortgage loan which rank senior in priority to the Subordinate Mortgage Loan Interests in the same commercial mortgage loan. Senior Loans means the debt in a commercial mortgage loan which rank senior in priority to the Subordinate Mortgage Loan Interests in the same commercial mortgage loan. Senior Notes means, with respect any Class of Notes (other than the Class A Senior Notes), the Class or Classes of Notes with a prior alphabetical designation. Senior Structuring Fee means, with respect to each Payment Date, an amount equal to 0.04875% per annum of the Fee Basis Amount payable to the Collateral Manager pursuant to the Collateral Management Agreement. Servicers means, Wachovia Bank and/or one or more additional servicers or special servicers, each servicing as a servicer or special servicer pursuant to the Servicing Agreement.

Processed and formatted by SEC Watch - Visit SECWatch.com

Servicing Agreement means a certain Servicing Agreement, dated as of December 7, 2006, as the same may be amended or supplemented from time to time, among the Issuer, and the Servicers, each as a servicer. Special Amortization Pro Rata Condition means a condition that will be satisfied with respect to any Payment Date if either: (i) (a) either (1) the Pro Rata Principal Coverage Test has been satisfied on the related and each prior Calculation Date, or (2) if the Pro Rata Principal Coverage Test has failed to be satisfied on any previous Calculation Date, subsequent to such failure, (x) the Pro Rata Principal Coverage Ratio as of the related Calculation Date equals or exceeds the Pro Rata Principal Coverage Ratio in existence on the Effective Date or (y) the Pro Rata Principal Coverage Test is satisfied as of the related Calculation Date without applying Collateral Principal Collections on any previous Payment Date, (b) either (1) the Herfindahl Score is equal to 22 and each of the Coverage Tests are satisfied as of the related Calculation Date or (2) if the Herfindahl Score fails to be equal to 22 then Rating Agency Confirmation and the consent of the Controlling Party is obtained, (c) the aggregate balance of the Collateral Interests as of the related Calculation Date is greater than an amount equal to 50% of the aggregate Principal Balance of the Collateral Interests on the Effective Date, (d) the Moody’s Maximum Weighted Average Rating Factor Test is satisfied as of the related Calculation Date, (e) Moody’s Minimum Average Recovery 63

Processed and formatted by SEC Watch - Visit SECWatch.com

Rate Test is satisfied as of the related Calculation Date, (f) the Moody’s Weighted Average Extended Maturity Test is satisfied as of the related Calculation Date, (g) no Event of Default has occurred and is continuing, and (h) the Interest Coverage Test for each Class of Offered Notes is satisfied; or (ii) a Rating Confirmation has been provided by Moody’s and the Controlling Party has given its consent. Specified Currency has the meaning specified in Section 14.13. Specified Person has the meaning specified in Section 2.5(a). Specified Place has the meaning specified in Section 14.13. Specified Types means any Trust Certificate, CMBS, Real Estate CDO Security, CRE Debt Obligations, REIT Debt Security or Collateral Interest related to (x) developed or undeveloped commercial real estate or (y) undeveloped real estate intended to be developed into residential property; provided that no loan shall be secured by an individual residential property. Stated Maturity Date means the Payment Date occurring in February 2041. Subordinate Collateral Management Fee means the subordinated fee payable to the Collateral Manager at a per annum rate in arrears on each Payment Date pursuant to the Collateral Management Agreement, in an amount (as certified by the Collateral Manager to the Trustee) equal to 0.25000% of the Fee Basis Amount for such Payment Date; provided that the Subordinate Collateral Management Fee will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Subordinate Collateral Management Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Subordinate Collateral Management Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Subordinate Collateral Management Fee accrued but not paid prior to the resignation or removal of the Collateral Manager shall continue to be payable to the Collateral Manager on the Payment Date immediately following the effectiveness of such resignation or removal. Subordinate Mortgage Loan Interests means subordinate interests in commercial mortgage loans (including subordinate participation interests in commercial mortgage loans) and subordinate commercial mortgage loans. Subpool means each of the groups of the Collateral Interests designated by the Collateral Manager in accordance with the Auction Procedures on which the Listed Bidders may provide a separate bid in an Auction. Substitute Collateral Interest means a debt obligation meeting the Eligibility Criteria acquired by or on behalf of the Issuer with Collateral Principal Collections, Sale Proceeds or Class A-R Draws that are reinvested in accordance with the provisions of this Indenture. 64

Processed and formatted by SEC Watch - Visit SECWatch.com

Suspense Account means the Securities Account designated the “Suspense Account” and established in the name of the Trustee pursuant to Section 10.12. Synthetic Security means any swap transaction, debt security, security issued by a trust or similar vehicle or other investment, the returns on which (as determined by the Collateral Manager) are linked to the credit performance of a reference obligation, but which may provide for a different maturity, payment date, interest rate, credit exposure or other credit or non-credit related characteristics from such reference obligation. Taxes means any present or future taxes, duties, assessments or governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by any governmental authority having power to tax. Tax Event means an event that will occur if (x)(1)(i) any obligor or withholding agent is, or on the next scheduled payment date under any Collateral Interest, will be, required to deduct or withhold from any payment under any Collateral Interest to the Issuer (other than any commitment fee with respect to the unfunded portion of any Future Funding Assets) for or on account of any tax for whatever reason and such obligor or withholding agent is not required to pay to the Issuer such additional amount as is necessary to 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, (ii) any jurisdiction imposes net income, profits, or similar tax on the Issuer, (iii) the Issuer is required to deduct or withhold from any payment under any Hedge Agreement for or on account of any tax and the Issuer is obligated to make a gross up payment (or otherwise pay additional amounts) to any Hedge Counterparty or (iv) any Hedge Counterparty is required to deduct or withhold from any payment under any Hedge Agreement for or on account of any tax for whatever reason and such Hedge Counterparty is not required to pay to the Issuer such additional amount as is necessary to 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 (2) the sum of the amount of (i) such a tax or taxes imposed on the Issuer or withheld from payments to the Issuer to the extent the Issuer receives less than the full amount that the Issuer would have received had no such deduction occurred and (ii) such gross up payments required to be made by the Issuer to the extent they exceed the amounts that the Issuer would have been required to pay had no deduction or withholding been required, in the aggregate, equals ten percent (10%) or more of the amount of aggregate interest payments on all of the related Collateral Interests during the related Due Period or (y) the Issuer fails to maintain its status as a Qualified REIT Subsidiary and has not received an opinion of counsel to the effect that the Issuer not a foreign corporation engaged in trade or business for U.S. Income Tax purposes. Tax Redemption has the meaning specified in Section 9.1(c). Tax Subsidiary has the meaning specified in Section 7.7(e). Taxed Collateral Interest means any Collateral Interest (including, without limitation, a Preferred Equity Security) the ownership of which could result in the Issuer being or becoming 65

Processed and formatted by SEC Watch - Visit SECWatch.com

subject to U.S. tax on a net income basis or being or becoming subject to the U.S. branch profits tax. Taxed Property means any property other than a Collateral Interest but including, without limitation, property acquired or to be acquired in respect of a Collateral Interest, the ownership of which could result in the Issuer being or becoming subject to U.S. tax on a net income basis or being or becoming subject to the U.S. branch profits tax. Tenant Lease Loan Interests means commercial mortgage-backed securities that entitle the holders thereof to receive payments that depend on the cash flow from a pool of commercial mortgage loans made to finance the acquisition, construction and improvement of properties primarily leased to tenants engaged in a business (or on the cash flow from such leases), the underwriting of which is dependent primarily on the creditworthiness of the related tenants; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the commercial mortgage-backed securities such as a financial guaranty insurance policy. Total Net Unfunded Future Advance Amount means, as of any date, the excess, if any, of (i) the then outstanding Total Unfunded Future Advance Amount over (ii) the amount then on deposit in the Future Funding Asset Account. Total Unfunded Future Advance Amount means for all Future Funding Assets, the aggregate amount of the Unfunded Future Advance Amounts. Transaction Documents means this Indenture, the Collateral Management Agreement, the Account Control Agreement, the Corporate Services Agreement, the Collateral Administration Agreement, any Hedge Agreement, the Paying Agency Agreement, the Class A-R Note Purchase Agreement and the Purchase and Placement Agreement. Transitional Asset means any Future Funding Asset or Other Loan for which the unfunded portion of such loan as of the origination date of the related financing represents 35% or less of the sum of (a) the then outstanding amount of such loan and (b) the remaining amount required to be funded to the borrower pursuant to the terms of such loan; provided, that an Future Funding Asset or Other Loan shall not be classified as a Non-Transitional Asset if Rating Confirmation to such effect is received. Trust Certificate means one or more trust certificates each of which represents an ownership interest in the Underlying Trust created pursuant to the Master Trust Agreement, which are secured by Subordinate Mortgage Loan Interests, Mezzanine Loans, Participation Interests, Mortgage Loan Interests, Credit Lease Loans, Preferred Equity Securities and/or Tenant Lease Loan Interests. Trust Officer means, when used with respect to the Trustee, any Officer within the Corporate Trust Office working on the transaction described in this Indenture and (or any successor group of the Trustee) authorized to act for and on behalf of the Trustee, including any vice president, assistant vice president or other Officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such Officers, respectively, or to 66

Processed and formatted by SEC Watch - Visit SECWatch.com

whom any corporate trust matter is referred at the Corporate Trust Office because of such person’s knowledge of and familiarity with the particular subject. Trustee means Wells Fargo Bank, National Association, and any successors or assigns, in its capacity as trustee under this Indenture. Trustee Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by or otherwise owing to the Trustee during the preceding Due Period in accordance with this Indenture, other than the Trustee Fee, including, without limitation, any expenses or indemnities incurred by the Trustee (and the Bank) in any of its capacities (including in its capacity as Collateral Administrator, Calculation Agent, Note Paying Agent, Class A-R Note Agent, PAA Issued Note Paying Agent and Registrar). Trustee Fee means, with respect to any Payment Date, the fee payable to the Trustee in an aggregate amount equal to 0.011% per annum of the Collateral Interest Principal Balance as of the first day of the related Due Period; provided that in no event shall, so long as any Class of Rated Notes remains Outstanding, such fee be an annual amount less than U.S.$25,000. Trustee Interest Advance Fee means, a per annum fee payable to the Trustee in accordance with the Priority of Payments on each Payment Date equal to 0.00125% of the outstanding principal amount of the Class A Notes (assuming for the purposes of this calculation that the Class A-R Notes are fully drawn) the Class B Notes, the Class C Notes and the Class D Notes immediately prior to such Payment Date. UCC means the Uniform Commercial Code as in effect in the State of New York. Underlying Instrument means the agreement pursuant to which a Pledged Security, Eligible Investment or Equity Interest has been issued or created and each other agreement that governs the terms of or secures the obligations represented by such Pledged Security or of which the holders of such Pledged Security are the beneficiaries. Underlying Trust means the newly formed trust established pursuant to the Master Trust Agreement. Underlying Trust Expenses means, all reasonable expenses, disbursements and advances incurred or made by the Underlying Trustee in accordance with any provision of the Master Trust Agreement or in the administration or the enforcement of any provision thereof (including the reasonable compensation, expenses and disbursements of its agents and counsel) including, without limitation, any amounts in respect of indemnification owed to the Underlying Trustee pursuant to Section 6.04 of the Master Trust Agreement, but excluding any overhead or employee expenses of the Underlying Trustee. Underlying Trustee means Wells Fargo Bank, National Association, in its capacity as underlying trustee pursuant to the Master Trust Agreement, and any successor or successors thereto. Undeveloped Real Estate Collateral Interest means a Collateral Interest related to undeveloped real estate intended to be developed into residential or commercial property. 67

Processed and formatted by SEC Watch - Visit SECWatch.com

Unfunded Future Advance Amount means, with respect to any Future Funding Asset and any Calculation Date, any Future Advance Amount not yet funded (by the Issuer or any other entity) pursuant to the terms of the Future Funding Asset. Uninvested Proceeds means, at any time, the net proceeds received by the Issuer on the Closing Date from the initial issuance of the Rated Notes and Income Notes, to the extent such proceeds have not theretofore been invested in Collateral Interests. Uninvested Proceeds Account has the meaning specified in Section 10.4. United States or U.S. means the United States of America, including the States thereof and the District of Columbia. Unregistered Securities has the meaning specified in Section 5.17(c). U.S. Person has the meaning given in Regulation S under the Securities Act. USA PATRIOT Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56 (2001). Wachovia Bank means Wachovia Bank, National Association and/or its affiliates. Warehouse Facility has the meaning specified in Section 12.2(y). Weighted Average Fixed Rate Coupon means, as of any Measurement Date, the sum (rounded up to the next 0.001%) of the number obtained by (i) multiplying the Principal Balance of each Fixed Rate Collateral Interest (except Collateral Interests that are currently deferring interest) held in the portfolio as of such date by the then-current interest rate, (ii) summing the amounts determined pursuant to clause (i) for all Fixed Rate Collateral Interests held in the portfolio as of such date and (iii) dividing such sum by the aggregate Principal Balance of all Fixed Rate Collateral Interests held in the portfolio as of such date; provided that for purposes of calculating the Weighted Average Fixed Rate Coupon of Collateral Interests that are Impaired Interests, the Written Down Amount with respect to Written Down Interests and Equity Interests will be excluded, except for those Impaired Interests that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument. Weighted Average Spread means, as of any Measurement Date, the sum (rounded up to the next 0.001%) of the number obtained by (i) summing the products obtained by multiplying (A) for each Floating Rate Collateral Interest (other than any Impaired Interest, Written Down Amount with respect to a Written Down Interest or Deferred Interest PIK Bond), the stated spread above LIBOR at which interest accrues on such Collateral Interest as of such date and, for each Deemed Floating Rate Collateral Interest (other than any Impaired Interest, Written Down Amount with respect to a Written Down Interest or Deferred Interest PIK Bond), the Deemed Floating Spread by (B) the Principal Balance of such Collateral Interest as of such date and (ii) dividing such sum by the aggregate Principal Balance of all Floating Rate Collateral Interests and all Deemed Floating Rate Collateral Interests (excluding, in each case, all Impaired Interests, Written Down Amounts with respect to Written Down Interests and Deferred Interest PIK 68

Processed and formatted by SEC Watch - Visit SECWatch.com

Bonds, except for those Impaired Interests that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument); provided, that for purposes of calculating the Weighted Average Spread, each Future Funding Asset will be deemed to be two separate Floating Rate Collateral Interests: (I) one with an outstanding principal balance equal to the funded portion thereof and a stated interest rate spread equal to the funded spread on such Future Funding Asset and (II) the other with an outstanding principal balance equal to the unfunded portion thereof and an assumed stated interest rate spread equal to the commitment fee of such Future Funding Asset, less any withholding tax on such commitment fee. Weighted Average Spread Test means the test that shall be satisfied as of any Measurement Date if the Weighted Average Spread is greater than or equal to the number set forth in the row entitled “Minimum Weighted Average Spread” in the Rating Factor/Weighted Average Spread/Weighted Average Recovery Rate Matrix based on the scenario chosen by the Collateral Manager as currently applicable to the applicable Collateral Quality Tests and the Collateral Interests. Withholding Tax Interest means a Collateral Interest if: (i)

any payments thereon to the Issuer (other than any commitment fee with respect to the unfunded portion of any Future Funding Assets) are subject to withholding tax imposed by any jurisdiction (other than U.S. backup withholding tax or other similar withholding tax); and

(ii)

under the underlying documentation with respect to such Collateral Interest, the issuer of or counterparty with respect to such Collateral Interest is not required to make “gross-up” payments to the Issuer that cover the full amount of such withholding tax on an after-tax basis.

Written Down Amount means, with respect to each Written Down Interest, the amount by which the original Principal Balance of such Written Down Interest is reduced as notified by or on behalf of the related issuer or trustee to the holders of such Written Down Interest (including appraisal reductions on CMBS). Written Down Interest means any Collateral Interest as to which the aggregate par amount of such Collateral Interest and all other securities secured by the same pool of collateral that rank pari passu with or senior in priority of payment to such Collateral Interest exceeds the aggregate par amount (including reserved interest or other amounts available for overcollateralization) of all collateral securing such securities (excluding defaulted collateral); provided that the Issuer shall immediately send notice to Fitch by facsimile and electronic mail upon any Collateral Interest becoming a Written Down Interest. 1.2.

ASSUMPTIONS AS TO COLLATERAL INTERESTS, FEES, ETC.

The provisions set forth in this Section 1.2 shall be applied in connection with all calculations required to be made pursuant to this Indenture with respect to Scheduled Distributions on any Pledged Security, or any payments on any other assets included in the Collateral, and with respect to the income that can be earned on Scheduled Distributions on such 69

Processed and formatted by SEC Watch - Visit SECWatch.com

Pledged Securities and on any other amounts that may be received for deposit in the Collection Account. (a)

All calculations with respect to Scheduled Distributions on the Pledged Securities securing the Indenture Issued Notes shall be made by the Issuer or the Collateral Administrator on behalf of the Issuer using (in the case of the Collateral Interests) the assumptions that (i) no Pledged Security defaults or is sold, (ii) prepayment of any Pledged Security during any month occurs at a rate equal to the average rate of prepayment during the period of six consecutive months immediately preceding the current month (or, with respect to any Pledged Security that has not been outstanding for at least six consecutive calendar months, at the rate of prepayment assumed at the time of issuance of such Pledged Security), (iii) any clean-up call with respect to a Pledged Security will be exercised when economic to the Person or Persons entitled to exercise such call and (iv) no other optional redemption of any Pledged Security will occur except for those that have actually occurred or as to which irrevocable notice thereof shall have been given.

(b)

For purposes of determining compliance with the Interest Coverage Tests, except as otherwise specified in the Interest Coverage Tests, there shall be excluded all payments in respect of Impaired Interests and Deferred Interest PIK Bonds unless the Trustee or Collateral Manager has actual knowledge such payments will be made in Cash and will be received on or before the Due Date therefor and all other scheduled payments (whether of principal, interest, fees or other amounts) including payments to the Issuer under any Hedge Agreement, as to which the Trustee or Collateral Manager has actual knowledge will not be made in Cash or will not be received when due. For purposes of calculating the applicable Interest Coverage Ratio:

(1)

the expected interest income on Collateral Interests and Eligible Investments and the expected interest payable on the Rated Notes and amounts, if any, payable under a Hedge Agreement will be calculated using the interest rates applicable thereto on the applicable date of determination;

(2)

accrued original issue discount on Eligible Investments will be deemed to be a scheduled interest payment thereon due on the date such original issue discount is scheduled to be paid; and

(3)

it will be assumed that no principal payments are made on the Rated Notes during the applicable periods.

(c)

For each Due Period, the Scheduled Distribution on any Pledged Security (other than (i) an Impaired Interest, (ii) a Deferred Interest PIK Bond or (iii) an Equity Interest, which, in each case except as otherwise provided 70

Processed and formatted by SEC Watch - Visit SECWatch.com

herein, shall be assumed to have a Scheduled Distribution of zero and with respect to any Written Down Interest, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount) shall be the sum of (x) the total amount of payments and collections in respect of such Pledged Security (including the proceeds of the sale of such Pledged Security received during the Due Period) that, if paid as scheduled, will be available in the Collection Account at the end of the Due Period for payment on the Rated Notes or other amounts payable pursuant to this Indenture and of certain expenses of the Issuer and the Co-Issuer plus (y) any such amounts received in prior Due Periods that were not disbursed on a previous Payment Date (provided that such sum shall be computed without regard to any amounts excluded from the determination of compliance with the Coverage Tests pursuant to Section 1.2(b)). (d)

Subject to Section 1.2(b), each Scheduled Distribution receivable with respect to a Pledged Security shall be assumed to be received on the applicable Due Date, and each such Scheduled Distribution shall be assumed to be immediately deposited in the Collection Account and, except as otherwise specified, to earn interest at the Assumed Reinvestment Rate. All such funds shall be assumed to continue to earn interest until the date on which they are required to be available in the Collection Account for transfer to the Payment Account and application, in accordance with the terms hereof, to payments of principal of or interest on the Rated Notes or other amounts payable pursuant to this Indenture.

(e)

With respect to any Collateral Interest as to which any interest or other payment thereon is subject to withholding tax of any Relevant Jurisdiction, each Distribution thereon shall, for purposes of the Coverage Tests and each Collateral Quality Test, be deemed to be payable net of such withholding tax unless the issuer thereof or obligor thereon is required to make additional payments sufficient on an after tax basis to cover any withholding tax imposed on payments to the Issuer with respect thereto (including in respect of any such additional payment). On any date of determination, the amount of any Scheduled Distribution due on any future date shall be assumed to be made net of any such uncompensated withholding tax based upon withholding tax rates in effect on such date of determination.

(f)

For purpose of determining compliance with the Interest Coverage Tests, it will be assumed that any amount required to be paid for taxes, filing and registration fees on the Payment Date immediately following the relevant Due Period shall be equal to the aggregate amount for which the Trustee has received an invoice or demand for payment on or prior to the relevant Measurement Date.

(g)

Any reference in the definition of “Trustee Fee,” “Senior Collateral Management Fee” or “Subordinate Collateral Management Fee” in 71

Section 1.1(a) to an amount calculated with respect to a period at a per annum rate shall be computed on the basis of a 360 day year of twelve 30-day periods. (h)

Unless otherwise specified, test calculations that evaluate to a percentage will be rounded to the nearest onehundredth, and test calculations that evaluate to a number or decimal will be rounded to the nearest one hundredth.

(i)

Unless otherwise specified, all calculations required to be made and all reports which are to be prepared pursuant to this Indenture with respect to the Collateral Interests, shall be made on the basis of the date on which the Issuer makes a commitment to acquire or to sell an asset, as applicable (the trade date), not the settlement date for such sale.

(j)

For the purpose of determining fees constituting Administrative Expenses payable under the Priority of Payments hereunder, periods longer or shorter than a 30-day period shall be prorated based on the number of days in such period.

(k)

With respect to any Collateral Interest that is a Preferred Equity Security, (i) payments of interest shall mean payments of dividends or other distributions not attributable to the return of capital by the related Underlying Instruments and (ii) payments of principal shall mean distributions attributable to the return of capital by the Underlying Instruments.

(l)

On and after the Effective Date, the Collateral Manager will have the option to elect which of the scenarios set forth in the Rating Factor/Weighted Average Spread/Weighted Average Recovery Rate Matrix shall apply for purposes of the Moody’s Maximum Weighted Average Rating Factor Test, the Weighted Average Spread Test and the Moody’s Minimum Average Recovery Rate Test going forward. On the Effective Date, the Collateral Manager will be required to elect which scenario shall initially apply. Thereafter, on ten Business Days’ notice to the Trustee and Moody’s, the Collateral Manager may elect to have a different scenario apply, so long as that the Collateral Quality Tests are satisfied after such election. In no event will the Collateral Manager be obligated to elect to have a different scenario apply.

Processed and formatted by SEC Watch - Visit SECWatch.com

(m)

For purposes of calculating the Collateral Quality Tests in clause (3) of the definition thereof (A) the Collateral Interests that are included in the Collateral Quality Tests described in clauses (10) and (11) of the definition thereof shall not be included and (B) a Collateral Interest that is secured by a Mortgaged Property that is a mixed use property shall be allocated among the property types described in subclause (i) through (vi) 72

Processed and formatted by SEC Watch - Visit SECWatch.com

of that test based on the relative square footage allocated to such use (as determined by the Collateral Manager). 1.3.

RULES OF CONSTRUCTION Unless the context otherwise clearly requires: (a)

the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined;

(b)

whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms;

(c)

the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”;

(d)

the word “will” shall be construed to have the same meaning and effect as the word “shall”;

(e)

any definition of or reference to any agreement, statute, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein);

(f)

any reference herein to any Person, or to any Person in a specified capacity, shall be construed to include such Person’s successors and assigns or such Person’s successors in such capacity, as the case may be; and

(g)

all references in this instrument to designated “Sections,” “clauses” and other subdivisions are to the designated Sections, clauses and other subdivisions of this instrument as originally executed, and the words “herein,” “hereof,” hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Section, clause or other subdivision. ARTICLE II THE INDENTURE ISSUED NOTES

2.1.

FORMS GENERALLY (a)

The Class A Notes (other than the Class A-R Notes), Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes offered and sold in reliance on Regulation S (each, a Regulation S Note) shall be issued in fully Registered form without interest coupons substantially in the form of 73

Processed and formatted by SEC Watch - Visit SECWatch.com

the note attached as Exhibit A-1 (each, a Regulation S Global Note) with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office in Minneapolis, Minnesota, as custodian for DTC and registered in the name of DTC or a nominee of DTC, duly executed by the Co-Issuers and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be. (b)

The Class A Notes (other than the Class A-R Notes), Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes. Class G Notes, Class H Notes, Class J Notes and Class K Notes and sold in the United States pursuant to an exemption from the registration requirements of the Securities Act (Rule 144A Notes) shall be issued in fully Registered form without interest coupons substantially in the form of the note attached as Exhibit A2 (each, a Rule 144A Global Note), with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for DTC and registered in the name of DTC or a nominee of DTC, duly executed by the Co-Issuers and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be.

(c)

Regulation S Global Notes and Rule 144A Global Notes may also be exchanged under the limited circumstances set forth in Section 2.4 for notes in definitive fully Registered form without interest coupons (each, a Certificated Class A-K Note), which may be either a Regulation S Certificated Class A-K Note or a Rule 144A Certificated Class A-K Note, with such legends as may be applicable thereto, which shall be duly executed by the Issuer and the Co-Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided.

(d)

The Class A-R Notes, the Class L Notes or Class M Notes offered or sold in the United States or to U.S. Persons pursuant to Rule 144A or another applicable exemption from registration under the Securities Act shall be issued in the form of physical certificates in definitive fully Registered form without interest coupons substantially in the form of the certificated note attached as Exhibit B (each, a Certificated Class A-R Note, or a Certificated Class L Note, or a Certificated Class M Note, and together, the Certificated Notes) with such legends as may be applicable thereto, 74

Processed and formatted by SEC Watch - Visit SECWatch.com

which shall be duly executed by the Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. (e)

2.2.

The Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) and the Issuer (in the case of the Class L Notes and the Class M Notes) in issuing the Indenture Issued Notes may use “CUSIP” or “private placement” numbers (if then generally in use), and, if so, the Trustee will indicate the “CUSIP” or “private placement” numbers of the Indenture Issued Notes in notices of redemption and related materials as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Indenture Issued Notes or as contained in any notice of redemption and related materials.

AUTHORIZED AMOUNT; APPLICABLE PERIODIC INTEREST RATE; STATED MATURITY DATE; DENOMINATIONS (a)

The aggregate principal amount of Indenture Issued Notes which may be issued under this Indenture may not exceed U.S.$740,700,000, excluding Indenture Issued Notes issued upon registration of, transfer of, or in exchange for, or in lieu of, other Indenture Issued Notes pursuant to Section 2.4, 2.5 or 8.5.

(b)

The Rated Notes shall be divided into fifteen Classes having designations, original principal amounts, original Applicable Periodic Interest Rates and Stated Maturity Dates as follows:

De signation

Class A-R Notes Class A-1 Notes Class A-2 Notes Class B Notes Class C Notes Class D Notes Class E Notes Class F Notes Class G Notes Class H Notes Class J Notes Class K Notes Class L Notes Class M Notes Class N Notes

O rigin al Prin cipal Am ou n t

Applicable Pe riodic Inte re st Rate

Inde n ture Issu e d Note S tate d Matu rity Date

U.S.$260,000,000 U.S.$100,000,000 U.S.$103,050,000 U.S.$60,300,000 U.S.$24,300,000 U.S.$17,100,000 U.S.$22,050,000 U.S.$25,200,000 U.S.$26,100,000 U.S.$20,700,000 U.S.$26,100,000 U.S.$18,900,000 U.S.$22,050,000 U.S.$14,850,000 U.S.$22,500,000

LIBOR +0.320% LIBOR + 0.290% LIBOR + 0.360% LIBOR + 0.420% LIBOR + 0.470% LIBOR + 0.550% LIBOR + 0.750% LIBOR + 0.850% LIBOR + 0.950% LIBOR + 1.330% LIBOR + 1.650% LIBOR + 1.950% LIBOR + 3.250% LIBOR + 3.750% LIBOR + 4.250%

February 1, 2041 February 1, 2041 February 1, 2041 February 1, 2041 February 1, 2041 February 1, 2041 February 1, 2041 February 1, 2041 February 1, 2041 February 1, 2041 February 1, 2041 February 1, 2041 February 1, 2041 February 1, 2041 February 1, 2041

The Indenture Issued Notes will be issuable in minimum denominations of U.S.$500,000 and, in each case, only in integral multiples of U.S.$1,000 in excess of such minimum denominations. After issuance, (x) an Indenture Issued Note may fail to be in compliance with the minimum denomination requirement as a 75

Processed and formatted by SEC Watch - Visit SECWatch.com

result of the repayment of principal thereon in accordance with the Priority of Payments and (y) the Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes or Class N Notes may fail to be in an amount which is an integral multiple of U.S.$1,000 due to the addition to the principal amount thereof of deferred interest.

2.3.

(c)

Interest shall accrue on the Aggregate Outstanding Amount of each Class of Indenture Issued Notes (determined as of the first day of each Interest Period and after giving effect to any payment of principal occurring on such day) from the Closing Date (or in the case of the Class A-R Notes, from the relevant funding date) and will be payable in arrears on each Payment Date. In addition, interest with respect to any Class A-R Notes may also be paid on any Interim Payment Date in connection with a Class A-R Prepayment. Interest on each Class of Indenture Issued Notes and interest on Defaulted Interest will be calculated in accordance with the definition of Periodic Interest.

(d)

The Indenture Issued Notes shall be redeemable as provided in Section 9.

(e)

The Depositary for the Global Notes shall initially be DTC.

(f)

The Indenture Issued Notes shall be numbered, lettered or otherwise distinguished in such manner as may be consistent herewith, determined by the Authorized Officers of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) and the Issuer (in the case of the Class L Notes and the Class M Notes) executing such Indenture Issued Notes as evidenced by their execution of such Indenture Issued Notes.

EXECUTION, AUTHENTICATION, DELIVERY AND DATING (a)

The Indenture Issued Notes (other than the Class L Notes and the Class M Notes) shall be executed on behalf of the Co-Issuers by an Authorized Officer of each of the Co-Issuers. The Class L Notes and the Class M Notes shall be executed on behalf of the Issuer by an Authorized Officer of the Issuer. The signatures of such Authorized Officers on the Indenture Issued Notes may be manual or facsimile (including in counterparts).

(b)

Indenture Issued Notes bearing the manual or facsimile signatures of individuals who were at any time the Authorized Officers of either of the Co-Issuers shall bind such Person, notwithstanding the fact that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Indenture Issued Notes or did not hold such offices at the date of issuance of such Indenture Issued Notes.

(c)

At any time and from time to time after the execution and delivery of this Indenture, the Co-Issuers may deliver Indenture Issued Notes (other than the Class L Notes and the Class M Notes) executed by the Co-Issuers and 76

Processed and formatted by SEC Watch - Visit SECWatch.com

the Issuer may deliver the Class L Notes and the Class M Notes executed by the Issuer, to the Trustee or the Authenticating Agent for authentication, and the Trustee or the Authenticating Agent, upon Issuer Order, shall authenticate and deliver such Indenture Issued Notes as provided in this Indenture and not otherwise.

2.4.

(d)

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

(e)

Indenture Issued Notes issued upon transfer, exchange or replacement of other Indenture Issued Notes shall be issued in authorized denominations reflecting the original aggregate principal amount of the Indenture Issued Notes so transferred, exchanged or replaced, but shall represent only the current Aggregate Outstanding Amount of the Indenture Issued Notes so transferred, exchanged or replaced. In the event that any Indenture Issued Note is divided into more than one Indenture Issued Note in accordance with this Section 2, the original principal amount of such Indenture Issued Note shall be proportionately divided among the Indenture Issued Notes delivered in exchange therefor and shall be deemed to be the original aggregate principal amount of such subsequently issued Indenture Issued Notes.

(f)

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

REGISTRATION, TRANSFER AND EXCHANGE OF INDENTURE ISSUED NOTES (a)

Registration of Indenture Issued Notes. The Trustee is hereby appointed as the registrar hereunder (the Note Registrar). The Trustee is hereby appointed as a transfer agent with respect to the Indenture Issued Notes, other than the Class A-R Note, (the Note Transfer Agent), and with respect to the Class A-R Notes, the Class A-R Note Agent (the Class A-R Note Agent). The Note Registrar shall (acting solely for this purpose as agent for the Issuer) keep a register (the Note Register) at the Corporate Trust Office in which, subject to such reasonable regulations as it may prescribe, the Note Registrar shall provide for the registration of Indenture Issued Notes and the registration of transfers of Indenture Issued Notes. 77

Processed and formatted by SEC Watch - Visit SECWatch.com

Upon any resignation or removal of the Note Registrar, the Issuer (after consultation with the Collateral Manager) shall propose a replacement for approval by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes. The Co-Issuers may not terminate the appointment of the Note Registrar or any Note Transfer Agent without the consent of each Holder of Indenture Issued Notes. Subject to this Section 2.4, upon surrender for registration of transfer of any Indenture Issued Notes (other than the Class L Notes and the Class M Notes) at the office or agency of the Co-Issuers (or in the case of the Class L Notes and the Class M Notes, the Issuer) to be maintained as provided in Section 7.2, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) or the Issuer (in the case of the Class L Notes and the Class M Notes) shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Indenture Issued Notes of any authorized denomination and of a like aggregate principal amount. At the option of the Holder, Indenture Issued Notes may be exchanged for Indenture Issued Notes of like terms, in any authorized denominations and of like aggregate principal amount, upon surrender of the Indenture Issued Notes to be exchanged at such office or agency. Whenever any Indenture Issued Note is surrendered for exchange, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) or the Issuer (in the case of the Class L Notes and the Class M Notes) shall execute and the Trustee shall authenticate and deliver the Indenture Issued Notes that the Indenture Issued Noteholder making the exchange is entitled to receive. All Indenture Issued Notes issued and authenticated upon any registration of transfer or exchange of Indenture Issued Notes shall be the valid obligations of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) or the Issuer (in the case of the Class L Notes and the Class M Notes), evidencing the same debt, and entitled to the same benefits under this Indenture, as the Indenture Issued Notes surrendered upon such registration of transfer or exchange. Every Indenture Issued Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) or the Issuer (in the case of the Class L Notes and the Class M Notes) and the Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to a Holder for any registration of transfer or exchange of Indenture Issued Notes, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith and delivery charges, if any, not made by regular mail. 78

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

Transfers of Class A Notes (other than the Class A-R Notes), Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes

(1)

Subject to Section 2.4(b)(4), exchanges or transfers of beneficial interests in a Global Note may be made only in accordance with the rules and regulations of the Depositary and the transfer restrictions contained in the legend on such Global Note and exchanges or transfers of interests in a Global Note may be made only in accordance with the following: (i)

Subject to Section 2.4(b)(1)(ii) through (vi), transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor’s nominee.

(ii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Regulation S Global Note for a beneficial interest in a Rule 144A Global Note upon provision to the Trustee and the Co-Issuers of a written certification in the form of Exhibit C-1 (a Rule 144A Transfer Certificate).

(iii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Rule 144A Global Note for a beneficial interest in a Regulation S Global Note upon provision to the Trustee and the Co-Issuers of a written certification substantially in the form of Exhibit C-2 (a Regulation S Transfer Certificate).

(iv)

An owner of a beneficial interest in a Regulation S Global Note may transfer such interest in the form of a beneficial interest in such Regulation S Global Note without the provision of written certification; provided that (1) such transfer is made to a Person who is not a U.S. Person in an offshore transaction in reliance on an exemption from the registration requirements of the Securities Act under Regulation S and (2) the transferee, by purchase of such interest in such Regulation S Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Regulation S Transfer Certificate.

(v)

An owner of a beneficial interest in a Rule 144A Global Note may transfer such interest in the form of a beneficial interest in such Rule 144A Global Note without the provision of written certification; provided that the transferee, by purchase of such interest in such Rule 144A Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Rule 144A Transfer Certificate. 79

Processed and formatted by SEC Watch - Visit SECWatch.com

(vi)

In the event Certificated Class A-K Notes are issued pursuant to Section 2.4(b)(5), the Trustee shall cause the transfer of (i) any beneficial interest in a Global Note for a Certificated A-K Note that is a Regulation S Note (a Regulation S Certificated Note), upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any beneficial interest in a Global Note for a Certificated A-K Note that is a Rule 144A Note (a Rule 144A Certificated Note), upon provision to the Trustee, the Co-Issuers and the Note Registrar of a Rule 144A Transfer Certificate.

(2)

Subject to Section 2.4(b)(4), in the event Certificated Class A-K Notes are issued pursuant to Section 2.4(b)(5), the Trustee shall cause the transfer of (i) any Certificated A-K Note for a beneficial interest in a Regulation S Global Note, upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any Certificated A-K Note for a beneficial interest in a Rule 144A Global Note, upon provision to the Trustee and the Co-Issuers of a Rule 144A Transfer Certificate.

(3)

Upon acceptance for exchange or transfer of a beneficial interest in a Global Note for a Certificated A-K Note, or upon acceptance for exchange or transfer of a Certificated A-K Note for a beneficial interest in a Global Note, each as provided herein, the Trustee shall approve the instruction at the Depositary to adjust the principal amount of such Global Note on its records to evidence the date of such exchange or transfer and the change in the principal amount of such Global Note.

(4)

Subject to the restrictions on transfer and exchange set forth in this Section 2.4 and to any additional restrictions on transfer or exchange specified in the Certificated Class A-K Notes, the Holder of any Certificated A-K Note may transfer or exchange the same in whole or in part (in a principal amount equal to the minimum authorized denomination or any larger authorized amount) by surrendering such Certificated A-K Note at the Corporate Trust Office or at the office of any Note Transfer Agent, together with (x) in the case of any transfer, an executed instrument of assignment and (y) in the case of any exchange, a written request for exchange. Following a proper request for transfer or exchange, the Trustee shall (provided it has available in its possession an inventory of Certificated Class A-K Notes), within five Business Days of such request if made at such Corporate Trust Office, or within ten Business Days if made at the office of a Note Transfer Agent (other than the Trustee), authenticate and make available at such Corporate Trust Office or at the office of such Note Transfer Agent, as the case may be, to the transferee (in the case of transfer) or Indenture Issued Noteholder (in the case of exchange) or send by first class mail (at the risk of the transferee in the case of transfer or Indenture Issued Noteholder in the case of exchange) to such address as the transferee or Indenture Issued Noteholder, as applicable, may request, a Certificated A-K Note or Notes, as the case 80

Processed and formatted by SEC Watch - Visit SECWatch.com

may require, for a like aggregate principal amount and in such authorized denomination or denominations as may be requested. The presentation for transfer or exchange of any Certificated Note shall not be valid unless made at the Corporate Trust Office or at the office of a Note Transfer Agent or by a duly authorized attorney-in-fact. Beneficial interests in Global Notes shall be exchangeable for Certificated Class A-K Notes only under the limited circumstances described in Section 2.4(b)(5). (5)

Interests in a Global Note deposited with or on behalf of the Depositary pursuant to Section 2.1 hereunder shall be transferred (A) to the Beneficial Owners thereof in the form of Certificated Class A-K Notes only if such transfer otherwise complies with this Section 2.4 (including Section 2.4(b)(1) and (2) and (1) the Depositary notifies the Issuer that it is unwilling or unable to continue as Depositary for the Indenture Issued Notes, (2) the Depositary ceases to be a “clearing agency” registered under the Exchange Act and a successor Depositary is not appointed by the Issuer within 90 days of such notice or (3) as a result of any amendment to or change in the laws or regulations of the Cayman Islands, or of any authority therein or thereof having power to tax, or in the interpretation or administration of such laws or regulations which become effective on or after the Closing Date, the Issuer, the Trustee or any Note Paying Agent becomes aware that it is or will be required to make any deduction or withholding from any payment in respect of the Global Notes which would not be required if the Global Notes were not represented by a global certificate or (B) to the purchaser thereof in the form of one or more Certificated Notes in accordance with the provisions of Section 2.4(b)(1).

(6)

If interests in any Global Note are to be transferred to the Beneficial Owners thereof in the form of Certificated Class A-K Notes pursuant to Section 2.4(b)(5), such Global Note shall be surrendered by the Depositary, or its custodian on its behalf, to the Corporate Trust Office or to the Note Transfer Agent located in Minneapolis, Minnesota and the Trustee shall authenticate and deliver without charge, upon such transfer of interests in such Global Note, an equal aggregate principal amount of Certificated Notes of authorized denominations. The Certificated Class A-K Notes transferred pursuant to this Section 2.4 shall be executed, authenticated and delivered only in the denominations specified in Section 2.2(b) and registered in such names as the Depositary shall direct in writing.

(7)

For so long as one or more Global Notes are Outstanding: (i)

the Trustee and its directors, officers, employees and agents may deal with the Depositary for all purposes (including the making of distributions on, and the giving of notices with respect to, the Global Notes); 81

(ii)

unless otherwise provided herein and subject to Section 2.4(b)(7)(i) above, the rights of Beneficial Owners shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such Beneficial Owners and the Depositary;

(iii)

for purposes of determining the identity of and principal amount of Indenture Issued Notes beneficially owned by a Beneficial Owner, the records of the Depositary shall be conclusive evidence of such identity and principal amount and the Trustee may conclusively rely on such records when acting hereunder;

(iv)

the Depositary will make book-entry transfers among the Depositary Participants of the Depositary and will receive and transmit distributions of principal of and interest on the Global Notes to such Depositary Participants; and

(v)

the Depositary Participants of the Depositary shall have no rights under this Indenture under or with respect to any of the Global Notes held on their behalf by the Depositary, and the Depositary may be treated by the Trustee and its agents, employees, officers and directors as the absolute owner of the Global Notes for all purposes whatsoever.

(8)

Each holder of a Class A Note, Class B Note, Class C Note, Class D Note, Class E Note, Class F Note, Class G Note, Class H Note, Class J Note and Class K Note (in each case, or an interest therein) shall represent or shall be deemed to represent that either (A) it is not, and it is not acquiring such Note or interest therein on behalf of or with “plan assets” (within the meaning of Plan Asset Regulation) of, any employee benefit plan (within the meaning of Section 3(3) of the ERISA) or plan (within the meaning of Section 4975 of the Code) subject to ERISA or Section 4975 of the Code (or any materially similar applicable law (a Similar Law)), including certain insurance company general accounts (each, a Plan), or (B)(I) such Note is rated investment grade or better as of the date of acquisition, (II) the holder believes that the Note is properly treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulation and agrees to so treat such Note and (III) the holder’s acquisition, holding and disposition of such Note will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code (or Similar Law).

(c)

Transfers of Class A-R Notes, Class L Notes and Class M Notes.

Processed and formatted by SEC Watch - Visit SECWatch.com

(1)

If a holder of a beneficial interest in a Certificated Class A-R Note, Certificated Class L Note or Certificated Class M Note wishes at any time to transfer its interest in such Certificated Note such holder may transfer or 82

Processed and formatted by SEC Watch - Visit SECWatch.com

cause the transfer of such interest for an equivalent beneficial interest in one or more such Certificated Notes, as provided below. Upon receipt by the Issuer and the Note Registrar of (A) such holder’s Certificated Class A-R Note, Certificated Class L Note or Certificated Class M Note, as applicable, properly endorsed for assignment to the transferee and (B) a certificate in the form of Exhibit C-3 (a Certificated Class A-R Note Transfer Certificate, Certificated Class L Note Transfer Certificate or Certificated Class M Note Transfer Certificate, as applicable) given by the transferee of such beneficial interest, the Note Registrar shall cancel such Certificated Note, record the transfer in the Note Register and authenticate and deliver one or more Certificated Class A-R Notes, Certificated Class L Notes or Certificated Class M Notes, as applicable, bearing the same designation as the related Certificated Notes endorsed for transfer, registered in the names specified in the assignment described in clause (A) above, in principal amounts designated by the transferee (the aggregate of such amounts being the same as the beneficial interest in the related Certificated Notes surrendered by the transferor) and in the minimum denominations and integral multiples in excess thereof. In addition, the Note Registrar shall not register any transfer of any Certificated Class L Notes or Certificated Class M Notes to a proposed transferee that has represented that it is a Benefit Plan Investor or a Controlling Person if the transfer would result in Benefit Plan Investors owning 25% or more of the value of the related Certificated Notes outstanding (as determined without regard to interests held by Controlling Persons, and otherwise contemplated by the applicable regulations under ERISA) immediately after such transfer, based on assurances received from investors. Without limiting the generality of the forgoing, the Note Registrar shall not register any transfer of Certificated Class L Notes or Certificated Class M Notes represented by Regulation S Notes to a proposed transferee of such Certificated Notes that has represented that it is or may become a Benefit Plan Investor or a Controlling Person. Without limiting the generality of the foregoing, a transfer of beneficial interests in a Certificated Class L Note or Certificated Class M Note will not be permitted unless an ERISA Restriction Certificate substantially in the form set forth in Exhibit C-4 is obtained from each transferee of the related Certificated Note, for the benefit of the Issuer, the Trustee and the Initial Purchaser, (i) in the case of a Certificated Class L Note or Certificated Class M Note not represented by a Regulation S Note, regarding whether it is, or is not and will not be, a Benefit Plan Investor or Controlling Person, or (ii) in the case of a Certificated Class L Note or Certificated Class M Note or represented by a Regulation S Note, to the effect that it is not and will not be a Benefit Plan Investor or Controlling Person. Any purported transfer in violation of the foregoing requirements shall be null and void ab initio, and the Note Registrar shall not register any such purported transfer and shall not authenticate and deliver such 83

Processed and formatted by SEC Watch - Visit SECWatch.com

Certificated Class A-R Notes, Certificated Class L Notes or Certificated Class M Notes, as applicable. (2)

If a holder of a beneficial interest in one or more Certificated Class A-R Notes, Certificated Class L Notes or Certificated Class M Notes wishes at any time to exchange its interest in such related Certificated Notes for an interest in one or more such Certificated Notes of different principal amounts, such holder may exchange or cause the exchange of such interest for an equivalent beneficial interest in the Certificated Class A-R Notes, Certificated Class L Notes or Certificated Class M Notes, as applicable, bearing the same designation as the related Certificated Notes endorsed for exchange as provided below. Upon receipt by the Note Registrar of (A) such holder’s Certificated Class A-R Notes, Certificated Class L Notes or Certificated Class M Notes, as applicable, properly endorsed for such exchange and (B) written instructions from such holder designating the number and principal amounts of the applicable Certificated Notes to be issued (the aggregate principal amounts of such Certificated Notes being the same as the Certificated Notes surrendered for exchange), then the Note Registrar shall cancel such Certificated Notes, record the exchange in the Note Register and authenticate and deliver one or more Certificated Notes bearing the same designation endorsed for exchange, registered in the same names as the related Certificated Notes surrendered by such holder or such different names as are specified in the endorsement described in clause (A) above, in different principal amounts designated by such holder (the Class and the aggregate principal amounts being the same as the beneficial interest in the Certificated Class A-R Notes, Certificated Class L Notes or Certificated Class M Notes, as applicable, surrendered by such holder), and the minimum denominations and integral multiples in excess.

(3)

Notwithstanding anything to the contrary herein, for so long as any Indenture Issued Notes other than the Class L Notes or the Class M Notes remain outstanding, the Note Registrar shall not register transfer of any Class L Notes or Class M Notes, as applicable, unless (i) the proposed transferee shall have delivered to the Trustee and the Note Registrar an Opinion of Counsel rendered by nationally recognized U.S. tax counsel experienced in such matters to the effect that the Class H Notes or the Class J Notes, as applicable, will be treated as indebtedness for U.S. federal income tax purposes, (ii) the proposed transferee shall have delivered to the Trustee and the Note Registrar a certificate in the form of Exhibit I (a Class L Note Tax Transfer Certificate or a Class M Note Tax Transfer Certificate, as applicable), or (iii) the proposed transferee shall have delivered to the Collateral Manager and the Trustee an Opinion of Counsel described in Section 7(e) of the Collateral Management Agreement; provided, however, that the Class L Notes and Class M Notes may be pledged to secure indebtedness and may be the subject of repurchase agreements treated by the Issuer as secured indebtedness for 84

Processed and formatted by SEC Watch - Visit SECWatch.com

U.S. federal income tax purposes, and may be transferred following a default under such indebtedness or repurchase transaction without regard to the foregoing limitations (provided that the Issuer gives notice to the Trustee of the occurrence of such event). (4)

Upon the transfer, exchange or replacement of a Class A-R Certificated Note bearing a legend, or upon specific request for removal of the legend on such Class A-R Certificated Note, the Issuer and the Co-Issuer will deliver only Class A-R Certificated Notes that bear the legend, or will refuse to remove the legend, as the case may be, unless there is delivered to the Issuer and Co- Issuer satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Issuer and the Co-Issuer that neither the legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act or the Investment Company Act.

(5)

Each person who becomes a beneficial owner of the Certificated Class A-R Notes will be required to represent and agree, among other things, as follows: (i)

(ii)

the owner is one of the following: (A)

(I) a Qualified Purchaser, (II) a Qualified Institutional Buyer, (III) is aware that the sale of the Certificated Class A-R Notes to it is being made in reliance on the exemption from registration provided by Rule 144A under the Securities Act, (IV) is acquiring the Certificated Class A-R Notes for its own account or for one or more accounts, each of which is a Qualified Institutional Buyer who is a Qualified Purchaser, and as to each of which the owner exercises sole investment discretion, and (V) is acquiring the Certificated Class A-R Notes in a minimum principal amount of not less than $500,000 for each such account; or

(B)

(I) is not a U.S. Person, (II) is aware that the sale of the Certificated Class A-R Notes to it is being made in reliance on the exemption from registration provided by Regulation S and (III) understands that the Certificated Class A-R Notes offered in reliance on Regulation S under the Securities Act will bear the legend set forth above;

and in each case the owner has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Certificated Class A-R Notes and the owner and any accounts for which it is acting are each able to bear the economic risk of the investment. 85

Processed and formatted by SEC Watch - Visit SECWatch.com

(d)

Denominations; Qualified Purchaser Status. No Person may hold a beneficial interest in any Indenture Issued Note (other than the Class-A-R Notes) except in a denomination authorized for the Indenture Issued Notes of such Class under Section 2.2(b). In addition, no transfer of an Indenture Issued Note (other than the Class-A-R Notes) or any interest therein, may be made to any Person that is a U.S. Person unless such Person is (A) a Qualified Institutional Buyer and (B) a Qualified Purchaser. In addition, no transfer of an Indenture Issued Note (other than the Class-A-R Notes) or any interest therein may be made to any Person that is a U.S. Person unless such Person (A) was not formed for the purpose of investing in either of the Co-Issuers (except when each beneficial owner of the purchaser is a Qualified Purchaser, (B) has received the necessary consent from its beneficial owners if it is a private investment company formed before April 30, 1996, (C) 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, (D) is not a pension, profit, sharing or other retirement trust fund or plan in which the partners, beneficiaries or participants, as applicable, may designate the particular investments to be made, and in a transaction that may be effected without loss of any applicable Investment Company Act exemption, (E) will provide notice to any subsequent transferee of the transfer restrictions provided in the legend, (F) will hold and transfer in a principal amount of not less than U.S.$500,000, for it or for each account for which it is acting and (G) will provide the Issuer from time to time such information as it may reasonably request in order to ascertain compliance with the foregoing. Any purported transfer that is not in compliance with this Section 2.4 or the legends on the Indenture Issued Notes 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 (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) or the Issuer (in the case of the Class L Notes and the Class M Notes), the Trustee or any intermediary. If any purported transfer of Indenture Issued Notes (other than the Class-A-R Notes) or any beneficial interest therein to a purported transferee does not comply with the requirements set forth in this Section 2.4 or the legends on the Indenture Issued Notes, then the purported transferor of such Indenture Issued Notes (other than the Class-A-R Notes) or beneficial interest therein shall be required to cause the purported transferee to surrender the Indenture Issued Notes (other than the Class-A-R Notes) or any beneficial interest therein in return for a refund of the consideration paid therefor by such transferee (together with interest thereon) or to cause the purported transferee to dispose of such Indenture Issued Notes (other than the Class-A-R Notes) or beneficial interest promptly in one or more open market sales to one or more persons each of whom satisfies the requirements of this Section 2.4 and the legends on the Indenture Issued Notes (other than the Class-A-R Notes) and such purported transferor shall take, and shall 86

Processed and formatted by SEC Watch - Visit SECWatch.com

cause such transferee to take, all further action necessary or desirable, in the judgment of the Trustee, to ensure that such Indenture Issued Notes (other than the Class-A-R Notes) or any beneficial interest therein are held by persons in compliance therewith. (e)

Requirement to Sell.

(1)

If, notwithstanding the restrictions set forth in this Section 2.4, either of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) or the Issuer (in the case of the Class L Notes and the Class M Notes) determines that any beneficial owner of a Rule 144A Note (A) is a U.S. Person and (B) is not a Qualified Institutional Buyer and also a Qualified Purchaser, either of the Co-Issuers or the Issuer, as applicable, may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Indenture Issued Note (or interest therein) to a Person that is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser, with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (x) upon written direction from the Issuer, the Trustee shall, and is hereby irrevocably authorized by such beneficial owner to cause its interest in such Indenture Issued Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9-611 of the UCC as applied to securities that are customarily sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser and (y) pending such transfer, no further payments will be made in respect of such Indenture Issued Note (or beneficial interest therein) held by such beneficial owner.

(2)

If, notwithstanding the restrictions set forth in this Section 2.4, either of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) or the Issuer (in the case of the Class L Notes and the Class M Notes) determines that any beneficial owner of a Regulation S Note is (A) a U.S. Person or (B) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), either of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) or the Issuer (in the case of the Class L Notes and the Class M Notes) may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Indenture Issued Note (or interest therein) to a Person that is not (1) a U.S. Person or (2) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (x) upon written direction from the Issuer, the Trustee shall, and is hereby irrevocably 87

Processed and formatted by SEC Watch - Visit SECWatch.com

authorized by such beneficial owner to cause its interest in such Indenture Issued Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9-611 of the UCC as applied to securities that are customarily sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is neither (1) a U.S. Person nor (2) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA) and (y) pending such transfer, no further payments will be made in respect of such Indenture Issued Note (or beneficial interest therein) held by such beneficial owner. (f)

Legends. Any Indenture Issued Note issued upon the transfer, exchange or replacement of Indenture Issued Notes shall bear such applicable legend set forth in the relevant Exhibit hereto unless there is delivered to the Trustee, the Note Registrar and the Co Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) or the Issuer (in the case of the Class L Notes and the Class M Notes) such satisfactory evidence, which may include an Opinion of Counsel, as may be reasonably required by any of the Trustee, the Note Registrar and the Co Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) or the Issuer (in the case of the Class L Notes and Class M Notes) to the effect that neither such applicable legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A and to ensure that neither of the Co Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) or the Issuer (in the case of the Class L Notes and the Class M Notes) nor the pool of Collateral becomes an investment company required to be registered under the Investment Company Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Co Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) or the Issuer (in the case of the Class L Notes and the Class M Notes), shall authenticate and deliver Indenture Issued Notes that do not bear such applicable legend.

(g)

Expenses; Acknowledgment of Transfer. Transfer, registration and exchange shall be permitted as provided in this Section 2.4 without any charge to the Indenture Issued Noteholder except for a sum sufficient to cover any tax or other governmental charge payable in connection therewith or the expenses of delivery (if any) not made by regular mail and payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith pursuant to Section 2.4(a). Registration of the transfer of a Indenture Issued Note by the Trustee shall be deemed to be the acknowledgment of such transfer on behalf of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) and the Issuer (in the case of the Class L Notes and the Class M Notes). 88

Processed and formatted by SEC Watch - Visit SECWatch.com

(h)

Surrender upon Final Payment. Upon final payment due on the date on which all outstanding unpaid principal of a Indenture Issued Note becomes due and payable as therein or herein provided, whether at the Stated Maturity Date or by declaration of acceleration, call for redemption or otherwise, the Holder thereof shall present and surrender such Indenture Issued Note at the Corporate Trust Office of the Trustee in Minneapolis, Minnesota.

(i)

Repurchase and Cancellation of Indenture Issued Notes. The Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) and the Issuer (in the case of the Class L Notes and the Class M Notes) will not purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the Outstanding Indenture Issued Notes except upon the redemption of the Indenture Issued Notes in accordance with the terms of this Indenture and the Indenture Issued Notes. The Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) and the Issuer (in the case of the Class L Notes and the Class M Notes) will promptly cancel all Indenture Issued Notes acquired by them pursuant to any payment, purchase, redemption, prepayment or other acquisition of Indenture Issued Notes pursuant to any provision of this Indenture and no Indenture Issued Notes may be issued in substitution or exchange for any such Indenture Issued Notes.

(j)

Compliance with Transfer Restrictions. Notwithstanding anything contained herein to the contrary, neither the Trustee nor the Note Registrar shall be responsible for ascertaining whether any transfer complies with the registration provisions of or exemptions from the Securities Act, applicable state securities laws, the rules of any Depositary, ERISA, the Code or the Investment Company Act; provided that if a certificate is specifically required by the express terms of this Section 2.4 to be delivered to the Trustee or the Note Registrar by a purchaser or transferee of a Indenture Issued Note, the Trustee or the Note Registrar, as the case may be, shall be under a duty to receive and examine the same to determine whether the transfer contemplated thereby substantially complies with the express terms of this Indenture and shall promptly notify the party delivering the same if such transfer does not comply with such terms. To the extent applicable to the Issuer, the Issuer shall impose additional restrictions to comply with the USA PATRIOT Act, and any such transfer restrictions shall be binding on each Holder or Beneficial Owner of a Indenture Issued Note. The Issuer shall notify the Trustee and the Note Registrar of the imposition of any such transfer restrictions.

(k)

Physical Indenture Issued Notes. The Issuer will promptly make available to the Trustee without charge a reasonable supply of Certificated Notes in definitive, fully Registered Form, without interest coupons. 89

2.5.

MUTILATED, DEFACED, DESTROYED, LOST OR STOLEN INDENTURE ISSUED NOTES

If (a) any mutilated or defaced Indenture Issued Note is surrendered to a Note Transfer Agent, or if there shall be delivered to either of the Co-Issuers (in the case of Indenture Issued Notes other than Class L Notes and the Class M Notes) or the Issuer (in the case of Class L Notes and the Class M Notes), the Trustee and the Note Transfer Agent (each, a Specified Person) evidence to their reasonable satisfaction of the destruction, loss or theft of any Indenture Issued Note, and (b) there is delivered to the Specified Persons such security or indemnity as may reasonably be required by them to save each of them harmless then, in the absence of notice to the Specified Persons that such Indenture Issued Note has been acquired by a bona fide purchaser, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) and the Issuer (in the case of the Class L Notes and the Class M Notes) shall execute and shall direct the Trustee to authenticate, and upon Issuer Request the Trustee shall authenticate and deliver, in lieu of any such mutilated, defaced, destroyed, lost or stolen Indenture Issued Note, a new Indenture Issued Note of the same Class as such mutilated, defaced, destroyed, lost or stolen Indenture Issued Note, of like tenor (including the same date of issuance) and equal principal amount, registered in the same manner, dated the date of its authentication, bearing interest from the date to which interest has been paid on the mutilated, defaced, destroyed, lost or stolen Indenture Issued Note and bearing a number not contemporaneously outstanding. If, after delivery of such new Indenture Issued Note, a bona fide purchaser of the predecessor Indenture Issued Note presents for payment, transfer or exchange such predecessor Indenture Issued Note, the Specified Persons shall be entitled to recover such new Indenture Issued Note from the Person to whom it was delivered or any Person taking therefrom, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Specified Persons in connection therewith. In case any such mutilated, defaced, destroyed, lost or stolen Indenture Issued Note has become due and payable, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) and the Issuer (in the case of the Class L Notes and the Class M Notes) in their or its (as applicable) discretion may, instead of issuing a new Indenture Issued Note, pay such Indenture Issued Note without requiring surrender thereof except that any mutilated Indenture Issued Note shall be surrendered. Upon the issuance of any new Indenture Issued Note under this Section 2.5, the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) and the Issuer (in the case of the Class L Notes and the Class M Notes), the Trustee or any Note Transfer Agent may require the payment by the registered Holder thereof of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.

Processed and formatted by SEC Watch - Visit SECWatch.com

Every new Indenture Issued Note issued pursuant to this Section 2.5 in lieu of any mutilated, defaced, destroyed, lost or stolen Indenture Issued Note, shall constitute an original additional contractual obligation of the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) and the Issuer (in the case of the Class L Notes and the Class M Notes) and such new Indenture Issued Note shall be entitled, subject to 90

Processed and formatted by SEC Watch - Visit SECWatch.com

the second paragraph of this Section 2.5, to all the benefits of this Indenture equally and proportionately with any and all other Indenture Issued Notes duly issued hereunder. The provisions of this Section 2.5 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, defaced, destroyed, lost or stolen Indenture Issued Notes. 2.6. PAYMENT OF PRINCIPAL AND INTEREST; RIGHTS PRESERVED (a)

Each Class of Rated Notes shall accrue interest during each Interest Period applicable to such Class in the manner and at the Applicable Periodic Interest Rate specified in Section 2.2. Interest on each Class of Rated Notes shall be due and payable on each Payment Date; provided that (i) interest on the Class A-2 Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Senior Notes (together with any Defaulted Interest thereon) (ii) interest on the Class B Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), (iii) interest on the Class C Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon) and on the Class B Notes (together with any Defaulted Interest thereon), (iv) interest on the Class D Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon) and on the Class C Notes (together with any Defaulted Interest thereon), (v) interest on the Class E Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon) and on the Class D Notes (together with any Defaulted Interest thereon), (vi) interest on the Class F Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon) and on the Class E Notes (together with any Defaulted Interest thereon), (vii) interest on the Class G Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes 91

Processed and formatted by SEC Watch - Visit SECWatch.com

(together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon) and on the Class F Notes (together with any Defaulted Interest thereon), (viii) interest on the Class H Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon), on the Class F Notes (together with any Defaulted Interest thereon) and on the Class G Notes (together with any Defaulted Interest thereon), (ix) interest on the Class J Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon), on the Class F Notes (together with any Defaulted Interest thereon), on the Class G Notes (together with any Defaulted Interest thereon) and on the Class H Notes (together with any Defaulted Interest thereon), (x) interest on the Class K Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon), on the Class F Notes (together with any Defaulted Interest thereon), on the Class G Notes (together with any Defaulted Interest thereon), on the Class H Notes (together with any Defaulted Interest thereon) and on the Class J Notes (together with any Defaulted Interest thereon), (xi) interest on the Class L Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon), on the Class F Notes (together with any Defaulted Interest thereon), on the Class G Notes (together with any Defaulted Interest thereon), on the Class H Notes (together with any Defaulted Interest thereon), on the Class J Notes (together with any Defaulted Interest thereon) and on the Class K Notes (together with any Defaulted Interest thereon), (xii) interest on the Class M Notes is subordinated in right of payment to the prior payment in full 92

Processed and formatted by SEC Watch - Visit SECWatch.com

on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon), on the Class F Notes (together with any Defaulted Interest thereon), on the Class G Notes (together with any Defaulted Interest thereon), on the Class H Notes (together with any Defaulted Interest thereon), on the Class J Notes (together with any Defaulted Interest thereon), on the Class K Notes (together with any Defaulted Interest thereon) and on the Class L Notes (together with any Defaulted Interest thereon), (xiii) interest on the Class N Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon), on the Class F Notes (together with any Defaulted Interest thereon), on the Class G Notes (together with any Defaulted Interest thereon), on the Class H Notes (together with any Defaulted Interest thereon), on the Class J Notes (together with any Defaulted Interest thereon), on the Class K Notes (together with any Defaulted Interest thereon), on the Class L Notes (together with any Defaulted Interest thereon) and on the Class M Notes (together with any Defaulted Interest thereon) and (xiv) interest on all Rated Notes is subordinated in right of payment to the prior payment in full on each Payment Date of other amounts in accordance with Section 11.1. Payments of interest on the Class A Senior Notes (including any Defaulted Interest) and Class A-R Commitment Fee will be paid on a pro rata basis between the Class A-1 Notes and the Class A-R Notes based on amount due. Except as provided in Section 5.5, no payment shall be made by the Co-Issuers hereunder other than on a Payment Date. So long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding, any Class E Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class E Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class E Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding, any Class F Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class F Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to 93

Processed and formatted by SEC Watch - Visit SECWatch.com

pay such Class F Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes are Outstanding, any Class G Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class G Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class G Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes or Class G Notes are Outstanding, any Class H Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class H Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class H Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes are Outstanding, any Class J Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class J Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class J Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes or Class J Notes are Outstanding, any Class K Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class K Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class K Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes or Class K Notes are Outstanding, any Class L Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class L Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class L Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class 94

Processed and formatted by SEC Watch - Visit SECWatch.com

K Notes or Class L Notes are Outstanding, any Class M Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class M Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class M Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1 So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes or Class M Notes are Outstanding, any Class N Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class N Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class N Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1 (b)

The principal of each Rated Note shall be payable no later than the Stated Maturity Date thereof unless the unpaid principal of such Rated Note becomes due and payable at an earlier date by declaration of acceleration, call for redemption or otherwise; provided that:

(1)

so long as any Class A Senior Notes are Outstanding, except as provided in Article 9 and Section 11.1(b)(24), the payment of principal of the Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes (to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Senior Notes have been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Senior Notes and other amounts payable in accordance with Section 11.1;

(2)

so long as any Class A Notes are Outstanding, except as provided in Article 9 and Section 11.1(b)(24), the payment of principal of the Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes (to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and other amounts payable in accordance with Section 11.1;

(3)

so long as any Class A Notes or Class B Notes are Outstanding, except as provided in Article 9 and Section 11.1(b)(24), the payment of principal of the Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G 95

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes (to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes and Class B Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and Class B Notes and other amounts payable in accordance with Section 11.1; (4)

so long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, except as provided in Section 11.1(b)(24), the payment of principal of the Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes (to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes and Class C Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes and Class C Notes and other amounts payable in accordance with Section 11.1;

(5)

so long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding, except as provided in Section 11.1(b)(24), the payment of principal of the Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes (to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes and Class D Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes and Class D Notes and other amounts payable in accordance with Section 11.1;

(6)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding, except as provided in Section 11.1(b)(24), the payment of principal of the Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes (to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes and other amounts payable in accordance with Section 11.1; 96

(7)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes are Outstanding, except as provided in Section 11.1(b)(24), the payment of principal of the Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes (to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes and other amounts payable in accordance with Section 11.1;

(8)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes or Class G Notes are Outstanding, except as provided in Section 11.1(b)(24), the payment of principal of the Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes (to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes and other amounts payable in accordance with Section 11.1; and

(9)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes are Outstanding, except as provided in Section 11.1(b)(24), the payment of principal of the Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes (to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes and other amounts payable in accordance with Section 11.1.

(10)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes or Class J Notes are Outstanding, except as provided in Section 11.1(b)(24), the payment of principal of the Class K Notes, Class L Notes, Class M Notes and Class N Notes (to the PAA Issued Note Paying

Processed and formatted by SEC Watch - Visit SECWatch.com

Agent for 97

Processed and formatted by SEC Watch - Visit SECWatch.com

payment on the Class N Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes and other amounts payable in accordance with Section 11.1. (11)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes or Class K Notes are Outstanding, except as provided in Section 11.1(b)(24), the payment of principal of the Class L Notes, Class M Notes and Class N Notes (to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes other amounts payable in accordance with Section 11.1.

(12)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes or Class L Notes are Outstanding, except as provided in Section 11.1(b)(24), the payment of principal of the Class M Notes and Class N Notes (to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement) (x) may only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes and Class L Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes and Class L Notes and other amounts payable in accordance with Section 11.1.

(13)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes or Class M Notes are Outstanding, except as provided in Section 11.1(b)(24), the payment of principal of the Class N Notes (to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement) (x) may 98

Processed and formatted by SEC Watch - Visit SECWatch.com

only occur after principal of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes and other amounts payable in accordance with Section 11.1. Provided that, payments of principal of the Class A Senior Notes will be made pro rata based on their respective outstanding principal amounts; however, during the Reinvestment Period, the draws under Class A-R Notes may be prepaid prior to any payments of principal of the Class A-1 Notes. No payments of principal will be distributable in respect of any Class of Notes junior to the Class A-R Notes so long as any Class A-R Commitments remain outstanding, except to the extent described herein in connection with a Special Amortization as provided in Section 11.1(b)(24). (c)

So long as the Coverage Tests are satisfied, principal will not be payable on any Class of Rated Notes except (i) upon the occurrence of a Redemption, (ii) if a Rating Confirmation Failure occurs, (iii) in the case of any Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes. Class K Notes, Class L Notes, Class M Notes and Class N Notes to pay amounts in respect of the Class E Cumulative Applicable Periodic Interest Shortfall Amount, the Class F Cumulative Applicable Periodic Interest Shortfall Amount, the Class G Cumulative Applicable Periodic Interest Shortfall Amount, the Class H Cumulative Applicable Periodic Interest Shortfall Amount, the Class J Cumulative Applicable Periodic Interest Shortfall Amount, the Class K Cumulative Applicable Periodic Interest Shortfall Amount, Class L Cumulative Applicable Periodic Interest Shortfall Amount, the Class M Cumulative Applicable Periodic Interest Shortfall Amount or the Class N Cumulative Applicable Periodic Interest Shortfall Amount, as the case may be, in accordance with Section 11.1 and (iv) on each Payment Date, in accordance with Section 11.1.

(d)

As a condition to the payment of any principal of or interest on any Rated Note without the imposition of withholding tax, any Note Paying Agent shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor 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 the applicable Internal Revenue Service Form W-8 (or applicable successor 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) or other certification acceptable to it to 99

Processed and formatted by SEC Watch - Visit SECWatch.com

enable the Co-Issuers (in the case of the Indenture Issued Notes other than the Class L Notes and the Class M Notes) or the Issuer (in the case of the Class L Notes and the Class M Notes), the Trustee and any Note Paying Agent to determine their duties and liabilities with respect to any taxes or other charges that they may be required to pay, deduct or withhold in respect of such Rated Note or the Holder of such Rated Note under any present or future law or regulation of the Cayman Islands or the United States or any present or future law or regulation of any political subdivision thereof or taxing authority therein or to comply with any reporting or other requirements under any such law or regulation. (e)

All payments made by the Issuer under the Rated Notes will be made without any deduction or withholding for or on the account of any tax unless such deduction or withholding is required by applicable law, as modified by the practice of any relevant governmental authority, then in effect. If the Issuer is so required to deduct or withhold, then neither the Issuer nor the Co-Issuer will be obligated to pay any additional amounts in respect of such withholding or deduction.

(f)

Payments in respect of principal of and interest on the Rated Notes shall be payable by wire transfer in immediately Available Funds to a Dollar account maintained or specified by the Rated Noteholders in accordance with wire transfer instructions received by any Note Paying Agent on or before the Record Date or, if no wire transfer instructions are received by a Note Paying Agent, by a Dollar check drawn on a bank in the United States mailed to the address of such Rated Noteholder as it appears on the Note Register at the close of business on the Record Date for such payment. Such wire instructions may direct that any such payments may be paid to a Dollar account of an assignee or designee of any Rated Noteholder and may be irrevocable to the effect set forth therein.

(g)

The principal of and interest on any Rated Note which is payable on a Redemption Date or in accordance with Section 11.1 on a Payment Date and is punctually paid or duly provided for on such Redemption Date or Payment Date shall be paid to the Person in whose name that Rated Note (or one or more predecessor Rated Notes) is registered at the close of business on the Record Date for such payment. All such payments that are mailed or wired and returned to the Note Paying Agent shall be held for payment as herein provided at the office or agency of the Co-Issuers (in the case of the Rated Notes other than the Class L Notes, Class M Notes and Class N Notes) or the Issuer (in the case of the Class L Notes, Class M Notes and Class N Notes) to be maintained as provided in Section 7.2.

Payments to Holders of the Rated Notes of each Class shall be made in the proportion that the Aggregate Outstanding Amount of the Rated Notes of such Class registered in the name of each such Holder on the Record Date for such 100

Processed and formatted by SEC Watch - Visit SECWatch.com

payment bears to the Aggregate Outstanding Amount of all Rated Notes of such Class on such Record Date. (h)

Payment of any Defaulted Interest may be made in any other lawful manner in accordance with Section 11.1 if notice of such payment is given by the Trustee to the Co-Issuers and the Rated Noteholders, and such manner of payment shall be deemed practicable by the Trustee.

(i)

All reductions in the principal amount of a Rated Note (or one or more predecessor Rated Notes) effected by payments of installments of principal made on any Payment Date or Redemption Date shall be binding upon all future Holders of such Rated Note and of any Rated Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Rated Note.

(j)

Notwithstanding anything to the contrary herein, the obligations of the Co-Issuers under the Rated Notes (other than the Class L Notes, Class M Notes and Class N Notes), the Issuer under the Class L Notes, Class M Notes and Class N Notes or the Co-Issuers under this Indenture or arising in connection herewith are limited recourse obligations of the Co-Issuers or the Issuer, as the case may be, payable solely from the Collateral and following realization of the Collateral, all obligations of and all claims against the Co-Issuers or the Issuer, as the case may be, hereunder or arising in connection herewith shall be extinguished and shall not thereafter revive. No recourse shall be had against any Officer, member, director, employee, security holder or incorporator of the Co-Issuers (in the case of the Rated Notes other than the Class L Notes, Class M Notes and Class N Notes) or the Issuer (in the case of the Class L Notes, Class M Notes and Class N Notes) or their respective successors or assigns for the payment of any amounts payable under the Rated Notes or this Indenture. It is understood that the foregoing provisions of this Section 2.6(j) shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or agreement which is part of the Collateral or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Rated Notes or secured by this Indenture until such Collateral has been realized, whereupon any outstanding indebtedness or obligation shall be extinguished. It is further understood that the foregoing provisions of this Section 2.6(j) shall not limit the right of any Person to name either of the Co-Issuers (in the case of the Rated Notes other than the Class L Notes, Class M Notes and Class N Notes) or the Issuer (in the case of the Class L Notes, Class M Notes and Class N Notes) as a party defendant in any action or suit or in the exercise of any other remedy under the Rated Notes or this Indenture, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity. 101

Processed and formatted by SEC Watch - Visit SECWatch.com

(k)

Subject to the foregoing provisions of this Section 2.6 and the provisions of Sections 2.4 and 2.5, each Rated Note delivered under this Indenture and upon registration of transfer of or in exchange for or in lieu of any other Rated Note shall carry the rights of unpaid interest and principal that were carried by such other Rated Note. ARTICLE III CONDITIONS PRECEDENT

3.1.

GENERAL PROVISIONS

The Indenture Issued Notes (other than the Class L Notes and the Class M Notes) may be executed by the Co-Issuers, or the Issuer in the case of the Class L Notes and the Class M Notes, and delivered to the Trustee for authentication and thereupon the same shall be authenticated and delivered by the Trustee (or an Authenticating Agent on its behalf) upon Issuer Request, upon receipt by the Trustee of the following: (a)

(1) an Officer’s certificate of the Issuer, (A) evidencing the authorization by Board Resolution of the execution and delivery of, and the performance of the Issuer’s obligations under, each Transaction Document, in each case as may be amended on or prior to, and as in effect on, the Closing Date, and the execution, authentication and delivery of the Indenture Issued Notes and specifying the Stated Maturity Date, the principal amount and the Applicable Periodic Interest Rate with respect to each Class of Indenture Issued Notes to be authenticated and delivered, and (B) certifying that (1) the attached copy of such Board Resolution is a true and complete copy thereof, (2) such resolutions have not been rescinded and are in full force and effect on and as of the Closing Date and (3) the Officers authorized to execute and deliver such documents hold the offices and have the signatures indicated thereon; and

(2)

a certificate of the Co-Issuer (A) evidencing the authorization by the Co-Issuer by action by written consent of the limited liability company manager of the execution and delivery of, and the performance of the Co-Issuer’s obligations under, this Indenture, as may be amended on or prior to, and as in effect on, the Closing Date, and the execution, authentication and delivery of the Indenture Issued Notes (other than the Class L Notes and the Class M Notes) and specifying the Stated Maturity Date, the principal amount and the Applicable Periodic Interest Rate of each Class of Indenture Issued Notes (other than the Class L Notes and the Class M Notes) to be authenticated and delivered, and (B) certifying that (1) the attached copy of such consent of the limited liability company manager is a true and complete copy thereof, (2) such resolutions have not been rescinded and are in full force and effect on and as of the Closing Date and (3) the Officers authorized to execute and deliver such documents hold the offices and have the signatures indicated thereon; 102

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

(1) either (A) a certificate of the Issuer, or other official document evidencing the due authorization, approval or consent of any governmental body or bodies, at the time having jurisdiction in the premises, together with an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee on which the Trustee is entitled to rely to the effect that no other authorization, approval or consent of any governmental body is required for the valid issuance of the Indenture Issued Notes, or (B) an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee to the effect that no such authorization, approval or consent of any governmental body is required for the valid issuance of the Indenture Issued Notes except as may have been given; and

(2)

either (A) a certificate of the Co-Issuer or other official document evidencing the due authorization, approval or consent of any governmental body or bodies, at the time having jurisdiction in the premises, together with an Opinion of Counsel to the Co-Issuer satisfactory in form and substance to the Trustee on which the Trustee is entitled to rely to the effect that no other authorization, approval or consent of any governmental body is required for the valid issuance of the Indenture Issued Notes (other than the Class L Notes and the Class M Notes), or (B) an Opinion of Counsel to the Co-Issuer satisfactory in form and substance to the Trustee that no such authorization, approval or consent of any governmental body is required for the valid issuance of the Indenture Issued Notes (other than the Class L Notes and the Class M Notes) except as may have been given;

(c)

(1) an opinion of Thacher Proffitt & Wood llp, special New York counsel to the Co-Issuers, dated the Closing Date, substantially in the form of Exhibit E- 1;

(2)

an opinion of Walkers, special Cayman Islands counsel to the Issuer, dated the Closing Date, substantially in the form of Exhibit E-2;

(3)

an opinion of Kennedy Covington Lobdell & Hickman, L.L.P., counsel to the Trustee, dated the Closing Date, substantially in the form of Exhibit F; and

(4)

an opinion of Thacher Proffitt & Wood llp, counsel to the Collateral Manager, dated the Closing Date, substantially in the form of Exhibit G;

(5)

an opinion of Hunton & Williams LLP, special counsel to NorthStar Realty Finance Corp., substantially in the form of Exhibit J;

(d)

an Officer’s certificate of the Issuer, stating that the Issuer is not in Default under this Indenture and that the issuance of the Indenture Issued Notes will not result in a breach of any of the terms, conditions or provisions of, 103

Processed and formatted by SEC Watch - Visit SECWatch.com

or constitute a Default under, the Articles, any indenture or other agreement or instrument to which the Issuer is a party or by which it is bound, or any order of any court or administrative agency entered in any Proceeding to which the Issuer is a party or by which it may be bound or to which it may be subject; that no Event of Default shall have occurred and be continuing; that all of the representations and warranties contained herein are true and correct as of the Closing Date; that all conditions precedent provided in this Indenture relating to the authentication and delivery of the Indenture Issued Notes applied for (including in Section 3.2) have been complied with; and that all expenses due or accrued with respect to the Offering or relating to actions taken on or in connection with the Closing Date have been paid; (e)

an Officer’s certificate of the Co-Issuer stating that the Co-Issuer is not in Default under this Indenture and that the issuance of the Indenture Issued Notes will not result in a breach of any of the terms, conditions or provisions of, or constitute a Default under, the Certificate of Formation or Limited Liability Company Operating Agreement of the Co-Issuer, any indenture or other agreement or instrument to which the Co-Issuer is a party or by which it is bound, or any order of any court or administrative agency entered in any Proceeding to which the Co-Issuer is a party or by which it may be bound or to which it may be subject; that no Event of Default shall have occurred and be continuing; that all of the representations and warranties contained herein are true and correct as of the Closing Date; that all conditions precedent provided in this Indenture relating to the authentication and delivery of the Indenture Issued Notes applied for have been complied with; and that all expenses due or accrued with respect to the Offering or relating to actions taken on or in connection with the Closing Date have been paid;

(f)

an Accountant’s Report (A) confirming the information with respect to each Collateral Interest (other than its price) set forth on a schedule setting forth each Collateral Interest and the information provided by the Issuer with respect to every other asset forming part of the Collateral, by reference to such sources as shall be specified therein, (B) confirming that, on the Closing Date, the Collateral Interests set forth on Schedule A meet the Collateral Quality Tests, (C) calculating each of the Coverage Tests as of the Closing Date and (D) specifying the procedures undertaken by them to review data and computations relating to the foregoing statement;

(g)

executed counterparts of this Indenture, the Account Control Agreement, the Collateral Administration Agreement, the Collateral Management Agreement and the other Transaction Documents;

(h)

execution and delivery of the Financing Statement for filing against the Issuer with the Recorder of Deeds in the District of Columbia; and 104

Processed and formatted by SEC Watch - Visit SECWatch.com

(i) 3.2.

evidence of an entry having been made in the Issuer’s Register of Mortgages and Charges in respect of the charge.

SECURITY FOR THE INDENTURE ISSUED NOTES

Prior to the issuance of the Indenture Issued Notes on the Closing Date, the Issuer shall cause the following conditions to be satisfied: (a)

Grant of Security Interest; Delivery of Collateral Interests. The Grant pursuant to the Granting clauses of this Indenture of all of the Issuer’s right, title and interest in and to the Collateral and the transfer of all Collateral Interests purchased by the Issuer on the Closing Date (as set forth in Schedule A) to the Trustee in the manner provided in Section 3.3(b).

(b)

Certificate of the Issuer. The delivery to the Trustee of a certificate of an Authorized Officer of the Issuer or the Collateral Manager, for and on behalf of the Issuer, dated as of the Closing Date, to the effect that (x) the Issuer has no assets other than the Collateral, (y) the Issuer has no investments that do not qualify as Collateral Interests or Eligible Investments and (z) in the case of each Collateral Interest identified on Schedule A and pledged to the Trustee for inclusion in the Collateral on the Closing Date:

(1)

the Issuer is the owner of such Collateral Interest free and clear of any liens, claims or encumbrances of any nature whatsoever except for those which are being released on the Closing Date and except for those Granted pursuant to this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on such Collateral Interest prior to the first Payment Date and owed by the Issuer to the seller of such Collateral Interest;

(2)

the Issuer has acquired its ownership in such Collateral Interest in good faith without notice of any adverse claim (within the meaning given to such term by Section 8-102(a)(1) of the UCC), except as described in clause (1) above;

(3)

the Issuer has not assigned, pledged or otherwise encumbered any interest in such Collateral Interest (or, if any such interest has been assigned, pledged or otherwise encumbered, it has been released) other than interests Granted pursuant to this Indenture;

(4)

the Issuer has full right to Grant a security interest in and assign and pledge all of its right, title and interest in such Collateral Interest to the Trustee;

(5)

the information set forth with respect to such Collateral Interest on Schedule A is correct and each such Collateral Interest is transferred to the 105

Processed and formatted by SEC Watch - Visit SECWatch.com

Trustee as required by Section 3.2(a) (or, if any such Collateral Interest is not so transferred to the Trustee on the Closing Date, the Issuer has entered into a binding agreement to purchase such Collateral Interest for settlement within 10 days after the Closing Date); (6)

each such Collateral Interest satisfies the requirements of the definition of “Collateral Interest” and is not an Impaired Interest; and

(7)

upon Grant by the Issuer, the Trustee has a first priority perfected security interest in the Collateral (assuming that any Clearing Corporation, Securities Intermediary or other entity not within the control of the Issuer involved in the Grant of Collateral takes the actions required of it under Section 3.3(b) for perfection of that interest) and a “security entitlement” (as defined in the UCC) with respect to Financial Assets.

(c)

Rating Letters. The delivery to the Trustee of an Officer’s certificate of the Issuer, to the effect that (A) a letter signed by Moody’s confirming that the Class A-1 Notes have been rated “Aaa”, Class A-R Notes have been rated “Aaa”, Class A-2 Notes have been rated “Aaa”, the Class B Notes have been rated at least “Aa1”, the Class C Notes have been rated at least “Aa2”, the Class D Notes have been rated at least “Aa3”, the Class E Notes have been rated at least “A1”, the Class F Notes have been rated at least “A2”, the Class G Notes have been rated at least “A3”, the Class H Notes have been rated at least “Baa1”, the Class J Notes have been rated at least “Baa2”, the Class K Notes have been rated at least “Baa3”, the Class L Notes have been rated at least “Ba1”, the Class M Notes have been rated at least “Ba2”, the Class N Notes have been rated at least “Ba3” by Moody’s and (B) a letter signed by Fitch confirming that the Class A-1 Notes have been rated “AAA”, Class A-R Notes have been rated “AAA”, Class A-2 Notes have been rated “AAA”, the Class B Notes have been rated at least “AA+”, the Class C Notes have been rated at least “AA”, the Class D Notes have been rated at least “AA-”, the Class E Notes have been rated at least “A+”, the Class F Notes have been rated at least “A”, the Class G Notes have been rated at least “A-”, the Class H Notes have been rated at least “BBB+”, the Class J Notes have been rated at least “BBB”, the Class K Notes have been rated at least “BBB-”, the Class L Notes have been rated at least “BB+”, the Class M Notes have been rated at least “BB” and the Class N Notes have been rated at least “BB-”by Fitch and (ii) each such rating is in full force and effect on the Closing Date.

(d)

Accounts. The delivery by the Trustee of evidence of the establishment of the Payment Account, the Collection Account (including each Collateral Sub-Account established therein), the Expense Reserve Account, the Interest Reserve Account, the Collateral Account, the Future Funding Asset Account, the Class A-R Holder Collateral Account and the Uninvested Proceeds Account and, to be established on the Closing Date. 106

3.3.

(e)

Funding Certificate. The delivery to the Trustee of a funding certificate (the Funding Certificate), duly executed by an Authorized Officer of the Issuer, relating to, among other things, the disposition of the proceeds of the issuance of the Indenture Issued Notes, dated the Closing Date, in substantially the form of Exhibit D hereto.

(f)

Purchases. The delivery to the Trustee of a certification of the Issuer that it shall have purchased Collateral Interests having an aggregate Principal Balance as of the related Reference Dates of not less than U.S.$628,959,632.

CUSTODIANSHIP; TRANSFER OF COLLATERAL INTERESTS AND ELIGIBLE INVESTMENTS (a)

The Trustee shall hold all Certificated Securities and Instruments in physical form at the office of a custodian appointed by it in Minnesota (together with any successor, the Custodian). Initially, such Custodian shall be Wells Fargo Bank, National Association with its address at Wells Fargo Center, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: CDO Trust Services—N-Star REL CDO VIII.

(b)

Each Collateral Interest, Equity Interest and Eligible Investment shall be credited to the appropriate Account. Each time that the Issuer shall direct or cause the acquisition of any Collateral Interest, Equity Interest or Eligible Investment, the Trustee (on behalf of the Issuer) shall, if such Collateral Interest, Equity Interest or Eligible Investment has not already been transferred to the Collateral Account and credited thereto, cause the transfer of such Collateral Interest, Equity Interest or Eligible Investment to the Custodian to be held in and credited to the Collateral Account for the benefit of the Trustee in accordance with the terms of this Indenture. The security interest of the Trustee in the funds or other property utilized in connection with such acquisition shall, immediately and without further action on the part of the Trustee, be released. The security interest of the Trustee shall nevertheless come into existence and continue in the Collateral Interest, Equity Interest or Eligible Investment so acquired, including all rights of the Issuer in and to any contracts related to and proceeds of such Collateral Interest, Equity Interest or Eligible Investment.

(c)

On the Closing Date, on each day thereafter, if any, that any Collateral is acquired or otherwise becomes subject to the lien of this Indenture and on the Effective Date, the Issuer represents and warrants to the Trustee as

Processed and formatted by SEC Watch - Visit SECWatch.com

follows: (1)

This Indenture creates a valid and continuing security interest (as defined in the applicable Uniform Commercial Code) in the Collateral in favor of the Trustee on behalf and for the benefit of the Secured Parties, which 107

Processed and formatted by SEC Watch - Visit SECWatch.com

security interest is prior to all other liens and security interests, and is enforceable as such as against creditors of and purchasers from the Issuer and, upon delivery of the Collateral Interests and filing of the appropriate financing statements in the appropriate filing offices, the lien and security interest created by this Indenture shall be a perfected first priority security interest in favor of the Trustee for the benefit of the Secured Parties. (2)

The Issuer owns and has good and marketable title to the Collateral free and clear of any liens, claims, encumbrances or defects of any nature whatsoever except for those which are being released on the Closing Date or on the date of purchase by the Issuer or those created pursuant to or contemplated under this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on any Collateral Interest prior to the first payment date and owed by the Issuer to the seller of such Collateral Interest.

(3)

The Issuer has acquired its ownership in each such Collateral Interest, or will acquire in the case of any Collateral Interests which the Issuer has on or before the Closing Date committed to purchase, but which will not have settled on or before the Closing Date or any additional Collateral Interests or Substitute Collateral Interests acquired by the Issuer after the Closing Date, in good faith without notice of any adverse claim, except as described in clause (2) above.

(4)

The Issuer (a) has delivered each such Collateral Interest, or will deliver any Collateral Interests which the Issuer has on or before the Closing Date committed to purchase, but which will not have settled on or before the Closing Date or any additional Collateral Interests or Substitute Collateral Interests acquired by the Issuer after the Closing Date, to the Trustee and (b) has not assigned, pledged, sold, granted a security interest in or otherwise encumbered any interest in such Collateral Interest other than interests granted pursuant to this Indenture.

(5)

The Issuer has full right to grant all security interests granted herein.

(6)

All Collateral is comprised of either “securities,” “instruments,” “tangible chattel paper,” “accounts,” “security entitlements” or “general intangibles,” in each case as defined in the applicable Uniform Commercial Code.

(7)

Each of the Accounts, and all sub-accounts thereof, constitute securities accounts as defined in the applicable Uniform Commercial Code.

(8)

All items of the Collateral that constitute security entitlements have been and will have been credited to one of the securities accounts. The securities intermediary for each of the Accounts has agreed to treat all 108

Processed and formatted by SEC Watch - Visit SECWatch.com

assets credited to the securities accounts as financial assets under the applicable Uniform Commercial Code. (9)

Other than the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Collateral. The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer that include a description of collateral covering the Collateral other than any financing statement relating to the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder or that has been terminated. The Issuer is not aware of any judgment, Pension Benefit Guarantee Corporation lien or tax lien filings against it.

(10)

The Issuer has caused or will have caused, within ten (10) days of the Closing Date, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Collateral granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder that constitutes chattel paper, instruments, accounts, securities entitlements or general intangibles under the applicable Uniform Commercial Code, if any.

(11)

The Trustee or the Custodian has in its possession all original copies of the instruments that constitute or evidence the Collateral, if any. The instruments, loan agreements and leases that constitute or evidence the Collateral do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties. All financing statements filed or to be filed against the Issuer in favor of the Trustee on behalf and for the benefit of the Secured Parties in connection herewith describing the Collateral contain a statement to the following effect: “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Trustee on behalf and for the benefit of (A) itself and for the benefit of the Noteholders, (B) the Collateral Manager and (C) each Hedge Counterparty.”

(12)

The authoritative copy of any chattel paper that constitutes or evidences the Collateral, if any, has been communicated to the Trustee and has no marks or notations indicating that it has been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties.

(13)

The Issuer has received or will receive all consents and approvals required by the terms of the underlying loan agreement, indenture or other underlying documentation, if any, relating to the Collateral to the transfer 109

Processed and formatted by SEC Watch - Visit SECWatch.com

to the Trustee on behalf and for the benefit of the Secured Parties of its interest and rights in the Collateral hereunder. (14)

The Issuer, the Custodian and the Trustee have entered into the Account Control Agreement pursuant to which the Custodian has agreed to comply with all instructions originated by the Trustee relating to the Accounts without further consent by the Issuer.

(15)

None of the Accounts is in the name of any person other than the Trustee, held on behalf and for the benefit of the Secured Parties. The Issuer has not consented to the Trustee or the Custodian maintaining any of the Accounts to comply with entitlement orders or instructions of any Person other than the Trustee.

(16)

Notwithstanding any other provision of this Indenture or any other related Transaction Document, the representations in this Section 3.3(c) shall be continuing and deemed to be updated on any day a new item of Collateral is acquired, and remain in full force and effect until such time as all obligations under this Indenture and the Notes have been finally and fully paid and performed and shall survive the termination of this Indenture for any other reason.

(17)

The parties to this Indenture (i) shall not, without obtaining a Rating Confirmation, waive any of the representations in this Section 3.3(c); (ii) shall provide each of the Rating Agencies with prompt written notice of any breach of the representations contained in this Section 3.3(c) upon becoming aware thereof; and (iii) shall not, without obtaining a Rating Confirmation (as determined after any adjustment or withdrawal of the ratings following notice of such breach), waive a breach of any of the representations in this Section 3.3(c). ARTICLE IV SATISFACTION AND DISCHARGE

4.1.

SATISFACTION AND DISCHARGE OF INDENTURE

This Indenture shall be discharged and shall cease to be of further effect with respect to the Collateral securing the Indenture Issued Notes and the Indenture Issued Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Indenture Issued Notes, (iii) rights of Rated Noteholders to receive payments of principal thereof and interest thereon, (iv) the rights, obligations and immunities of the Trustee hereunder, (v) the rights, obligations and immunities of the Collateral Manager hereunder and under the Collateral Management Agreement and (vi) the rights of the Secured Parties as beneficiaries hereof with respect to the property deposited with the Trustee and payable to all or any of them; and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when: 110

Processed and formatted by SEC Watch - Visit SECWatch.com

(a)

either:

(1)

all Indenture Issued Notes theretofore authenticated and delivered (other than (A) Indenture Issued Notes which have been mutilated, defaced, destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.5 and (B) Indenture Issued Notes for whose payment funds have theretofore irrevocably been deposited in trust and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 7.3) have been delivered to the Trustee for cancellation; or

(2)

all Rated Notes not theretofore delivered to the Trustee or the PAA Issued Note Paying Agent, as applicable, for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity Date within one year, or (C) are to be called for redemption pursuant to Section 9.1 under an arrangement satisfactory to the Trustee for the giving of notice of redemption by the Co-Issuers pursuant to Section 9.3 and the Issuer has irrevocably deposited or caused to be deposited with the Trustee, in trust for such purpose, Cash or non-callable direct obligations of the United States in an amount sufficient, according to the Priority of Payments as verified by a firm of nationally recognized Independent certified public accountants, to pay and discharge the entire indebtedness on all Rated Notes not theretofore delivered to the Trustee or the PAA Issued Note Paying Agent, as applicable, for cancellation, including all principal and interest (including the Class E Cumulative Applicable Periodic Interest Shortfall Amount, Class F Cumulative Applicable Periodic Interest Shortfall Amount, Class G Cumulative Applicable Periodic Interest Shortfall Amount, Class H Cumulative Applicable Periodic Interest Shortfall Amount, Class J Cumulative Applicable Periodic Interest Shortfall Amount, Class K Cumulative Applicable Periodic Interest Shortfall Amount, Class L Cumulative Applicable Periodic Interest Shortfall Amount, Class M Cumulative Applicable Periodic Interest Shortfall Amount and Class N Cumulative Applicable Periodic Interest Shortfall Amount, accrued to the date of such deposit (in the case of Rated Notes which have become due and payable) or to the Stated Maturity Date or the Redemption Date, as the case may be; provided that (x) such obligations are entitled to the full faith and credit of the United States and (y) this subclause (2) shall not apply if an election to act in accordance with the provisions of Section 5.5(a) shall have been made and not rescinded;

(b)

the Issuer has paid or caused to be paid all other sums payable hereunder (including amounts payable pursuant to the Paying Agency Agreement, the Corporate Services Agreement, the Collateral Management Agreement, any Hedge Agreement and the Collateral Administration Agreement) and no other amounts will become due and payable by the Issuer; and 111

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

the Co-Issuers have delivered to the Trustee Officer’s certificates and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the rights and obligations of the Co-Issuers, the Trustee and any Hedge Counterparty and, if applicable, the Rated Noteholders, as the case may be, under Sections 2.6, 4.1, 4.2, 5.9, 5.18, 6.7, 6.8, 7.1 and 7.3 shall survive. 4.2.

APPLICATION OF TRUST MONEY

All funds deposited with the Trustee pursuant to Section 4.1 for the payment of principal of and interest on the Rated Notes and amounts payable pursuant to any Hedge Agreement, the Collateral Management Agreement, the Paying Agency Agreement, the Corporate Services Agreement and the Collateral Administration Agreement shall be held in trust and applied by it in accordance with the provisions of the Rated Notes and this Indenture, including the Priority of Payments, for the payment either directly or through any Note Paying Agent, as the Trustee may determine, to the Person entitled thereto of the respective amounts in respect of which such funds has been deposited with the Trustee; but such funds need not be segregated from other funds except to the extent required herein or required by law. 4.3.

REPAYMENT OF FUNDS HELD BY NOTE PAYING AGENT

In connection with the satisfaction and discharge of this Indenture with respect to the Rated Notes, all funds then held by any Note Paying Agent other than the Trustee under the provisions of this Indenture shall, upon demand of the Co-Issuers, be paid to the Trustee to be held and applied pursuant to Section 7.3 and in accordance with the Priority of Payments and thereupon such Note Paying Agent shall be released from all further liability with respect to such funds. ARTICLE V EVENTS OF DEFAULT; REMEDIES 5.1.

EVENTS OF DEFAULT

Event of Default, is defined as any one of the following wherever used herein, means any one of the following events as set forth in Section 5.1(a) through (i) (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a)

a default for five Business Days in the payment, when due and payable, of any interest on any Class A Note, any Class B Note, any Class C Note or any Class D Notes or any Class A-R Commitment Fee, or if there are no Class A Notes, Class B Notes, Class C Notes or Class D Notes Outstanding, of any interest on any Class E Note, or if there are no 112

Processed and formatted by SEC Watch - Visit SECWatch.com

Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes Outstanding, of any interest on any Class F Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes Outstanding, of any interest on any Class G Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes or Class G Notes Outstanding, of any interest on any Class H Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes Outstanding, of any interest on any Class J Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, or Class J Notes Outstanding, of any interest on any Class K Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes or Class K Notes Outstanding, of any interest on any Class L Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes or Class L Notes Outstanding, of any interest on any Class M Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes or Class M Notes Outstanding, of any interest on any Class N Note; (b)

a default in the payment of any principal, when due and payable of any Rated Note other than a Class N Note (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent, the Note Registrar or the PAA Issued Note Registrar, such default continues for a period of five Business Days);

(c)

the failure on any Payment Date to disburse amounts available in accordance with Section 11.1 (except as provided in Section 5.1(a) and (b) above) and a continuation of such failure for three Business Days (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent, the Note Registrar or the PAA Issued Note Registrar, such default continues for a period of five Business Days);

(d)

the event that either of the Co-Issuers or the pool of Collateral becomes an investment company required to be registered under the Investment Company Act;

(e)

a default in the performance, or breach, of any other covenant (it being understood that non-compliance with any of the Coverage Tests or the Collateral Quality Tests will not constitute a default or breach) or of any representation or warranty of either of the Co-Issuers under this Indenture, or if any certificate or writing delivered pursuant thereto proves to be 113

Processed and formatted by SEC Watch - Visit SECWatch.com

incorrect when made, which default or breach has a material adverse effect on the Rated Noteholders and continues for a period of thirty (30) days (or, in the case of a default, breach or failure of a representation or warranty regarding the Collateral, fifteen days) of the earlier of knowledge by the Co-Issuers or the Collateral Manager or notice to the Co-Issuers and the Collateral Manager by the Trustee or to the Co-Issuers and the Collateral Manager by the Holders of at least 25%, of the then Aggregate Outstanding Amount of the Rated Notes of any Class, specifying such default, breach or failure and requiring it to be remedied and stating that such notice is a “Notice of Default” under this Indenture; (f)

the Issuer is not treated as a Qualified REIT Subsidiary, unless (A) the Issuer has received an opinion of tax counsel of nationally recognized standing in the United States experienced in such matters to the effect that (i) notwithstanding the Issuer’s loss of Qualified REIT Subsidiary status, the Issuer is not, and has not been, an association (or publicly traded partnership) taxable as a corporation, or is not, and has not been, and will not be treated as a foreign corporation that is engaged in a trade or business in the United States or is otherwise subject to U.S. federal income tax on a net basis, (ii) payments of interest on the Collateral Interests will not be subject to withholding or other taxes, fees or assessments and (iii) the Holders of the Notes are not otherwise materially adversely affected by the loss of Qualified REIT Subsidiary status, (B) on or before the Measurement Date related to each Payment Date after the Issuer is not treated as a Qualified REIT Subsidiary, the Issuer receives an amount from the Income Noteholders sufficient to discharge in full any amounts (including any resulting taxes) and expenses of the Issuer that are caused by the Issuer not being treated as a Qualified REIT Subsidiary and are due on or before the Payment Date following such Measurement Date or (C) all Classes of the Notes are subject to a Tax Redemption announced by the Issuer in compliance with this Indenture, and such redemption has not been rescinded;

(g)

the entry of a decree or order by a court having competent jurisdiction adjudging the Issuer or the Co-Issuer as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer or the Co-Issuer under the Bankruptcy Code or any other applicable law, or appointing a receiver, liquidator, assignee, or sequestrator (or other similar official) of the Issuer or the CoIssuer or of any substantial part of its property; 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 ninety (90) consecutive days;

(h)

the institution by the Issuer or the Co-Issuer of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a 114

Processed and formatted by SEC Watch - Visit SECWatch.com

petition or answer or consent seeking reorganization or relief under the Bankruptcy Code or any other similar applicable law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of the Issuer or the Co-Issuer or of any substantial part of its property, respectively, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the passing of a special resolution for the voluntary winding up of the Issuer by its shareholders, the taking of any action by the Issuer or the Co-Issuer in furtherance of any such action; or (i)

on any Measurement Date, the Class A Principal Coverage Ratio is less than 89%.

If either of the Co-Issuers shall obtain actual knowledge that an Event of Default shall have occurred and be continuing, such CoIssuer shall (unless the Trustee shall have provided notice of such Event of Default pursuant to Section 6.2) promptly notify the Trustee, the Rated Noteholders, any Hedge Counterparty, the Collateral Manager and each Rating Agency in writing of such Event of Default. 5.2.

ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT (a)

If an Event of Default occurs and is continuing, the Trustee may or, if so directed by the Controlling Party, will declare the principal of and accrued interest on all Notes to be immediately due and payable (except that in the case of an Event of Default described in Section 5.1(g) or 5.1(h) above, such an acceleration will occur automatically).

(b)

Any Hedge Agreement existing on or after such acceleration may not be terminated by the Issuer unless and until liquidation of the Collateral has commenced and annulment of such acceleration may no longer be affected.

(c)

At any time after such acceleration of maturity has been made and before a judgment or decree for payment of the amount due has been obtained by the Trustee as hereinafter provided in this Section 5, the Trustee may reverse such acceleration and its consequences if the Trustee determines that:

(1)

the Issuer has paid or deposited with the Trustee funds sufficient to pay: (i)

all overdue installments of principal of and interest and Class A-R Commitment Fee on the Notes (including interest upon the Class E Cumulative Applicable Periodic Interest Shortfall Amount, the Class F Cumulative Applicable Periodic Interest Shortfall Amount, the Class G Cumulative Applicable Periodic Interest Shortfall Amount, the Class H Cumulative Applicable Periodic Interest Shortfall Amount, the Class J Cumulative Applicable Periodic 115

Interest Shortfall Amount, the Class K Cumulative Applicable Periodic Interest Shortfall Amount, the Class L Cumulative Applicable Periodic Interest Shortfall Amount, the Class M Cumulative Applicable Periodic Interest Shortfall Amount and the Class N Cumulative Applicable Periodic Interest Shortfall Amount respectively, at the Applicable Periodic Interest Rate and, to the extent that payment of such interest is lawful, upon Defaulted Interest at the Applicable Periodic Interest Rate); (ii)

any accrued and unpaid amounts and Class A-R Commitment Fee, Class A-R Increased Costs or Class AR Breakage Costs (including termination payments, if any) payable by the Issuer pursuant to any Hedge Agreement or the Class A-R Note Purchase Agreement;

(iii)

all unpaid taxes and Administrative Expenses, any accrued and unpaid Senior Collateral Management Fee, and other sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel;

(2)

the Trustee has determined that all Events of Default of which it has actual knowledge, other than the nonpayment of the principal of or interest on the Rated Notes that have become due solely by such acceleration, have been cured; and

(3)

any Hedge Agreement in effect immediately prior to such acceleration shall remain in effect.

provided that the Trustee shall have obtained (and shall be entitled to rely upon) a certification of an Independent accounting firm of national reputation as to the sufficiency of the amounts in Section 5.2(c)(1) above, which certification shall be conclusive evidence as to such sufficiency. In addition, the Trustee may, but is not required to, obtain, at the Issuer’s expense (and may rely upon), an Opinion of Counsel as to the matters in Sections 5.2(c)(2) and (3) above. At any such time as the Trustee shall reverse such acceleration and its consequences, the Trustee shall preserve the Collateral in accordance with the provisions of Section 5.5; provided that, if the conditions for liquidation of the Collateral are satisfied pursuant to

Processed and formatted by SEC Watch - Visit SECWatch.com

Section 5.5, the Rated Notes may be accelerated pursuant to Section 5.2(a). No such reversal of acceleration shall affect any subsequent Default or impair any right consequent thereon. 5.3.

COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE

The Co-Issuers (or, with respect to the Class L Notes, Class M Notes and Class N Notes, the Issuer only) covenant that if a Default shall occur in respect of the payment of any principal of or interest on any Class A Senior Note, the payment of principal of or interest on any Class A-2 116

Processed and formatted by SEC Watch - Visit SECWatch.com

Note (but with respect to interest, only after the Class A Senior Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class B Note (but with respect to interest, only after the Class A Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class C Note (but with respect to interest, only after the Class A Notes and Class B Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class D Note (but with respect to interest, only after the Class A Notes, Class B Notes and Class C Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class E Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes and Class D Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class F Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class G Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class H Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class J Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class K Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class L Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class M Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes and all interest accrued thereon have been paid in full) or the payment of principal of or interest on any Class N Note (but with respect to interest, only after the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes and all interest accrued thereon have been paid in full) the Co-Issuers (or, with respect to the Class L Notes, Class M Notes and Class N Notes, the Issuer only) will, upon demand of the Trustee or any affected Rated Noteholder, pay to the Trustee, for the benefit of the Holder of such Rated Note, the whole amount, if any, then due and payable on such Rated Note for principal and interest, with interest upon the overdue principal and, to the extent that payments of such interest shall be legally enforceable, upon overdue installments of interest, at the Applicable Periodic Interest Rate and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee and such Rated Noteholder and their respective agents and counsel. If either of the Co-Issuers (or, in the case of the Class L Notes, Class M Notes and Class N Notes, the Issuer only), fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of 117

Processed and formatted by SEC Watch - Visit SECWatch.com

the sums so due and unpaid, and may, and shall, upon the direction by the Controlling Party (and, if the action of the Issuer or the Co-Issuer pursuant to such direction would have a material adverse effect on the Initial Hedge Counterparty, the Initial Hedge Counterparty), prosecute such Proceeding to judgment or final decree, and may enforce the same against the Issuer or the Co-Issuers, as applicable, or any other obligor upon the Rated Notes and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the Collateral; provided that a Holder of a Rated Note may institute any proceeding if (i) such Holder previously has given to the Trustee written notice of an Event of Default, (ii) except in the case of a default in the payment of principal or interest, the Controlling Party, or if MBIA is no longer the Controlling Party, the Holders of at least 25% of the then Aggregate Outstanding Amount of the Notes of the Controlling Class, has made a written request upon the Trustee to institute such proceedings in its own name as Trustee and such Holders have offered the Trustee reasonable indemnity, (iii) the Trustee has, for thirty (30) days after receipt of notice, request and offer of such indemnity, failed to institute any such proceeding and (iv) no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Controlling Party. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Secured Parties by such appropriate Proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law. The Controlling Party or, if MBIA is no longer the Controlling Party, the Holders of a Majority of the then Aggregate Outstanding Amount or the Notes may (with the consent of the Initial Hedge Counterparty), in certain cases, waive any default with respect to such Notes, except (i) a default for more than five (5) Business Days in the payment, when due and payable, of any interest on any Note, (ii) a default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date, (iii) the failure on any Payment Date to disburse amounts available in the Collection Account in accordance with Section 11.1 and continuation of such failure for a period of three (3) Business Days, (iv) certain events of bankruptcy or insolvency with respect to the Co-Issuers (or, in the case of the Class L Notes, Class M Notes and Class N Notes, the Issuer only) or (v) a default in respect of any provision of this Indenture that cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby. In case there shall be pending Proceedings relative to the Issuer or the Co-Issuer or any other obligor upon the Rated Notes or any Hedge Agreement under the Bankruptcy Code or any other applicable bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer, the Co-Issuer or their respective property or such other obligor or its property, or in case of any other comparable Proceedings relative to the Issuer, the Co-Issuer or other obligor upon the Rated Notes or Hedge Agreement, or the creditors or property of the Issuer, the Co-Issuer or such other obligor, the Trustee, regardless of whether the principal of any Rated Notes or Hedge Agreement shall then be due and payable as therein expressed or by declaration or otherwise and regardless of whether the Trustee shall have made 118

Processed and formatted by SEC Watch - Visit SECWatch.com

any demand pursuant to the provisions of this Section 5.3, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (a)

to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Rated Notes or any Hedge Agreement upon direction by a Majority of the then Aggregate Outstanding Amount of the Notes, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee) and of the Rated Noteholders allowed in any Proceedings relative to the Issuer, the Co-Issuer or other obligor upon the Rated Notes or to the creditors or property of the Issuer, the Co-Issuer or such other obligor;

(b)

unless prohibited by applicable law and regulations, to vote on behalf of the Holders of the Rated Notes, upon the direction of such Holders, in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency Proceedings or person performing similar functions in comparable Proceedings; and

(c)

to collect and receive any amounts or other property payable to or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Rated Noteholders and of the Trustee on behalf of the Rated Noteholders and the Trustee; and any trustee, receiver or liquidator, custodian or other similar official is hereby authorized by each of the Rated Noteholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Rated Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other reasonable expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Rated Noteholder or the Initial Hedge Counterparty, any plan of reorganization, arrangement, adjustment or composition affecting the Rated Notes or the rights of any Holder thereof or the Initial Hedge Counterparty, or to authorize the Trustee to vote in respect of the claim of any Rated Noteholder or the Initial Hedge Counterparty in any such Proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. 119

Processed and formatted by SEC Watch - Visit SECWatch.com

In any Proceedings brought by the Trustee on behalf of the Holders, the Trustee shall be held to represent, subject to Section 6.17, all the Secured Parties if applicable, pursuant to Section 6.17. Notwithstanding anything in this Section 5.3 to the contrary, the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to this Section 5.3 except in accordance with Section 5.5(a). 5.4.

REMEDIES (a)

If an Event of Default shall have occurred and be continuing, and the Notes have been declared due and payable and such declaration and its consequences have not been rescinded and annulled, the Co-Issuers agree that, in addition to the requirements of Section 5.5(a), the Trustee may, after giving notice to the Noteholders, the Collateral Manager, each Hedge Counterparty and each Rating Agency, and with the consent of the Controlling Party, and shall, upon written direction by the Controlling Party, to the extent permitted by applicable law, exercise one or more of the following rights, privileges and remedies:

(1)

institute Proceedings for the collection of all amounts then payable on the Notes or otherwise payable under this Indenture, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Collateral any amounts adjudged due;

(2)

institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Collateral;

(3)

exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Secured Parties hereunder; and

(4)

subject to Section 5.4(d) below, exercise any other rights and remedies that may be available at law or in equity;

provided that the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to this Section 5.4 except in accordance with Section 5.5(a). The Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking firm of national reputation as to the feasibility of any action proposed to be taken in accordance with this Section 5.4 and as to the sufficiency of the proceeds and other amounts receivable with respect to the Collateral to make the required payments of principal of and interest on the Notes, which opinion shall be conclusive evidence as to such feasibility or sufficiency. (b)

If an Event of Default as described in Section 5.1(e) shall have occurred and be continuing, the Trustee may, and at the request of at least 25% of 120

Processed and formatted by SEC Watch - Visit SECWatch.com

the Holders of the then Aggregate Outstanding Amount of the Notes shall, institute a Proceeding solely to compel performance of the covenant or agreement or to cure the representation or warranty, the breach of which gave rise to the Event of Default under such Section, and enforce any equitable decree or order arising from such proceeding; provided that (i) such request does not conflict with any provision in this Indenture, (ii) the Trustee determines that such action will not involve the Trustee incurring any liability (unless the Trustee is indemnified to its satisfaction against any such liability) and (iii) the Trustee may take other action deemed proper by the Trustee, that is not inconsistent with such direction. (c)

Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the Initial Purchaser, any Hedge Counterparty, any Noteholder or Noteholders may bid for and purchase the Collateral or any part thereof and, upon compliance with the terms of sale, may hold, retain, possess or dispose of such property in its or their own absolute right without accountability.

Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the receipt of the Trustee, or of the Officer making a sale under judicial proceedings, shall be a sufficient discharge to the purchaser or purchasers at any sale for its or their purchase price, and such purchaser or purchasers shall not be obliged to see to the application thereof. Any such sale, whether under any power of sale hereby given or by virtue of judicial proceedings, shall bind the Co-Issuers, the Trustee and the Noteholders, shall operate to divest all right, title and interest whatsoever, either at law or in equity, of each of them in and to the property sold, and shall be a perpetual bar, both at law and in equity, against each of them and their successors and assigns, and against any and all Persons claiming through or under them. (d)

Notwithstanding any other provision of this Indenture, the Trustee may not, prior to the date which is one year and one day, or if longer the applicable preference period then in effect, after the payment in full of all Notes, institute against, or join any other Person in instituting against, the Issuer or the Co-Issuer any bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceedings, or other proceedings under federal or state bankruptcy or similar laws (of any jurisdiction). Nothing in this Section 5.4 shall preclude, or be deemed to stop, the Trustee (i) from taking any action prior to the expiration of the aforementioned one year and one day period, or if longer the applicable preference period then in effect, in (A) any case or proceeding voluntarily filed or commenced by the Issuer or the Co-Issuer or (B) any involuntary insolvency proceeding filed or commenced by a Person other than the Trustee, or (ii) from commencing against the Issuer or the Co-Issuer or any of its properties any legal action which is not a bankruptcy, 121

Processed and formatted by SEC Watch - Visit SECWatch.com

reorganization, arrangement, insolvency, moratorium, liquidation or similar proceeding. 5.5.

PRESERVATION OF COLLATERAL (a)

If an Event of Default shall have occurred and be continuing when any Class of Rated Notes is Outstanding, the Trustee shall retain the Collateral securing the Indenture Issued Notes and any Hedge Agreement intact, collect and cause the collection of the proceeds thereof and make all payments and deposits and maintain all accounts in respect of the Collateral, the Rated Notes and any Hedge Agreement in accordance with Section 11.1 and the provisions of Articles 10, 12 and 13 unless:

(1)

the Trustee, pursuant to Section 5.5(c), determines (such determinations may be based upon a certificate from the Collateral Manager) that the anticipated proceeds of a sale or liquidation of the Collateral (after deducting reasonable expenses relating to such sale or liquidation) would be sufficient to discharge in full the Redemption Prices then due on the Rated Notes (including the Class A-R Commitment Fees, Class A-R Increased Costs and Class A-R Breakage Costs), any amounts required to be paid under any Hedge Agreement, all unreimbursed Interest Advances together with interest thereon, all unreimbursed Cure Advances, all unpaid Administrative Expenses and any accrued and unpaid Senior Collateral Management Fee (to the extent not waived by the Collateral Manager) and the Controlling Party agrees with such determination; or

(2)

in the case of an Event of Default described in clauses (a), (b), (g), (h) or (i) in the definition thereof, the Controlling Party (and, unless it will be paid in full all amounts owing to it by the Issuer, the Initial Hedge Counterparty), subject to the provisions hereof, and subject to the Trustee determining that such action will not involve the Trustee incurring any liability, (unless the Trustee is indemnified to its satisfaction against any such liability) direct the sale and liquidation of the Collateral.

For purposes of Section 5.5(a)(2), if the Initial Hedge Counterparty shall fail to vote to direct the sale and liquidation of the Collateral within three Business Days after written notice from the Issuer or the Trustee requesting a vote pursuant to such Section 5.5(a)(2), the Initial Hedge Counterparty shall not be entitled to participate in the vote requested by such notice. The Trustee shall give written notice of the retention of the Collateral to the Issuer with a copy to the Co-Issuer, each Holder of the Rated Notes and the Initial Hedge Counterparty. So long as such Event of Default is continuing, any such retention pursuant to this Section 5.5(a) may be rescinded at any time when the conditions specified in clause Section 5.5(a)(1) or (2) exist. 122

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

Nothing contained in Section 5.5(a) shall be construed to require the Trustee to preserve the Collateral securing the Indenture Issued Notes if prohibited by applicable law.

(c)

In determining whether the condition specified in Section 5.5(a)(1) exists, the Trustee shall obtain bid prices with respect to each security contained in the Collateral from two nationally recognized dealers (or if it is unable in good faith to obtain such bid prices from two nationally recognized dealers, one nationally recognized dealer), as specified by the Collateral Manager in writing, which are Independent from each other and the Collateral Manager, at the time making a market in such securities and shall compute the anticipated proceeds of sale or liquidation on the basis of the lower of such bid prices for each such security. In addition, for the purposes of determining issues relating to the execution of a sale or liquidation of the Pledged Securities and the execution of a sale or other liquidation thereof in connection with a determination whether the condition specified in Section 5.5(a)(1) exists, the Trustee may retain and rely on an opinion of an Independent investment banking firm of national reputation.

The Trustee shall deliver to the Noteholders, each Hedge Counterparty, the Rating Agencies and the Co-Issuers a report stating the results of any determination required pursuant to Section 5.5(a)(1) no later than ten (10) days after making such determination but in any event prior to the sale or liquidation of the Collateral. The Trustee shall make the determinations required by Section 5.5(a)(1) within thirty (30) days after an Event of Default and at the request of the Controlling Party at any time during which the Trustee retains the Collateral pursuant to Section 5.5(a)(1). In the case of each calculation made by the Trustee pursuant to Section 5.5(a)(1), the Trustee shall obtain a letter of an Independent certified public accountant confirming the accuracy of the computations of the Trustee and certifying their conformity to the requirements of this Indenture. In determining whether the Controlling Party or the Holders of the requisite percentage of any Class of Rated Notes have given any direction or notice or have agreed pursuant to Section 5.5(a), any Holder of a Rated Note of a Class or Income Notes who is also a Holder of Rated Notes of another Class or of Income Notes or any Affiliate of any such Holder shall be counted as a Holder of each such Rated Note and/or Income Note for all purposes. (d)

If an Event of Default shall have occurred and be continuing at a time when no Rated Note is Outstanding, the Trustee shall retain the Collateral securing the Indenture Issued Notes and any Hedge Agreement intact, collect and cause the collection of the proceeds thereof and make and apply all payments and deposits and maintain all accounts in respect of the Collateral and the Rated Notes in accordance with Section 11.1 and the provisions of Section 10 and Section 12 unless a Majority of the Income Noteholders direct the sale and liquidation of the Collateral. 123

Processed and formatted by SEC Watch - Visit SECWatch.com

5.6.

(e)

If an Event of Default occurs and is continuing and prior to the Mandatory Class A-R Draw Date, no Class A-R Draw may be made except with respect to Class A-R Draws to be applied to fund Future Advance Amounts related to Future Funding Assets; provided, however, if an Event of Default specified in clauses Sections 5.1(d), (g) or (h) above occurs, the undrawn Class A-R Commitments will terminate automatically without need for further action.

(f)

On the Mandatory Class A-R Draw Date, the Issuer (or the Collateral Manager on behalf of the Issuer) will draw on the Class A-R Notes, in an amount equal to the lesser of (x) the Aggregate Class A-R Undrawn Amount and (y) the Total Net Future Unfunded Amount, and will deposit such amount into the Future Funding Asset Account in accordance with Section 17.1(c). Immediately following such draw, the Class A-R Commitments will terminate. The amounts on deposit in the Future Funding Asset Account may only be applied to fund Future Advance Amounts or on the date on which the Notes are redeemed in full, shall be transferred to the Collateral Principal Collection sub-account of the Collection Account and distributed pursuant to the Priority of Payments; provided, that to the extent that the amounts then on deposit in the Future Funding Asset Account exceed the Total Unfunded Future Advance Amount, the Collateral Manager may direct the Trustee to transfer such excess to the Collection Account as Collateral Principal Collections in accordance with the Priority of Payments.

TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION

All rights of action and of asserting claims under this Indenture, or under any of the Rated Notes, may be enforced by the Trustee without the possession of any of the Hedge Agreements or the Rated Notes or the production thereof in any trial or other Proceedings relative thereto, and any action or Proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the reasonable expenses, disbursements and compensation of the Trustee, each predecessor trustee and their respective agents and attorneys and counsel, shall be for the benefit of the Secured Parties and shall be applied as set forth in Section 5.7. 5.7.

APPLICATION OF FUNDS COLLECTED

Any funds collected by the Trustee with respect to any Hedge Agreement or the Rated Notes pursuant to this Section 5 and any funds that may then be held or thereafter received by the Trustee with respect to any Hedge Agreements or the Rated Notes hereunder shall be applied subject to Section 13.1 and in accordance with the provisions of Section 11.1(c), at the date or dates fixed by the Trustee. 124

5.8.

LIMITATION ON SUITS

Only the Trustee may pursue remedies available hereunder and no Holder of any Note shall have any right to institute any Proceedings, judicial or otherwise, with respect to this Indenture, or its Note or otherwise, for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a)

such Holder has previously given to the Trustee written notice of an Event of Default;

(b)

except in the case of a default in the payment of principal or interest, the Controlling Party or, if MBIA is no longer the Controlling Party, the Holders of at least 25% of the then Aggregate Outstanding Amount of the Notes of the Controlling Class shall have made a written request to the Trustee to institute Proceedings in respect of such Event of Default in its own name as Trustee hereunder and such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

(c)

the Trustee for thirty (30) days after its receipt of such notice, request and offer of indemnity has failed to institute any such Proceeding; and

(d)

no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Controlling Party;

it being understood and intended that no one or more Holders of Rated Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders of the Notes of the same Class or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders of Notes of the same Class. In addition, any action taken by any one or more of the Holders of Notes shall be subject to and in accordance with Sections 13.1 and 11.1(d). Notwithstanding any other provisions of this Indenture but subject to Section 5.8(d), if the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of the Rated Notes, each representing less than a Majority of the then Aggregate Outstanding Amount of Rated Notes, the Trustee shall follow the instructions of the group representing the higher percentage of aggregate principal amount of Outstanding Rated Notes.

Processed and formatted by SEC Watch - Visit SECWatch.com

5.9.

UNCONDITIONAL RIGHTS OF RATED NOTEHOLDERS (OTHER THAN THE CLASS N NOTEHOLDERS) TO RECEIVE PRINCIPAL AND INTEREST

Notwithstanding any other provision in this Indenture (other than Section 2.6(i)), the Holder of any Indenture Issued Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest (if any) on such Indenture Issued Note as such principal and/or interest become due and payable in accordance with Sections 13.1 and 125

Processed and formatted by SEC Watch - Visit SECWatch.com

11.1(c) and, subject to the provisions of Section 5.8, to institute proceedings for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. Holders of the Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes shall have no right to institute proceedings for the enforcement of any payment until such time as no Class of Rated Note that is senior to such Class of them remains Outstanding, which right shall be subject to the provisions of Section 5.8, and shall not be impaired without the consent of any such Holder. 5.10.

RESTORATION OF RIGHTS AND REMEDIES

If the Trustee or any Rated Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Rated Noteholder, then and in every such case the Co-Issuers, the Trustee and the Rated Noteholder shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Secured Parties shall continue as though no such Proceeding had been instituted. 5.11.

RIGHTS AND REMEDIES CUMULATIVE

No right or remedy herein conferred upon or reserved to the Trustee or to the Rated Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing by law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 5.12.

DELAY OR OMISSION NOT WAIVER

No delay or omission of the Trustee, any Rated Noteholder or the Initial Hedge Counterparty to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Section 5 or by law to the Trustee, the Rated Noteholders or the Initial Hedge Counterparty may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Rated Noteholders or the Initial Hedge Counterparty, as the case may be. 5.13.

CONTROL BY THE CONTROLLING PARTY

Notwithstanding any other provision of this Indenture (but subject to the proviso in the definition of “Outstanding” in Section 1.1(a)), the Controlling Party or the Holders of a Majority of the then Aggregate Outstanding Amount of Rated Notes shall have the right to cause the institution of and direct the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or of any sale of the Collateral, in whole or in part, provided that: (a)

such direction shall not conflict with any rule of law or with this Indenture; 126

Processed and formatted by SEC Watch - Visit SECWatch.com

5.14.

(b)

the Trustee may take any other action deemed proper by it that is not inconsistent with such direction; provided that, subject to Section 6.1, the Trustee need not take any action that it determines might involve it in liability (unless the Trustee has received an indemnity reasonably satisfactory to it against such liability as set forth below);

(c)

the Trustee shall have been provided with an indemnity reasonably satisfactory to it; and

(d)

any direction to the Trustee to undertake a Sale of the Collateral shall be made only pursuant to, and in accordance with, Sections 5.4 and 5.5.

WAIVER OF PAST DEFAULTS

The Controlling Party or the Holders of a Majority of the then Aggregate Outstanding Amount of Rated Notes may (with the consent of the Initial Hedge Counterparty), in certain cases waive any past Default and its consequences, except: (a)

a Default for more than five (5) Business Days in the payment, when due and payable, of any interest on any Note; or

(b)

a Default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date; or

(c)

the failure on any Payment Date to disburse amounts available in the Collection Account in accordance with Section 11.1 and the continuation of such failure for a period of three (3) Business Days; or

(d)

a Default arising under Section 5.1(g) or 5.1(h); or

(e)

a Default in respect of any provision of this Indenture that under Section 8.2 cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby.

In the case of any such waiver, (i) the Co-Issuers, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto, and (ii) the Trustee shall promptly give written notice of any such waiver to the Collateral Manager, each Hedge Counterparty and each Holder of Rated Notes. The Rating Agencies shall be notified by the Issuer of any such waiver. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. 127

Processed and formatted by SEC Watch - Visit SECWatch.com

5.15.

UNDERTAKING FOR COSTS

All parties to this Indenture agree, and each Holder of any Rated Note by its acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.15 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Rated Noteholder, or group of Rated Noteholders, holding in the aggregate more than 10% in Aggregate Outstanding Amount of the Rated Notes, or to any suit instituted by any Rated Noteholder for the enforcement of the payment of the principal of or interest on any Rated Note on or after the Stated Maturity Date expressed in such Rated Note (or, in the case of redemption, on or after the applicable Redemption Date). 5.16.

WAIVER OF STAY OR EXTENSION LAWS

The Co-Issuers covenant (to the extent that they may lawfully do so) that they will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force (including but not limited to filing a voluntary petition under Chapter 11 of the Bankruptcy Code and by the voluntary commencement of a proceeding or the filing of a petition seeking winding up, liquidation, reorganization or other relief under any bankruptcy, insolvency, receivership or similar law now or hereafter in effect), which may affect the covenants, the performance of or any remedies under this Indenture; and the Co-Issuers (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 5.17.

SALE OF COLLATERAL (a)

The power to effect any sale (a Sale) of any portion of the Collateral pursuant to Sections 5.4 and 5.5 shall not be exhausted by any one or more Sales as to any portion of such Collateral remaining unsold, but shall continue unimpaired until the entire Collateral shall have been sold or all amounts secured by the Collateral shall have been paid. The Trustee hereby expressly waives its rights to any amount fixed by law as compensation for any Sale; provided that the Trustee shall be authorized to deduct the reasonable costs, charges and expenses incurred by it in connection with such Sale from the proceeds thereof notwithstanding the provisions of Section 6.7.

(b)

The Trustee may bid for and acquire any portion of the Collateral in connection with a public Sale thereof, by crediting all or part of the net proceeds of such Sale after deducting the reasonable costs, charges and expenses incurred by the Trustee in connection with such Sale 128

Processed and formatted by SEC Watch - Visit SECWatch.com

notwithstanding the provisions of Section 6.7. The Rated Notes and any Hedge Agreement need not be produced in order to complete any such Sale, or in order for the net proceeds of such Sale to be credited against amounts owing on the Rated Notes. The Trustee may hold, lease, operate, manage or otherwise deal with any property so acquired in any manner permitted by law in accordance with this Indenture.

5.18.

(c)

If any portion of the Collateral consists of securities not registered under the Securities Act (Unregistered Securities), the Trustee may, but shall not be required to, seek an Opinion of Counsel, or, if no such Opinion of Counsel can be obtained, with the consent of a Majority of the then Aggregate Outstanding Amount of Rated Notes seek, a no-action position from the Commission or any other relevant federal or state regulatory authorities, regarding the legality of a public or private sale of such Unregistered Securities. In no event will the Trustee be required to register Unregistered Securities under the Securities Act.

(d)

The Trustee shall execute and deliver an appropriate instrument of conveyance transferring its interest in any portion of the Collateral in connection with a sale thereof. In addition, the Trustee is hereby irrevocably appointed the agent and attorney-in-fact of the Issuer to transfer and convey its interest in any portion of the Collateral in connection with a sale thereof, and to take all action necessary to effect such sale. No purchaser or transferee at such a sale shall be bound to ascertain the Trustee’s authority, to inquire into the satisfaction of any conditions precedent or see to the application of any funds.

ACTION ON THE RATED NOTES

The Trustee’s right to seek and recover judgment on the Rated Notes or under this Indenture shall not be affected by the seeking or obtaining of or application for any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Secured Parties shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer or the Co-Issuer. ARTICLE VI THE TRUSTEE 6.1.

CERTAIN DUTIES AND RESPONSIBILITIES (a)

Except during the continuance of an Event of Default:

(1)

the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and 129

Processed and formatted by SEC Watch - Visit SECWatch.com

(2)

in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided that, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they substantially conform to the requirements of this Indenture and shall promptly, but in any event within three Business Days in the case of an Officer’s certificate furnished by the Issuer, notify the party delivering the same if such certificate or opinion does not conform. If a corrected form shall not have been delivered to the Trustee within 15 days after such notice from the Trustee, the Trustee shall promptly notify the Rated Noteholders and the Hedge Counterparties.

(b)

In case an Event of Default actually known to the Trustee has occurred and is continuing, the Trustee shall, prior to the receipt of directions, if any, from the Controlling Party, exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(c)

No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(1)

This Section 6.1(c) shall not be construed to limit the effect of Section 6.1(a);

(2)

the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it shall be proven that the Trustee was negligent in ascertaining the pertinent facts;

(3)

the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Issuer or the Co-Issuer in accordance with this Indenture and/or the Controlling Party or a Majority (or such other percentage as may be required by the terms hereof) of the Aggregate Outstanding Amount of the Controlling Class (or other Class if required or permitted by the terms hereof) relating to the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;

(4)

no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers contemplated hereunder, if it shall have reasonable grounds for 130

Processed and formatted by SEC Watch - Visit SECWatch.com

believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it (if the amount of such funds or risk or liability does not exceed the amount payable to the Trustee pursuant to Section 11.1(a)(1) net of the amounts specified in Section 6.8(a)(1), the Trustee shall be deemed to be reasonably assured of such repayment) unless such risk or liability relates to performance of its ordinary services, including under Section 5, under this Indenture; and (5)

the Trustee shall not be liable to the Rated Noteholders for any action taken or omitted by it at the direction of the Co-Issuers (in the case of the Rated Notes other than the Class L Notes, Class M Notes and Class N Notes), the Issuer (in the case of the Class L Notes, Class M Notes and Class N Notes), the Collateral Manager and/or the Holders of the Rated Notes under the circumstances in which such direction is required or permitted by the terms of this Indenture.

(d)

For all purposes under this Indenture, the Trustee shall not be deemed to have notice or knowledge of any Protection Provider Default or Event of Default described in Section 5.1(d), 5.1(e), 5.1(f), 5.1(g) or 5.1(h) unless a Trust Officer assigned to and working in the Corporate Trust Office has actual knowledge thereof or unless written notice of any event which is in fact such a Protection Provider Default, Event of Default or such a Default, as the case may be, is received by the Trustee at the Corporate Trust Office. For purposes of determining the Trustee’s responsibility and liability hereunder, whenever reference is made in this Indenture to such an Event of Default or such a Default, as the case may be, such reference shall be construed to refer only to such an Event of Default or such a Default, as the case may be, of which the Trustee is deemed to have notice as described in this Section 6.1(d).

(e)

Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.

(f)

The Trustee shall, upon receipt of reasonable (but no less than three Business Days’) prior written notice, permit any representative of a Holder of a Rated Note or a Hedge Counterparty, during the Trustee’s normal business hours, to examine all books of account, records, reports and other papers of the Trustee relating to the Rated Notes, to make copies and extracts therefrom (the reasonable out-of-pocket expenses incurred in making any such copies or extracts to be reimbursed to the Trustee by such Holder) and to discuss the Trustee’s actions, as such actions relate to the Trustee’s duties with respect to the Rated Notes, with the Trustee’s officers and employees responsible for carrying out the Trustee’s duties with respect to the Rated Notes; provided that under no circumstances shall a Hedge Counterparty be permitted to review any documentation 131

Processed and formatted by SEC Watch - Visit SECWatch.com

containing the names or other indicia of identity of any of the Noteholders unless any such information (including the number of shares held by such Noteholder) has been redacted from such documentation. (g)

6.2.

With respect to the security interests created hereunder, the Trustee acts as a fiduciary for the Rated Noteholders only, and serves as a collateral agent for the other Secured Parties.

NOTICE OF DEFAULT

Promptly (and in no event later than three Business Days) after the occurrence of any Default actually known to a Trust Officer of the Trustee or after acceleration has been made pursuant to Section 5.2, the Trustee shall send to the Issuer, the PAA Issued Note Paying Agent, each Rating Agency, (for so long as any Class of Rated Notes is Outstanding), the Collateral Manager, each Hedge Counterparty and to all Holders of Rated Notes, as their names and addresses appear on the Note Register, notice of all Defaults hereunder known to the Trustee, unless such Default shall have been cured or waived. 6.3.

CERTAIN RIGHTS OF TRUSTEE Except as otherwise provided in Sections 6.1 and 8: (a)

the Trustee may rely and shall be protected in acting or refraining from acting in good faith and in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b)

any request or direction of the Issuer or the Co-Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or Issuer Order, as the case may be;

(c)

whenever in the administration of this Indenture the Trustee shall (i) deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer’s certificate or (ii) be required to determine the value of any Collateral or funds hereunder or the cashflows projected to be received therefrom, the Trustee may, in the absence of bad faith on its part, rely on reports of nationally recognized accountants, investment bankers or other Persons qualified to provide the information required to make such determination, including nationally recognized dealers in securities of the type being valued and securities quotation services;

(d)

as a condition to the taking or omitting of any action by it hereunder, the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection 132

Processed and formatted by SEC Watch - Visit SECWatch.com

in respect of any action taken or omitted by it hereunder in good faith and in reliance thereon; (e)

the Trustee shall be under no obligation to exercise or to honor any of the rights or powers vested in it by this Indenture at the request or direction of any of the Rated Noteholders pursuant to this Indenture, unless such Rated Noteholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might reasonably be incurred by it in compliance with such request or direction;

(f)

the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper documents, but the Trustee, in its discretion, may and, upon the written direction of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of any Class, the Initial Hedge Counterparty or any Rating Agency shall make such further inquiry or investigation into such facts or matters as it may see fit or as it shall be directed, and, the Trustee shall be entitled, on reasonable prior notice to the Co-Issuers, to examine the books and records of the Co-Issuers or the Collateral Manager relating to the Rated Notes and the Collateral, personally or by agent or attorney at a time acceptable to the Co-Issuers or the Collateral Manager in their reasonable judgment during normal business hours; provided that the Trustee shall, and shall cause its agents, to hold in confidence all such information, except (i) to the extent disclosure may be required by law by any regulatory authority and (ii) to the extent that the Trustee, in its sole judgment, may determine that such disclosure is consistent with its obligations hereunder;

(g)

the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys; provided that the Trustee shall not be responsible for any misconduct or negligence on the part of any agent (other than any Affiliate of the Trustee) appointed and supervised, or attorney appointed, with due care by it hereunder;

(h)

the Trustee shall not be liable for any action it takes or omits to take in good faith that it reasonably and, after the occurrence and during the continuance of an Event of Default, prudently believes to be authorized or within its rights or powers hereunder;

(i)

nothing herein shall be construed to impose an obligation on the part of the Trustee to recalculate, evaluate or verify any report, certificate or information received from the Issuer or Collateral Manager (unless and except to the extent otherwise expressly set forth herein or upon the request of the Initial Hedge Counterparty, a Rating Agency or a Majority of the then Aggregate Outstanding Amount of the Rated Notes); 133

6.4.

(j)

the Trustee shall not be responsible or liable for the actions or omissions of, or any inaccuracies in the records of, any non-Affiliated custodian, clearing agency, common depository, Euroclear or Clearstream or for the acts or omissions of the Collateral Manager or either Co-Issuer;

(k)

to the extent any defined term hereunder, or any calculation required to be made or determined by the Trustee hereunder, is dependent upon or defined by reference to generally accepted accounting principles in the United States (GAAP), the Trustee shall be entitled to request and receive (and rely upon) instruction from the Issuer or the accountants appointed pursuant to 10.14 as to the application of GAAP in such connection, in any instance;

(l)

to the extent permitted by law, the Trustee shall not be required to give any bond or surety in respect of the execution of this Indenture or otherwise; and

(m)

the permissive right of the Trustee to take or refrain from taking any actions enumerated in this Indenture shall not be construed as a duty.

(n)

The Trustee shall be entitled to conclusively rely upon the Collateral Manager’s determination that the representations and warranties provided in connection with the acquisition of a Mezzanine Loan, a Subordinate Mortgage Loan Interest, a Credit Lease Loan, a Tenant Lease Loan Interest, a Participation Interest or a Commercial Mortgage Loan comply with the requirements of Sections 12.2(u) and (v).

AUTHENTICATING AGENTS

If the Trustee so chooses the Trustee may appoint one or more Authenticating Agents with power to act on its behalf and subject to its direction in the authentication of Indenture Issued Notes in connection with issuance, transfers and exchanges under Sections 2.4, 2.5 and 8.5, as fully to all intents and purposes as though each such Authenticating Agent had been expressly authorized by those Sections to authenticate such Indenture Issued Notes. For all purposes of this Indenture, the authentication of Indenture Issued Notes by an Authenticating Agent pursuant to this Section 6.4 shall be deemed to be the authentication of Indenture Issued Notes “by the Trustee.” Any entity into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any entity

Processed and formatted by SEC Watch - Visit SECWatch.com

resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any entity succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, without the execution or filing of any further act on the part of the parties hereto or such Authenticating Agent or such successor entity. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and the Issuer. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and 134

Processed and formatted by SEC Watch - Visit SECWatch.com

the Co-Issuers. Upon receiving such notice of resignation or upon such a termination, the Trustee shall promptly appoint a successor Authenticating Agent and shall give written notice of such appointment to the Co-Issuers. The Issuer agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services (provided, however, that, so long as an Authenticating Agent is the Trustee, or an Affiliate thereof, such compensation shall be payable by the Trustee, rather than by the Issuer), and reimbursement for its reasonable expenses relating thereto and the Trustee shall be entitled to be reimbursed for such payments, subject to Section 6.8. The provisions of Sections 2.8, 6.5 and 6.6 shall be applicable to any Authenticating Agent. 6.5.

NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF RATED NOTES

The recitals contained herein and in the Rated Notes, other than the Certificate of Authentication thereon, shall be taken as the statements of the Co-Issuers (with respect to the Rated Notes other than the Class L Notes, Class M Notes and Class N Notes) and the Issuer (with respect to the Class L Notes, Class M Notes and Class N Notes), and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or sufficiency of this Indenture (except as may be made with respect to the validity of the Trustee’s obligations hereunder), of the Collateral or of the Rated Notes. The Trustee shall not be accountable for the use or application by the Co-Issuers of the Rated Notes (other than the Class L Notes, Class M Notes or the Class N Notes), by the Issuer of the Class L Notes, Class M Notes or the Class N Notes or the proceeds thereof or any amounts paid to either of the Co-Issuers pursuant to the provisions hereof. 6.6.

MAY HOLD RATED NOTES

The Trustee, any Note Paying Agent, the Note Registrar or any other agent of the Co-Issuers, in its individual or any other capacity, may become the owner or pledgee of Rated Notes and, may otherwise deal with the Co-Issuers or any of their Affiliates, with the same rights it would have if it were not Trustee, Note Paying Agent, Note Registrar or such other agent. 6.7.

FUNDS HELD IN TRUST

Funds held by the Trustee hereunder shall be held in trust to the extent required herein. The Trustee shall be under no liability for interest on any funds received by it hereunder except as otherwise agreed upon with the Issuer and except to the extent of income or other gain on investments which are deposits in or certificates of deposit of the Trustee in its commercial capacity and income or other gain actually received by the Trustee on Eligible Investments. 6.8.

COMPENSATION AND REIMBURSEMENT (a)

The Issuer agrees:

(1)

to pay the Trustee on each Payment Date the Trustee Fee, the PAA Issued Note Paying Agent Fee and reasonable compensation for all other services, including custodial services, rendered by it hereunder (which 135

Processed and formatted by SEC Watch - Visit SECWatch.com

compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2)

except as otherwise expressly provided herein, to reimburse the Trustee (subject to any written agreement between the Issuer and the Trustee) in a timely manner upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture or in the enforcement of any provision hereof and expenses related to the maintenance and administration of the Collateral (including securities transaction charges and the reasonable compensation and expenses and disbursements of its agents and legal counsel and of any accounting firm or investment banking firm employed by the Trustee pursuant to Section 5.2, 5.4, 5.5, 6.3(c), 6.3(k), 10.12 or 10.14, except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith but only to the extent any such securities transaction charges have not been waived during a Due Period due to the Trustee’s receipt of a payment from a financial institution with respect to certain Eligible Investments);

(3)

to indemnify the Trustee and its Officers, directors, employees and agents for, and to hold them harmless against, any loss, liability or expense incurred by it without negligence, willful misconduct or bad faith on their part, arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs and expenses (including reasonable counsel fees) of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties hereunder; and

(4)

to pay the Trustee reasonable additional compensation together with its expenses (including reasonable counsel fees) for any collection action taken pursuant to Section 6.14.

(b)

The Issuer may remit payment for such fees and expenses to the Trustee or, in the absence thereof, the Trustee may from time to time deduct payment of its fees and expenses hereunder from funds on deposit in the Expense Account pursuant to Section 11.1.

(c)

The Trustee hereby agrees not to cause the filing of a petition in bankruptcy against the Issuer for the nonpayment to the Trustee of any amounts provided by this Section 6.8 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 Rated Notes.

(d)

The amounts payable to the Trustee pursuant to Sections 6.8(a)(2) through (4) (other than amounts received by the Trustee from financial institutions under Section 6.8(a)(2) above) shall not, except as provided by Section 11.1(a)(34) or Section 11.1(b)(28), exceed on any Payment Date 136

Processed and formatted by SEC Watch - Visit SECWatch.com

the limitation described in Section 11.1(a)(1) for such Payment Date; provided that (A) the Trustee shall not institute any proceeding for enforcement of such lien except in connection with an action pursuant to Section 5.3 or 5.4 for the enforcement of the lien of this Indenture for the benefit of the Secured Parties and (B) the Trustee may only enforce such a lien in conjunction with the enforcement of the rights of the Secured Parties in the manner set forth in Section 5.4. The Trustee shall, subject to the Priority of Payments, receive amounts pursuant to this Section 6.8 and Section 11.1 only to the extent that the payment thereof will not result in an Event of Default and the failure to pay such amounts to the Trustee will not, by itself, constitute an Event of Default. Subject to Section 6.10, the Trustee shall continue to serve as Trustee under this Indenture notwithstanding the fact that the Trustee shall not have received amounts due it hereunder and hereby agrees not to cause the filing of a petition in bankruptcy against the Co-Issuers for the nonpayment to the Trustee of any amounts provided by this Section 6.8 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 Rated Notes. No direction by the Holders of a Majority of the then Aggregate Outstanding Amount of the Rated Notes shall affect the right of the Trustee t o collect amounts owed to it under this Indenture. The indemnifications in favor of the Trustee in this Section 6.8 shall (i) survive any resignation or removal of any Person acting as Trustee (to the extent of any indemnified liabilities, costs, expenses and other amounts arising or incurred prior to, or arising out of actions or omissions occurring prior to, such resignation or removal) and (ii) apply to the Trustee in its capacities as Custodian, Note Paying Agent, Rated Note Calculation Agent and Authenticating Agent. 6.9.

CORPORATE TRUSTEE REQUIRED; ELIGIBILITY

There shall at all times be a Trustee hereunder which shall be a bank, corporation or trust company 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.$100,000,000, subject to supervision or examination by federal or state banking authorities, and insured by the Federal Deposit Insurance Corporation, an entity with respect to which Rating Confirmation has been received. If such entity publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.9, the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.9, it shall resign immediately in the manner and with the effect hereinafter specified in this Section 6. 6.10.

RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR (a)

No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Section 6 shall become effective until 137

Processed and formatted by SEC Watch - Visit SECWatch.com

the acceptance of appointment by the successor Trustee under Section 6.11. (b)

The Trustee may resign at any time by giving 90 days prior written notice thereof to the Co-Issuers, the Rated Noteholders, the Collateral Manager, each Hedge Counterparty and each Rating Agency. Upon receiving such notice of resignation, or if the Trustee is removed or becomes incapable of acting, or if a vacancy shall occur in the office of the Trustee for any reason, the Issuer shall (after consultation with the Collateral Manager) promptly propose a successor trustee for approval by the Holders of 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes. A proposed successor trustee approved in accordance with the preceding sentence shall be appointed by the Co-Issuers as successor trustee by written instrument, in duplicate, executed by an Authorized Officer of the Issuer and an Authorized Officer of the Co-Issuer, one copy of which shall be delivered to the Trustee so resigning and one copy to the successor trustee or trustees, together with a copy to each Rated Noteholder. If no successor trustee shall have been appointed and an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee or any Holder of a Rated Note or any Hedge Counterparty on behalf of itself and all others similarly situated, subject to Section 5.15, may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c)

The Trustee may be removed at any time by an Act of the Holders of at least 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes delivered to the Trustee and to the Co-Issuers.

(d)

If at any time:

(1)

the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by any Holder; or

(2)

the Trustee shall become incapable of acting or shall be adjudged as bankrupt or insolvent or a receiver or liquidator of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case (subject to Section 6.10(a)), (A) the Co-Issuers, by Issuer Order shall remove the Trustee, or (B) subject to Section 5.15, any Holder or any Hedge Counterparty may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. 138

Processed and formatted by SEC Watch - Visit SECWatch.com

(e)

6.11.

The Co-Issuers shall give prompt notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first class mail, postage prepaid, to each Rating Agency, each Hedge Counterparty, the Collateral Manager and the Holders as their names and addresses appear in the Note Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. If the Co-Issuers fail to mail such notice within ten days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Co-Issuers.

ACCEPTANCE OF APPOINTMENT BY SUCCESSOR

Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Co-Issuers and the retiring Trustee (with copies to the Collateral Manager) an instrument accepting such appointment. Upon delivery of the required instruments, the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any other act, deed or conveyance, shall become vested with all the rights, powers, trusts, duties and obligations of the retiring Trustee; but, on request of the Co-Issuers or a Majority of the then Aggregate Outstanding Amount of the Notes of any Class of Notes or the successor Trustee, such retiring Trustee shall, upon payment of its charges, fees, indemnities and expenses then unpaid, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and funds held by such retiring Trustee hereunder, subject nevertheless to its lien, if any, provided for in Section 6.8(d). Upon request of any such successor Trustee, the Co-Issuers shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless (a) at the time of such acceptance such successor shall be qualified and eligible under Section 6.9 and the other provisions of this Section 6 and (b) a Rating Confirmation shall have been obtained with respect to the appointment of such successor Trustee shall have been satisfied. No appointment of a successor Trustee shall become effective unless approved by the Holders of not less than 66 2/3% of the Aggregate Outstanding Amount of the Notes; and no appointment of a successor Trustee shall become effective until the date ten days after notice of such appointment has been given to each Rated Noteholder and each Rating Agency. 6.12.

MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF TRUSTEE

Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided such Person shall be otherwise qualified and eligible under this Section 6, without the execution or filing of any paper or any further act on the part of any of the parties hereto. The successor Trustee will notify each Rating Agency of any such merger, conversion or consolidation. In case any of the Indenture Issued Notes have been authenticated, but not delivered, by the Trustee then in office, 139

Processed and formatted by SEC Watch - Visit SECWatch.com

any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Indenture Issued Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Indenture Issued Notes. 6.13.

CO-TRUSTEES

At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any part of the Collateral may at the time be located, the Trustee shall have power to appoint one or more Persons to act as Co-trustee, jointly with the Trustee of all or any part of the Collateral, with the power to file such proofs of claim and take such other actions pursuant to Section 5.6 and to make such claims and enforce such rights of action on behalf of the Holders of the Rated Notes subject to the other provisions of this Section 6.13. The Co-Issuers shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint a Co-trustee. If the Co-Issuers do not join in such appointment within 15 days after the receipt by them of a request to do so, the Trustee shall have power to make such appointment. Should any written instrument from the Co-Issuers be required by any Co-trustee so appointed for more fully confirming to such Cotrustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the CoIssuers. The Co-Issuers agree to pay (subject to the Priority of Payments) for any reasonable fees and expenses in connection with such appointment. Every Co-trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms: (a)

the Indenture Issued Notes shall be authenticated and delivered and all rights, powers, duties and obligations hereunder in respect of the custody of securities, funds and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely by the Trustee;

(b)

the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by the appointment of a Co-trustee shall be conferred or imposed upon and exercised or performed by the Trustee or by the Trustee and such Co-trustee jointly, as shall be provided in the instrument appointing such Cotrustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by a Co-trustee;

(c)

the Trustee at any time, by an instrument in writing executed by it, may accept the resignation of or remove any Cotrustee appointed under this Section 6.13. A successor to any Co-trustee so resigned or removed may be appointed in the manner provided in this Section 6.13; 140

Processed and formatted by SEC Watch - Visit SECWatch.com

6.14.

(d)

no Co-trustee hereunder shall be personally liable by reason of any act or omission of the Trustee or any other Cotrustee hereunder;

(e)

the Trustee shall not be liable by reason of any act or omission of a Co-trustee;

(f)

any Act of Rated Noteholders delivered to the Trustee shall be deemed to have been delivered to each Co-trustee; and

(g)

each Co-trustee hereunder shall at the time of such acceptance satisfy the qualification required of a Trustee under Section 6.9 and the other provisions of this Section 6.

CERTAIN DUTIES RELATED TO DELAYED PAYMENT OF PROCEEDS; OTHER NOTICES

In the event that the Trustee shall not have received a payment with respect to any Pledged Security within two Business Days after its Due Date, the Trustee shall (i) notify the Issuer and Collateral Manager in writing and (ii) promptly request the issuer of such Pledged Security, the trustee under the related Underlying Instrument or paying agent designated by either of them, as the case may be, to make such payment as soon as practicable after such request but in no event later than three Business Days after the date of such request. In the event that such payment is not made within such time period, the Trustee, subject to the provisions of Section 6.1(c)(4), shall, subject to the restrictions on the sale of Collateral Interests set forth in Section 12.1, take such action as the Collateral Manager shall direct in writing. Any such action shall be without prejudice to any right to claim a Default under this Indenture. The Trustee will promptly notify the Issuer if the Collateral Manager has determined that (i) any Collateral Interest has become an Impaired Interest, a Deferred Interest PIK Bond, a Credit Risk Interest, a Credit Improved Interest, a Future Funding Interest or a Written Down Interest or (ii) the Trustee has received an Equity Interest in connection with any Collateral Interest. 6.15.

REPRESENTATIONS AND WARRANTIES OF THE BANK (a)

Organization. The Bank has been duly organized and is validly existing as a national banking association under the laws of the United States and has the power to conduct its business and affairs as a trustee.

(b)

Authorization; Binding Obligations. The Bank has the power and authority to perform the duties and obligations of Trustee, Note Registrar and Note Transfer Agent or any other capacity to which it is appointed under this Indenture. The Bank has taken all necessary action to authorize the execution, delivery and performance of this Indenture, and all of the documents required to be executed by the Bank pursuant hereto. This Indenture has been duly executed and delivered by the Bank. Upon execution and delivery by the Co-Issuers, this Indenture will constitute the legal, valid and binding obligation of the Bank enforceable in accordance with its terms. 141

Processed and formatted by SEC Watch - Visit SECWatch.com

6.16.

(c)

Eligibility. The Bank is eligible under Section 6.9 to serve as Trustee hereunder.

(d)

No Conflict. Neither the execution, delivery and performance of this Indenture, nor the consummation of the transactions contemplated by this Indenture, (i) is prohibited by, or requires the Bank to obtain any consent, authorization, approval or registration under, any law, statute, rule, regulation, judgment, order, writ, injunction or decree that is binding upon the Bank or any of its properties or assets, or (ii) will violate any provision of, result in any default or acceleration of any obligations under, result in the creation or imposition of any lien pursuant to, or require any consent under, any agreement to which the Bank is a party or by which it or any of its property is bound.

(e)

No Proceedings. There are no proceedings pending, or to the best knowledge of the Bank, threatened against the Bank before any federal, state or other governmental agency, authority, administrator or regulatory body, arbitrator, court or other tribunal, foreign or domestic, that could have a material adverse effect on the Collateral or any action taken or to be taken by the Bank under this Indenture.

EXCHANGE OFFERS, PROPOSED AMENDMENTS ETC.

The Collateral Manager may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, take any of the following actions with respect to a Collateral Interest or Equity Interest as to which an Offer has been made or as to which any consent, waiver, vote or exercise has been requested: (i) exchange such instrument for other securities or a mixture of securities and other consideration pursuant to such Offer (and in making a determination whether or not to exchange any security, none of the restrictions set forth in Section 12 shall be applicable); and (ii) give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Interest or Equity Interest. In the event that the Trustee does not receive instruction from the Collateral Manager, the Trustee shall have no obligation to take action with respect to such exchange or such request for consent, waiver, vote or exercise. In the event that the Trustee receives written notice of any proposed amendment, consent or waiver under the Underlying Instruments of any Collateral Interests (before or after any default), the Trustee shall promptly deliver copies of such notice to the Issuer and the Collateral Manager. The Collateral Manager may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, with respect to a Collateral Interest as to which a consent or waiver under the Underlying Instruments of such Collateral Interest (before or after any default) has been proposed, give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Interest only in accordance with such Issuer Order. In the absence of any instruction from the Collateral Manager, the Trustee shall not engage in any vote with respect to such Collateral Interest. 142

6.17.

FIDUCIARY FOR RATED NOTEHOLDERS ONLY; AGENT FOR OTHER SECURED PARTIES

With respect to the security interests created hereunder, the pledge of any portion of the Collateral to the Trustee is to the Trustee as representative of the Rated Noteholders and agent for other Secured Parties. In furtherance of the foregoing, the possession by the Trustee of any portion of the Collateral and the endorsement to or registration in the name of the Trustee of any portion of the Collateral (including without limitation as entitlement holder of the Collateral Account) are all undertaken by the Trustee in its capacity as representative of the Rated Noteholders and as agent for the other Secured Parties. The Trustee shall not by reason of this Indenture be deemed to be acting as fiduciary for any Hedge Counterparty or the Collateral Manager, provided that the foregoing shall not limit any of the express obligations of the Trustee under this Indenture. 6.18.

WITHHOLDING

If any withholding tax is imposed on the Issuer’s payment (or allocations of income) under the Rated Notes to any Rated Noteholder, such tax shall reduce the amount otherwise distributable to such Rated Noteholder. The Trustee is hereby authorized and directed to retain from amounts otherwise distributable to any Rated Noteholder sufficient funds for the payment of any tax that is required to be withheld or deducted by the Issuer (but such authorization shall not prevent the Trustee from contesting any such tax in appropriate proceedings and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding tax imposed with respect to any Rated Noteholder shall be treated as Cash distributed to such Rated Noteholder at the time it is withheld by the Trustee and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution, the Trustee may in its sole discretion withhold such amounts in accordance with this Section 6.18. If any Rated Noteholder wishes to apply for a refund of any such withholding tax, the Trustee shall reasonably cooperate with such Rated Noteholder in making such claim so long as such Rated Noteholder agrees to reimburse the Trustee for any out-of-pocket expenses incurred. Nothing herein shall impose an obligation on the part of the Trustee to determine the amount of any tax or withholding obligation on the part of the Issuer or in respect of the Income Notes. ARTICLE VII COVENANTS 7.1.

PAYMENT OF PRINCIPAL AND INTEREST The Co-Issuers will duly and punctually pay all principal (including the Class E Cumulative Periodic Interest Shortfall Amount, the

Processed and formatted by SEC Watch - Visit SECWatch.com

Class F Cumulative Periodic Interest Shortfall Amount and the Class G Cumulative Periodic Interest Shortfall Amount, the Class H Cumulative Periodic Interest Shortfall Amount, the Class J Cumulative Periodic Interest Shortfall Amount and the Class K Cumulative Periodic Interest Shortfall Amount), interest (including Defaulted Interest and interest thereon, if any) in accordance with the terms of the Rated Notes (other than the Class L Notes, Class M Notes and Class N Notes) and this Indenture and amounts due under any Hedge Agreement in accordance with this Indenture. The Issuer will 143

Processed and formatted by SEC Watch - Visit SECWatch.com

duly and punctually pay all principal (including the Class L Cumulative Periodic Interest Shortfall Amount, the Class M Cumulative Periodic Interest Shortfall Amount and the Class N Cumulative Periodic Interest Shortfall Amount), interest (including Defaulted Interest and interest thereon, if any) in accordance with the terms of the Class L Notes, Class M Notes and Class N Notes and this Indenture and amounts due under any Hedge Agreement in accordance with this Indenture. Amounts properly withheld under the Code or other applicable law by any Person from a payment to any Rated Noteholder of principal and/or interest shall be considered as having been paid by the Co-Issuers (in the case of Rated Notes other than the Class L Notes, Class M Notes and Class N Notes) or the Issuer (in the case of the Class L Notes, the Class M Notes or the Class N Notes) to such Rated Noteholder for all purposes of this Indenture. The Trustee shall, unless prevented from doing so for reasons beyond its reasonable control, give notice to each Rated Noteholder and each Rating Agency of any such withholding requirement no later than ten days prior to the date of the payment from which amounts are required to be withheld; provided that despite the failure of the Trustee to give such notice, amounts withheld pursuant to applicable tax laws shall be considered as having been paid by the Co-Issuers or the Issuer as provided above. 7.2.

MAINTENANCE OF OFFICE OR AGENCY

The Co-Issuers hereby appoint the Trustee as Note Paying Agent for the payment of principal of and interest on the Rated Notes. The Co-Issuers hereby appoint Wells Fargo Bank, National Association with an address at 9062 Old Annapolis Road, Columbia, Maryland 21045, Attn: CDO Trust Services—N-Star REL CDO VIII, as the Co-Issuers’ agent where notices and demands to or upon the Co-Issuers in respect of the Rated Notes or this Indenture (except service of any and all process in any action or proceeding) may be served. Rated Notes may be surrendered for registration of transfer or exchange at the Corporate Trust Office of the Trustee in Minnesota. The Co-Issuers may at any time and from time to time, terminate the appointment of any such agent or appoint any additional agents for any or all of such purposes; provided that (A) the Co-Issuers will maintain in the Borough of Manhattan, The City of New York, an office or agency where notices and demands to or upon the Co-Issuers in respect of the Rated Notes and this Indenture may be served, (B) no Note Paying Agent shall be appointed in a jurisdiction which subjects payments on the Rated Notes to withholding tax and (C) the Co-Issuers may not terminate the appointment of any Note Paying Agent without the consent of each Income Noteholder. The Co-Issuers shall give prompt written notice to the Trustee, each Hedge Counterparty and each Rating Agency and the Rated Noteholders of the appointment or termination of any such agent and of the location and any change in the location of any such office or agency. If at any time the Co-Issuers shall fail to maintain any such required office or agency in the Borough of Manhattan, The City of New York or shall fail to furnish the Trustee with the address thereof, presentations and surrenders may be made at and notices and demands may be served on the Co-Issuers and Rated Notes may be presented and surrendered for payment to the Note Paying Agent at its office in Minnesota (and the Co-Issuers hereby appoint the same as their agent to receive such respective presentations, surrenders, notices and demands). 144

Processed and formatted by SEC Watch - Visit SECWatch.com

7.3.

FUNDS FOR RATED NOTE PAYMENTS TO BE HELD IN TRUST

All payments of amounts due and payable with respect to any Rated Notes that are to be made from amounts withdrawn from the Payment Account shall be made on behalf of the Co-Issuers or the Issuer, as applicable, by the Trustee or a Note Paying Agent with respect to payments on the Rated Notes. When the Co-Issuers shall have a Note Paying Agent that is not also the Note Registrar, they shall direct the Note Registrar to furnish, no later than the fifth calendar day after each Record Date a list, if necessary, in such form as such Note Paying Agent may reasonably request, of the names and addresses of the Holders and of the certificate numbers of individual Rated Notes held by each such Holder. The initial Note Paying Agent shall be as set forth in Section 7.2. Any additional or successor Paying Agents shall be appointed by Issuer Order with written notice thereof to the Trustee and the Rating Agencies. The Co-Issuers shall cause each Note Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Note Paying Agent shall agree with the Trustee (and if the Trustee acts as Note Paying Agent, it hereby so agrees), subject to the provisions of this Section 7.3, that such Note Paying Agent will: (a)

allocate all sums received for payment to the Holders of Rated Notes for which it acts as Note Paying Agent on each Payment Date and Redemption Date among such Holders in the proportion specified in the instructions set forth in the applicable Note Valuation Report or Redemption Date Statement or as otherwise provided herein, in each case to the extent permitted by applicable law;

(b)

hold all amounts held by it for the payment of amounts due with respect to the Rated Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided;

(c)

if such Note Paying Agent is not the Trustee, immediately resign as a Note Paying Agent and forthwith pay to the Trustee all amounts held by it in trust for the payment of Rated Notes if at any time it ceases to meet the standards set forth above required to be met by a Note Paying Agent at the time of its appointment;

(d)

if such Note Paying Agent is not the Trustee, immediately give the Trustee notice of any Default by the Issuer or the Co-Issuer (or any other obligor upon the Rated Notes) in the making of any payment required to be made; and

(e)

if such Note Paying Agent is not the Trustee at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all amounts so held in trust by such Note Paying Agent. 145

Processed and formatted by SEC Watch - Visit SECWatch.com

If the Co-Issuers shall have appointed a Note Paying Agent other than the Trustee, the Trustee shall deposit on or prior to the Business Day next preceding each Payment Date or Redemption Date, as the case may be, with such Note Paying Agent, if necessary, an aggregate amount sufficient to pay the amounts then becoming due (to the extent funds are then available for such purpose in the Collection Account, as the case may be), such amount to be held in trust for the benefit of the Persons entitled thereto. Any funds deposited with a Note Paying Agent (other than the Trustee) in excess of an amount sufficient to pay the amounts then becoming due on the Rated Notes with respect to which such deposit was made shall be paid over by such Note Paying Agent to the Trustee for application in accordance with Section 11. The Co-Issuers may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, direct any Note Paying Agent to pay, to the Trustee all amounts held in trust by such Note Paying Agent, such amounts to be held by the Trustee upon the same trusts as those upon which such amounts were held by such Note Paying Agent; and, upon such payment by any Note Paying Agent to the Trustee, such Note Paying Agent shall be released from all further liability with respect to such amounts. Except as otherwise required by applicable law, any funds deposited with the Trustee or any Note Paying Agent in trust for the payment of the principal of or interest on any Rated Note and remaining unclaimed for two years after the same has become due and payable shall be paid to the Co-Issuers on Issuer Request; and the Holder of such Rated Note shall thereafter, as an unsecured general creditor, look only to the Co-Issuers (in the case of the Rated Notes other than the Class L Notes, Class M Notes and Class N Notes) or the Issuer (in the case of the Class L Notes, the Class M Notes or the Class N Notes) for payment of such amounts and all liability of the Trustee or such Note Paying Agent with respect to such trust funds (but only to the extent of the amounts so paid to the Co-Issuers) shall thereupon cease. The Trustee or such Note Paying Agent, before being required to make any such release of payment, may, but shall not be required to, adopt and employ, at the expense of the Co-Issuers, any reasonable means of notification of such release of payment, including mailing notice of such release to Holders whose Rated Notes have been called but have not been surrendered for redemption or whose right to or interest in amounts due and payable but not claimed is determinable from the records of any Note Paying Agent, at the last address of record of each such Holder. 7.4.

EXISTENCE OF CO-ISSUERS

The Issuer and the Co-Issuer shall (to the extent they are able) maintain in full force and effect their existence and rights as an exempted company incorporated and registered under the laws of the Cayman Islands and as a limited liability company formed under the laws of the State of Delaware, respectively, and shall obtain and preserve their qualification to do business in each jurisdiction in which such qualifications are or shall be necessary to protect the validity and enforceability of this Indenture, the Rated Notes (in the case of the Issuer), the Rated Notes other than the Class L Notes, Class M Notes and Class N Notes (in the case of the Co-Issuer) or any of the Collateral. The Issuer and the Co-Issuer shall ensure that all corporate or other formalities regarding their respective existences (including holding regular board of directors’, members’ and shareholders’, or other similar, meetings) or registrations are followed. Neither the Issuer nor the 146

Processed and formatted by SEC Watch - Visit SECWatch.com

Co-Issuer shall take any action, or conduct its affairs in a manner, that is likely to result in its separate existence being ignored or in its assets and liabilities being substantively consolidated with any other Person in a bankruptcy, reorganization or other insolvency proceeding. At least one director of the Issuer and at least one member of the Co-Issuer shall be Independent of other parties to the Transaction Documents. Without limiting the foregoing, (a) the Issuer shall not have any subsidiaries (other than the Co-Issuer and any Tax Subsidiary), (b) the CoIssuer shall not have any subsidiaries and (c) the Issuer and the Co-Issuer shall not (i) have any employees, (ii) engage in any transaction with any shareholder that would constitute a conflict of interest or (iii) pay dividends, provided that the foregoing shall not prohibit the Issuer from entering into the transactions contemplated by the Corporate Services Agreement with the Administrator. 7.5.

PROTECTION OF COLLATERAL (a)

The Issuer shall from time to time, execute and deliver all such supplements and amendments hereto and all such Financing Statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action as may be necessary or advisable or desirable to secure the rights and remedies of the Secured Parties hereunder and to:

(1)

Grant more effectively all or any portion of the Collateral;

(2)

maintain, preserve and perfect the lien (and the first priority nature thereof) of this Indenture or to carry out more effectively the purposes hereof;

(3)

perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations);

(4)

enforce any of the Pledged Securities or other instruments or property included in the Collateral;

(5)

preserve and defend title to the Collateral and the rights therein of the Trustee and the Holders of the Rated Notes against the claims of all Persons and parties; or

(6)

pay or cause to be paid any and all taxes levied or assessed upon all or any part of the Collateral.

The Issuer hereby designates the Trustee its agent and attorney-in-fact to file any Financing Statement, continuation statement or other instrument delivered to it pursuant to this Section 7.5, and the Trustee, as agent of the Issuer, agrees to file such continuation statements as are necessary to maintain perfection of the Collateral perfected by the filing of Financing Statements, provided that the Issuer retains ultimate responsibility to maintain the perfection of the Collateral perfected by the filing of Financing Statements and any failure of the Trustee to file continuation statements pursuant to this undertaking shall not result in any 147

Processed and formatted by SEC Watch - Visit SECWatch.com

liability of the Trustee and the Trustee shall be entitled to indemnification pursuant to Section 6.8(a) with respect to any claim, loss, liability or expense incurred by the Trustee with respect to the filing of such continuation statements. The Trustee agrees that it will from time to time, at the direction of any Secured Party, cause to be filed Financing Statements and continuation statements. The Issuer shall otherwise cause the perfection and priority of the security interest in the Collateral and the maintenance of such security interest at all times. Notwithstanding anything to the contrary herein, the right of a Secured Party to provide direction to the Trustee shall not impose upon the Trustee, as Secured Party, any obligation to provide any such direction. The Issuer agrees that a carbon, photographic, photostatic or other reproduction of this Indenture or of a Financing Statement is sufficient as an Indenture or a Financing Statement as the case may be. (b)

The Trustee shall not (i) except in accordance with Section 10.12(a) or (b), as applicable, remove any portion of the Collateral that consists of Cash or is evidenced by an Instrument, certificate or other writing (A) from the jurisdiction in which it was held at the date the most recent Opinion of Counsel was delivered pursuant to Section 7.6 (or from the jurisdiction in which it was held as described in the Opinion of Counsel delivered at the Closing Date pursuant to Section 3.1(c), if no Opinion of Counsel has yet been delivered pursuant to Section 7.6) or (B) from the possession of the Person who held it on such date or (ii) cause or permit ownership or the pledge of any portion of the Collateral that consists of book-entry securities to be recorded on the books of a Person (A) located in a different jurisdiction from the jurisdiction in which such ownership or pledge was recorded at such date or (B) other than the Person on whose books such ownership or pledge was recorded at such date, unless the Trustee shall have first received an Opinion of Counsel to the effect that the lien and security interest created by this Indenture with respect to such property will continue to be maintained after giving effect to such action or actions.

(c)

The Issuer shall pay or cause to be paid taxes, if any, levied on account of the beneficial ownership by the Issuer of any Pledged Securities that secure the Rated Notes; provided that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which disputed amounts or adequate reserves have been made or the failure of which to pay or discharge could not reasonably be expected to have a material adverse effect upon the ability of the Issuer to timely and fully perform any of its payment or other material obligations under this Indenture or upon the interests of the Rated Noteholders in the Collateral.

(d)

The Issuer shall enforce all of its material rights and remedies under the Transaction Documents to which it is a party. 148

Processed and formatted by SEC Watch - Visit SECWatch.com

(e)

7.6.

Without at least thirty (30) days’ prior written notice to the Trustee, the Issuer shall not change its name, or the name under which it does business, from the name shown on the signature pages hereto, reincorporate or reorganize under the laws of another jurisdiction, or establish an office in the United States.

OPINIONS AS TO COLLATERAL

On or before February 28, 2011 and on or before the fifth anniversary of such date thereafter, the Issuer shall furnish to the Trustee, each Hedge Counterparty and each Rating Agency an Opinion of Counsel (which shall include assumptions and qualifications substantially similar to those set forth in Exhibit E-1) stating that, in the opinion of such counsel, as of the date of such opinion, the lien and security interest created by this Indenture with respect to the Collateral remains a valid and perfected first priority lien and describing the manner in which such security interest shall remain perfected. 7.7.

PERFORMANCE OF OBLIGATIONS (a)

The Trustee shall notify the Issuer, each Hedge Counterparty and each Rated Noteholder of any request for an amendment, waiver or supplement to any Underlying Instrument included in the Collateral or of any other notice of a vote in respect of any Collateral Interest included in the Collateral. The Issuer may only enter into any such amendment, waiver or supplement to any such Underlying Instrument if such amendment, supplement or waiver:

(1)

is required by the provisions of any Underlying Instrument or by applicable law (other than pursuant to an Underlying Instrument);

(2)

is necessary to cure any ambiguity, inconsistency or formal defect or omission in such Underlying Instrument; or

(3)

(x) is deemed necessary by the Issuer or the Collateral Manager and does not materially and adversely affect the Secured Parties or (y) is effected pursuant to Section 6.16.

The Issuer shall be entitled to rely on an Opinion of Counsel or Officer’s certificate of the Collateral Manager as to material adverse effect and as to whether the entry into an amendment, supplement or waiver is permitted pursuant to this Indenture. (b)

The Issuer or the Co-Issuer may, with the prior written consent of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of each Class of Rated Notes and the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes and the Initial Hedge Counterparty, contract with other Persons, including the Collateral Administrator, the Collateral Manager and the Bank, for the performance of actions and obligations to be performed by the Issuer or 149

Processed and formatted by SEC Watch - Visit SECWatch.com

the Co-Issuer hereunder by such Persons. Notwithstanding any such arrangement, the Issuer or the Co-Issuer, as the case may be, shall remain liable for all such actions and obligations. In the event of such contract, the performance of such actions and obligations by such Persons shall be deemed to be performance of such actions and obligations by the Issuer or the Co-Issuer, as the case may be; and the Issuer or Co-Issuer, as the case may be, will punctually perform, and use its best efforts to cause such other Person to perform, all of their obligations and agreements contained in related agreement. (c)

The Co-Issuers shall treat all acquisitions of Collateral Interests as a “purchase” for tax, accounting and reporting purposes.

(d)

Each of the Co-Issuers shall file, or cause to be filed, any tax returns, including information tax returns, required by any governmental authority.

(e)

If the Issuer ceases to be disregarded as an entity separate from the Owner REIT, in the event that (i) a Collateral Interest would become a Taxed Collateral Interest or property acquired in respect of a Collateral Interest would become Taxed Property (in either case excluding, for the avoidance of doubt, any Taxed Collateral Interests or Taxed Property required to be disposed of as described in Section 12.1(a)(2)), and (ii) the Issuer does not sell or otherwise dispose of all or a portion of such Taxed Collateral Interest or Taxed Property in accordance with the provisions of Section 12.1 (a)(3), the Collateral Manager on behalf of the Issuer shall, prior to such Collateral Interest becoming a Taxed Collateral Interest or such property becoming a Taxed Property, (a) set up a special purpose subsidiary meeting the then current published rating agency criteria for bankruptcy remote special purpose entities (a Tax Subsidiary) to receive and hold any such Taxed Collateral Interest or Taxed Property and transfer such Taxed Collateral Interest or Taxed Property to the Tax Subsidiary or (b) contribute such Taxed Collateral Interest or Taxed Property to a REMIC or other pass-through entity, unless the Issuer has received an Opinion of Counsel rendered by nationally recognized tax counsel that the Issuer can hold such Taxed Collateral Interest or Taxed Property directly without causing the Issuer to be treated as engaged in a trade or business in the United States for U.S. federal income tax purposes. The Issuer shall cause the purposes and permitted activities of any such Tax Subsidiary to be restricted solely to the acquisition, holding and disposition of such Taxed Collateral Interest or Taxed Property and shall require such subsidiary to distribute 100% of any payments or distributions received with respect to such taxed Collateral Interest, together with the proceeds of any sale of such Taxed Collateral Interest or Taxed Property, net of any tax liabilities, to the Issuer. 150

7.8.

NEGATIVE COVENANTS (a)

The Issuer will not and, with respect to Section 7.8(a)(3), (4), (5) and (9), the Co-Issuer will not:

(1)

intentionally operate so as to be subject to U.S. federal income taxes on its net income;

(2)

sell, assign, participate, transfer, exchange or otherwise dispose of, or pledge, mortgage, hypothecate or otherwise encumber (or permit such to occur or suffer such to exist), any part of the Collateral, except as expressly permitted by this Indenture;

(3)

claim any credit on, make any deduction from, or dispute the enforceability of, the payment of the principal or interest (or any other amount) payable in respect of the Rated Notes (other than amounts required to be paid, deducted or withheld in accordance with any applicable law or regulation of any governmental authority) or assert any claim against any present or future Rated Noteholder by reason of the payment of any taxes levied or assessed upon any part of the Collateral;

(4)

(A) incur or assume or guarantee any indebtedness, other than the Rated Notes and this Indenture and the transactions contemplated hereby; (B) issue any additional class of securities other than the Income Notes; or (C) issue any additional shares of stock;

(5)

(A) take any action that would impair the validity or effectiveness of this Indenture or any Grant hereunder or the lien of this Indenture, amend hypothecate, subordinate, terminate, discharge or release any Person from any covenants or obligations with respect to this Indenture or the Rated Notes, except as may be permitted hereby, (B) create or extend any lien, charge, adverse claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) on or to the Collateral or any part thereof, any interest therein or the proceeds thereof, or (C) take any action that would cause the lien of this Indenture not to constitute a valid first priority security interest in the Collateral;

(6)

use any of the proceeds of the Rated Notes issued hereunder (A) to extend “purpose credit” within the meaning given to such term in Regulation U or (B) to purchase or otherwise acquire any Margin Stock;

Processed and formatted by SEC Watch - Visit SECWatch.com

(7)

permit the aggregate book value of all Margin Stock held by the Issuer on any date to exceed the net worth of the Issuer on such date (excluding any unrealized gains and losses) on such date;

(8)

dissolve or liquidate in whole or in part, except as permitted hereunder; or 151

Processed and formatted by SEC Watch - Visit SECWatch.com

7.9.

(9)

except for any agreements involving the purchase and sale of Collateral Interests having customary purchase or sale terms and documents with customary loan trading documentation (but not excepting any Hedge Agreement), enter into any agreements unless such agreements contain “non-petition” and “limited recourse” provisions with respect to the Issuer.

(b)

Except as permitted by this Indenture, the Issuer will not do business under any other name other than the name set forth in the Articles and neither the Issuer nor the Trustee shall acquire any Collateral after the Closing Date, sell, transfer, exchange or otherwise dispose of Collateral, or enter into or engage in any business with respect to any part of the Collateral.

STATEMENT AS TO COMPLIANCE

On or before February 28 in each calendar year commencing in 2008, or immediately if there has been a Default in the fulfillment of an obligation under this Indenture, the Issuer shall deliver to the Trustee, the PAA Issued Note Paying Agent, each Rated Noteholder making a written request therefor, the Initial Hedge Counterparty, the Collateral Manager and each Rating Agency a certificate of the Issuer stating, as to each signer thereof, that:

7.10.

(a)

the Officer executing such certificate has conducted a review of the activities of the Issuer and of the Issuer’s performance under this Indenture during the 12-month period ending on December 31 of such year (or from the Closing Date until December 31, 2007, in the case of the first such certificate) based on reports and other information delivered to such Officer by the Trustee, the Collateral Manager and the Collateral Administrator and a review of the Accountant’s Reports prepared pursuant to Section 10.11 and such other materials as such Officer deems appropriate; and

(b)

to the best of knowledge of the Issuer, based on such review, the Issuer has fulfilled all of its material obligations under this Indenture throughout the period, or, if there has been a Default in the fulfillment of any such obligation, specifying each such Default known to such Officer and the nature and status thereof, including actions undertaken to remedy the same.

CO-ISSUERS MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS (a)

The Issuer shall not consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any Person, unless permitted by Cayman Islands law and unless:

(1)

the Issuer shall be the surviving entity, or the Person (if other than the Issuer) formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall be an exempted limited liability company organized and 152

Processed and formatted by SEC Watch - Visit SECWatch.com

existing under the laws of the Cayman Islands or such other jurisdiction outside the United States as may be approved by a Majority of each Class and each Hedge Counterparty, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, each Hedge Counterparty and each Rated Noteholder, the due and punctual payment of the principal of and interest on all Rated Notes and the performance of every covenant of this Indenture and any Hedge Agreement on the part of the Issuer to be performed or observed, all as provided herein; (2)

each Rating Agency and each Hedge Counterparty shall have received written notification from the Issuer of such consolidation, merger, transfer or conveyance and the identity of the surviving entity and a Rating Confirmation shall have been obtained with respect to the consummation of such transaction;

(3)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have agreed with the Trustee (A) to observe the same legal requirements for the recognition of such formed or surviving entity as a legal entity separate and apart from any of its Affiliates as are applicable to the Issuer with respect to its Affiliates and (B) not to consolidate or merge with or into any other Person or transfer or convey the Collateral or all or substantially all of its assets to any other Person except in accordance with the provisions of this Section 7.10;

(4)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have delivered to the Trustee, each Hedge Counterparty and each Rating Agency an Officer’s certificate and an Opinion of Counsel each stating that such Person shall be duly organized, validly existing and (if applicable) in good standing in the jurisdiction in which such Person is organized; that such Person has sufficient power and authority to assume the obligations set forth in Section 7.10(a)(1) above and to execute and deliver an indenture supplemental hereto for the purpose of assuming such obligations; that such Person has duly authorized the execution, delivery and performance of an indenture supplemental hereto for the purpose of assuming such obligations and that such supplemental indenture is a valid, legal and binding obligation of such Person, enforceable in accordance with its terms, subject only to bankruptcy, reorganization, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); that, immediately following the event which causes such Person to become the successor to the Issuer, (A) such Person has good and marketable title, free and clear of any lien, security interest or charge, other than the lien and 153

Processed and formatted by SEC Watch - Visit SECWatch.com

security interest of this Indenture, to the Collateral; (B) the Trustee continues to have a valid perfected first priority security interest in the Collateral securing all of the Rated Notes; (C) such Person has received an Opinion of Counsel to the effect that (i) (x) such Person has been organized in conformity with the requirements for qualification as a real estate investment trust under the Code, and such Person’s actual method of operation has (for the time period specified in such Opinion of Counsel) enabled, and its proposed method of operation will enable, such Person to satisfy the requirements for qualification and taxation as a real estate investment trust under the Code or (y) such Person will not be subject to net income tax or be treated as engaged in a trade or business within the United States for U.S. federal income tax purposes and (ii) such other matters as the Trustee, the Initial Hedge Counterparty or any Rated Noteholder may reasonably require; (5)

immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(6)

the Issuer shall have delivered to the Trustee, each Hedge Counterparty and each Rated Noteholder an Officer’s certificate and an Opinion of Counsel each stating that such consolidation, merger, transfer or conveyance and such supplemental indenture comply with this Section 7, that all conditions precedent in this Section 7 provided for relating to such transaction have been complied with and that no adverse tax consequences will result therefrom to any Rated Noteholder or any Hedge Counterparty; and

(7)

the Issuer shall have delivered to the Trustee an Opinion of Counsel stating that after giving effect to such transaction, neither of the Co-Issuers will be required to register as an investment company under the Investment Company Act.

(b)

The Co-Issuer shall not consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any Person, unless:

(1)

the Co-Issuer shall be the surviving entity, or the Person (if other than the Co-Issuer) formed by such consolidation or into which the Co-Issuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, the due and punctual payment of the principal of and interest on all Rated Notes and the performance of every covenant of this Indenture on the part of the Co-Issuer to be performed or observed, all as provided herein;

(2)

each Rating Agency shall have received written notification from the Co-Issuer of such consolidation, merger, transfer or conveyance and the 154

Processed and formatted by SEC Watch - Visit SECWatch.com

identity of the surviving entity and a Rating Confirmation shall have been obtained with respect to the consummation of such transaction; (3)

if the Co-Issuer is not the surviving entity, the Person formed by such consolidation or into which the Co-Issuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall have agreed with the Trustee (A) to observe the same legal requirements for the recognition of such formed or surviving corporation as a legal entity separate and apart from any of its Affiliates as are applicable to the Co-Issuer with respect to its Affiliates and (B) not to consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any other Person except in accordance with the provisions of this Section 7.10;

(4)

if the Co-Issuer is not the surviving entity, the Person formed by such consolidation or into which the Co-Issuer is merged or to which all or substantially all of the assets of the Co-Issuer are transferred or conveyed shall have delivered to the Trustee and each Rating Agency an Officer’s certificate and an Opinion of Counsel each stating that such Person shall be duly organized, validly existing and (if applicable) in good standing in the jurisdiction in which such Person is organized; that such Person has sufficient power and authority to assume the obligations set forth in Section 7.10(b)(1) above and to execute and deliver an indenture supplemental hereto for the purpose of assuming such obligations; that such Person has duly authorized the execution, delivery and performance of an indenture supplemental hereto for the purpose of assuming such obligations and that such supplemental indenture is a valid, legal and binding obligation of such Person, enforceable in accordance with its terms, subject only to bankruptcy, reorganization, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and such other matters as the Trustee or any Rated Noteholder may reasonably require;

(5)

immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(6)

the Co-Issuer shall have delivered to the Trustee and each Rated Noteholder an Officer’s certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance or transfer and such supplemental indenture comply with this Section 7 and that all conditions precedent in this Section 7 provided for relating to such transaction have been complied with and that no adverse tax consequences will result therefrom to any Rated Noteholder; 155

Processed and formatted by SEC Watch - Visit SECWatch.com

7.11.

(7)

after giving effect to such transaction, neither of the Co-Issuers will be required to register as an investment company under the Investment Company Act; and

(8)

after giving effect to such transaction, the outstanding membership interest in the Co-Issuer will not be beneficially owned by any Person other than the Issuer.

SUCCESSOR SUBSTITUTED

Upon any consolidation or merger, or transfer or conveyance of all or substantially all of the assets of the Issuer or the Co-Issuer, in accordance with Section 7.10, the Person formed by or surviving such consolidation or merger (if other than the Issuer or the Co-Issuer), or, the Person to which such transfer or conveyance is made, shall succeed to, and be substituted for, and may exercise every right and power of, and shall be bound by each obligation or covenant of, the Issuer or the Co-Issuer, as the case may be, under this Indenture with the same effect as if such Person had been named as the Issuer or the Co-Issuer, as the case may be, herein. In the event of any such consolidation, merger, transfer or conveyance, the Person named as the “Issuer” or the “Co-Issuer” in the first paragraph of this Indenture or any successor which shall theretofore have become such in the manner prescribed in this Section 7 may be dissolved, wound-up and liquidated at any time thereafter, and such Person thereafter shall be released from its liabilities as obligor and maker on all the Rated Notes and from its obligations under this Indenture. 7.12.

NO OTHER BUSINESS

The Issuer shall not engage in any business or activity other than (i) issuing and selling the Indenture Issued Notes pursuant to this Indenture, (ii) issuing and selling the PAA Issued Notes in accordance with the Paying Agency Agreement (iii) issuing the Ordinary Shares pursuant to the Issuer Charter, (iv) acquiring, pledging, holding and disposing of, solely for its own account, Collateral Interests, Eligible Investments and other Collateral described in clauses (a) to (e) of the granting clauses hereof, (v) holding the membership interest in the CoIssuer and (vi) such other activities that are incidental thereto and connected therewith. The Co-Issuer shall not engage in any business or activity other than issuing and selling the Indenture Issued Notes (other than the Class K Notes) pursuant to this Indenture and such other activities incidental thereto or connected therewith. The Issuer shall not hold itself out as a derivatives dealer willing to enter into either side of, or to offer to enter into, assume, offset, assign or otherwise terminate positions in (i) interest rate, currency, equity or commodity swaps or caps or (ii) derivative financial instruments (including options, forward contracts, short positions and similar instruments) in any commodity, currency, share of stock, partnership or trust, note, bond, debenture or other evidence of indebtedness, swap or cap; provided, however, that the foregoing shall not limit the ability of the Issuer to enter into any Hedge Agreements. Furthermore, the Issuer shall not hold itself out, whether through advertising or otherwise, as a bank, insurance company or finance company, or as originating loans, lending funds, making a market in loans or other assets or selling loans or other assets to customers. The Issuer will not amend the Issuer Charter and the Co-Issuer will not amend its Certificate of Formation or the Limited Liability Company Operating Agreement, if such amendment would result in the rating (including any 156

Processed and formatted by SEC Watch - Visit SECWatch.com

private or confidential rating) of any Class of Rated Notes being reduced or withdrawn. Except as provided in the Transaction Documents, at any time at which the Issuer is not a Qualified REIT Subsidiary, the Issuer shall not engage in any business or activity or hold any asset that would cause the Issuer to be engaged in a U.S. trade or business for U.S. federal income tax purposes, except as the result of ownership of Equity Interests or securities received in an Offer in accordance with the provisions of this Indenture. 7.13.

CHANGE OR WITHDRAWAL OF RATING

The Issuer shall promptly notify the Trustee in writing and upon receipt of such notice the Trustee shall promptly notify the Rated Noteholders and each Hedge Counterparty if at any time the rating of any Class of Rated Notes has been, or is known will be, changed or withdrawn. 7.14.

REPORTING

At any time when the Co-Issuers are not subject to Section 13 or 15(d) of the Exchange Act and are not exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, upon the request of a Holder or Beneficial Owner of a Rated Note or Income Note, the CoIssuers shall promptly furnish or cause to be furnished Rule 144A Information to such Holder or Beneficial Owner, to a prospective purchaser of such Rated Note or Income Note designated by such Holder or Beneficial Owner or to the Trustee for delivery to such Holder or Beneficial Owner or a prospective purchaser designated by such Holder or Beneficial Owner, as the case may be, in order to permit compliance by such Holder or Beneficial Owner with Rule 144A under the Securities Act in connection with the resale of such Rated Note or Income Note by such Holder or Beneficial Owner. 7.15.

RATED NOTE CALCULATION AGENT (a)

The Issuer hereby agrees that for so long as any of the Rated Notes remain Outstanding the Issuer will at all times cause there to be an agent appointed to calculate LIBOR in respect of each Interest Period in accordance with the terms of Schedule B (the Rated Note Calculation Agent), which agent shall be a financial institution, subject to supervision or examination by federal or state authority, having an office within the United States. Whenever the Rated Note Calculation Agent is required to act or exercise judgment, it will do so in good faith and in a commercially reasonable manner. The Issuer has initially appointed the Trustee as Rated Note Calculation Agent for purposes of determining LIBOR for each Interest Period. If the Rated Note Calculation Agent is unable or unwilling to act as such or is removed by the Issuer, the Issuer (after consultation with the Collateral Manager) will propose a leading bank which is engaged in transactions in Dollar deposits in the international Eurodollar market and which does not control or is not controlled by or under common control with the Co-Issuers or any of their Affiliates as a replacement Rated Note Calculation Agent for approval by Holders of not less than 662/3% of the aggregate principal amount of the Outstanding 157

Processed and formatted by SEC Watch - Visit SECWatch.com

Income Notes. The Rated Note Calculation Agent may not resign its duties without a successor having been duly appointed. (b)

7.16.

As soon as possible after 11:00 a.m. (London time) on each LIBOR Calculation Date, but in no event later than 11:00 a.m. (New York time) on the London Banking Day immediately following each LIBOR Calculation Date, the Rated Note Calculation Agent will calculate LIBOR for the next Interest Period and the Periodic Interest payable for such Interest Period in respect of the Outstanding Rated Notes, rounded to the nearest cent, with half a cent being rounded upward, on the related Payment Date to be given to the Co-Issuers, the Trustee, the Collateral Manager, the Depositary, Euroclear, Clearstream and the Note Paying Agent. The Rated Note Calculation Agent will also specify to the Co-Issuers and the Collateral Manager the quotations upon which the Applicable Periodic Interest Rate for each Class of Rated Notes is based, and in any event the Rated Note Calculation Agent must notify the Co-Issuers and the Collateral Manager before 5:00 p.m. (New York time) on each applicable LIBOR Calculation Date if it has not determined and is not in the process of determining LIBOR with respect to the Rated Notes and the Periodic Interest with respect to each Class of Rated Notes, together with its reasons for the delay.

LISTING

The Issuer will use its commercially reasonable efforts to obtain and maintain the listing of each Class of Rated Notes (other than the Class A-R Notes) on the Cayman Islands Stock Exchange. 7.17.

AMENDMENT OF CERTAIN DOCUMENTS

The Issuer will not agree to any amendment to or modification, substitution or replacement of the Corporate Services Agreement, the Collateral Management Agreement, the Account Control Agreement or any Hedge Agreement at any time without obtaining Rating Confirmation with respect to any such amendment, modification, substitution or replacement and will not amend, modify or waive any “nonpetition” or “limited recourse” provisions of any Transaction Document to which it is a party without obtaining a Rating Confirmation with respect to such modification. The Trustee shall provide each of the Holders of Rated Notes, the Collateral Manager, each Hedge Counterparty and the Rating Agencies with a copy of any such amendment or modification within 10 Business Days before effecting such amendment or modification. Prior to entering into any waiver in respect of the any of the foregoing agreements, the Issuer will provide to each Rating Agency and the Trustee with written notice of such waiver. 7.18.

PURCHASE OF COLLATERAL; INFORMATION REGARDING COLLATERAL; RATING CONFIRMATION (a)

The Issuer will use reasonable efforts to purchase, on or before the Effective Date (with amounts on deposit in the Uninvested Proceeds), 158

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Interests having an aggregate Principal Balance of not less than U.S.$ 900,000,000 (which amount includes all Future Funding Obligations with respect to Future Funding Assets) (assuming, for these purposes, settlement (in accordance with customary settlement procedures in the relevant markets) of all agreements entered into by the Issuer to acquire Collateral Interests scheduled to settle on or following the Effective Date). (b)

The Issuer (or the Collateral Manager on behalf of the Issuer) shall cause to be delivered to the Trustee on the Effective Date an amended Schedule A listing all Collateral Interests purchased on or before the Effective Date, which schedule will supersede any prior Schedule A delivered to the Trustee.

(c)

On or before the Effective Date, the Issuer (or the Collateral Manager on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Rated Notes, each Hedge Counterparty and each Rating Agency demonstrating compliance by the Issuer with its obligations under Section 7.18(a) and satisfaction of each applicable Collateral Quality Test, and Coverage Test or, if on the Effective Date, the Issuer shall be in default in the performance of its obligations under this Section 7.18 or any of the Collateral Quality Tests or the specified Coverage Tests shall fail to be satisfied, the Issuer (or the Collateral Manager on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Rated Notes, each Hedge Counterparty and each Rating Agency specifying the details of such default or failure; provided that the failure to satisfy any of the Collateral Quality Tests or Coverage Tests does not constitute an Event of Default but such failure may result in a Rating Confirmation Failure.

(d)

No later than fifteen (15) Business Days after the Effective Date, the Issuer (or the Collateral Manager on its behalf) shall deliver or cause to be delivered to the Trustee an accountant’s certificate (the Accountant’s Certificate) (i) confirming the information with respect to each Collateral Interest set forth on the amended schedule delivered pursuant to Section 7.18(b) as of the Effective Date, and the information provided by the Issuer with respect to every other asset included in the Collateral, (ii) certifying as of the Effective Date the procedures applied and their associated findings with respect to the Coverage Tests and the Collateral Quality Tests and (iii) specifying the procedures undertaken to review data and computations relating to the foregoing clause (ii) held by the Issuer on the Effective Date.

(e)

The Issuer (or the Collateral Manager on its behalf) shall request in writing that each of the Rating Agencies confirm in writing (a Rating Confirmation), within thirty (30) Business Days after the Effective Date (or, in the case of each Rating Agency, any such later date (in no event longer than 60 Business Days after the Effective Date) that shall be acceptable to such Rating Agency), the ratings (including any private or 159

Processed and formatted by SEC Watch - Visit SECWatch.com

confidential ratings) assigned by it on the Closing Date to the Rated Notes. In the event that the Issuer fails to obtain a Rating Confirmation within thirty (30) days after the Effective Date (a Rating Confirmation Failure), on the next and succeeding Payment Dates, the Issuer will be required to pay principal, to the extent of Available Funds in the Collection Account and as provided in Section 11.1, of the Notes in the order of the Note Payment Sequence, to the extent necessary for each of the Rating Agencies to provide a Rating Confirmation or until each Class of Notes is paid in full (and the Class A-R Commitments are simultaneously reduced in accordance with Section 17.1(e)); provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (i) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Future Funding Asset Account, and (ii) any remainder will be deposited in the Collection Account as Collateral Principal Collections. (f)

On each Payment Date on which a Rating Confirmation Failure occurs, each related Hedge Agreement (other than Deemed Floating Asset Hedges) will be terminated in part in accordance with the terms and conditions thereof, and any amounts due and payable pursuant to such Hedge Agreement in connection with such termination thereof will be paid on such Payment Date in accordance with Section 11.1.

Notwithstanding the foregoing, if (i) the Issuer (or the Collateral Manager on its behalf) has requested in writing that each of the Rating Agencies provide Rating Confirmation within five (5) Business Days after the Effective Date, (ii) the Issuer (or the Collateral Manager on its behalf) has obtained confirmation by electronic mail, facsimile or telephone that each of the Rating Agencies has received such request and has promptly delivered to the applicable Rating Agency any additional information reasonably requested by such Rating Agency, and (iii) any of the Rating Agencies fails to respond to such request within thirty (30) Business Days after the Effective Date, then such failure to respond will not immediately constitute a Rating Confirmation Failure but shall not constitute receipt of Rating Confirmation so long as, as of the Effective Date, (x) the Collateral Interest Principal Balance equals at least $855,000,000 and (y) the Collateral Quality Tests are satisfied (as evidenced by the Accountant’s Certificate); provided that Rating Confirmation Failure shall thereafter occur immediately upon receipt from the Rating Agencies of an actual notice of Rating Confirmation Failure. If such response is not received within 60 Business Days after the Effective Date, the Issuer (or the Collateral Manager on behalf of the Issuer) shall repeat such request on such 60th Business Day. In addition, if any rating assigned as of the Closing Date to any Class of Notes has not been confirmed, or is reduced or withdrawn, within 30 Business Days after the Effective Date by any Rating Agency, the Collateral Manager may, on behalf of the Issuer, within 10 Business Days provide to such Rating Agency a proposal (a “Proposal”) with respect to the Collateral Interests. If such Rating Agency accepts the Proposal, a Rating Confirmation shall 160

Processed and formatted by SEC Watch - Visit SECWatch.com

be deemed to have occurred with respect to such Rating Agency provided the Collateral Manager meets the conditions set forth in such Proposal within the time requirements set forth in such Proposal. If the Collateral Manager, on behalf of the Issuer, elects not to submit a Proposal, if a Proposal is submitted but not accepted or if the Collateral Manager fails to meet the conditions set forth in the Proposal within the time requirements set forth in such Proposal then a Rating Confirmation Failure shall have occurred. 7.19.

LIQUIDITY TESTS (a)

So long as the Issuer owns Related Future Advance Loans with respect to which the related Other Loans are held by Future Advance Holders, and the aggregate amount of the additional funding commitments related to such Other Loans is greater than $5,000,000, the Future Advance Holders’ combined Liquidity will be measured on each Quarterly Measurement Date (each such measurement, a Liquidity Test). If the Future Advance Holders’ combined Liquidity is less than $16,000,000 on any Quarterly Measurement Date on which the aggregate amount of the additional funding commitments related to such Other Loans is greater than $5,000,000, and the Future Advance Holders do not, within 30 calendar days, (i) increase their combined Liquidity to at least $16,000,000, (ii) obtain a Qualified Letter of Credit or a guarantee from an entity rated at least “A3” by Moody’s in an amount at least equal to the excess, if any, of $16,000,000 over their combined Liquidity, (iii) fund one or more accounts owned by the relevant Future Advance Holder(s) in an aggregate amount at least equal to the excess, if any, of $16,000,000 over their combined Liquidity, the only permitted withdrawals from which will be to satisfy the additional funding commitments of such Future Advance Holder(s) or to reimburse the Issuer for losses related to the failure of the Future Advance Holders to fund future advances in accordance with the terms of the related Mortgage Loan documents, or (iv) take some other action for which Rating Confirmation is obtained, a Liquidity Test Failure shall have occurred with respect to such Quarterly Measurement Date. For the avoidance of doubt, if the Future Advance Holders collectively take one of the actions described in clause (ii) or (iii) of the immediately preceding sentence following the occurrence of a Liquidity Test Failure, they or it, as the case may be, will be permitted to terminate such Qualified Letter of Credit or guarantee or liquidate such account, as applicable, at any time thereafter when their combined Liquidity is at least $16,000,000.

(b)

If a Liquidity Test Failure or a Future Funding Reserve Test Failure is not cured by the following Payment Date, Collateral Interest Collections available to be distributed to the PAA Issued Notes Paying Agent for distribution to the holders of the Income Notes instead will be deposited into the Suspense Account until any and all such failures are cured in accordance with Section 11.1(b). The Collateral Manager shall notify the 161

Rating Agencies if a Liquidity Test Failure or Future Funding Reserve Test Failure occurs (and in connection therewith shall report to the Rating Agencies the amount of Liquidity or Future Funding Reserve Amount as of the date of such failure). In addition, amounts on deposit in the Suspense Account (or any portion thereof) will be released from the lien of the Indenture and paid (upon standing order of the Issuer) to the PAA Issued Note Paying Agent for distribution to the holders of the Income Notes (subject to and in accordance with the provisions of the Paying Agency Agreement) on any date on which the Liquidity Test and Future Funding Reserve Test would be satisfied after such release and payment. ARTICLE VIII SUPPLEMENTAL INDENTURES 8.1.

SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF RATED NOTEHOLDERS

Without the consent of the Holders of any Rated Notes, the Initial Hedge Counterparty (except as specified below) or the Income Noteholders and with notice to the Controlling Party, the Co-Issuers, when authorized by Board Resolutions or by action by written consent of the limited liability company manager, as applicable, and the Trustee, at any time and from time to time subject to the requirement provided below in this Section 8.1 with respect to the ratings of the Rated Notes and subject to Section 8.3, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for certain limited purposes including, inter alia, to: (a)

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 herein and in the Rated Notes and the assumption by any such successor Person of the covenants of the Co-Issuer herein and in the Rated Notes (other than the Class L Notes, Class M Notes and Class N Notes) pursuant to Section 7.10 or 7.11;

(b)

add to the covenants of the Co-Issuers (in the case of the Rated Notes other than the Class L Notes, Class M Notes or the Class N Notes) or the Issuer (in the case of the Class L Notes, the Class M Notes or the Class N Notes) or the Trustee for the benefit of the Holders of all of the Rated Notes;

(c)

pledge any additional property to the Trustee;

Processed and formatted by SEC Watch - Visit SECWatch.com

(d)

add to the conditions, limitations or restrictions on the authorized amount, terms and purposes of the issue, authentication and delivery of the Rated Notes;

(e)

effect the appointment of a successor;

(f)

reduce the permitted minimum denomination of the Rated Notes; 162

Processed and formatted by SEC Watch - Visit SECWatch.com

(g)

take any action necessary or advisable to prevent the Issuer, any Note Paying Agent or the Trustee from being subject to withholding or other taxes, fees or assessments, to prevent the Issuer from failing to qualify as a Qualified REIT Subsidiary or, at any time at which the Issuer is not a Qualified REIT Subsidiary, to prevent the Issuer from being treated as engaged in a U.S. trade or business or otherwise being subjected to U.S. federal, state or local income tax on a net income tax basis; provided that such action will not cause the Noteholders to experience any material change to the timing, character or source of income from the Notes and will not be considered a significant modification resulting in an exchange for purposes of section 1.1001-3 of the U.S. Treasury regulations;

(h)

modify the restrictions on and procedures for resale and other transfer of the Rated 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 (in addition to that provided under Section 3 (c)(7) thereunder) or to remove restrictions on resale and transfer to the extent not required thereunder;

(i)

grant, convey, transfer, assign, mortgage or pledge any property to or with the Trustee for the benefit of the Secured Parties;

(j)

correct or amplify the description of any property at any time subject to the lien of this Indenture, or to better assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations) or to subject to the lien of this Indenture any additional property;

(k)

make any change required by the stock exchange on which any Class of Rated Note is listed, if any, in order to permit or maintain such listing;

(l)

correct, amend, cure any manifest error, inconsistency, defect or ambiguity or correct any typographical error in this Indenture;

(m)

modify this Indenture to conform the terms herein to the terms set forth in the then current Offering Circular;

(n)

modify any provision (other than in respect of a Reserved Matter), with respect to restrictions upon the Issuer’s rights to acquire and dispose of Collateral Interests and other assets, that the Issuer or the Collateral Manager determines to be necessary or desirable in order for the Issuer to maintain any desired exemption from registration of the Issuer under the Investment Company Act or of the Notes under the Securities Act;

(o)

with the consent of the Collateral Manager, modify the Collateral Quality Tests and Coverage Tests and the definitions applicable thereto; 163

Processed and formatted by SEC Watch - Visit SECWatch.com

(p)

with the consent of the Collateral Manager and the Controlling Party, to modify the calculation of the Coverage Tests and the definitions applicable thereto to correspond with published or written changes in the guidelines, methodology or standards established by the Rating Agencies; or

(q)

agree to any modification of this Indenture or any other Transaction Document (other than in respect of a Reserved Matter), which is, in the opinion of the Trustee, proper to make if, in the opinion of the Trustee (based upon an opinion of counsel), such modification will not have a material adverse effect on the interests of Holders of any Class or Classes of Notes or the Initial Hedge Counterparty and which is of a formal, minor or technical nature or is to correct a manifest error.

The Trustee shall not enter into any such supplemental indenture unless the Trustee has been provided with an Opinion of Counsel from nationally recognized U.S. tax counsel experienced in such matters to the effect that either (A) at any time at which the Issuer is a Qualified REIT Subsidiary the proposed supplemental indenture will not cause the Issuer to fail to be treated as a Qualified REIT Subsidiary or (B) at any other time, the proposed supplemental indenture will not otherwise cause the Issuer to be subject to U.S. federal income tax on a net income basis. In addition, the Trustee may, but is not obligated to, without the consent of the Rated Noteholders or of the Holders of any relevant Class or Classes of Rated Notes, agree to any modification of any other Transaction Document which is of a formal, minor or technical nature or is to correct a manifest error and which is, in the opinion of the Trustee, proper to make, in the opinion of the Trustee (based upon an opinion of counsel); provided such modification will not have a material adverse effect on the interests of the Initial Hedge Counterparty or the Holders of any Class or Classes of Notes. For so long as any Rated Notes are Outstanding, no such supplemental indenture shall be effective unless and until Rating Confirmation has been received. The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. Without obtaining the requisite consents of the applicable parties pursuant to this Section 8.1, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of the Initial Hedge Counterparty any Holder of Rated Notes or of the Income Noteholders would be materially and adversely affected thereby. Unless notified by (i) a Majority of the then Aggregate Outstanding Amount of any Class of Rated Notes that such Class will be materially and adversely affected, (ii) a Majority of the aggregate principal amount of Income Notes Outstanding that the Income Noteholders will be materially and adversely affected or (iii) the Initial Hedge Counterparty that the Initial Hedge Counterparty will be materially and adversely affected, the Trustee shall be entitled to rely upon an Officer’s 164

Processed and formatted by SEC Watch - Visit SECWatch.com

certificate of the Collateral Manager or the Issuer as to whether the interests of any Holder of Rated Notes or of Income Notes would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the PAA Issued Note Paying Agent). The Collateral Manager will not be bound by any supplemental indenture that affects the obligations of the Collateral Manager unless the Collateral Manager has consented thereto (which consent will not be unreasonably withheld). The Co-Issuers shall not consent to any supplemental indenture that would have a material adverse effect on the Initial Hedge Counterparty without the consent of the Initial Hedge Counterparty. At the cost of the Co-Issuers, the Trustee shall provide to the Rated Noteholders, the PAA Issued Note Paying Agent, each Hedge Counterparty and each Rating Agency a copy of any proposed supplemental indenture at least 10 days prior to the execution thereof by the Trustee and, for so long as any Rated Notes are Outstanding, request a Rating Confirmation from each Rating Agency with respect to such supplemental indenture. As soon as practicable after the execution by the Trustee and the Issuer of any such supplemental indenture, the Trustee shall provide to the Rated Noteholders, the PAA Issued Note Paying Agent, each Hedge Counterparty and each Rating Agency a copy of the executed supplemental indenture. For so long as any Rated Notes are Outstanding, no supplemental indenture shall be effective unless and until a Rating Confirmation from each Rating Agency has been received. 8.2.

SUPPLEMENTAL INDENTURES WITH CONSENT OF RATED NOTEHOLDERS

With the written consent of the Holders of not less than a majority of the then Aggregate Outstanding Amount of each adversely affected Class of Rated Notes, the written consent of 66 2/3% of the Holders of the aggregate principal amount of the Outstanding Income Notes if materially and adversely affected thereby (which consent shall be evidenced by an Officer’s certificate of the Issuer certifying that such consent has been obtained), the Class A-R Note Agent if it is materially and adversely affected thereby, the prior written consent of the Initial Hedge Counterparty if it is materially and adversely affected thereby, the written consent of the Controlling Party (such consent not to be unreasonably withheld and if such consent is not provided within 10 days of the proposed supplemental indenture then consent shall be deemed to be given) and Rating Confirmation and, the Trustee and Co-Issuers may, subject to Section 8.3, enter into one or more indentures supplemental hereto in order to: (a)

change the applicable Stated Maturity Date of the Rated Notes or scheduled redemption of the principal of or the due date of any installment of interest on the Rated Notes or the Class A-R Commitment Fee, reduce the principal amount thereof or the rate of interest thereon, or the Redemption Price with respect thereto, or change the earliest date on which Rated Notes may be redeemed, change the provisions of this Indenture relating to the application of proceeds of any Collateral to the payment of principal of or interest on the Rated Notes or change any place where, or the coin or currency in which, Rated Notes or the principal thereof or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity Date thereof (or, in the case of redemption, on or after the Redemption Date); 165

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

reduce the percentage, in principal amount, of Holders of Rated Notes of each Class, or the percentage of Income Noteholders, whose consent is required for the authorization of any supplemental indenture or for any waiver of compliance with certain provisions of this Indenture or certain defaults thereunder or their consequences;

(c)

impair or adversely affect the Collateral other than as permitted by this Indenture;

(d)

permit the creation of any security interest ranking prior to or on a parity with the security interest of this Indenture with respect to any part of the Collateral or terminate such security interest on any property at any time subject thereto (other than in accordance with this Indenture) or deprive the Holder of any Rated Note or the Initial Hedge Counterparty of the security afforded by the security interest of this Indenture;

(e)

reduce the percentage of the aggregate principal amount of Holders of Rated Notes of each Class whose consent is required to request the Trustee to preserve the Collateral or rescind the Trustee’s election to preserve the Collateral pursuant to Section 5.5 or to sell or liquidate the Collateral pursuant to Section 5.4 or 5.5;

(f)

modify any of the provisions of this Section 8.2, except to increase the percentage of the aggregate principal amount of Outstanding Rated Notes of each Class whose Holders’ consent is required for any such action or to provide that other provisions of this Indenture cannot be modified or waived without the written consent of the Holders of 66 2/3% of the then Aggregate Outstanding Amount of each affected Class of Rated Notes Outstanding and the Initial Hedge Counterparty;

(g)

modify the definition of the term “Outstanding” or Section 11.1;

(h)

modify any of the provisions of this Indenture in such a manner as to affect the calculation of the amount of any payment of interest or principal of any Rated Note on any Payment Date or to affect the right of the Holders of Rated Notes or the Initial Hedge Counterparty to the benefit of any provisions for the redemption of such Rated Notes contained therein;

(i)

modify provisions related to the bankruptcy or insolvency of the Co-Issuers; or

(j)

modify provisions stating that the obligations of the Co-Issuers are joint and several limited recourse obligations of the Co-Issuers payable solely from the Collateral in accordance with the terms of this Indenture (Section 8.2(a) through (j) collectively, the Reserved Matters);

provided that unless notified (after giving 30 Business Days’ notice of such change to the Controlling Party, the holders of each Class of Notes, the Holders of the Income Notes and the 166

Processed and formatted by SEC Watch - Visit SECWatch.com

Initial Hedge Counterparty) by holders of a majority in Aggregate Outstanding Amount (excluding any Class E Deferred Interest Amount, Class F Deferred Interest Amount, Class G Deferred Interest Amount, Class H Deferred Interest Amount, Class J Deferred Interest Amount, Class K Deferred Interest Amount and Class L Deferred Interest Amount, as the case may be) of the Notes of any Class that such Class of Notes will be materially and adversely affected by the proposed supplemental indenture, the interests of such Class will be deemed not to be materially and adversely affected by such proposed supplemental indenture. The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. Not later than 15 Business Days prior to the execution of any proposed supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Co-Issuers, shall mail to the Rated Noteholders, PAA Issued Note Paying Agent, the Class A-R Note Agent, each Hedge Counterparty, the Collateral Manager and each Rating Agency a copy of such proposed supplemental indenture (or a description of the substance thereof) and shall request Rating Confirmation with respect to such supplemental indenture. If any Class of Rated Notes is then rated by any Rating Agency, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, Rating Confirmation would not be received with respect to such supplemental indenture, unless each Holder of Rated Notes of each Class whose rating will be reduced or withdrawn has, after notice that the proposed supplemental indenture would result in such reduction or withdrawal of the rating of the Class of Rated Notes held by such Holder, consented to such supplemental indenture. Without having obtained the consent of the applicable parties pursuant to this Section 8.2, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of any Holder of Rated Notes, the Initial Hedge Counterparty or of the Income Noteholders would be materially and adversely affected thereby. Unless notified by (i) the Holders of a Majority of the then Aggregate Outstanding Amount of any Class of Rated Notes that such Class will be materially and adversely affected or (ii) the Holders of a Majority of aggregate principal balance of the Income Notes that the Income Noteholders will be materially and adversely affected, the Trustee shall be entitled to rely upon an Officer’s certificate of the Collateral Manager or the Issuer as to whether the interests of any Holder of Rated Notes or of the Income Noteholders would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the PAA Issued Note Paying Agent). It shall not be necessary for any Act of Rated Noteholders or any consent of Income Noteholders under this Section 8.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act or consent shall approve the substance thereof. Promptly after the execution by the Co-Issuers and the Trustee of any supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Co-Issuers, shall mail or make available to the Rated Noteholders, each Hedge Counterparty, the PAA Issued Note Paying 167

Processed and formatted by SEC Watch - Visit SECWatch.com

Agent (for forwarding to the Income Noteholders), the Class A-R Note Agent, the Collateral Manager and each Rating Agency a copy thereof. Any failure of the Trustee to publish or mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. In addition, the Issuer shall cause to be delivered a copy of the executed supplemental indenture to the Repository for posting on the Repository in the manner described in Section 14.3. 8.3.

EXECUTION OF SUPPLEMENTAL INDENTURES

In executing or accepting the additional trusts created by any supplemental indenture permitted by this Section 8 or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Sections 6.1 and 6.3) shall be fully protected in relying in good faith upon an Opinion of Counsel, stating that the execution of such supplemental indenture is authorized, or permitted by this Indenture and that all conditions precedent thereto have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or indemnities under this Indenture or otherwise. Such supplemental indenture will not be binding on the Collateral Manager to the extent that it reduces the rights or increases the obligations of the Collateral Manager, unless such supplemental indenture is consented to in writing by the Collateral Manager. 8.4.

EFFECT OF SUPPLEMENTAL INDENTURES

Upon the execution of any supplemental indenture under this Section 8, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Rated Notes theretofore and thereafter authenticated and delivered hereunder or under the Paying Agency Agreement shall be bound thereby. Notwithstanding anything to the contrary herein, no amendment or modification of or supplement to this Indenture will be effective until the Collateral Manager has received written notice of such amendment, modification or supplement and, if such amendment, modification or supplement affects the rights, obligations or compensation of the Collateral Manager, the Collateral Manager has consented in writing to the terms of the proposed amendment. In addition, the consent of any predecessor Collateral Manager will be required to implement any such amendment, modification or supplemental that would change any provision of this Indenture entitling such predecessor Collateral Manager to any fee or other amount payable to it under this Indenture or to reduce or delay the right of such predecessor to such payment. 8.5.

REFERENCE IN INDENTURE ISSUED NOTES TO SUPPLEMENTAL INDENTURES

Indenture Issued Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Section 8 may, and if required by the Trustee shall, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Co-Issuers shall so determine, new Indenture Issued Notes, so modified as to conform in the opinion of the Trustee and the Co-Issuers to any such supplemental indenture, 168

Processed and formatted by SEC Watch - Visit SECWatch.com

may be prepared and executed by the Co-Issuers and authenticated and delivered by the Trustee in exchange for Outstanding Indenture Issued Notes. ARTICLE IX REDEMPTION OF RATED NOTES 9.1.

REDEMPTION OF RATED NOTES

The Rated Notes will be subject to redemption in whole but not in part at their respective Redemption Prices, in each case, in accordance with the procedures, and subject to the satisfaction of the conditions, in Section 9.2 below, in the following circumstances:

9.2.

(a)

on or after the Payment Date occurring in February 2010 and continuing until the Stated Maturity Date (the Call Period), at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Income Notes Outstanding (an Optional Redemption);

(b)

on any Payment Date on which the outstanding principal amount of the Notes (including the Unfunded Class AR Commitment) has been reduced to 10% of the aggregate outstanding principal amount of the Notes on the Closing Date, at the direction of the Collateral Manager, in whole but not in part, at a price equal to the applicable Redemption Price (such a redemption a Clean-Up Call);

(c)

on any Payment Date following the occurrence and during the continuation of a Tax Event, at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Income Notes Outstanding (such a redemption, a Tax Redemption); and

(d)

automatically and without any direction by any Person, (i) if the Notes have not been redeemed in full on or after the Payment Date occurring in February 2019, and (ii) if any of the conditions set forth in Sections 9.2(a) through (d) below have not been met or if the highest bidder fails to pay the purchase price within six (6) Business Days following such Payment Date, the Payment Date thereafter, unless the Notes are redeemed in full prior to the next Auction Date (such a redemption, an Auction Call Redemption).

REDEMPTION PROCEDURES; AUCTION

In connection with any Redemption, the Trustee and the Collateral Manager will, in accordance with the procedures set forth in Schedule D (the Auction Procedures) and subject to the satisfaction of the Income Note Redemption Approval Conditions and at the expense of the Issuer, conduct an auction (an Auction) of the Collateral Interests included in the Collateral on a date (each such date, an Auction Date) occurring no later than ten (10) Business Days prior to any scheduled Redemption Date. Any of the Initial Purchaser, the Collateral Manager, the 169

Processed and formatted by SEC Watch - Visit SECWatch.com

Income Noteholders, the Trustee or their respective Affiliates may, but will not be required to, bid at the Auction. (a)

Any Redemption will be subject to the satisfaction of each of the following conditions:

(1)

the related Auction has been conducted in accordance with the Auction Procedures;

(2)

the Trustee has received bids for the Collateral Interests (or for each of the related Subpools) from at least two Qualified Bidders (including the winning Qualified Bidder, and which may include the Collateral Manager) identified on a list of qualified bidders provided by the Collateral Manager to the Trustee;

(3)

the Collateral Manager certifies that the Highest Auction Price would result in the Sale Proceeds from the Collateral Interests (or the related Subpools) for a purchase price (paid in cash) plus the Balance of all Eligible Investments and cash held by the Issuer, plus any termination payments payable by a Hedge Counterparty to the Issuer (in excess of any amounts payable by the Issuer to a Hedge Counterparty) resulting from the termination of the related Hedge Agreement pursuant to the Redemption being at least equal to the sum of (i) the aggregate Redemption Prices of the Notes plus (ii) any accrued but unpaid fees and expenses of the Issuer pursuant to Section 11.1(b)(1) and (26) through (31) (including any termination payments payable by the Issuer resulting from the termination of any Hedge Agreement pursuant to the Redemption) plus (iii) any Outstanding Interest Advances, together with interest thereon; and

(4)

the bidder(s) who offered the Highest Auction Price for the Collateral Interests (or the related Subpools) enter(s) into a written agreement with the Issuer (which the Issuer will execute if the conditions set forth above and in this Indenture are satisfied, which execution will constitute certification by the Issuer that such conditions have been satisfied) that obligates the highest bidder(s) (or the highest bidder for each Subpool) to purchase all of the Collateral Interests (or the relevant Subpool) and provides for payment in full (in Cash) of the purchase price to the Trustee on or prior to the sixth Business Day following the relevant Auction Date.

Provided that all of the conditions set forth in this Section 9.2(a)(1) through (4) have been met, the Trustee will sell and transfer the Collateral Interests (or each related Subpool), without representation, warranty or recourse, to the bidder(s) who offered the Highest Auction Price for the Collateral Interests (or the related Subpools) in accordance with and upon completion of the Auction Procedures. If any of the conditions set forth in this Section 9.2(a)(1) through (4) are not met, (i) the Redemption will not occur on the Payment Date following the relevant Auction Date, (ii) the Trustee will give notice of the withdrawal of the Redemption, (iii) subject to clause (iv) below, the Trustee will decline to consummate such sale and will not 170

Processed and formatted by SEC Watch - Visit SECWatch.com

terminate any Hedge Agreements and may not solicit any further bids or otherwise negotiate any further sale of Collateral Interests in relation to such Auction and (iv) unless the Rated Notes are redeemed in full prior to the next succeeding Auction Date, the Trustee will conduct another Auction on the next succeeding Auction Date. (b)

In addition, any Optional Redemption requires the occurrence of the following:

(1)

at least four (4) Business Days before the scheduled Redemption Date, the Collateral Manager has furnished to the Trustee evidence, in form satisfactory to the Trustee, that the Collateral Manager on behalf of the Issuer has entered into a binding agreement or agreements with an institution or institutions (or guarantor or guarantors of the obligations): (A) with regard to which Rating Confirmation has been received; or (B) whose short-term unsecured debt obligations (other than such obligations whose rating is based on the credit of a person other than such institution) have a credit rating from Moody’s, if rated by Moody’s, to sell, not later than the Business Day immediately preceding the scheduled Redemption Date, in immediately available funds, all or part of the Collateral Interests at a purchase price (paid in Cash) which together with the Balance of all Eligible Investments and Cash held by the Issuer will be at least equal to the sum of (i) the aggregate Redemption Prices of the Notes plus (ii) any accrued but unpaid fees and expenses of the Issuer pursuant to Section 11.1(b)(1) and (26) through (30) (including any termination payments payable by the Issuer resulting from the termination of any Hedge Agreement pursuant to the Redemption); or

(2)

prior to selling any Collateral Interests or any other collateral, the Collateral Manager certifies that the expected proceeds from such sale will, in the aggregate, equal or exceed, in each case, the sum of (A) any amounts payable in connection with an Optional Redemption pursuant to Section 9.2 of the Notes plus (B) all expenses of such redemption and all other administrative fees and expenses payable on the related Redemption Date.

The Trustee will deposit the purchase price for the Collateral Interests in the Collection Account, and the Rated Notes and, to the extent funds are available therefor, the Income Notes, will be redeemed on the Payment Date immediately following the relevant Auction Date in the order of priorities set forth in Section 11.1. Any Redemption will only be effected on a Payment Date. Installments of principal and interest due on or prior to a Redemption Date shall continue to be payable to the Holders of such Rated Notes as of the relevant Record Dates according to their terms. 9.3.

RECORD DATE; NOTICE TO TRUSTEE OF REDEMPTION (a)

The Issuer shall set the Redemption Date and the applicable Record Date and give notice thereof to the Trustee pursuant to Section 9.3(b) below and 171

shall issue an Issuer Request to the Trustee for the provision of the information necessary for the Issuer to compile the Redemption Date Statement in accordance with Section 10.11(b). (b)

9.4.

In the event of any Redemption, the Issuer shall, at least 45 days (but not more than 90 days) prior to the Redemption Date, notify the Trustee and each Hedge Counterparty of such Redemption Date, the applicable Record Date, the principal amount of each Class of Notes to be redeemed on such Redemption Date and the Redemption Price of such Notes.

NOTICE OF REDEMPTION

Notice of Redemption will be given by first-class mail, postage prepaid, mailed not less than eight (8) Business Days prior to the applicable Redemption Date, to each Hedge Counterparty, the Class A-R Note Agent, each Rating Agency and each Holder of Rated Notes at such Holder’s address in the Note Register maintained by the Note Registrar in accordance with the provisions of this Indenture and to the Collateral Manager. Rated Notes called for Redemption must be surrendered at the office of any Note Paying Agent appointed pursuant to this Indenture in order to receive the Redemption Price. All notices of redemption shall state: (a)

the applicable Redemption Date;

(b)

the applicable Record Date;

(c)

the Redemption Price;

(d)

that all the Notes of the relevant Class are being redeemed in full and that interest on the applicable principal amount of Notes shall cease to accrue on the date specified in the notice; and

(e)

the place or places where such Rated Notes are to be surrendered for payment of the Redemption Price, which shall

Processed and formatted by SEC Watch - Visit SECWatch.com

be the office or agency of the Note Paying Agent to be maintained as provided in Section 7.2. Notice of redemption shall be given by the Co-Issuers or, at the Co-Issuers’ request, by the Trustee in the name and at the expense of the Co-Issuers. Failure to give notice of redemption, or any defect therein, to any Holder of any Note selected for redemption shall not impair or affect the validity of the redemption of any other Notes. 9.5.

NOTICE OF WITHDRAWAL

With regard to an Optional Redemption or a Tax Redemption, any notice of redemption may be withdrawn by the Issuer up to the fourth Business Day prior to the Redemption Date by written notice to the Trustee, each Hedge Counterparty and the Collateral Manager only if the Collateral Manager is unable to deliver such sale agreement or agreements or certifications, as the case may be, in form satisfactory to the Trustee. With regard to any Redemption, notice of 172

Processed and formatted by SEC Watch - Visit SECWatch.com

any withdrawal pursuant to Section 9.2 shall be given by the Trustee to each Holder of Rated Notes at such Holder’s address in the Note Register maintained by the Note Registrar by overnight courier guaranteeing next day delivery (or second day delivery outside the United States) sent not later than the third Business Day prior to such Redemption Date. 9.6.

RATED NOTES PAYABLE ON REDEMPTION DATE

Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after the Redemption Date (unless the Issuer shall default in the payment of the Redemption Price) such Rated Notes shall cease to bear interest. Upon final payment on a Note to be redeemed, the Holder shall present and surrender such Note at the place specified in the notice of redemption on or prior to such Redemption Date; provided that if there is delivered to the Co-Issuers (i) such security or indemnity as may be required by them to save each of them harmless and (ii) an undertaking thereafter to surrender such Note, then, in the absence of notice to the Co-Issuers that the applicable Note has been acquired by a bona fide purchaser, such final payment shall be made without presentation or surrender. Installments of interest on Rated Notes of a Class so to be redeemed whose Stated Maturity Date is on or prior to the Redemption Date shall be payable to the Holders of such Rated Notes, or one or more predecessor Rated Notes, registered as such at the close of business on the relevant Record Date according to the terms and provisions of Section 2.6(e). If any Rated Note called for redemption shall not be paid upon surrender thereof for redemption, the principal thereof shall, until paid, bear interest from the Redemption Date at the Applicable Periodic Interest Rate for each successive Interest Period the Rated Note remains Outstanding. 9.7.

SPECIAL AMORTIZATION

If the Collateral Manager notifies the Trustee in writing that it has determined, in its sole discretion, that investments in additional Collateral Interests would either be impractical or not beneficial, the amount of such Collateral Principal Collections available pursuant to Section 11.1(b)(24), as determined by the Collateral Manager (the Special Amortization Amount) shall be applied to the payment of principal of the Notes on the next succeeding Payment Date (a Special Amortization) in accordance with Section 11.1(b)(24)(ii) hereof. Payments of principal of the Notes pursuant to Section 11.1(b)(24)(ii) shall be made: (a)

if the Special Amortization Pro Rata Condition is satisfied with respect to the related Payment Date, pro rata to the respective Classes of the Rated Notes (for purposes of the pro rata allocation to the Class A Senior Notes based on the Class A Senior Pro Rata Allocation) pursuant to Section 11.1(b)(24)(i) of the Priority of Principal Payments provided that a Special Amortization Notice is delivered by the Collateral Manager to the Issuer and the Trustee; or

(b)

if the criteria for either the Special Amortization Pro Rata Condition are not satisfied, sequentially to the respective Classes of the Rated Notes 173

Processed and formatted by SEC Watch - Visit SECWatch.com

pursuant to Section 11.1(b)(24)(ii)(2) of the Priority of Principal Payments. If the Collateral Manager elects to initiate a Special Amortization, the Collateral Manager shall deliver on or prior to the related Calculation Date, to each of the Trustee and each Rating Agency, advance written notice (which may be included in the related Note Report) (each, a Special Amortization Notice) specifying the identity and principal amount of each Class of Rated Notes to be paid pursuant to such Special Amortization and that the Collateral Manager has been unable to identify for purchase by the Issuer Substitute Collateral Interests that comply with the Reinvestment Criteria and the other applicable requirements of this Indenture, and that the other applicable requirements of this Indenture, and that all other Indenture requirements for such Special Amortization are complied with. On each Payment Date on which a Special Amortization occurs, each related Hedge Agreement (other than Deemed Floating Asset Hedges) will be terminated in part in accordance with the terms and conditions thereof, and any amounts due and payable pursuant to such Hedge Agreement in connection with such termination thereof will be paid on such Payment Date in accordance with Section 11.1. ARTICLE X ACCOUNTS, ACCOUNTINGS AND RELEASES 10.1.

COLLECTION OF FUNDS (a)

Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all funds and other property payable to or receivable by the Trustee pursuant to this Indenture, including all payments due on the Pledged Securities, in accordance with the terms and conditions of such Pledged Securities. The Trustee shall segregate and hold all such funds and property received by it in trust for the Secured Parties and shall apply such funds as provided in this Indenture.

(b)

Each of the parties hereto hereby agrees to cause the Custodian or any other Securities Intermediary that holds any funds or other property for the Issuer or the Co-Issuer in an Account to agree with the parties hereto that (1) each Account is a Securities Account in respect of which the Trustee is the Entitlement Holder, (2) each Account is held by a financial institution that has a combined capital and surplus of at least U.S.$250,000,000 and being subject to supervision or examination by federal or state banking authority, (3) the Cash, Securities and other property credited to any Account is to be treated as a Financial Asset under Article 8 of the UCC and (4) the securities intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC) for that purpose will be the State of New York. In no event may any Financial Asset held in any Account be registered in 174

Processed and formatted by SEC Watch - Visit SECWatch.com

the name of, payable to the order of, or specially Indorsed to, the Issuer unless such Financial Asset has also been Indorsed in blank or to the Custodian or other Securities Intermediary that holds such Financial Asset in such Account. Each Account shall be held and maintained at an office located in Minneapolis, Minnesota or Columbia, Maryland. 10.2.

GENERAL PROVISIONS APPLICABLE TO ACCOUNTS (a)

The Trustee agrees to give the Issuer prompt notice (with a copy to each Hedge Counterparty, the Collateral Manager, each Rating Agency, the Class A-R Note Agent and the PAA Issued Note Paying Agent) if any Account or any funds on deposit therein, or otherwise standing to the credit of any Account, shall become subject to any writ, order, judgment, warrant of attachment, execution or similar process.

(b)

The Issuer (or the Collateral Manager on behalf of the Issuer) shall direct the Trustee to invest and reinvest any funds on deposit in any of the Accounts (other than the Payment Account or the Collateral Account) in Eligible Investments. In the event that the Collateral Manager has not delivered investment instructions to the Trustee or after the occurrence of an Event of Default, the Trustee shall invest and reinvest any funds on deposit in any Account (other than the Payment Account) as fully as practicable in investments described in clause (vii) of the definition of Eligible Investments maturing not later than the earlier of (i) 30 days after the date of such investment or (ii) the Business Day immediately preceding the next Payment Date. With respect to each Account, all interest and other income from Eligible Investments purchased with funds on deposit in such Account shall be deposited in such Account, any gain realized from such investments shall be credited to such Account, and any loss resulting from such investments shall be charged to such Account. Any gain or loss with respect to an Eligible Investment shall be allocated in such a manner as to increase or decrease, respectively, Collateral Principal Collections and/or Collateral Interest Collections in the proportion that the amount of Collateral Principal Collections and/or Collateral Interest Collections used to acquire such Eligible Investment bears to the purchase price thereof. The Trustee shall not in any way be held liable by reason of any insufficiency of any such Account resulting from any loss relating to any such investment. Nothing herein shall be deemed to relieve the Bank or its Affiliates from any duties or liabilities with respect to investments in obligations of the Bank or any Affiliate thereof.

(c)

All funds deposited from time to time in the Collection Account, the Expense Reserve Account or the Interest Reserve Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided. 175

Processed and formatted by SEC Watch - Visit SECWatch.com

10.3.

COLLATERAL ACCOUNT

The Trustee shall, prior to the Closing Date, cause the Custodian to establish a Securities Account which shall be designated as the Collateral Account, which shall be in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties and into which the Trustee shall from time to time deposit Collateral. All Collateral from time to time deposited in, or otherwise standing to the credit of, the Collateral Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided. The Co-Issuers shall not have any legal, equitable or beneficial interest in the Collateral Account other than in accordance with the Priority of Payments. 10.4.

UNINVESTED PROCEEDS ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the Uninvested Proceeds Account, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties, into which the Trustee shall deposit all Uninvested Proceeds (other than the organizational and structuring fees and expenses of the Co-Issuers (including, without limitation, the legal fees and expenses of counsel to the Co-Issuers, Wachovia Capital Markets, LLC and the Collateral Manager), the expenses of offering the Rated Notes and the Income Notes (including placement fees and structuring fees) and amounts deposited in the Expense Reserve Account on such date). On or prior to the Effective Date, the Collateral Manager on behalf of the Issuer may direct the Trustee to, and upon such direction the Trustee shall, apply funds in the Uninvested Proceeds Account to purchase additional Collateral Interests and, pending such investment in additional Collateral Interests, such funds will be invested in Eligible Investments, as directed by the Collateral Manager, with stated maturities no later than the Business Day immediately preceding the next Payment Date; provided, however that during the Ramp-Up Period, Substitute Collateral Interests shall be purchased with amounts in the Uninvested Proceeds Account, if sufficient amounts are available in the Uninvested Proceeds Account, and only if sufficient amounts are not available in the Uninvested Proceeds Account, with any Collateral Principal Collections. The Trustee shall transfer any Uninvested Proceeds remaining on deposit in the Uninvested Proceeds Account on the Effective Date to the Collection Account, at the direction of the Collateral Manager, to be treated as either (i) Collateral Interest Collections deposited in the Collateral Interest Collections Sub-Account, provided that a Rating Confirmation Failure has not occurred, or (ii) if a Rating Confirmation Failure occurs, as Collateral Principal Collections deposited in the Collateral Principal Collections Sub-Account. 10.5.

COLLECTION ACCOUNT (a)

Collection Account

(1)

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the Collection Account, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. The Trustee shall cause to be established two sub-accounts of the Collection Account. The Trustee shall deposit Collateral Principal Collections into one sub-account (the 176

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Principal Collections Sub-Account) and Collateral Interest Collections into the other sub-account (the Collateral Interest Collections Sub-Account). At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Collection Account (including the Collateral Principal Collection Sub-Account) in Eligible Investments or Substitute Collateral Interests in accordance with the requirements and limitations contained in Section 12.1(c). (2)

The Trustee, within one Business Day after receipt of any Distribution or other proceeds that are not Cash shall so notify the Issuer and the Issuer shall sell such Distribution or other proceeds for Cash in accordance with Section 12.1.

(3)

The Trustee shall transfer to the Payment Account for application pursuant to Section 11.1 and in accordance with the calculations and the instructions contained in the Note Valuation Report prepared by the Issuer pursuant to Section 10.11(a), on or prior to the Business Day prior to each Payment Date, funds on deposit in the Collection Account (including reinvestment income) other than Collections received after the end of the Due Period with respect to such Payment Date. An Authorized Officer of the Issuer or the Collateral Manager’s approval of the Note Valuation Report shall constitute direction to the Trustee to, and upon such approval, the Trustee shall, transfer to the Payment Account, for application pursuant to Section 11.1 no later than the Business Day prior to each Payment Date, all Interest Advances made to or by the Trustee pursuant to Section 10.17 and any amounts then held in the Collection Account other than proceeds received after the end of the Due Period with respect to such Payment Date.

(4)

The Trustee shall withdraw and apply amounts on deposit in the Collection Account in accordance with any Redemption Date Statement delivered to the Trustee in connection with the redemption of Rated Notes pursuant to Section 9.1.

(5)

Payments due to any Hedge Counterparty shall be paid, in accordance with Section 11.1 pro rata with all other Hedge Agreement payments on the applicable Payment Date; provided that the Issuer’s payment obligations under any Deemed Floating Asset Hedges payable on a date other than a Payment Date shall only be paid to the extent Collateral Interest Collections are then available in the Collateral Interest Collections Sub-Account. With respect to Hedge Agreements paid during the related Due Period, the Trustee, in accordance with this Section 10.5(a)(5), shall transfer Collateral Interest Collections to the Payment Account for payment to the related Hedge Counterparty on the payment date required pursuant to the related Hedge Agreement. 177

Processed and formatted by SEC Watch - Visit SECWatch.com

10.6.

EXPENSE RESERVE ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the Expense Reserve Account, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. On the Closing Date, the Trustee shall deposit into the Expense Reserve Account an amount equal to U.S.$50,000 together with an amount sufficient to pay any outstanding fees and expenses of the Issuer in relation to the offering of the Rated Notes and the Income Notes which are not paid on the Closing Date. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Expense Reserve Account in Eligible Investments. Any amounts held in the Expense Reserve Account in excess of U.S.$50,000 on the day which is 60 days following the Closing Date (or, if such day is not a Business Day, the next following Business Day) shall be transferred by the Trustee into the Uninvested Proceeds Account. Thereafter, the Trustee shall transfer to the Expense Reserve Account from the Payment Account amounts required to be deposited therein pursuant to Section 11.1(a) and in accordance with the calculations and the instruction contained in the Note Valuation Report prepared by the Issuer pursuant to Section 10.11(a). Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be to pay (on any day other than a Payment Date) accrued and unpaid Administrative Expenses of the Co-Issuers; provided that the Trustee shall deposit all amounts remaining on deposit in the Expense Reserve Account at the time when substantially all of the Issuer’s assets have been sold or otherwise disposed of into the Collections Account as Collateral Interest Collections and will be distributed in accordance with the Section 11 on the immediately succeeding Payment Date. 10.7.

INTEREST RESERVE ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the Interest Reserve Account, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Interest Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Interest Reserve Account in Eligible Investments. On each Payment Date, in accordance with the Priority of Payments, the Trustee will deposit the Interest Reserve Amount, if any, into the Interest Reserve Account. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Interest Reserve Account shall be to deposit into the Payment Account, on the Business Day prior to each Payment Date, the Balance of the Interest Reserve Account (including reinvestment income) for distribution as Collateral Interest Collections in accordance with the Priority of Payments on the related Payment Date. 178

10.8.

FUTURE FUNDING ASSET ACCOUNT

With respect to any Future Funding Asset except as set forth in the last sentence of this paragraph, the Trustee, if so directed by the Collateral Manager, at the time of purchase thereof shall withdraw from the Collateral Principal Collections Sub-Account and deposit into the Future Funding Asset Account the amount of funds equal to or greater than the combined aggregate Future Funding Obligations under such Future Funding Asset included in the Collateral Interests less the amount of any previous Future Advances, as specified in such direction. Upon initial purchase of an Future Funding Asset, such Future Funding Obligation shall be treated as part of the purchase price for such Collateral Interest. A deposit into the Future Funding Asset Account is not required to be made in connection with the purchase of an Future Funding Asset to the extent that the Total Unfunded Future Advance Amounts, including the Unfunded Future Advance Amounts with respect to such Future Funding Asset, are less than the Available Aggregate Class A-R Undrawn Amount. The Issuer (at the direction of the Collateral Manager) will deposit any Class A-R Draws into the Future Funding Asset Account. As directed by the Collateral Manager in writing and in accordance with this Indenture, amounts on deposit in the Future Funding Asset Account shall be invested in overnight funds that are Eligible Investments. On the Business Day immediately preceding each Payment Date, the income received on amounts contained in the Future Funding Asset Account during the related Due Period shall be withdrawn from such account and deposited in the Collection Account as Collateral Interest Collections. The amounts on deposit in the Future Funding Asset Account may only be applied to fund Future Advance Amounts or on the date on which the Notes are redeemed in full, shall be transferred to the Collateral Principal Collection Sub-Account and distributed pursuant to the Priority of Payments; provided, that to the extent that the amounts then on deposit in the Future Funding Asset Account exceed the Total Unfunded Future Advance Amount, the Collateral Manager may direct the Trustee to transfer such excess to the Collection Account as Collateral Principal Collections for distribution in accordance with Section 11.1. After the Commitment Termination Time, the amounts on deposit in the Future Funding Asset Account will in no event be less than the Total Unfunded Future Advance Amount. Funds in the Future Funding Asset Account shall be available for application at the direction of the Collateral Manager (i) to fund any Future Advance Amounts, (ii) during the Reinvestment Period, to make Class A-R Prepayments and (iii) to the Collateral Principal Collection Sub-Account as Collateral Principal Collections for application on the next Payment Date (provided that such direction is delivered on or before the related Calculation Date); provided, however, that the Collateral Manager may elect, rather than to fund such Future Advance with a withdrawal from the Future Funding Asset Account, to instead fund such Future Advance with a Class A-R Draw; provided, further, that no application pursuant to clause (ii) or (iii) above shall exceed the excess of (a) the sum of (1) amounts on deposit in the Future Funding Asset Account and (2) the Available Aggregate Class A-R Undrawn Amount over (b) the Total Unfunded Future Advance Amount. Upon (i) the sale or maturity of an Future Funding Asset or (ii) the occurrence of an event of default with respect to an Future Funding Asset or any

Processed and formatted by SEC Watch - Visit SECWatch.com

other event or circumstance which results in the irrevocable reduction of the undrawn commitments under such Future Funding Asset, any funds in the Future Funding Asset Account 179

Processed and formatted by SEC Watch - Visit SECWatch.com

in excess of the amount needed to cover any drawdowns on all remaining Future Funding Assets will be transferred, at the direction of the Collateral Manager, to the Collection Account as Collateral Principal Collections and will be distributed in accordance with Section 11.1 on the immediately succeeding Payment Date. 10.9.

PAYMENT ACCOUNT

The Trustee shall, prior to the Closing Date, establish a Securities Account which shall be designated as the Payment Account, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Payment Account shall be held in trust by the Trustee for the benefit of the Secured Parties. Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Payment Account shall be to pay the interest on and the principal of the Rated Notes in accordance with their terms and the provisions of this Indenture and, upon Issuer Order, to pay Administrative Expenses, amounts due to the Advancing Agent or the Trustee in connection with the reimbursement of Interest Advances, certain Cure Advances and certain servicing advances made in accordance with any Servicing Agreement and servicing and other fees paid in accordance with any Servicing Agreement and interest thereon and other amounts specified therein, each in accordance with the Priority of Payments. The Co-Issuers shall not have any legal, equitable or beneficial interest in the Payment Account other than in accordance with the Priority of Payments. 10.10.

REPORTS BY TRUSTEE

The Trustee shall supply, in a timely fashion to each Rating Agency (so long as any Rated Notes are rated by such Rating Agency), each Hedge Counterparty, the Holders of Rated Notes, the Collateral Manager, the PAA Issued Note Paying Agent, the Initial Purchaser, the Placement Agent, the Issuer and the Advancing Agent any information regularly maintained by the Trustee that each such Person may from time to time request with respect to the Pledged Securities or the Accounts reasonably needed to complete the Note Valuation Report or to provide any other information reasonably available to the Trustee by reason of its acting as Trustee hereunder and required to be provided by Section 10.11. The Trustee shall forward to the Collateral Manager, the Controlling Party, the Advancing Agent, or upon request therefor, any Holder of a Rated Note shown on the Note Register, the Initial Purchaser, each Hedge Counterparty or the PAA Issued Note Paying Agent, copies of notices and other writings received by it from the issuer of any Collateral Interest or from any Clearing Agency with respect to any Collateral Interest advising the holders of such security of any rights that the holders might have with respect thereto (including notices of calls and redemptions of securities) as well as all periodic financial reports received from such issuer and Clearing Agencies with respect to such issuer. As promptly as possible following the delivery of each Note Valuation Report to the Trustee pursuant to Section 10.11(a) or (b), as applicable, the Issuer shall cause a copy of such report to be delivered the Repository for posting on the Repository in the manner described in Section 14.3. In connection therewith, each of the Co-Issuers acknowledges and agrees that each 180

Processed and formatted by SEC Watch - Visit SECWatch.com

Note Valuation Report shall be posted to the Repository for use in the manner described in the section headed “Terms of Use” on the Repository. In the event that a Distribution on any Collateral Interest is not paid to the Trustee on the Due Date therefor, the Trustee shall provide the Advancing Agent with notice of such default on the Business Day immediately following such default. In addition, (i) the Trustee shall provide the Advancing Agent (either electronically or in hard-copy format) with copies of all reports received from any trustee, trust administrator, master servicer or similar administrative entity with respect to the Collateral Interests and (ii) upon request, the Trustee shall promptly make available to the Advancing Agent any other information reasonably available to the Trustee by reason of its acting as Trustee hereunder to permit the Advancing Agent to make a determination of recoverability with respect to any Interest Advance and to otherwise perform its advancing obligations hereunder. 10.11.

ACCOUNTINGS (a)

Accounting. The Issuer shall deliver, not later than the related Payment Date and after the reconciliation process described in this Section 10.11, an accounting (each, a Remittance Report and, together with the Monthly Reports, the Note Valuation Reports), determined as of each Calculation Date, to each Rating Agency, the Trustee, the Collateral Manager, the Issuer and the Advancing Agent and make available via the Trustee’s internet website, initially located at www.cdolink.com to the Trustee, each Hedge Counterparty, the PAA Issued Note Paying Agent, each Note Transfer Agent, Wachovia Capital Markets, LLC, the Advancing Agent, the Issuer and, upon written request therefor, any Holder of a Rated Note shown on the Note Register. The Note Valuation Report shall contain the following information determined, unless otherwise specified below, as of the related Calculation Date;

(1)

the calculation showing compliance with each of the Coverage Tests, accompanied by a list setting forth the applicable maximum or minimum value, percentage or ratio which must be maintained pursuant to this Indenture with respect to each of the Coverage Tests and a list setting forth the results of the calculation of each of the Coverage Tests with respect to the Collateral Interests, and the calculation showing the Moody’s Maximum Weighted Average Rating Factor Test, the Weighted Average Fixed Rate Coupon, the Weighted Average Spread, the Weighted Average Life and the Moody’s Minimum Average Recovery Rate and, if applicable, the Moody’s Post-Acquisition Compliance Test;

(2)

the estimated remaining Average Life of each of the Collateral Interests;

(3)

the Applicable Periodic Interest Rate in respect of each Class of Notes and the amount of Periodic Interest payable to the Holders of the Notes for such Payment Date (in the aggregate and by Class); 181

Processed and formatted by SEC Watch - Visit SECWatch.com

(4)

the amount (if any) payable to each Hedge Counterparty pursuant to the related Hedge Agreement;

(5)

the amount (if any) payable by each Hedge Counterparty pursuant to the related Hedge Agreement:

(6)

the Aggregate Fees and Expenses payable on the next Payment Date on an itemized basis;

(7)

the Aggregate Fees and Expenses paid during a period of twelve (12) months ending on the next Payment Date on an itemized basis;

(8)

for the Collection Account:

(9)

(i)

the Balance on deposit in the Collection Account and the Collateral Principal Collections Sub-Account at the end of the related Due Period;

(ii)

the nature and source of any Collections in the Collection Account and the Collateral Principal Collections Sub-Account, including Collections received since the date of the last Note Valuation Report;

(iii)

the amounts payable from the Collection Account in accordance with the priority set forth in Section 11.1 on the next Payment Date; and

(iv)

the Balance remaining in the Collection Account immediately after all payments and deposits to be made on such Payment Date;

(v)

the Balance on deposit in the Collateral Principal Collections Sub-Account.

for the Interest Reserve Account: (i)

the balance on deposit in the Interest Reserve Account at the end of the related Due Period;

(ii)

the amount payable from the Interest Reserve Account pursuant to the Priority of Payments on the next Payment Date;

(iii)

the Interest Reserve Amount to be paid into the Interest Reserve Account on the next Payment Date; and

(iv)

the Balance remaining in the Interest Reserve Account immediately after all payments and deposits to be made on such Payment Date; 182

Processed and formatted by SEC Watch - Visit SECWatch.com

(10)

(11)

for the Expense Reserve Account: (i)

the amount to be paid into the Expense Reserve Account on the next Payment Date; and

(ii)

the Balance remaining in the Expense Reserve Account immediately after all payments and deposits to be made on such Payment Date;

for the Future Funding Asset Account: (i)

the balance on deposit in the Future Funding Asset Account at the end of the related Due Period;

(ii)

the amount, if any, payable from the Future Funding Asset Account;

(iii)

the amount, if any, to be paid into the Future Funding Asset Account on the next Payment Date; and

(iv)

the Balance remaining in the Future Funding Asset Account immediately after all payments and deposits to be made on such Payment Date;

(12)

for the Class A-R Holder Collateral Account, the Balance remaining in the Class A-R Holder Collateral Account immediately after all payments and deposits to be made on such Payment Date;

(13)

any Hedge Receipt Amount or Hedge Payment Amount for the related Payment Date, and for each Hedge Agreement (if any), the outstanding notional amount of such Hedge Agreement and the amounts, if any, scheduled to be received or paid, as the case may be, by the Issuer pursuant to such Hedge Agreement for the related Payment Date, separately stating the portion payable in accordance with Section 11.1;

(14)

the aggregate amount of outstanding Interest Advances and Cure Advances;

(15)

the amount of Income Note Excess Funds on the related Payment Date;

(16)

the amount of the Senior Collateral Management Fee and the amount of the Subordinate Collateral Management Fee;

(17)

such other information as the Collateral Manager, the Initial Purchaser, the Trustee, any Rating Agency or any Hedge Counterparty may reasonably request; 183

Processed and formatted by SEC Watch - Visit SECWatch.com

(18)

with respect to each Collateral Interest, the Principal Balance, the annual coupon rate or spread to the relevant floating rate index, the frequency of coupon payments, the amount of principal payments received, the maturity date, the issuer, the country in which the issuer is incorporated or organized, the Moody’s Recovery Rate and the Moody’s Rating (provided that if any Moody’s Rating for any Collateral Interest is an “estimated” or “shadow” rating, such rating shall be identified as “estimated” or “shadow rated,” shall be disclosed with an asterisk (or any such other marking designed to indicate an estimated or shadow rating) in the place of the applicable estimated or shadow rating and shall include the date as of which such rating was first provided by Moody’s to the Issuer).

(19)

the Principal Balance, the maturity date, the Moody’s Rating and the issuer of each Eligible Investment included in the Collateral;

(20)

(A) the identity and Principal Balance of each Collateral Interest that became a Credit Risk Interest, an Impaired Interest, an Equity Interest, a Written Down Interest, a Withholding Tax Interest, a Deferred Interest PIK Bond, a Buy/Sell Interest, a Credit Improved Interest, a Future Funding Interest, a Taxed Collateral Interest or a Taxed Property, (B) the date, as provided by the Collateral Manager, on which any Collateral Interest became a Credit Risk Interest, an Impaired Interest, an Equity Interest, a Written Down Interest, a Buy/Sell Interest, a Withholding Tax Interest, a Taxed Collateral Interest or a Taxed Property, (C) whether the Collateral Manager has directed the Issuer to sell or not to sell such Collateral Interest, and (D) the date by which any such sale occurs;

(21)

the identity of each Collateral Interest that was upgraded or downgraded or placed on watch for upgrade or downgrade by any Rating Agency since the date of the last Note Valuation Report;

(22)

the Principal Balance and identity of each Collateral Interest that was released for sale indicating the reason for such sale and the amount and identity of each Collateral Interest that was granted since the date of the last Note Valuation Report;

(23)

the identity and Principal Balance of each Collateral Interest that was a Credit Risk Interest, an Impaired Interest, an Equity Interest, a Written Down Interest, a Buy/Sell Interest, a Withholding Tax Interest, a Buy/Sell Interest, a Credit Improved Interest, a Future Funding Interest, a Deferred Interest PIK Bond, a Taxed Collateral Interest, a Taxed Property or a Discretionary Sale;

(24)

the purchase price of each Pledged Security granted and the sale price of each Pledged Security subject to a sale since the date of the last Note 184

Processed and formatted by SEC Watch - Visit SECWatch.com

Valuation Report; and whether such Pledged Security is a Collateral Interest, an Eligible Investment or proceeds in the Collection Account; (25)

the amount of Purchased Accrued Interest;

(26)

a description of any transactions with the Collateral Manager, the Issuer, the Collateral Administrator and the Trustee and any Affiliates thereof;

(27)

the Herfindahl Score;

(28)

the Fitch Recovery for each Class of Notes;

(29)

the components of the Fitch Poolwide Expected Loss Test; and

(30)

the amount of any Class A-R Draws, remaining Class A-R Commitments, the Total Net Unfunded Future Advance Amount, the Total Unfunded Future Advance Amount and Future Funding Obligations.

Upon receipt of each Note Valuation Report, the Trustee and the Collateral Manager shall compare the information contained therein to the information contained in their respective records with respect to the Collateral and shall, within two (2) Business Days after receipt of such Note Valuation Report, notify each of the Issuer, the Collateral Manager, the Trustee, each Hedge Counterparty, Moody’s and Fitch if the information contained in the Note Valuation Report does not conform to the information maintained by the Trustee or the Collateral Manager as applicable, with respect to the Collateral, and detail any discrepancies. In the event that any discrepancy exists, the Trustee and the Issuer, or the Collateral Manager shall attempt to promptly resolve the discrepancy. If such discrepancy cannot be promptly resolved, the Trustee shall within five (5) Business Days after discovery of such discrepancy cause the Independent Accountants of recognized international reputation to review such Note Valuation Report and the Trustee’s and the Collateral Manager’s records to determine the cause of such discrepancy. If such review reveals an error in the Note Valuation Report or the records of the Trustee or the Collateral Manager, as the case may be, such item shall be revised accordingly and, as so revised, shall be utilized in making further calculations. Subject to the terms of this Indenture and the Collateral Administration Agreement, the Collateral Administrator shall be entitled to rely on the information supplied by the Collateral Manager in relation to the preparation of the Note Valuation Report and shall not be liable for the accuracy or completeness of such information or the lack thereof. In addition to the foregoing information, each Note Valuation Report shall include a statement to the following effect: “The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act), or under any state securities laws, and the Co-Issuers have not been and will not be registered under the United States Investment Company Act of 1940, as amended (the 1940 Act). Each Holder of the Notes, other than those Holders that are not “U.S. persons” (U.S. Person) within the meaning of Regulation S (Regulation S) under the Securities Act and have acquired their Notes outside the United States pursuant to Regulation 185

Processed and formatted by SEC Watch - Visit SECWatch.com

S, is required to be both (i) (A) with respect to any Rated Note, a “qualified institutional buyer” as defined in Rule 144A under the Securities Act (Qualified Institutional Buyer) or (B) solely with respect to the Income Notes, any of NS CDO Holdings VIII2, LLC, NS Advisors, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(A) under the Securities Act (each of the foregoing, a Permitted NS Purchaser) and (ii) a “qualified purchaser” (Qualified Purchaser) within the meaning of Section 3(c)(7) of the 1940 Act, purchasing for its own account or for the account of another Qualified Purchaser, that can make all of the representations in this Indenture applicable to a holder that is a U.S. Person. The beneficial interest in the Notes may be transferred only to a transferee that meets both of the criteria in clauses (i) and (ii) above and can make all of the representations in this Indenture applicable to a Holder that is a U.S. Person, except that any such transfer in reliance on Regulation S can be made only to a transferee that is not a U.S. Person. The Issuer has the right to compel any Holder that does not meet the qualifications and the transfer restrictions set forth in this Indenture to sell its interest in the Notes, or may sell such interest on behalf of such owner, pursuant to the Indenture.” (b)

Redemption Date Instructions. Not less than five Business Days after receiving an Issuer Request requesting information regarding a redemption pursuant to Section 9.1 of the Rated Notes of a Class as of a proposed Redemption Date set forth in such Issuer Request, the Trustee shall provide the necessary information (to the extent it is available to the Trustee) to the Issuer, and the Issuer shall compute the following information and provide such information in a statement (the Redemption Date Statement) delivered to the Trustee:

(1)

the Aggregate Outstanding Amount of the Rated Notes of the Class or Classes to be redeemed as of such Redemption Date;

(2)

the amount of accrued interest due on such Rated Notes as of the last day of the Interest Period immediately preceding such Redemption Date; and

(3)

the amount in the Collection Account available for application to the redemption of such Rated Notes.

(c)

If the Trustee shall not have received any accounting provided for in this Section 10.11 on the first Business Day after the date on which such accounting is due to the Trustee, the Trustee shall use reasonable efforts to cause such accounting to be made by the applicable Payment Date or Redemption Date. To the extent the Trustee is required to provide any information or reports pursuant to this Section 10.11 as a result of the failure of the Issuer to provide such information or reports, the Trustee shall be entitled to retain an Independent certified public accountant in connection therewith and the reasonable costs incurred by the Trustee for such Independent certified public accountant shall be reimbursed pursuant to Section 6.8. 186

The Trustee will make the Note Valuation Report available via its internet website initially located at www.cdolink.com. All information made available on the Trustee’s website will be restricted and the Trustee will only provide access to such reports to those parties entitled thereto pursuant to this Indenture. In connection with providing access to its website, the Trustee may require registration and the acceptance of a disclaimer. Questions regarding the Trustee’s website can be directed to the Trustee’s customer service desk at phone number 301-815-6600. 10.12.

RELEASE OF SECURITIES (a)

If no Event of Default has occurred and is continuing and subject to Section 12, the Issuer shall, in connection with any sale required pursuant to Section 12.1, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the settlement date for any sale of a security certifying that the conditions set forth in Section 12.1 are satisfied, direct the Trustee to release such security from the lien of this Indenture against receipt of payment therefor.

(b)

The Issuer shall, if notified that the issuer of the Pledged Security requires delivery of such Pledged Security as a condition to redemption or payment in full, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the date set for redemption or payment in full of a Pledged Security, certifying that such security is being redeemed or paid in full, direct the Trustee or, at the Trustee’s instructions, the Custodian, to deliver such security, if in physical form, duly endorsed, or, if such security is a Clearing Corporation Security, to cause it to be presented, to the appropriate paying agent therefor on or before the date set for redemption or payment, in each case against receipt of the redemption price or payment in full thereof.

(c)

The Trustee shall, upon receipt of an Issuer Order at such time as there are no Rated Notes Outstanding and all obligations of the Co-Issuers hereunder have been satisfied, release the Collateral from the lien of this Indenture.

(d)

The Issuer may retain agents (including the Collateral Manager) to assist the Issuer in preparing any notice or other report required under Section 10.12 and this Section 10.13.

Processed and formatted by SEC Watch - Visit SECWatch.com

10.13.

REPORTS BY INDEPENDENT ACCOUNTANTS (a)

At the Closing Date the Issuer (or the Collateral Manager on its behalf) shall appoint a firm of Independent certified public accountants of recognized national reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Indenture. Upon any resignation by such firm, the Issuer shall (after consultation with 187

Processed and formatted by SEC Watch - Visit SECWatch.com

the Collateral Manager) propose a replacement firm meeting the criteria set forth in the preceding sentence for approval by a Majority of the Controlling Class. Upon approval by a Majority of the Controlling Class, the Issuer shall promptly appoint such firm by Issuer Order delivered to the Trustee, each Hedge Counterparty, the Collateral Manager and each Rating Agency. If the Issuer shall fail to appoint a successor to a firm of Independent certified public accountants which has resigned within 30 days after such resignation, the Issuer shall promptly notify the Trustee of such failure in writing. The fees of such Independent certified public accountants and its successor shall be payable by the Issuer as provided in Section 11.1. (b)

On or before May 31 of each year (commencing with May 31, 2008), the Issuer shall cause to be delivered to the Trustee, the PAA Issued Note Paying Agent and each Rating Agency an Accountant’s Report specifying the procedures applied and their associated findings with respect to the Note Valuation Reports and any Redemption Date Statements prepared in the preceding year. At least 60 days prior to the Payment Date in May 2008 (and, if at any time a successor firm of Independent certified public accountants is appointed, prior to the Payment Date in August following the date of such appointment), the Issuer shall deliver to the Trustee an Accountant’s Report specifying in advance the procedures that such firm will apply in making the aforementioned findings throughout the term of its service as accountants to the Issuer. The Trustee shall promptly forward a copy of such Accountant’s Report to each Hedge Counterparty, the Rating Agencies, the PAA Issued Note Paying Agent and each Holder of Class A Senior Notes (or, if no Class A Senior Notes are Outstanding, each Holder of Class A-2 Notes or, if no Class A Notes are Outstanding, each Holder of Class B Notes or, if no Class B Notes are Outstanding, each Holder of Class C Notes or, if no Class C Notes are Outstanding, each Holder of Class D Notes or, if no Class D Notes are Outstanding, each Holder of Class E Notes or, if no Class E Notes are Outstanding, each Holder of Class F Notes or, if no Class F Notes are Outstanding, each Holder of Class G Notes or, if no Class G Notes are Outstanding, each Holder of Class H Notes or, if no Class H Notes are Outstanding, each Holder of Class J Notes or, if no Class J Notes are Outstanding, each Holder of Class K Notes, or, if no Class K Notes are Outstanding, each Holder of Class L Notes or, if no Class L Notes are Outstanding, each Holder of Class M Notes or, if no Class M Notes are Outstanding, each Holder of Class N Notes), at the address shown on the Note Register. The Issuer shall not approve the institution of such procedures if a Majority of the Controlling Class or the Collateral Manager, by notice to the Issuer and the Trustee within 30 days after the date of the related notice to the Trustee, object thereto. 188

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

10.14.

Any statement delivered to the Trustee pursuant to Section 10.13(b) above shall be made available by the Trustee to any Holder of a Rated Note shown on the Note Register upon written request therefor.

REPORTS TO RATING AGENCIES

In addition to the information and reports specifically required to be provided to the Rating Agencies, the PAA Issued Note Paying Agent, the Holders of Rated Notes and each Hedge Counterparty pursuant to the terms of this Indenture or the Paying Agency Agreement (as the case may be), the Issuer shall provide or procure to provide the Rating Agencies and each Hedge Counterparty with (a) all information or reports delivered to the Trustee hereunder and (b) such additional information as the Rating Agencies, each Hedge Counterparty or the PAA Issued Note Paying Agent may from time to time reasonably request, provided that such information may be obtained and provided without unreasonable burden or expense. The Issuer shall promptly notify the Trustee, the PAA Issued Note Paying Agent if the rating of any Class of Rated Notes has been, or it is known by the Issuer that such rating will be, changed or withdrawn. The Issuer shall notify each Rating Agency and each Hedge Counterparty in the case of (i) termination or amendment of any Transaction Document or organizational document of the Issuer or Co-Issuer, (ii) termination or change of party to any of the Transaction Documents or (iii) material breach of any of the Transaction Documents by any party thereto. 10.15.

TAX MATTERS

The Issuer and the Co-Issuer agree to treat, and hereby notify the Trustee to treat, and, by accepting a Certificated Class A-K Note, a Class L Note or Class M Note, each Holder of a Certificated Class A-K Note, a Class L Note or Class M Note agrees to treat, for U.S. federal income, state and local income and franchise tax and any other income tax purposes, for so long as an Owner REIT qualifies for U.S. federal income tax purposes as a REIT and 100% of the Class L Notes, Class M Notes, Class N Notes, Income Notes, and Ordinary Shares (other than any Class L Notes, Class M Notes or Class N Notes with respect to which the Issuer has received an Opinion of Counsel rendered by nationally recognized U.S. tax counsel experienced in such matters to the effect that the Class L Notes, Class M Notes or Class N Notes, as applicable, will be treated as indebtedness for U.S. federal income tax purposes) are owned by the Owner REIT, directly or indirectly through one or more Qualified REIT Subsidiaries thereof or one or more entities disregarded as entities separate from the Owner REIT or its Qualified REIT Subsidiaries, (i) the Certificated Class A-K Notes as indebtedness solely of the Owner REIT, and not as indebtedness of the Issuer or the Co-Issuer, and at any other time, as indebtedness solely of the Issuer and not the Co-Issuer, (ii) the Class L Notes, Class M Notes, Class N Notes and Income Notes as indebtedness of the Issuer for legal purposes and for certain tax purposes, and at any other time, as indebtedness solely of the Issuer and not the Co-Issuer, and (iii) the Income Notes as not issued or outstanding for tax purposes, and at any other time, as equity in the Issuer. The Issuer (and, with respect to the Certificated Class A-K Notes, the Co-Issuer) agree, and, by accepting a Certificated Class A-K Note, Class L Note or Class M Note, each Holder of a Certificated Class A-K Note or Class L Note or Class M Note agrees, to report all income (or loss) in accordance with such treatment, and not to take any action inconsistent with such treatment except as otherwise required by any taxing authority under applicable law. The Issuer agrees that, for purposes of U.S. federal income taxes, for so long as an Owner REIT qualifies 189

Processed and formatted by SEC Watch - Visit SECWatch.com

for U.S. federal income tax purposes as a REIT and 100% of the Class L Notes, Class M Notes, Class N Notes, Income Notes, and Ordinary Shares (other than any Class L Notes, Class M Notes or Class N Notes with respect to which the Issuer has received an Opinion of Counsel rendered by nationally recognized U.S. tax counsel experienced in such matters to the effect that the Class L Notes, Class M Notes or Class N Notes, as applicable, will be treated as indebtedness for U.S. federal income tax purposes) are owned by the Owner REIT, directly or indirectly through one or more Qualified REIT Subsidiaries thereof or one or more entities disregarded as entities separate from the Owner REIT or its Qualified REIT Subsidiaries, the Issuer will be treated as a Qualified REIT Subsidiary of the Owner REIT, and at any other time, the Issuer agrees not to elect to be treated as other than an association taxable as a corporation for U.S. federal income tax purposes. The Class A-R Commitment Fee will be includible as ordinary income by a U.S. Holder of a Class A-R Note in accordance with its regular method of tax accounting. 10.16.

[RESERVED]

10.17.

INTEREST ADVANCES (a)

With respect to each Payment Date for which the sum of (i) Collateral Interest Collections collected during the related Due Period and (ii) funds on deposit in the Collection Account, are insufficient to remit the interest due and payable with respect to the Class A Notes, Class B Notes, Class C Notes and Class D Notes on the following Payment Date (the amount of such insufficiency, an Interest Shortfall), so long as that no Event of Default is occurring (except an Event of Default with respect to the nonpayment of interest on the Class A Notes, the Class B Notes, the Class C Notes or the Class D Notes), the Trustee shall provide the Advancing Agent with written notice of such Interest Shortfall no later than 12:00 noon (New York time) on the Business Day immediately preceding such Payment Date. The Trustee shall provide the Advancing Agent with notice, prior to any funding of an Interest Advance (as defined below) by the Advancing Agent, of any additional interest remittances received by the Trustee after deliver of such initial notice that reduce such Interest Shortfall. No later than 5:00 p.m. (New York time) on the Business Day immediately preceding the related Payment Date, the Advancing Agent shall advance the difference between such amounts (each such advance, an Interest Advance) by deposit of an amount equal to such Interest Shortfall in the Payment Account, subject to a determination of recoverability by the Advancing Agent as described in Section 10.17(b). Any Interest Advance made by the Advancing Agent with respect to a Payment Date that is in excess of the actual Interest Shortfall for such Payment Date shall be refunded to the Advancing Agent by the Trustee on the same Business Day that such Interest Advance was made (or, if such Interest Advance is made prior to final determination by the Trustee of such Interest Shortfall, on the Business Day of such final determination). The Advancing Agent shall provide the Trustee written notice of a 190

Processed and formatted by SEC Watch - Visit SECWatch.com

determination by the Advancing Agent that a proposed Interest Advance would constitute a Nonrecoverable Advance no later than the close of business on the Business Day immediately preceding the related Payment Date. If the Advancing Agent does not make any required Interest Advance at or prior to the time at which distributions are to be made pursuant to Section 11.1, the Trustee shall be required to make such Interest Advance, subject to a determination of recoverability by the Trustee as described in Section 10.17(b). The Trustee shall be entitled to conclusively rely on any determination by the Advancing Agent that an Interest Advance, if made, would constitute a Nonrecoverable Advance. Notwithstanding the foregoing, to the extent the Advancing Agent fails to make an Interest Advance it was required to make, the Advancing Agent shall not be entitled to make a recoverability determination affecting the Trustee’s obligation to provide an Interest Advance and any such determination shall not be binding on the Trustee. Notwithstanding anything herein to the contrary, neither the Advancing Agent nor the Trustee shall be required to make any Interest Advance unless such Person determines, in its sole discretion, exercised in good faith and, with respect to any such determination made by the Advancing Agent, in accordance with the Advancing Standards (as defined below), that such Interest Advance, plus interest expected to accrue thereon at the Reimbursement Rate, will be recoverable from subsequent payments or collections with respect to all Collateral Interests. Such interest on any Interest Advance will be payable to the Advancing Agent or the Trustee, as the case may be, out of default charges collected in respect of the Collateral Interests for the related period or, in connection with the reimbursement of such Interest Advance, out of Collateral Interest Collections, and to the extent not reimbursed in full by Collateral Interest Collections, out of Collateral Principal Collections then on deposit in the Collection Account or any collection account established in favor of the Underlying Trust (provided that interest on Nonrecoverable Advances will be payable first from Collateral Principal Collections, and to the extent not reimbursed in full from Collateral Principal Collections, from Collateral Interest Collections then on deposit in the Collection Account or any collection account established in favor of the Underlying Trust). To the extent interest on any outstanding Interest Advance cannot be offset by such default charges, such interest accrued on outstanding Interest Advances made in respect thereof will result in a reduction in amounts payable on the Collateral Interests. In determining whether any proposed Interest Advance will be, or whether any Interest Advance previously made is, a Nonrecoverable Advance, the Advancing Agent or the Trustee, as applicable, will take into account: (1)

amounts that may be realized on each Mortgaged Property in its “as is” or then current condition and occupancy;

(2)

that such Interest Advances, together with interest accruing thereon, may only be recovered from subsequent payments or collections on the Collateral Interests, as allocable thereto from recoveries on the related 191

Processed and formatted by SEC Watch - Visit SECWatch.com

Mortgage Properties pursuant to the related participation agreement, intercreditor agreement or other similar agreement; (3)

that the related Senior Interests may be required to be fully paid and any advances (and interest thereon) made in respect of such Senior Interests may be required to be fully reimbursed, prior to any amounts recovered in respect of the Mortgaged Properties being allocated or otherwise made available to the Collateral Interests;

(4)

the possibility and effects of future adverse change with respect to the Mortgaged Properties, the potential length of time before such Interest Advance may be reimbursed and the resulting degree of uncertainty with respect to such reimbursement; and

(5)

the fact that Interest Advances are intended to provide liquidity only and not credit support to the Noteholders.

For purposes of any such determination of whether an Interest Advance constitutes or would constitute a Nonrecoverable Advance, an Interest Advance will be deemed to be nonrecoverable if the Advancing Agent or the Trustee, as applicable, determines that future payments or collections on the Collateral Interests may be insufficient to fully reimburse such Interest Advance, plus interest thereon at the Reimbursement Rate, within a reasonable period of time. Absent bad faith, the determination by the Advancing Agent or the Trustee, as applicable, as to the nonrecoverability of any Interest Advance shall be conclusive and binding on the Noteholders. The Trustee shall be entitled to conclusively rely on any determination by the Advancing Agent that an Interest Advance, if made, would constitute a Nonrecoverable Advance. The Collateral Manager and the Advancing Agent shall provide any information regarding the Collateral reasonably requested by the Trustee in connection with the Trustee’s determination of whether any Interest Advance would be recoverable. (b)

The Advancing Agent and the Trustee will each be entitled to recover any previously unreimbursed Interest Advance made by it (including any Nonrecoverable Advance), together with interest thereon, in accordance with the Section 11.1(k).

(c)

The Advancing Agent and the Trustee will each be entitled with respect to any Interest Advance made by it (including Nonrecoverable Advances) to interest accrued on the amount of such Interest Advance for so long as it is outstanding at the Reimbursement Rate.

(d)

The Advancing Agent’s obligations to make Interest Advances in respect of the Class A Notes, Class B Notes, Class C Notes and Class D Notes will continue through the date on which the outstanding principal amount of such Notes is paid in full or redeemed. 192

Processed and formatted by SEC Watch - Visit SECWatch.com

(e)

In no event will the Advancing Agent or the Trustee be required to advance any payments in respect of interest on any Notes other than the Class A Notes, Class B Notes, Class C Notes and Class D Notes or any payments in respect of principal on any Notes.

(f)

In consideration of the performance of its obligations hereunder, the Trustee shall be entitled to receive, in its capacity as backup advancing agent, at the times set forth herein and subject to the conditions and the priority of distribution provisions hereof, to the extent funds are available therefor, the Trustee Interest Advance Fee. In addition, to the extent that the Trustee makes an Interest Advance on any Payment Date that the Advancing Agent was required, but failed to make, the Trustee shall be entitled to receive the Advancing Agent Fee (in addition to the Trustee Interest Advance Fee) for such Payment Date and any future Payment Dates upon which such Interest Advance remains outstanding.

(g)

In consideration of the performance of its obligations hereunder, the Advancing Agent shall be entitled to receive, at the times set forth herein and subject to the conditions and the priority of distribution provisions hereof, to the extent funds are available therefor, the Advancing Agent Fee (except to the extent the Advancing Agent Fee is being paid to the Trustee as described in clause (f), above).

(h)

The determination by the Advancing Agent or the Trustee, as applicable, (i) that it has made a Nonrecoverable Advance or (ii) that any proposed Interest Advance, if made, would constitute a Nonrecoverable Advance, shall be evidenced by an Officer’s certificate delivered promptly to the Trustee (or, if applicable, retained thereby) and the Issuer, setting forth the basis for such determination; provided, that failure to give such notice, or any defect therein, shall not impair or affect the validity of, or the Advancing Agent’s or the Trustee’s entitlement to reimbursement with respect to, any Interest Advance.

(i)

The Advancing Agent, in such capacity, shall act in the best interests of the Class A Noteholders, the Class B Noteholders, the Class C Noteholders and the Class D Noteholders (taking into account the interests of the Class A Noteholders, the Class B Noteholders Class C Noteholders and the Class D Noteholders collectively), as determined by the Advancing Agent, in its good faith judgment and in accordance with this Indenture and applicable law, and in all cases without regard to: (i) any relationship that the Advancing Agent may have with any obligor under a Collateral Interest or any Affiliate of such obligor, any seller or any other parties to this Indenture; (ii) the ownership of any Note by the Advancing Agent or any of its Affiliates; (iii) the adequacy of the Advancing Agent’s right to receive compensation for its services and reimbursement for its costs hereunder; (iv) the ownership or management of any interests in any mortgage loans, mortgaged properties, mezzanine loans or Collateral 193

Processed and formatted by SEC Watch - Visit SECWatch.com

Interests by the Advancing Agent; (v) any obligation of the Advancing Agent or any of its Affiliates to cure a breach of a representation or warranty or document defect with respect to, or repurchase or substitute for any Collateral Interest; and (vi) any other debt the Advancing Agent or any of its Affiliates has extended to any obligor under any Collateral Interest or any of its Affiliates (the criteria specified in this Section 10.17(i), collectively referred to as the Advancing Standards). 10.18.

CURE ADVANCES The Issuer, as holder of a Subordinate Mortgage Loan Interest or Mezzanine Loan, may have the right to cure certain payment defaults or other defaults by the borrower of the related commercial mortgage loan or mezzanine loan, subject to the rights of any junior participant, junior note holder or mezzanine loan holder. If such a right is exercisable by the Issuer, then, upon written instruction from the Holders of at least a Majority of the Income Notes in accordance with the Paying Agency Agreement, the Collateral Manager may exercise such cure right and make a cash advance solely out of funds received from the Holders of the majority of the Income Notes (each such advance, a Cure Advance) to cure the related default, but only to the extent that the Collateral Manager has determined in its sole discretion, exercised in good faith, that such cash advance is not a Nonrecoverable Cure Advance. The Holders of the majority of the Income Notes will be entitled to reimbursement from any subsequent payments or recoveries on each Collateral Interest in respect of which it makes a Cure Advance in accordance with the Priority of Payments; provided that, if at any time the Collateral Manager determines in its sole discretion, exercised in good faith, that a Cure Advance previously made is a Nonrecoverable Cure Advance, the Collateral Manager will be entitled to reimbursement for such Cure Advance from subsequent payments or collections with respect to all of the Collateral Interests on any Business Day during any Interest Period prior to the end of the related Due Period (or on a Payment Date prior to any payment of interest on or principal of the Notes in accordance with the Priority of Payments). Reimbursement of such Nonrecoverable Cure Advances will be made first from Collateral Interest Collections and, then, to the extent Collateral Interest Collections were insufficient, from Collateral Principal Collections.

10.19.

FUTURE FUNDING RESERVE ACCOUNT

The Trustee shall, prior to the first Quarterly Measurement Date on the Collateral Manager’s instruction, establish a segregated trust account which shall be designated as the Future Funding Reserve Account for the benefit of the Future Advance Holders. From time to time, the Future Advance Holders (or one or more other entities on their behalf) may contribute to the Issuer amounts for deposit into the Future Funding Reserve Account. The Trustee will deposit into the Future Funding Reserve Account all amounts so received by the Issuer. At the direction of the Collateral Manager, the Issuer may by Issuer Order direct the Trustee to, and upon receipt of the Issuer Order, the Trustee will, transfer all amounts on deposit in the Future Funding Reserve Account, if any, (A) to the Future Advance Holders to satisfy the additional commitments in respect of one or more Other Loans or (B) to reimburse the Issuer for losses related to the failure of any Future Advance Holder to fund any such Other Loans in accordance 194

Processed and formatted by SEC Watch - Visit SECWatch.com

with the related Underlying Instruments. At the direction of the Collateral Manager, amounts on deposit in the Future Funding Reserve Account will be invested in certain investments as set forth in the Indenture (which shall include investments rated “A3” or higher by Moody’s). Amounts on deposit in the Future Funding Reserve Account (or any portion thereof) will be released at the direction of the Collateral Manager and paid to the Future Advance Holders (or their designees) on any date on which the Future Funding Reserve Test would be satisfied (as calculated by the Collateral Manager and notified to the Trustee) after such release and payment. For the avoidance of doubt, amounts on deposit in the Future Funding Reserve Account will not be included in the Collateral securing the Notes. 10.20.

SUSPENSE ACCOUNT

The Trustee shall, prior to the first Quarterly Measurement Date on the Collateral Manager’s instruction establish a segregated trust account designate as the Suspense Account for the benefit of the Future Advance Holders. On any Payment Date on which a Liquidity Test Failure or a Future Funding Reserve Test Failure has occurred and is continuing, the Trustee, at the direction of the Collateral Manager, will release from the lien of the Indenture and deposit into the Suspense Account all amounts available distributed pursuant to Section 11.1(a)(37) until such Liquidity Test Failure is cured. At the direction of the Collateral Manager, the Issuer may by Issuer Order direct the Trustee to, and upon receipt of the Issuer Order, the Trustee will, transfer all amounts on deposit in the Suspense Account, if any, (A) to the Future Advance Holders to satisfy the additional commitments in respect of one or more Other Loans or (B) to reimburse the Issuer for losses related to the failure of any Future Advance Holder to fund any such Other Loans in accordance with the related Underlying Instruments. At the direction of the Collateral Manager, amounts on deposit in the Suspense Account will be invested in certain investments as set forth in the Indenture (which shall include investments rated “A3” or higher Moody’s). Amounts on deposit in the Suspense Account (or any portion thereof) will be released and paid (upon standing order of the Issuer) to the PAA Issued Note Paying Agent for distribution to the holders of the Income Notes (subject to and in accordance with the provisions of the Paying Agency Agreement) on any date on which the Liquidity Test would be satisfied as calculated by the Collateral Manager and notified to the Trustee) after such release and payment (as notified to the Trustee by the Collateral Manager). For the avoidance of doubt, amounts on deposit in the Suspense Account will not be included in the Collateral securing the Notes. ARTICLE XI APPLICATION OF MONIES 11.1.

DISBURSEMENTS OF FUNDS FROM PAYMENT ACCOUNT; PRIORITY OF PAYMENTS (a)

Collateral Interest Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Rated Notes in connection with an Event of Default, in accordance with a Note Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Interest Collections, to the extent of Available Funds in the Payment Account, together with any Interest 195

Advances applied for such Payment Date, less (i) any amounts applied to reimburse any outstanding Interest Advances, together with interest thereon, as described in Section 10.17, (ii) any amounts in respect of interest applied to reimburse any outstanding Cure Advance (other than a Nonrecoverable Cure Advance) to the extent of a specific recovery of such Cure Advance from the proceeds of the Collateral Interest as to which such Cure Advance was made, as described under Section 10.18, (iii) any amounts in respect of interest applied to reimburse Nonrecoverable Cure Advances as described in Section 10.18 and (iv) any amounts applied to pay any Hedge Counterparties during the applicable Due Period (other than any termination payments payable under clause (32) below), as described in Section 10.5(a)(5), will be applied by the Trustee in the following order of priority: (1)

to pay, in the following order: (i)

taxes and filing fees and registration fees (including, without limitation, annual return fees) payable by the Co-Issuers, if any; and then,

(ii)

pro rata the amount of any due and unpaid Trustee Fee, Trustee Interest Advance Fee, Class A-R Note Agent Fee and PAA Issued Note Paying Agent Fee; and then,

(iii)

the amount of any due and unpaid fees to the Administrator; and then,

(iv)

pro rata the amount of any due and unpaid Trustee Expenses and Underlying Trust Expenses; and then,

(v)

the amount of any due and unpaid fees and expenses of the Rating Agencies; and then,

(vi)

to any accrued and unpaid Class A-R Increased Costs; provided that the cumulative amount paid under this clause (vi) may not exceed $180,000 in the aggregate in any consecutive 12-month period; and then

Processed and formatted by SEC Watch - Visit SECWatch.com

(vii)

pro rata the amount of any due and unpaid Advancing Agent Fee, expenses of the Administrator and Administrative Expenses not included in (iv), (v) and (vi) above, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee; and then,

(viii)

to deposit to the Expense Reserve Account the amount needed to bring the amount on deposit therein to U.S.$50,000 (unless the 196

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Manager directs that a lesser amount be deposited to the Expense Reserve Account); provided that the cumulative amount paid under (iii), (iv), (v) and (vii) above (excluding any Administrative Expenses due or accrued with respect to the actions taken on or prior to the Closing Date and accounting fees that the Trustee is required to pay (other than certain accountants’ fees related to annual reviews) and fees the Trustee pays in connection with any Event of Default and any default of the Collateral Interests) may not exceed U.S.$450,000 in the aggregate in any consecutive 12-month period; (2)

to pay the Senior Collateral Management Fee with respect to such Payment Date and any Senior Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date;

(3)

to pay any Hedge Counterparty any amounts due to such Hedge Counterparty under any Hedge Agreement to the extent not paid during the related Due Period pursuant to Section 10.5(a)(5), pro rata, including any termination payments other than any termination payments payable under Section 11.1(a)(32), below;

(4)

to pay (a) Periodic Interest on the Class A Senior Notes and any Defaulted Interest on the Class A Senior Notes (and interest thereon), and (b) the Class A-R Commitment Fee in each case pro rata, based on amounts due and then (c) to the Class A-R Noteholders, any accrued and unpaid and Class A-R Breakage Costs;

(5)

to pay Periodic Interest on the Class A-2 Notes and any Defaulted Interest on the Class A-2 Notes (and interest thereon);

(6)

to pay Periodic Interest on the Class B Notes and any Defaulted Interest on the Class B Notes (and interest thereon);

(7)

to pay Periodic Interest on the Class C Notes and any Defaulted Interest (and interest thereon);

(8)

to pay Periodic Interest on the Class D Notes and any Defaulted Interest (and interest thereon);

(9)

to pay an amount equal to the Interest Reserve Amount for deposit into the Interest Reserve Account;

(10)

if a Rating Confirmation Failure occurs, on each Payment Date commencing with the Payment Date immediately following the Effective Date, to pay principal of the Notes in accordance with the Note Payment Sequence, in the amounts necessary for each Rating Agency to confirm its 197

Processed and formatted by SEC Watch - Visit SECWatch.com

respective ratings of the Notes assigned on the Closing Date or until each Class of Notes is paid in full; (11)

if either of the Class A/B/C/D Coverage Tests is not satisfied as of the preceding Calculation Date, first, to pay principal of the Class A-1 Notes and Class A-R Notes then Outstanding, pro rata, based on the Class A Senior Pro Rata Allocation, until such Class A/B/C/D Coverage Test is satisfied as of such Calculation Date or until the Class A Senior Notes are paid in full; provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (a) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Future Funding Asset Account, and (b) any remainder will be deposited in the Collection Account as Collateral Principal Collections, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class A/B/C/D Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class A/B/C/D Coverage Test is satisfied or until the Class D Notes are paid in full;

(12)

to pay Periodic Interest on the Class E Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class E Notes (and interest thereon);

(13)

to pay the Class E Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(14)

to pay Periodic Interest on the Class F Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class F Notes (and interest thereon);

(15)

to pay the Class F Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(16)

to pay Periodic Interest on the Class G Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class G Notes (and interest thereon);

(17)

to pay the Class G Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(18)

if either of the Class E/F/G Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal of the most Senior Class of Notes then Outstanding, first, with respect to the Class A Senior Notes, to pay principal of the Class A-1 Notes and Class A-R Notes then Outstanding, pro rata, based on the Class A Senior Pro Rata Allocation, until such Class E/F/G Coverage Test is satisfied as of such Calculation Date or until the Class A Senior Notes are paid in full; provided that, to 198

Processed and formatted by SEC Watch - Visit SECWatch.com

the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (a) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Future Funding Asset Account, and (b) any remainder will be deposited in the Collection Account as Collateral Principal Collections, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class E/F/G Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class E/F/G Coverage Test is satisfied or until the Class G Notes are paid in full; (19)

to pay Periodic Interest on the Class H Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class H Notes (and interest thereon);

(20)

to pay the Class H Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(21)

to pay Periodic Interest on the Class J Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class J Notes (and interest thereon);

(22)

to pay the Class J Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(23)

to pay Periodic Interest on the Class K Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class K Notes (and interest thereon), if any;

(24)

to pay the Class K Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any;

(25)

if either of the Class H/J/K Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal of the most Senior Class of Notes then Outstanding, first, with respect to the Class A Senior Notes, to pay principal of the Class A-1 Notes and Class A-R Notes then Outstanding, pro rata, based on the Class A Senior Pro Rata Allocation, until such Class H/J/K Coverage Test is satisfied as of such Calculation Date or until the Class A Senior Notes are paid in full; provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (i) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Future Funding Asset Account, and (ii) any remainder will be deposited in the Collection Account as Collateral Principal Collections, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class H/J/K Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class 199

Processed and formatted by SEC Watch - Visit SECWatch.com

of Notes is paid in full and so on, until such Class H/J/K Coverage Test is satisfied or until the Class K Notes are paid in full; (26)

to pay Periodic Interest on the Class L Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class L Notes (and interest thereon);

(27)

to pay the Class L Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon);

(28)

to pay Periodic Interest on the Class M Notes and, if no Senior Notes are Outstanding, any Defaulted Interest on the Class M Notes (and interest thereon);

(29)

to pay the Class M Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon);

(30)

to pay Periodic Interest on the Class N Notes, if no Senior Notes are Outstanding, any Defaulted Interest on the Class N Notes (and interest thereon), to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement;

(31)

to pay the Class N Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), if any, to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement;

(32)

to pay termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, pro rata, if such termination occurred solely as the result of an event of default or a termination event (other than Illegality or Tax Event, each as defined in the related Hedge Agreement) with respect to the Hedge Counterparty as Defaulting Party or sole Affected Party, as the case may be;

(33)

to the Class A-R Noteholders, any accrued and unpaid Class A-R Increased Costs to the extent not paid in full under Section 11.1(a) (1)(vi) above without regard to any limitation on any maximum amounts payable on such date contained therein and, in the event the Collateral Manager requires any Class A-R Noteholder to transfer or assign its interest in the Class A-R Notes as a result of such Noteholder claiming any Class A-R Increased Costs, to the applicable Class A-R Noteholder, any reasonable costs incurred by such Noteholder in effecting such transfer or assignment;

(34)

to pay, in the following order: (i)

to any Servicer, any reimbursements for nonrecoverable servicing advances not paid out of collections received pursuant to the terms of the related Servicing Agreement; 200

Processed and formatted by SEC Watch - Visit SECWatch.com

(ii)

any due and unpaid Trustee Fee, Trustee Interest Advance Fee, Underlying Trust Expenses, Class A-R Note Agent Fee, PAA Issued Note Paying Agent Fee, Trustee Expenses, Advancing Agent Fee and other Administrative Expenses, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee, in each case, in the same order of priority as provided in Section 11.1(a)(1) above and to the extent not paid in full under Section 11.1(a)(1) above without regard to any limitation on any maximum amounts payable on such date contained therein; and

(iii)

on a pro rata basis, any due and unpaid expenses and other liabilities of the Co-Issuers to the extent not paid under Section 11.1(a)(1) above, whether as a result of an amount limitation imposed thereunder or otherwise;

(35)

to pay the Subordinate Collateral Management Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date;

(36)

to repay, pro rata, the amount of any outstanding Cure Advances not previously reimbursed, if any;

(37)

if a Liquidity Test Failure or Future Funding Reserve Test Failure has occurred and is continuing, to the Suspense Account in an amount equal to the amount necessary to cause such Liquidity Test Failure to be cured; and

(38)

all Income Note Excess Funds to the PAA Issued Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Paying Agency Agreement;

Provided, however, with respect to this Section 11.1(a), for purposes of determining if any Principal Coverage Test is satisfied after giving effect to payments of principal, the denominator of such Principal Coverage Test shall be determined after giving effect to any principal of the Notes paid pursuant to any clauses prior to such clause and such clause on the related Payment Date (b)

Collateral Principal Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Rated Notes in connection with an Event of Default, in accordance with a Note Valuation Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Principal Collections, to the extent of Available Funds in the Payment Account, less (i) any amounts in respect of principal applied to reimburse Interest Advances together with interest thereon, as described in Section 10.17, (ii) any amounts in respect of 201

Processed and formatted by SEC Watch - Visit SECWatch.com

principal applied to reimburse any outstanding Cure Advance (other than a Nonrecoverable Cure Advance) to the extent of a specific recovery of such Cure Advance from the proceeds of the Collateral Interest as to which such Cure Advance was made, as described Section 10.18 and (iii) any amounts in respect of principal applied to reimburse Nonrecoverable Cure Advances as described under Section 10.18 will be applied by the Trustee in the following order of priority: (1)

to the payment of the amounts referred to in Sections 11.1(a)(1) through (10), in the same order of priority specified therein, but only to the extent not paid in full thereunder;

(2)

if either of the Class A/B/C/D Coverage Tests is not satisfied as of the preceding Calculation Date, and to the extent that the amounts paid pursuant to clause (11) of the Priority of Payments—Collateral Interest Collections are insufficient to cause the Class A/B/C/D Coverage Tests to be satisfied, first, to pay principal of the Class A-1 Senior Notes and Class A-R Notes then Outstanding, pro rata, based on the Class A Senior Pro Rata Allocation, until such Class A/B/C/D Coverage Test is satisfied as of such Calculation Date or until the Class A Senior Notes are paid in full; provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (a) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Future Funding Asset Account, and (b) any remainder will be deposited in the Collection Account as Collateral Principal Collections, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class A/B/C/D Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class A/B/C/D Coverage Test is satisfied or until the Class D Notes are paid in full;

(3)

if the Class A Notes, Class B Notes, Class C Notes and Class D Notes are no longer Outstanding, to pay Periodic Interest on the Class E Notes and any Defaulted Interest on the Class E Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(12) are insufficient to pay such amounts in full thereunder;

(4)

if the Class A Notes, Class B Notes, Class C Notes and Class D Notes are no longer Outstanding, to pay the Class E Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(13) are insufficient to pay such amounts in full thereunder;

(5)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes are no longer Outstanding, to pay Periodic Interest on the Class F Notes and any Defaulted Interest on the Class F Notes (and 202

Processed and formatted by SEC Watch - Visit SECWatch.com

interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(14) are insufficient to pay such amounts in full thereunder; (6)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes are no longer Outstanding, to pay the Class F Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that amounts paid pursuant to Section 11.1(a)(15) are insufficient to pay such amounts in full thereunder;

(7)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes are no longer Outstanding, to pay Periodic Interest on the Class G Notes and any Defaulted Interest on the Class G Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(16) of are insufficient to pay such amounts in full thereunder;

(8)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes are no longer Outstanding, to pay the Class G Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(17) are insufficient to pay such amounts in full thereunder;

(9)

if either of the Class E/F/G Coverage Tests is not satisfied as of the preceding Calculation Date, and to the extent that the amounts paid pursuant to Section 11.1(a)(18) are insufficient to cause the Class E/F/G Coverage Tests to be satisfied, to pay principal of the most Senior Class of Notes then Outstanding, first, with respect to the Class A Senior Notes, to pay principal of the Class A—1 Notes and Class A-R Notes then Outstanding, pro rata, based on the Class A Senior Pro Rata Allocation, until such Class E/F/G Coverage Test is satisfied as of such Calculation Date or until the Class A Senior Notes are paid in full; provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (i) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Future Funding Asset Account, and (ii) any remainder will be deposited in the Collection Account as Collateral Principal Collections, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class E/F/G Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class E/F/G Coverage Test is satisfied or until the Class G Notes are paid in full;

(10)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes are no longer Outstanding, to pay Periodic Interest on the Class H Notes and any Defaulted Interest on the Class H Notes (and interest thereon), to the extent that the amounts 203

Processed and formatted by SEC Watch - Visit SECWatch.com

paid pursuant to Section 11.1(a)(19) are insufficient to pay such amounts in full thereunder; (11)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes are no longer Outstanding, to pay the Class H Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(20) are insufficient to pay such amounts in full thereunder;

(12)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes are no longer Outstanding, to pay Periodic Interest on the Class J Notes and any Defaulted Interest on the Class J Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(21) are insufficient to pay such amounts in full thereunder;

(13)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes are no longer Outstanding, to pay the Class J Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(22) are insufficient to pay such amounts in full thereunder;

(14)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes are no longer Outstanding, to pay Periodic Interest on the Class K Notes and any Defaulted Interest on the Class K Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(23) are insufficient to pay such amounts in full thereunder;

(15)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes , Class G Notes, Class H Notes and Class J Notes are no longer Outstanding, to pay the Class K Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(24) are insufficient to pay such amounts in full thereunder;

(16)

if either of the Class H/J/K Coverage Tests is not satisfied as of the preceding Calculation Date, and to the extent that the amounts paid pursuant to Section 11.1(a)(25) are insufficient to cause the Class H/J/K Coverage Tests to be satisfied, to pay principal of the most Senior Class of Notes then Outstanding, first, with respect to the Class A Senior Notes, to pay principal of the Class A-1 Notes and Class A-R Notes then Outstanding, pro rata, based on the Class A Senior Pro Rata Allocation, until such Class H/J/K Coverage Test is satisfied as of such Calculation Date or until the Class A Senior Notes are paid in full; provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, 204

Processed and formatted by SEC Watch - Visit SECWatch.com

any remaining principal payments allocable thereto will be deposited as follows: (i) an amount up to the Total Net Unfunded Future Advance Amount will be deposited in the Future Funding Asset Account, and (ii) any remainder will be deposited in the Collection Account as Collateral Principal Collections, and then to pay principal of the next most Senior Class of Notes Outstanding until such Class H/J/K Coverage Test is satisfied as of such Calculation Date or until such next most Senior Class of Notes is paid in full and so on, until such Class H/J/K Coverage Test is satisfied or until the Class K Notes are paid in full; (17)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes are no longer Outstanding, to pay Periodic Interest on the Class L Notes and any Defaulted Interest on the Class L Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(26) are insufficient to pay such amounts in full thereunder;

(18)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes are no longer Outstanding, to pay the Class L Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(27) are insufficient to pay such amounts in full thereunder;

(19)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes and Class L Notes are no longer Outstanding, to pay Periodic Interest on the Class M Notes and any Defaulted Interest on the Class M Notes (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(28) are insufficient to pay such amounts in full thereunder;

(20)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class, J Notes, Class K Notes and Class L Notes are no longer Outstanding, to pay the Class M Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon), to the extent that the amounts paid pursuant to Section 11.1(a)(29) are insufficient to pay such amounts in full thereunder;

(21)

he Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes are no longer Outstanding, to pay Periodic Interest on the Class N Notes and any Defaulted Interest on the Class N Notes (and interest thereon) to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement, to the extent that the amounts paid pursuant to clause Section 11.1(a)(30) are insufficient to pay such amounts in full thereunder; 205

(22)

if the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes are no longer Outstanding, to pay the Class N Cumulative Applicable Periodic Interest Shortfall Amount (and interest thereon) to the PAA Issued Note Paying Agent for payment on the Class N Notes in accordance with the Paying Agency Agreement, to the extent that the amounts paid pursuant to Section 11.1(a)(31) are insufficient to pay such amounts in full thereunder;

(23)

in such amounts pursuant to written instructions to the Trustee from the Collateral Manager no later than the related Calculation Date, in the Collateral Manager’s discretion and in the priority directed by the Collateral Manager prior to the last day of the Reinvestment Period, (a) to the Class A-R Notes, as Class A-R Note Prepayments and (b) to the Future Funding Asset Account, up to the Current Pay Future Advance Amount (including amounts already on deposit therein);

(24)

on or prior to the last day of the Reinvestment Period to pay, in the following order: (i)

to be retained in the Collection Account (a) to invest in Eligible Investments pending reinvestment in Substitute Collateral Interests at a later date, (b) to reinvest in Substitute Collateral Interests subject to the Reinvestment Criteria and (c) for payment of a Special Amortization in accordance with clause (ii) below (to the extent of available Collateral Principal Collections determined by the Collateral Manager);

(ii)

on each Payment Date through and including the last Payment Date during the Reinvestment Period, if the Collateral Manager notifies the Trustee in writing that it has decided to declare a Special Amortization, the amount of available Collateral Principal Collections determined by the Collateral Manager, if the Special Amortization Pro Rata Condition is satisfied, to pay each Class of Rated Notes, pro rata based on their respective aggregate outstanding principal amounts (for purposes of the pro rata allocation to the Class A Senior Notes based on the Class A Senior Pro Rata Allocation; provided that, to the extent the principal amount of the Class A-R Notes is reduced to zero, any remaining principal payments allocable thereto will be deposited as follows: (1) an amount up to the Total Net Unfunded

Processed and formatted by SEC Watch - Visit SECWatch.com

Future Advance Amount will be deposited in the Future Funding Asset Account, and (2) any remainder will be deposited in the Collection Account as Collateral Principal Collections) and (b) if the Special Amortization Pro Rata Condition is not satisfied, to pay principal of each Class of Rated Notes in accordance with the Note Payment 206

Processed and formatted by SEC Watch - Visit SECWatch.com

Sequence until each such Class of Rated Notes have been paid in full; (25)

after the end of the Reinvestment Period, to pay principal of each Class of Rated Notes in accordance with the Note Payment Sequence until each such Class of Rated Notes have been paid in full;

(26)

to pay termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, pro rata, if such termination occurred solely as the result of an event of default or a termination event (other than Illegality or Tax Event, each as defined in the related Hedge Agreement) with respect to the Hedge Counterparty as Defaulting Party or sole Affected Party, as the case may be, to the extent that the amounts paid pursuant to Section 11.1(a)(32) are insufficient to pay such amounts in full thereunder;

(27)

to the Class A-R Noteholders, any accrued and unpaid Class A-R Increased Costs, to the extent not paid in full pursuant to Section 11.1(a)(33) above without regard to any limitation on any maximum amounts payable on such date contained therein and, in the event the Collateral Manager requires any Class A-R Noteholder to transfer or assign its interest in the Class A-R Notes as a result of such Noteholder claiming any Class A-R Increased Costs, to the applicable Class A-R Noteholder, any reasonable costs incurred by such Noteholder in effecting such transfer or assignment;

(28)

to pay, in the following order: (i)

to any Servicer, any reimbursements for nonrecoverable servicing advances not paid out of collections received pursuant to the terms of the related Servicing Agreement;

(ii)

any due and unpaid Trustee Fee, Trustee Interest Advance Fee, Underlying Trust Expenses, Class A-R Note Agent Fee, PAA Issued Note Paying Agent Fee, Trustee Expenses, Advancing Agent Fee and other Administrative Expenses, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee, in each case, in the same order of priority as provided in Section 11.1(b)(1) above and to the extent not paid in full under Section 11.1(b)(1) above and to the extent that the amounts paid pursuant to Section 11.1(a)(1) and (34) are insufficient to pay such amounts in full thereunder; and

(iii)

on a pro rata basis, any due and unpaid expenses and other liabilities of the Co-Issuers to the extent not paid under Section 11.1(b)(1) above and to the extent that the amounts paid 207

Processed and formatted by SEC Watch - Visit SECWatch.com

pursuant to Section 11.1(a)(1) and (34) are insufficient to pay such amounts in full thereunder, whether as a result of an amount limitation imposed thereunder or otherwise; (29)

to pay the Subordinate Collateral Management Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date, to the extent that the amounts paid pursuant to Section 11.1(a)(35) are insufficient to pay such amounts in full thereunder;

(30)

to repay, pro rata, the amount of any outstanding Cure Advances, if any to the extent that the amounts paid pursuant to clause (36) of the Priority of Payments—Collateral Interest Collections are insufficient to pay such amounts in full thereunder; and

(31)

all Income Note Excess Funds to the PAA Issued Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Paying Agency Agreement.

Provided, however, that with respect to clauses (2), (9), (16), (24)(ii) and (25) above, no principal shall be paid on any Class of Rated Notes if there is any Periodic Interest, Defaulted Interest, Cumulative Applicable Periodic Shortfall Amount (or any interest thereon) outstanding on any Senior Notes with respect to such Class, and any amounts available to pay principal on such junior Class of Rated Notes shall be redirected to an earlier priority in the Priority of Payments-Collateral Principal Collections to pay such Periodic Interest, Defaulted Interest, Cumulative Applicable Periodic Shortfall Amount (or interest thereon) in full before paying principal on any such junior Class of Rated Notes; provided, further, that with respect to with respect to this Section 11.1(b), for purposes of determining if any Principal Coverage Test is satisfied after giving effect to payments of principal, the denominator of such Principal Coverage Test shall be determined after giving effect to any principal of the Notes paid pursuant to any clauses prior to such clause and such clause on the related Payment Date. (c)

If an Event of Default has occurred and is continuing, on the date or dates determined by the Trustee, the Trustee will pay, from all collections from, and proceeds of the sale or liquidation of, the Collateral (excluding any amounts necessary to reimburse any unpaid Interest Advances, together with interest thereon, any unpaid Nonrecoverable Cure Advances and any other amounts due under any Servicing Agreement together with interest thereon), in the following order:

(1)

amounts corresponding to the amounts set forth in clauses Section 11.1(a)(1) through (3), and (to the extent not covered by Section 11.1(a)(1) through (3)) Section 11.1(b)(1) (without giving effect to any limitations on amounts payable set forth therein); 208

Processed and formatted by SEC Watch - Visit SECWatch.com

(2)

the Periodic Interest on the Class A Senior Notes (including Defaulted Interest on such Class A Notes, if any), Class A-R Breakage Costs and then outstanding principal of the Class A Senior Notes, (provided that payments of interest on the Class A Senior Notes and the Class A-R Commitment Fee in respect of the Class A-R Notes will be paid pro rata between the Class A-1 Notes and the Class A-R Notes based on amounts due) and then principal of the Class A Senior Notes (provided that payments of principal of the Class A Senior Notes will be made pro rata based on their respective outstanding principal amounts) until paid in full until paid in full;

(3)

the Periodic Interest on the Class A-2 Notes (including Defaulted Interest on such Class A-2 Notes, if any) and then outstanding principal of the Class A-2 Notes until paid in full;

(4)

the Periodic Interest on the Class B Notes (including Defaulted Interest on such Class B Notes, if any) and then outstanding principal of the Class B Notes until paid in full;

(5)

the Periodic Interest on the Class C Notes (including Defaulted Interest on the Class C Notes, if any) and then outstanding principal of the Class C Notes until paid in full;

(6)

the Periodic Interest on the Class D Notes (including Defaulted Interest on the Class D Notes, if any) and then outstanding principal of the Class D Notes until paid in full;

(7)

the Periodic Interest on the Class E Notes (including Defaulted Interest on the Class E Notes, if any) and then outstanding principal of the Class E Notes (including Class E Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(8)

the Periodic Interest on the Class F Notes (including Defaulted Interest on the Class F Notes, if any) and then outstanding principal of the Class F Notes (including Class F Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(9)

the Periodic Interest on the Class G Notes (including Defaulted Interest on the Class G Notes, if any) and then outstanding principal of the Class G Notes (including Class G Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(10)

the Periodic Interest on the Class H Notes (including Defaulted Interest on the Class H Notes, if any) and then outstanding principal of the Class H Notes (including Class H Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full; 209

Processed and formatted by SEC Watch - Visit SECWatch.com

(11)

the Periodic Interest on the Class J Notes (including Defaulted Interest on the Class J Notes, if any) and then outstanding principal of the Class J Notes (including Class J Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(12)

the Periodic Interest on the Class K Notes (including Defaulted Interest on the Class K Notes, if any) and then outstanding principal of the Class K Notes (including Class K Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(13)

the Periodic Interest on the Class L Notes (including any Defaulted Interest on the Class L Notes) and then principal of the Class L Notes (including Class L Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(14)

the Periodic Interest on the Class M Notes (including any Defaulted Interest on the Class M Notes) and then principal of the Class M Notes (including Class M Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(15)

to the PAA Issued Note Paying Agent, the Periodic Interest on the Class N Notes (including any Defaulted Interest on the Class N Notes) and then principal of the Class N Notes (including Class N Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(16)

amounts corresponding to the amounts set forth in Section 11.1(a)(32) through (38) and Section 11.1(b)(23) through (31); and

(17)

to the PAA Issued Note Paying Agent, any remaining amounts for distributions on the Income Notes.

(d)

Not later than 12:00 p.m., New York time, on or before the Business Day preceding each Payment Date, the Issuer shall, pursuant to Section 10, remit or cause to be remitted to the Trustee for deposit in the Payment Account an amount of Cash sufficient to pay the amounts described in Section 11.1(a) and 11.1(b) required to be paid on such Payment Date.

(e)

If, on any Payment Date, the amount available in the Payment Account from amounts received in the related Due Period is insufficient to make the full amount of the disbursements required by the statements furnished by the Issuer pursuant to Section 10.12(b), the Trustee shall make the disbursements called for in the order and according to the priority set forth under Section 11.1(a) and 11.1(b), subject to Section 13.1, to the extent funds are available therefor.

(f)

Except as otherwise expressly provided in this Section 11.1, if on any Payment Date the amount of funds is insufficient to make the full amount of the disbursements required by any clause or subclause of 210

Processed and formatted by SEC Watch - Visit SECWatch.com

Section 11.1(a) or 11.1(b) to different Persons, the Trustee shall make the disbursements called for by such clause or subclause ratably in accordance with the respective amounts of such disbursements then due and payable to the extent funds are available therefor. (g)

[Reserved].

(h)

Any amounts to be paid to the PAA Issued Note Paying Agent pursuant to Section 11.1(a)(30), (31) and (38) or Section 11.1(b)(21), (22) and (31) will be released from the lien of this Indenture.

(i)

If directed by the Holder of not less than 100% of the Income Notes, the Trustee shall withhold distributions to the PAA Issued Note Paying Agent that would otherwise be paid pursuant to Section 11.1(a)(38) and Section 11.1(b)(31) in respect of distributions on the Income Notes. Further, any Holder of Income Notes may elect at any time to make additional capital contributions to the Issuer, which contributions will be pledged to the Trustee as Collateral pursuant to this Indenture. Any such retained distribution or additional capital contribution will be deemed to be Collateral Principal Collections received in the Due Period following the Due Period relating to the Payment Date on which the option is exercised. Any Holder who makes an additional capital contribution will not be entitled to interest or additional return thereon.

(j)

The Advancing Agent and the Trustee shall be entitled to receive the Advancing Agent Fee and the Trustee Interest Advance Fee, respectively, in each case payable in accordance with the Priority of Payments. In addition, the Advancing Agent and the Trustee shall each be entitled on each Payment Date to reimbursement of any previously unreimbursed Interest Advance made by it, together with interest thereon, from Collateral Interest Collections, and to the extent not reimbursed in full by Collateral Interest Collections, from Collateral Principal Collections, prior to application of Collections in accordance with Section 11.1(a), (b) and (c); provided that (i) reimbursement of Interest Advances (other than Nonrecoverable Advances) shall not cause an additional Interest Shortfall, (ii) reimbursement of Nonrecoverable Advances, together with interest thereon, will be made first from Collateral Principal Collections, and to the extent not reimbursed in full from Collateral Principal Collections, from Collateral Interest Collections and (iii) reimbursement of Nonrecoverable Advances shall be made regardless of whether such reimbursement causes an additional Interest Shortfall. Prior to an Interest Advance becoming a Nonrecoverable Advance, such reimbursement shall not be payable to the extent it would trigger an additional Interest Shortfall and shall be junior in priority to the payment of interest due on the Class A Notes, Class B Notes, Class C Notes and Class D Notes on such Payment Date, but shall be senior in priority to payment of interest on any other Class of Notes. For purposes of the foregoing, an Interest Advance shall 211

Processed and formatted by SEC Watch - Visit SECWatch.com

be deemed to be a Nonrecoverable Advance if the Advancing Agent or the Trustee, as applicable, determines that future payments or collections on the Collateral Interests could reasonably be expected to be insufficient to fully reimburse such Interest Advance, plus interest thereon. Amounts used for the reimbursement of Interest Advances and interest thereon shall not be included in the Available Funds for any Payment Date. Notwithstanding the foregoing, the Advancing Agent or the Trustee, as applicable, may opt, in their sole discretion, to defer the reimbursement for Nonrecoverable Advances to a subsequent Payment Date or Payment Dates if such reimbursement would trigger an additional Interest Shortfall. Notwithstanding the foregoing, the Advancing Agent will be permitted (but not obligated) to defer or otherwise structure the timing of recoveries of Nonrecoverable Advances in such manner as the Advancing Agent determines is in the best interest of the holders of the Class A Notes, Class B Notes, Class C Notes and Class D Notes as a collective whole, which may include being reimbursed for Nonrecoverable Advances in installments. In addition, based upon information available at such time, the Advancing Agent or the Trustee, as applicable, shall provide 15 days prior notice to the Collateral Manager, the Trustee and each Rating Agency if an Interest Advance is determined to be a Nonrecoverable Advance and whether or not reimbursement thereof shall be deferred; provided, that the failure to provide such notice shall in no way limit the rights of either of the Trustee or the Advancing Agent to reimburse itself for Nonrecoverable Advances on any Payment Date. ARTICLE XII PURCHASE AND SALE OF COLLATERAL INTERESTS 12.1.

SALE OF COLLATERAL INTERESTS (a)

Sale of Collateral Interests.

(1)

Subject to the satisfaction of the conditions specified in Section 10.12 as applicable, if the Collateral Manager, on behalf of the Issuer, pursuant to this Article 12, shall direct the Trustee to sell any Impaired Interest, Credit Risk Interest, Written Down Interest, Credit Improved Interests, Future Funding Interests, Buy/Sell Interest, Withholding Tax Interest, CMBS, Real Estate CDO Security, Taxed Collateral Interest, Taxed Property, REIT Debt Security or Participation Interest, the Trustee shall sell in the manner directed by the Collateral Manager, such Impaired Interest, Equity Interest, Credit Risk Interest, Credit Improved Interests, Future Funding Interests, Written Down Interest, Buy/Sell Interest, Taxed Collateral Interest, Taxed Property, Withholding Tax Interest, CMBS, Real Estate CDO Security, Taxed Collateral Interest, Taxed Property, REIT Debt Security or Participation Interest. 212

Processed and formatted by SEC Watch - Visit SECWatch.com

(2)

Upon the occurrence of an Investment Guidelines Event, the Collateral Manager shall direct the Issuer to sell any Taxed Collateral Interest or Taxed Property within 90 days after such Investment Guidelines Event (or such shorter time period as provided in the Collateral Management Agreement) in accordance with the provisions of the Collateral Management Agreement.

(3)

The Collateral Manager may, in its reasonable discretion, direct the Issuer to sell or otherwise dispose of any Impaired Interest, Credit Risk Interest, Written Down Interest, Credit Improved Interests, Future Funding Interests, Buy/Sell Interest, Taxed Collateral Interest, Taxed Property or Withholding Tax Interest. The Collateral Manager shall direct the Issuer to sell or otherwise dispose of any Collateral Interest that is an Equity Interest as soon as practicable after such Collateral Interest becomes an Equity Interest.

(4)

The Collateral Manager may direct the Issuer to (i) sell any Buy/Sell Interest at any time if the Sales Proceeds thereof are at least equal to its Principal Balance (adjusted for any Collateral Principal Payments received thereon) or (ii) purchase the corresponding pari passu participation from the related participant at any time, regardless of whether such purchase would occur during the Reinvestment Period or whether Reinvestment Criteria would be satisfied thereafter, so long as the Issuer entered into a binding agreement with the Collateral Manager, any of its Affiliates or any other person qualified in accordance with this Indenture to purchase such corresponding pari passu participation from the Issuer at a purchase price equal to that paid by the Issuer to such participant and such purchaser thereof either is (A) a Qualified Institutional Lender or (B) such purchase is permitted under the Underlying Agreements.. In addition, the Collateral Manager may direct the Issuer to sell any Future Funding Interest at any time if the Sales Proceeds thereof are at least equal to the greater of its (i) Principal Balance (adjusted for any Collateral Principal Payments received thereon) and (ii) fair market value.

(5)

In the event of a Redemption, the Collateral Manager shall direct the Trustee to sell Collateral Interests without regard to the foregoing limitations; provided that the Sale Proceeds therefrom and other amounts available therefor will be at least sufficient to pay certain expenses, including all amounts due under any Hedge Agreements, and redeem, in whole but not in part, the Notes at the applicable Redemption Prices; and provided, further, that such Sale Proceeds are used to make such a Redemption.

(6)

The Collateral Manager shall sell any Collateral Interest pursuant to this Section 12 only at a price that, in its judgment, is not substantially less than the market value of such Collateral Interest at the time of such sale. 213

Processed and formatted by SEC Watch - Visit SECWatch.com

(7)

So long as no Event of Default has occurred and is continuing, the Collateral Manager, on behalf of the Issuer, may, at any time prior to the end of the Reinvestment Period, direct the Trustee to sell, and the Trustee will sell in the manner directed by the Collateral Manager, any Collateral Interest not otherwise permitted to be sold pursuant to Section 12.1(a) (each such sale, a Discretionary Sale) provided that: (i) the aggregate principal balance of such Collateral Interests sold pursuant to such Discretionary Sales for a given calendar year does not exceed 15% of the Collateral Interest Principal Balance at the beginning of that year, (ii) the Collateral Manager believes in good faith that Sale Proceeds from such Discretionary Sale can be reinvested within 30 Business Days after the sale of such Collateral Interest in one or more Substitute Collateral Interests having an aggregate Principal Balance of not less than 100% of the Principal Balance of the Collateral Interest being sold; provided that in the case of a Collateral Interest that is a Mortgage Loan Interest the Substitute Collateral Interest can be identified within 30 Business Days after the sale of the original Collateral Interest and the Collateral Manager has an additional 60 days to complete the transaction, (iii) after giving effect to such sale and to the purchase of Substitute Collateral Interests with the Sale Proceeds thereof, the Reinvestment Criteria will be met and (iv) such Collateral Manager has not been removed, or voted to be removed, for “cause” as provided under the Collateral Management Agreement.

(b)

Reinvestment of Sale Proceeds and Replacement of Collateral Interests. Subject to Section 9.7 above, following the Closing Date and during the Reinvestment Period, subject to the satisfaction of the Eligibility Criteria and the Reinvestment Criteria, the Collateral Manager, acting on behalf of the Issuer, shall use reasonable efforts to cause the Trustee to reinvest Sale Proceeds received at any time from the sale of Collateral Interests that are Impaired Interests, Equity Interests, Credit Risk Interests, Credit Improved Interests, Future Funding Interests, Written Down Interests, Buy/Sell Interests, Taxed Collateral Interests, Taxed Properties or Withholding Tax Interests in Substitute Collateral Interests with an aggregate purchase price up to the amount of the Sale Proceeds, and to reinvest Collateral Principal Payments, transfers from the Future Funding Asset Account and proceeds of Class AR Draws in Substitute Collateral Interests; provided, however, that prior to any such acquisition of Substitute Collateral Interests by or on behalf of the Issuer in the manner described above, the Reinvestment Criteria are satisfied on the date of such acquisition. Under no circumstances shall Collateral Principal Collections (including Sale Proceeds) be reinvested following the Reinvestment Period, and amounts on deposit in the Future Funding Asset Account will only be applied to fund Future Advances and for transfer to the Collateral Principal Collection Sub-Account in accordance with Section 10.8. During the Reinvestment Period, Class A-R Draws (and at any time, the amounts on deposit in the Future Funding Asset 214

Processed and formatted by SEC Watch - Visit SECWatch.com

Account) may be applied to fund Future Advance Amounts prior to making payments on the Notes. (c)

After the Effective Date, within 10 Business Days of purchasing any Substitute Collateral Interest that does not have a Moody’s Rating, the Collateral Manager shall deliver to Moody’s a set of asset and underwriting materials in form and substance reasonably acceptable to Moody’s (the Reinvestment Asset Information) describing such Substitute Collateral Interest. After receiving the Reinvestment Asset Information, Moody’s may provide an estimated rating (a Moody’s Estimated Rating) to the Collateral Manager with respect to such Substitute Collateral Interest. If the Collateral Manager receives a Moody’s Estimated Rating that is worse than the estimated tranched rating permitted pursuant to clause (ii) of the definition of Moody’s Rating, then the Collateral Manager shall calculate the Moody’s Maximum Weighted Average Rating Factor Test using such Moody’s Estimated Rating. For all other purposes, the Moody’s Maximum Weighted Average Rating Factor Test will be calculated using the Moody’s Rating.

In the event that such calculation (using the Moody’s Estimated Rating) indicates that the purchase of the related Substitute Collateral Interest caused the Moody’s Post-Acquisition Compliance Test to not be satisfied (a Moody’s PostAcquisition Compliance Test Failure), the Collateral Manager is permitted to take any of the following actions to cause the Moody’s Post-Acquisition Compliance Test to be satisfied: (i) direct the Trustee to sell such Substitute Collateral Interest (or a Participation Interest therein) that caused the Moody’s Post-Acquisition Compliance Test Failure, at a price at least equal to the price paid by the Issuer for the Substitute Collateral Interest, plus any fees and expenses attributable to such sale, (ii) instruct the Trustee to sell any other Collateral Interest (or a Participation Interest therein) (provided that such sale price may only be less than the price paid by the Issuer therefore, plus any fees and expenses related to such sale, if the aggregate net difference of such amounts for such sale and all prior sales pursuant to this Section 12.1(c) does not exceed the aggregate principal balance of the Income Notes and any outstanding Class L Notes, Class M Notes and Class N Notes) and/or (iii) instruct the Trustee to purchase additional Substitute Collateral Interests (or a Participation Interest therein), subject to the Reinvestment Criteria, that would result in satisfaction of the Moody’s Post-Acquisition Compliance Test. If the Moody’s Post-Acquisition Compliance Test is not satisfied within 120 days of a finding of a Moody’s Post-Acquisition Compliance Test Failure, then until such time as the Moody’s Post-Acquisition Compliance Test is satisfied, the Issuer may only purchase a subsequent Substitute Collateral Interest if it is rated by Moody’s (a Moody’s Post Acquisition Test Failure Suspension.). For the avoidance of doubt, any Collateral Interest sold pursuant to clauses (i) or (ii) above will not be considered an Impaired Interest, Written Down Interest, Credit Improved Interest, Future Funding Interest, Withholding Tax Interest, Buy/Sell Interest, Taxed Collateral Interest, Taxed Property, Credit Risk Interest or Discretionary Sale. 215

Processed and formatted by SEC Watch - Visit SECWatch.com

Notwithstanding anything described in this Indenture to the contrary, the Issuer will have the right to effect any transaction which has been consented to in writing by holders of Rated Notes evidencing 100% of the aggregate outstanding principal amount of each Class of Notes and of which each Rating Agency has been notified. 12.2.

PORTFOLIO CHARACTERISTICS

Except as provided in Section 12.3(c), a security will be eligible for inclusion in the Collateral as a Pledged Collateral Interest only if, as evidenced by an Officer’s certificate from the Collateral Manager to the Trustee, each of the following eligibility criteria is satisfied immediately after the Issuer Grants such Collateral Interest to the Trustee (collectively, the Eligibility Criteria): (a)

it is issued by an issuer that is a Qualifying Foreign Obligor;

(b)

it is U.S. Dollar-denominated and all cash flows thereunder are to be paid in U.S. Dollars, and it is not convertible into, or payable in, any other currency; provided, however, the requirements of this Section (b) will not be applicable if Rating Confirmation is obtained;

(c)

it is one of the Specified Types of Collateral Interests;

(d)

it has a Moody’s Rating;

(e)

the Issuer is a Qualified REIT Subsidiary and its acquisition would not cause the Owner REIT to fail to qualify as a REIT under the Code (unless the Issuer has previously received an Opinion of Counsel to the effect that it is not engaged in a U.S. trade or business for U.S. federal income tax purposes, in which case the acquisition, ownership, enforcement and disposition of such security will not cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or otherwise to be subject to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation (other than as attributable to property received in connection with a foreclosure, as permitted under the Transaction Documents));

(f)

the payments on such security are not subject to withholding tax unless the issuer thereof or the obligor thereon is required to make additional payments sufficient to cover any withholding tax imposed at any time on payments made to the Issuer with respect thereto (for the avoidance of doubt, this clause will not apply to any commitment fees with respect to the unfunded portion of any Future Funding Assets);

(g)

its acquisition would not cause the Issuer or the pool of Collateral to be required to register as an investment company under the Investment Company Act; 216

(h)

it is not an obligation that is ineligible under its Underlying Instruments to be purchased by the Issuer and pledged to the Trustee, and in the case of a Mezzanine Loan, a Subordinate Mortgage Loan Interest, a Credit Lease Loan, a Tenant Lease Loan Interest, a Participation Interest, a CRE Debt Obligation or a Mortgage Loan Interest, it is not ineligible under its Underlying Instruments to be purchased by the Underlying Trust;

(i)

it is not an insurance-linked debt instrument containing a provision pursuant to which the issuer’s obligation to pay interest or principal is deferred or forgiven in the event of loss due to certain natural catastrophes specified in the Underlying Instruments;

(j)

it provides for the payment of principal (or, in the case of Preferred Equity Securities, distributions attributable to the return of capital by their governing documents) at not less than par upon maturity;

(k)

(A) its Underlying Instruments do not obligate the Issuer to make any future advances or any other payment except the purchase price thereof (except for obligations to provide for Future Advance Amounts in the case of Future Funding Assets) and (B) in the case of an Future Funding Asset, the sum of (1) amounts on deposit in the Future Funding Asset Account at such time (after giving effect to any deposit by the Issuer with respect to such Future Funding Asset) and (2) the Aggregate Class A-R Undrawn Amount shall equal at all times an amount sufficient to meet the Total Unfunded Future Advance Amount (including the Future Funding Obligations related to such Future Funding Asset) in full;

(l)

it is not an obligation with respect to which, in the reasonable judgment of the Collateral Manager, the timely repayment of principal and interest is subject to substantial non-credit related risks;

(m)

it is not an Interest Only Security;

(n)

it is not an obligation issued by an Emerging Market Issuer;

Processed and formatted by SEC Watch - Visit SECWatch.com

(o)

it is not an obligation that has, at the time of purchase, any deferred or capitalized interest unless by its terms it was scheduled to defer or capitalize interest;

(p)

it is not an obligation that, at the time it is purchased, is a Credit Risk Interest, an Impaired Interest, a Written Down Interest or a Deferred Interest PIK Bond;

(q)

it is not a Synthetic Security;

(r)

if it is a Participation Interest in a commercial mortgage loan, the entity that created such participation interest is either (A) a Qualified Institutional Lender or (B) a special purpose entity with respect to which 217

Processed and formatted by SEC Watch - Visit SECWatch.com

Rating Confirmation has been received; provided that a securitization trust, a CDO issuer or a similar securitization vehicle shall be deemed to be a special purpose entity for purposes of this section (r) of the Eligibility Criteria; (s)

at the time the obligation is purchased by the Issuer:

(1)

it is not an obligation issued by an issuer located in a country that imposes foreign exchange controls that effectively limit the availability or use of U.S. Dollars to make when due the scheduled payments of principal and interest on such security;

(2)

it is not, and does not provide for conversion or exchange into, Margin Stock at any time over its life;

(3)

it is not the subject of (1) any offer by the issuer of such obligation or by any other person made to all of the holders of such obligation to purchase or otherwise acquire such obligation (other than pursuant to any redemption in accordance with the terms of the related Underlying Instruments) or to convert or exchange such obligation into or for cash, securities or any other type of consideration or (2) any solicitation by an issuer of such obligation or any other person to amend, modify or waive any provision of such obligation or any related Underlying Instrument, and has not been called for redemption;

(4)

it is not an Equity Interest;

(5)

except with respect to Preferred Equity Securities, it is not an obligation that by the terms of its Underlying Instruments provides for conversion or exchange (whether mandatory or at the option of the issuer or the holder thereof) into equity capital at any time prior to its maturity;

(6)

it is not a financing by a debtor-in-possession in any insolvency proceeding;

(7)

it is not a first loss tranche of any securitization that does not have a Moody’s Rating (as defined in clause (i) of the definition of Moody’s Rating), that addresses the obligation of the obligor (or guarantor, if applicable) to pay principal of and interest on the relevant Collateral Interest in full, which ratings are monitored on an ongoing basis by the relevant Rating Agency;

(8)

it is not an obligation that provides for the payment of interest (or, in the case of Preferred Equity Securities, dividends or other distributions) in cash less frequently than semi-annually;

(9)

(A) if it is a Mortgage Loan Interest, a Mezzanine Loan, a Subordinate Mortgage Loan Interest, a Credit Lease Loan or a Tenant Lease Loan 218

Processed and formatted by SEC Watch - Visit SECWatch.com

Interest, no commercial mortgage loan underlying, securing or constituting such Collateral Interest has a maturity date (including any extension option) that is later than 10 years prior to the Stated Maturity Date; and (B) if it is a CMBS, such CMBS (without regard to the maturities of any collateral underlying such CMBS) does not have a rated final maturity date later than five years after the Stated Maturity Date; provided that, with respect to any such CMBS that has a stated maturity or a rated final distribution date scheduled to occur later than the Stated Maturity Date, such CMBS is rated at least “A3” by Moody’s (and, if rated “A3”, it is not on credit watch with negative implications); (C) if it is a REIT Debt Security or a CRE Debt Obligation, such REIT Debt Security or CRE Debt Obligation does not have a rated final maturity date later than the Stated Maturity Date; (D) if it is a Preferred Equity Security, the date (after giving effect to all permissible extensions thereof) by which distributions on such Preferred Equity Security attributable to the return of capital by its governing documents are required to be made is not later than the Stated Maturity Date (after giving effect to all anticipated settlement concerns in connection with such return of capital); and (E) if it is a Real Estate CDO Security, it does not have a stated maturity later than five years after the Stated Maturity Date; provided that, with respect to any such Real Estate CDO Security that has a stated maturity or a rated final distribution date scheduled to occur later than the Stated Maturity Date, such Real Estate CDO Security is rated at least “Aa3” by Moody’s (and, if rated “Aa3”, it is not on credit watch with negative implications); except that, up to 3% of the aggregate Principal Balance of all initial Collateral Interests may consist of Real Estate CDO Securities with a Moody’s Rating of below “Aa2” and with a stated maturity not more than five years after the Stated Maturity Date; and (10)

if it is a Deemed Floating Rate Collateral Interest, the Deemed Floating Asset Hedge entered into with respect to such Deemed Floating Rate Collateral Interest conforms to all requirements set forth in the definition of “Deemed Floating Asset Hedge;”

(t)

if it is a (1) Subordinate Mortgage Loan Interest and the related senior mortgage loan is not otherwise serviced in connection with a commercial mortgage backed securitization transaction, it is serviced in accordance with the related participation agreement, intercreditor agreement or servicing agreement the terms of which are substantially similar to the terms of servicing agreements entered into in connection with CMBS transactions or a comparable servicing agreement and (2) Credit Lease Loan, a Tenant Lease Loan Interest, a Preferred Equity Security, a Mezzanine Loan or a Mortgage Loan Interest, or a Participation Interest therein, it is serviced (or in the case of a Mezzanine Loan, a Preferred Equity Security or a Mortgage Loan Interest acquired by the Issuer on the Closing Date or within 60 days thereafter, will be serviced within 60 days of the Closing Date) in accordance with and as determined by the 219

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Manager in its reasonable discretion, a servicing agreement the terms of which are substantially similar to the terms of servicing agreements entered into in connection with CMBS transactions or a comparable servicing agreement; (u)

if it is a Mezzanine Loan, a Subordinate Mortgage Loan Interest, a Mortgage Loan Interest (other than a Credit Lease Loan or a Tenant Lease Loan Interest), or a Participation Interest therein, such Collateral Interest shall have the benefit of (i) either (A) representations and warranties made by the related Seller of such Collateral Interest (with such exceptions, qualifications and omissions as the Collateral Manager shall reasonably determine) substantially similar to either (x) the representations and warranties set forth on Schedule E-1 hereto or (y) in the case of a Mezzanine Loan or a Subordinate Mortgage Loan Interest, the representations and warranties made by the related Seller of such Collateral Interest in connection with the CMBS transaction, including the related senior interest in such Collateral Interest or (B) comparable representations and warranties, as determined by the Collateral Manager, and (ii) remedies for the breach of such representations and warranties or the existence of document defects that are substantially similar to the remedies provided in the Asset Transfer Agreements or otherwise acceptable to the Collateral Manager;

(v)

if it is a Credit Lease Loan or a Tenant Lease Loan Interest or a Participation Interest therein, such Collateral Interest shall have the benefit of (i) either (A) representations and warranties made by the related Seller of such Collateral Interest (with such exceptions, qualifications and omissions as the Collateral Manager shall reasonably determine) substantially similar to the representations and warranties set forth on Schedule E-1 (to the extent such representations and warranties are applicable to Credit Lease Loans and Tenant Lease Loan Interests) and Schedule E-2 hereto or (B) comparable representations and warranties as determined by the Collateral Manager, and (ii) remedies for the breach of representations and warranties or the existence of document defects that are substantially similar to the remedies provided in the Asset Transfer Agreements or otherwise acceptable to the Collateral Manager;

(w)

if it is a Preferred Equity Security, such Collateral Interest shall have the benefit of (i) either (A) representations and warranties made by the related Seller of such Collateral Interest (with such exceptions, qualifications and omissions as the Collateral Manager shall reasonably determine) substantially similar to the representations and warranties set forth on Schedule E-3 hereto or (B) comparable representations and warranties as determined by the Collateral Manager, and (ii) remedies for the breach of representations and warranties or the existence of document defects that are substantially similar to the remedies provided in the Asset Transfer Agreements or otherwise acceptable to the Collateral Manager; 220

Processed and formatted by SEC Watch - Visit SECWatch.com

(x)

if it is a Collateral Interest acquired after the Closing Date, it will be transferred (i) from a Seller to the Depositor pursuant to an agreement substantially similar to the Asset Transfer Agreements and (ii) from the Depositor (in the case of a CMBS, Real Estate CDO Security or REIT Debt Security) or the Underlying Trustee (in the case of a Trust Certificate) to the Issuer pursuant to an agreement substantially similar to the Bill of Sale; and

(y)

if it is a Related Future Advance Loan, either (A) (i) the related additional funding obligation in respect of the related Other Loan is an obligation of a Seller (or a successor special purpose entity or any similar special purpose entity that is established as a repurchase agreement seller or warehouse borrower) (any such entity, the Future Advance Holder) and is not an obligation of the Issuer; (ii) at the time the Issuer acquired such Related Future Advance Loan, the Other Loan was owned by the Future Advance Holder and pledged and/or otherwise financed to or with, as applicable, an entity (x) with a long-term, unsecured debt rating of “A3” or better from Moody’s, or (y) with respect to which a Rating Confirmation has been obtained (any entity described in the preceding clause (x) or clause (y), an Approved Lender) pursuant to the related repurchase agreement or other warehouse facility, as applicable (any such agreement or facility, a Warehouse Facility); (iii) at the time the Issuer acquires such Related Future Advance Loan, (a) there is sufficient (x) capacity under the related Warehouse Facility to satisfy the outstanding principal amount of the related Other Loan and (y) Liquidity to satisfy the not yet financed portion of such Other Loan representing the additional funding obligation in respect thereof (in accordance with the terms of the applicable Warehouse Facility) if all conditions under the related mortgage loan documents and Warehouse Facility documents were satisfied, and (b) the Approved Lender has approved of the Related Future Advance Loan and is required to fund the financed portion of such Other Loan (either directly or via an advance to the Future Advance Holder) provided all conditions under the related mortgage loan documents and Warehouse Facility documents are satisfied; (iv) the related issuer or borrower of such Related Future Advance Loan has acknowledged and/or agreed in writing that it has not, and will not, exercise any right to offset or defense related to the Other Loan against payment under the Related Future Advance Loan owned by the Issuer against the Issuer; (v) the Future Advance Holder has agreed in writing with the Issuer not to transfer the Other Loan except in connection with the Approved Lender’s rights under the applicable Warehouse Facility (or in satisfaction or settlement of such rights currently or in the future) without receipt of a Rating Confirmation unless such transferee is rated at least “A3” by Moody’s or is otherwise approved by Moody’s; (vi) the Responsible Party at all times (including upon any transfer of the Other Loan), has agreed to indemnify the Issuer (for purposes of this eligibility criterion, the Indemnified Party) for, from and against any claims, demands, penalties, 221

Processed and formatted by SEC Watch - Visit SECWatch.com

fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent or otherwise, whether incurred or imposed within or outside the judicial process, including, without limitation, reasonable attorneys’ fees and disbursements imposed upon or incurred by or asserted against the Indemnified Party due to its ownership of any Related Future Advance Loan for the failure of any Future Advance Holder to make an advance on any Other Loan required to be made by such Future Advance Holder; (vii) any related Warehouse Facility has a term that is scheduled to end no earlier than the date that is 12 months after the date on which the Issuer acquires such Related Future Advance Loan; (viii) no Future Funding Reserve Test Failure has occurred and is continuing with respect to the most recent Quarterly Measurement Date; (ix) no Liquidity Test Failure has occurred and is continuing with respect to the most recent Quarterly Measurement Date; or (B) Rating Confirmation has been obtained with respect to the Issuer’s ownership of such Related Future Advance Loan. provided that notwithstanding anything to the contrary herein, the Issuer may, while attempting to dispose of property acquired in foreclosure or similar circumstances, make an election under Section 882(d) of the Code to treat the income related to real property located in the United States as income that is effectively connected with a U.S. trade or business; and provided further that notwithstanding anything to the contrary herein, with respect to any Collateral Interest acquired by the Issuer on or prior to the Closing Date, if any of the Eligibility Criteria above pertains to the subject matter of a representation and warranty under the related Collateral Interest purchase agreement as to which an exception has been disclosed in the related exception schedule, such Collateral Interest shall be deemed to satisfy such criterion notwithstanding such exception. 12.3.

CONDITIONS APPLICABLE TO ALL TRANSACTIONS INVOLVING SALE OR GRANT (a)

Any transaction effected under Section 5, Section 9, Section 10.2 or Section 12.1 shall be conducted on an arm’s length basis and if effected with the Issuer, the Trustee, the Collateral Manager or any Affiliate of any of the foregoing, shall be effected in a secondary market transaction on terms at least as favorable to the Rated Noteholders as would be the case if such Person were not so Affiliated; provided that any disposition of a Collateral Interest in accordance with Section 12.1 shall be deemed to comply with this Section 12.3(a). The Trustee shall have no responsibility to oversee compliance with this clause by the other parties.

(b)

Upon any purchase or substitution pursuant to this Section 12, all of the Issuer’s right, title and interest to the Pledged Security or Securities shall be, and hereby is, Granted to the Trustee pursuant to this Indenture, such Pledged Security or Securities shall be registered in the name of the Trustee, and, if applicable, the Trustee shall receive such Pledged Security or Securities. The Trustee shall receive, not later than the date of delivery of any Pledged Security pursuant to a purchase under this Section 12, 222

Processed and formatted by SEC Watch - Visit SECWatch.com

(a) an Officer’s certificate of the Collateral Manager certifying (1) compliance with the Reinvestment Criteria in accordance with Section 12.1(b), (2) that the Collateral Interest to be sold constitutes an Impaired Interest, Credit Risk Interest, Credit Improved Interest, Future Funding Interest, Written Down Interest, Buy/Sell Interest, Taxed Collateral Interest, Taxed Property or Withholding Tax Interest, or upon the occurrence of an Investment Guidelines Event, Preferred Equity Security and (3) that any security to be purchased satisfies the definition of Collateral Interest and (b) an Officer’s certificate of the Collateral Manager on behalf of the Issuer containing the statements set forth in Section 3.2(b)(2) through (4), (6) and (7). (c)

Notwithstanding anything contained in this Section 12 to the contrary, the Issuer shall, subject to Section 12.3(d), have the right to effect any transaction to which the Initial Hedge Counterparty, Holders of Rated Notes evidencing 100% of the Aggregate Outstanding Amount of each Class of Rated Notes, and each Income Noteholder has consented, and of which each Rating Agency has been notified in advance.

(d)

Except as specifically provided in this Indenture, at any time at which the Issuer is not a Qualified REIT Subsidiary, the Issuer may not (i) engage in any business or activity that would cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or (ii) acquire or hold any asset that is an equity interest in an entity that is treated as a partnership engaged in a U.S. trade or business for U.S. federal income tax purposes or the acquisition or ownership of which otherwise would subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation. ARTICLE XIII SECURED PARTIES’ RELATIONS

13.1.

SUBORDINATION (a)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes agree for the benefit of the Holders of the Class A Senior Notes that the Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Senior Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Senior Notes to the extent and in the manner set forth in this Indenture, including as set 223

Processed and formatted by SEC Watch - Visit SECWatch.com

forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived, the Class A Senior Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Senior Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Senior Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Senior Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (b)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes agree for the benefit of the Holders of the Class A Notes that the Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived, the Class A Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(c)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes 224

Processed and formatted by SEC Watch - Visit SECWatch.com

agree for the benefit of the Holders of the Class A Notes and Class B Notes that the Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes and Class B Notes the Subordinate Interests) shall be subordinate and junior to the Class A Notes and Class B Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived, the Class A Notes and Class B Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes and Class B Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes and Class B Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the CoIssuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes and Class B Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (d)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes and Class C Notes that the Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes and Class C Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes and Class C Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes and Class C Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes, Class B Notes and Class C Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes and Class C Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated 225

Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes and Class C Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (e)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes and Class D Notes that the Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes and Class D Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes and Class D Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes and Class D Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, Class B Notes, Class C Notes and Class D Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes and Class D Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes and Class D Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(f)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes that the Class F Notes, Class G Notes, Class H Notes, Class J Notes. Class K Notes, Class L Notes, Class M Notes and Class N Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes, the Subordinate Interests) shall be

Processed and formatted by SEC Watch - Visit SECWatch.com

subordinate and junior to the Class A 226

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes shall be paid in full in Cash or, to the extent a Majority of each of Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (g)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes that the Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay 227

Processed and formatted by SEC Watch - Visit SECWatch.com

to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes and Class F Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (h)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes that the Class H Notes, Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes and Class G Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(i)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class J Notes, Class K Notes, Class L Notes, Class M Notes and Class N Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes that the Class J Notes, the Class K Notes, Class L Notes, Class M 228

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes and Class N Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes and Class H Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (j)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class K Notes, Class L Notes, Class M Notes and Class N Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes that the Class K Notes, Class L Notes, Class M Notes and Class N Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes shall be paid in full in Cash or, 229

Processed and formatted by SEC Watch - Visit SECWatch.com

to the extent a Majority of each of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the CoIssuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes and Class J Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (k)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class L Notes, Class M Notes and Class N Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes that the Class L Notes, Class M Notes and Class N Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes 230

Processed and formatted by SEC Watch - Visit SECWatch.com

evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (l)

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class M Notes and Class N Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes and Class L Notes that the Class M Notes and Class N Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes and Class L Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes and Class L Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes and Class L Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes and Class L Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes and Class L Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes and Class L Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. 231

Processed and formatted by SEC Watch - Visit SECWatch.com

(m)

13.2.

Anything in this Indenture or the Rated Notes to the contrary notwithstanding, the Issuer and the Holders of the Class N Notes agree for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes that the Class N Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(f) or (g)) has occurred and has not been cured or waived the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Rated Notes evidencing Subordinate Interests and the holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes, not to cause the filing of a petition in bankruptcy against the Issuer or the CoIssuer for failure to pay to them amounts due under the Rated Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes, Class K Notes, Class L Notes and Class M Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

STANDARD OF CONDUCT

In exercising any of its or their voting rights, rights to direct and consent or any other rights as a Secured Party under this Indenture, subject to the terms and conditions of this Indenture, including Section 5.9, a Secured Party or Secured Parties shall not have any obligation or duty to any Person or to consider or take into account the interests of any Person and shall not be liable to any Person for any action taken by it or them or at its or their direction or any failure 232

Processed and formatted by SEC Watch - Visit SECWatch.com

by it or them to act or to direct that an action be taken, without regard to whether such action or inaction benefits or adversely affects any Secured Party, the Issuer, or any other Person. ARTICLE XIV MISCELLANEOUS 14.1.

FORM OF DOCUMENTS DELIVERED TO TRUSTEE

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Manager may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Authorized Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Manager or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer, the Co-Issuer, the Collateral Manager or any other Person, stating that the information with respect to such factual matters is in the possession of the Issuer, the Co-Issuer, the Collateral Manager or such other Person, unless such Authorized Officer of the Issuer, the Co-Issuer or the Collateral Manager or such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Any Opinion of Counsel may also be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer, the Co-Issuer or the Collateral Manager, stating that the information with respect to such matters is in the possession of the Issuer, the Co-Issuer or the Collateral Manager, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture it is provided that the absence of the occurrence and continuation of a Default is a condition precedent to the taking of any action by the Trustee at the request or direction of the Issuer or the Co-Issuer, then notwithstanding that the satisfaction of such condition is a condition precedent to the Co-Issuers’ rights to make such request or direction, the Trustee shall be protected in acting in accordance with such request or direction if it does not have actual knowledge of the occurrence and continuation of such Default as provided in Section 6.1(d). 233

14.2.

14.3.

ACTS OF RATED NOTEHOLDERS (a)

Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Rated Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Rated Noteholders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action or actions embodied therein and evidenced thereby) are herein sometimes referred to as the Act of the Rated Noteholders, signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Co-Issuers, if made in the manner provided in this Section 14.2.

(b)

The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Trustee deems sufficient.

(c)

The principal amount and registered numbers of Rated Notes held by any Person, and the date of his holding the same, shall be proved by the Note Register.

(d)

Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Rated Notes shall bind the Holder (and any transferee thereof) of such Rated Note and of every Rated Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Co-Issuers in reliance thereon, whether or not notation of such action is made upon such Rated Note.

NOTICES, ETC., TO TRUSTEE, THE CO-ISSUERS AND THE RATING AGENCIES Any request, demand, authorization, direction, notice, consent, waiver or Act of Rated Noteholders or other documents provided or

Processed and formatted by SEC Watch - Visit SECWatch.com

permitted by this Indenture to be made upon, given or furnished to, or filed with: (a)

the Trustee, the PAA Issued Note Paying Agent, the Class A-R Note Agent by any Rated Noteholder or by the Issuer or the Co-Issuer shall be sufficient for every purpose hereunder if in writing and sent by facsimile in legible form and confirmed by overnight courier service guaranteed next day delivery to the Trustee or the PAA Issued Note Paying Agent addressed to it at 9062 Old Annapolis Road, Columbia, Maryland 21045, Attn: CDO Trust Services—N-Star REL CDO VIII, telephone number 410-884-2000, fax number 410-715-3748, with a copy to P.O. Box 98, 234

Processed and formatted by SEC Watch - Visit SECWatch.com

Columbia Maryland 21046 or at any other address previously furnished in writing to the Co-Issuers or Rated Noteholder by the Trustee, PAA Issued Note Paying Agent or the Class A-R Note Agent; (b)

the Issuer by the Trustee or by any Rated Noteholder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, to the Issuer addressed to it at c/o Walkers SPV Limited, Walker House, 87 Mary Street, George Town, Grand Cayman, KY1-9002, Cayman Islands, Attention: The Directors, or at any other address previously furnished in writing to the Trustee by the Issuer;

(c)

the Co-Issuer by the Trustee or by any Rated Noteholder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, to the Co-Issuer addressed to it at c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19711, Attention: Donald Puglisi, Esq., facsimile no. 302-738-7210, or at any other address previously furnished in writing to the Trustee by the Co-Issuer; or

(d)

the Rating Agencies by the Co-Issuers or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, (i) in the case of Moody’s, addressed to Moody’s Investors Service, Inc., 99 Church Street, New York, New York 10007 facsimile no. (212) 553-7820, Attention: NorthStar REL CDO VIII CBO CLO Monitoring (e-mail: cdomonitoring@moody’s.com); and (ii) in the case of Fitch, addressed to Fitch, Inc., One State Street Plaza, New York, New York 10004, telecopy No. (212) 908-0500, Attention: Commercial Real Estate Loan CDOs, Performance Analytics (or by electronic mail at [email protected] and [email protected]) or such other address that Fitch shall designate in the future;

(e)

the Collateral Manager by the Co-Issuers or by the Trustee or a Majority of the Rated Notes, or by the Collateral Administrator shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and sent by facsimile in legible form and confirmed by overnight courier service guaranteed next day delivery, or by electronic mail (where expressly provided herein) to the Collateral Manager addressed to it at the address specified in the Collateral Management Agreement or at any other address previously furnished in writing to the Co-Issuers or the Trustee by the Collateral Manager; 235

Processed and formatted by SEC Watch - Visit SECWatch.com

(f)

the PAA Issued Note Paying Agent by the Trustee in writing sent by facsimile confirmed by overnight courier guaranteed next day delivery;

(g)

Wachovia Capital Markets, LLC by the Co-Issuers, the Collateral Manager or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by telecopy in legible form, to Wachovia Capital Markets, LLC addressed to Wachovia Capital Markets, LLC., 375 Park Avenue, New York, New York 10152, Attention: Structured Credit Products Group;

(h)

to the Repository by the Issuer pursuant to this Indenture shall be made available to the Repository by electronic mail as a pdf (portable document format) file to CDO Library, c/o The Bond Market Association, 360 Madison Avenue (18th Floor), New York, NY 10017; Electronic mail address: [email protected]; and

(i)

each Hedge Counterparty by the Co-Issuers, the Collateral Manager or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by telecopy in legible form, to the address set forth in the related Hedge Agreement.

Delivery of any request, demand, authorization, direction, notice, consent, waiver or Act of Rated Noteholders or other documents made as provided above will be deemed effective: (i) if in writing and delivered in person or by overnight courier service, on the date it is delivered; (ii) if sent by facsimile transmission, on the date that transmission is received by the recipient in legible form (as evidenced by the sender’s written record of a telephone call to the recipient in which the recipient acknowledged receipt of such facsimile transmission); and (iii) if sent by mail, on the date that mail is delivered or its delivery is attempted; in each case, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Business Day. 14.4.

NOTICES AND REPORTS TO RATED NOTEHOLDERS; WAIVER

Except as otherwise expressly provided herein, where this Indenture provides for a report to Holders or for a notice to Holders of Rated Notes of any event, such notice shall be sufficiently given to Holders of Rated Notes if in writing and mailed, first-class postage prepaid, to each Holder of a Rated Note affected by such event, at the address of such Holder as it appears in the Note Register, not earlier than the earliest date and not later than the latest date, prescribed for the giving of such report or notice and such report or notice shall be in the English language. Notwithstanding any provision to the contrary contained herein or in any agreement or document related hereto, any report, statement or other information to be provided by the Trustee may be provided by providing access to the Trustee’s website containing such information. Such reports and notices will be deemed to have been given on the date of such mailing. 236

Processed and formatted by SEC Watch - Visit SECWatch.com

The Trustee will deliver to the Holder of any Rated Note shown on the Note Register any readily available information or notice requested to be so delivered, at the expense of the Issuer. Neither the failure to mail any notice, nor any defect in any notice so mailed, to any particular Holder of a Rated Note shall affect the sufficiency of such notice with respect to other Holders of Rated Notes. Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Rated Noteholders shall be filed with the Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In the event that, by reason of the suspension of the regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Rated Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. 14.5.

EFFECT OF HEADINGS AND TABLE OF CONTENTS The Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

14.6.

SUCCESSORS AND ASSIGNS

All covenants and agreements in this Indenture by the Co-Issuers shall bind their respective successors and assigns, whether so expressed or not. Written notice of any assignment shall be promptly provided by the Issuer to the Holders of Rated Notes, each Hedge Counterparty and each Rating Agency. 14.7.

SEVERABILITY

In case any provision in this Indenture or in the Rated Notes shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 14.8.

BENEFITS OF INDENTURE

The Rated Noteholders, the Initial Hedge Counterparty and each Income Noteholder is an express third-party beneficiary of this Indenture. Nothing in this Indenture or in the Rated Notes, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the Rated Noteholders, the Initial Hedge Counterparty and each Income Noteholder, any benefit or any legal or equitable right, remedy or claim under this Indenture. 237

Processed and formatted by SEC Watch - Visit SECWatch.com

14.9.

GOVERNING LAW

This Indenture and each Rated Note shall be construed in accordance with, and this Indenture and each Rated Note and all matters arising out of or relating in any way whatsoever (whether in contract, tort or otherwise) to this Indenture or any Rated Note shall be governed by, the law of the State of New York. 14.10.

SUBMISSION TO JURISDICTION

The Co-Issuers hereby irrevocably submit to the non-exclusive jurisdiction of the Supreme Court of the State of New York sitting in Manhattan and the U.S. District Court for the Southern District of New York, and any court of appeal therefrom, in any action or proceeding arising out of or relating to the Rated Notes or this Indenture, and the Co-Issuers hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in such New York State or federal court. The Co-Issuers hereby irrevocably waive, to the fullest extent that they may legally do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The CoIssuers hereby irrevocably appoint and designate CT Corporation, 111 Eighth Avenue, 13th Floor, New York, New York 10011, or any other Person having and maintaining a place of business in the State of New York whom the Co-Issuers may from time to time hereafter designate as the true and lawful attorney and duly authorized agent for acceptance of service of legal process of the Co-Issuers. The Co-Issuers agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 14.11.

COUNTERPARTS

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 14.12.

WAIVER OF JURY TRIAL

EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING. Each party hereby (i) certifies that no representative, agent or attorney of the other has represented, expressly or otherwise, that the other would not, in the event of a Proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it has been induced to enter into this Indenture by, among other things, the mutual waivers and certifications in this paragraph. 14.13.

JUDGMENT CURRENCY

This is an international financing transaction in which the specification of Dollars (the Specified Currency), and the specification of the place of payment, as the case may be (the Specified Place), is of the essence, and the Specified Currency shall be the currency of account in all events relating to payments of or on the Rated Notes. The payment obligations of the Co-Issuers under this Indenture and the Rated Notes shall not be discharged by an amount paid in another currency or in another place, whether pursuant to a judgment or otherwise, to the 238

Processed and formatted by SEC Watch - Visit SECWatch.com

extent that the amount so paid on conversion to the Specified Currency and transfer to the Specified Place under normal banking procedures does not yield the amount of the Specified Currency at the Specified Place. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder or the Rated Notes in the Specified Currency into another currency (the Second Currency), the rate of exchange which shall be applied shall be that at which in accordance with normal banking procedures the Trustee could purchase the Specified Currency with the Second Currency on the Business Day next preceding that on which such judgment is rendered. The obligation of the Co-Issuers in respect of any such sum due from the Co-Issuers hereunder shall, notwithstanding the rate of exchange actually applied in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by the Trustee of any sum adjudged to be due hereunder or under the Rated Notes in the Second Currency the Trustee may in accordance with normal banking procedures purchase and transfer to the Specified Place the Specified Currency with the amount of the Second Currency so adjudged to be due; and the Co-Issuers hereby, as a separate obligation and notwithstanding any such judgment (but subject to the Priority of Payments as if such separate obligation in respect of each Class of Rated Notes constituted additional principal owing in respect of such Class of Rated Notes), agree to indemnify the Trustee and each Rated Noteholder against, and to pay the Trustee or such Rated Noteholder, as the case may be, on demand in the Specified Currency, any difference between the sum originally due to the Trustee or such Rated Noteholder, as the case may be, in the Specified Currency and the amount of the Specified Currency so purchased and transferred. 14.14.

CONFIDENTIAL TREATMENT OF DOCUMENTS

Except as otherwise provided in this Indenture or as required by law, this Indenture and any Hedge Agreement shall be treated by the Trustee and the Collateral Manager as confidential. The Trustee shall provide a copy of this Indenture to the PAA Issued Note Paying Agent and to any Holder of a beneficial interest in any Rated Note upon written request therefor certifying that it is such a Holder. ARTICLE XV ASSIGNMENT OF AGREEMENTS, ETC. 15.1.

ASSIGNMENT

The Issuer, in furtherance of the covenants of this Indenture and as security for the Rated Notes and amounts payable to the Rated Noteholders hereunder and the performance and observance of the provisions hereof, hereby assigns, transfers, conveys and sets over to the Trustee, for the benefit of the Secured Parties, all of the Issuer’s estate, right, title and interest in, to and under the Corporate Services Agreement, the Collateral Management Agreement, the Asset Transfer Agreements and any Hedge Agreement into which the Issuer may enter, including (i) the right to give all notices, consents and releases thereunder, (ii) the right to give all notices of termination, including the commencement, conduct and consummation of proceedings at law or in equity, (iii) the right to receive all notices, accountings, consents, releases and statements thereunder and (iv) the right to do any and all other things whatsoever that the Issuer is or may be entitled to do thereunder; provided that nothing herein shall obligate the Trustee to determine 239

Processed and formatted by SEC Watch - Visit SECWatch.com

independently whether “cause” exists for the removal of the Collateral Manager pursuant to the Collateral Management Agreement. For the avoidance of doubt, in no event shall the Trustee be required to perform the obligations of the Collateral Manager under the Collateral Management Agreement. 15.2.

NO IMPAIRMENT

The assignment made hereby is executed as collateral security, and the execution and delivery hereby shall not in any way impair or diminish the obligations of the Issuer under the provisions of the Corporate Services Agreement or, the Collateral Management Agreement. 15.3.

TERMINATION, ETC.

Upon the redemption and cancellation of the Rated Notes and the payment of all other Secured Obligations and the release of the Collateral from the lien of this Indenture, this assignment and all rights herein assigned to the Trustee for the benefit of the Secured Parties shall cease and terminate and all the estate, right, title and interest of the Trustee in, to and under the Corporate Services Agreement and the Collateral Management Agreement shall revert to the Issuer and no further instrument or act shall be necessary to evidence such termination and reversion. 15.4.

ISSUER AGREEMENTS, ETC

The Issuer represents that it has not executed any other assignment of the Collateral Administration Agreement or the Collateral Management Agreement. The Issuer agrees that this assignment is irrevocable, and that it will not take any action which is inconsistent with this assignment or make any other assignment inconsistent herewith. The Issuer will, from time to time upon the request of the Trustee, execute all instruments of further assurance and all such supplemental instruments with respect to this assignment as the Trustee may reasonably specify. ARTICLE XVI HEDGE AGREEMENTS 16.1.

HEDGE AGREEMENTS (a)

The Issuer may, after the Closing Date, enter into one or more Hedge Agreements (including one or more Deemed Floating Asset Hedges) with Hedge Counterparties as the Issuer may elect in its sole discretion, in each case (i) subject to Rating Confirmation and (ii) with the delivery to the Issuer of an Opinion of Counsel to the Hedge Counterparty; provided that the Issuer will not be required to obtain Rating Confirmation in connection with entering into any Deemed Floating Asset Hedges which are Form-Approved Hedge Agreements with a Hedge Counterparty that satisfies the Hedge Counterparty Ratings Requirement.

(b)

The Issuer shall assign such Hedge Agreement to the Trustee pursuant to Article 15 hereof. 240

(c)

The Trustee shall, on behalf of the Issuer and in accordance with the Note Valuation Report, pay amounts due to any Hedge Counterparty under any Hedge Agreement on any Payment Date in accordance with Section 11.1 and Section 10.5(a)(5).

(d)

Upon the entry of the Issuer into a Hedge Agreement, the Trustee shall cause the Custodian to establish a segregated, non-interest bearing Securities Account which shall be designated as a Hedge Counterparty Collateral Account with respect to the Hedge Counterparty in respect of which the Trustee shall be the Entitlement Holder and which the Trustee shall hold in trust for the benefit of the Secured Parties. The Trustee shall deposit all collateral received from such Hedge Counterparty under the related Hedge Agreement in such Hedge Counterparty Collateral Account. Any and all funds at any time on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be held in trust by the Trustee for the benefit of the Secured Parties subject to the rights and interests of the related Hedge Counterparty under the related Hedge Agreement. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be (i) for application to obligations of the related Hedge Counterparty to the Issuer under the Hedge Agreement that are not paid when due (whether when scheduled or upon early termination) or (ii) to return collateral to the related Hedge Counterparty when and as required by the related Hedge Agreement in each case upon the direction of the Issuer pursuant to an Issuer Order. No assets credited to any Hedge Counterparty Collateral Account shall be considered an asset of the Issuer for purposes of any of the Coverage Tests or any Redemption unless and until the Issuer or the Trustee on its behalf is entitled to foreclose on such assets in accordance with the terms of the Hedge Agreement.

(e)

Upon its receipt of notice that the Hedge Counterparty has defaulted in the payment when due of its obligations to the Issuer under any Hedge Agreement (or, if earlier, when the Trustee becomes aware of such default) the Trustee

Processed and formatted by SEC Watch - Visit SECWatch.com

shall make a demand on such Hedge Counterparty, or any guarantor, if applicable, demanding payment forthwith. The Trustee shall give notice to the Rated Noteholders and each Rating Agency upon the continuance of the failure by such Hedge Counterparty to perform its obligations for two Business Days following a demand made by the Trustee on such Hedge Counterparty. (f)

If at any time any Hedge Agreement becomes subject to early termination due to the occurrence of an “event of default” or a “termination event” (each as defined in the related Hedge Agreement), the Issuer and the Trustee shall take such actions, if any, (following the expiration of any applicable grace period) to enforce the rights of the Issuer and the Trustee thereunder as may be permitted by the terms of such Hedge Agreement 241

Processed and formatted by SEC Watch - Visit SECWatch.com

and consistent with the terms hereof, and shall apply any proceeds of any such actions (including the proceeds of the liquidation of any collateral pledged by the related Hedge Counterparty) to enter into a replacement Hedge Agreement on substantially identical terms or on such other terms as to which each Rating Agency shall have provided a Rating Confirmation with a substitute Hedge Counterparty with respect to which the Hedge Counterparty Ratings Requirement is satisfied and each Rating Agency shall have provided a Rating Confirmation. If the Issuer is the sole non-Affected Party or the sole non-Defaulting Party with respect to such “event of default” or “termination event”, the Issuer will (with the assistance of the Collateral Manager) obtain quotations with respect to such replacement Hedge Agreement from five prospective counterparties Independent from the Issuer, the Collateral Manager and each other that satisfy the Hedge Counterparty Ratings Requirement and with respect to which a Rating Confirmation shall have been obtained and enter into a replacement Hedge Agreement with the prospective counterparty that provides the lowest quotation (if the Issuer is required to make a payment to such replacement counterparty) or the highest quotation (if such replacement counterparty is required to make a payment to the Issuer). (g)

The Issuer shall notify each Rating Agency if at any time any Hedge Counterparty is required to post collateral or assign its rights and obligations in and under the related Hedge Agreement.

(h)

No Hedge Agreement may be amended or modified at any time other than to effect the appointment of a substitute Hedge Counterparty or to effect a modification which is of a formal, minor or technical nature or is to correct a manifest error and which, in the opinion of the Trustee (based upon an Opinion of Counsel) would not have a material adverse effect on the interests of Holders of the Rated Notes or of Holders of any Class or Classes of Rated Notes or the Holders of the Income Notes unless the Issuer has obtained Rating Confirmation with respect to such amendment or modification. The Trustee shall provide the Collateral Manager and the Rating Agencies with a copy of any such amendment or modification within 10 Business Days before effecting such modification.

(i)

The Issuer shall enter into a Hedge Agreement only if the payments from the Hedge Counterparty thereunder are not subject to withholding tax or if the related Hedge Counterparty shall be required in accordance with the terms of the related Hedge Agreement to pay additional amounts to the Issuer sufficient to cover any withholding tax due on payments made by such Hedge Counterparty to the Issuer under such Hedge Agreement, subject to the Issuer making customary payee tax representations and providing customary tax documentation. At any time at which the Issuer is not a Qualified REIT Subsidiary, the Issuer shall not enter into any Hedge Agreement the acquisition (including the manner of acquisition), ownership, enforcement or disposition of which would subject the Issuer 242

Processed and formatted by SEC Watch - Visit SECWatch.com

to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation. (j)

The Issuer will not terminate any Hedge Agreement without receiving Rating Confirmation with respect to such termination except to the extent otherwise specified herein. ARTICLE XVII CLASS A-R NOTES

17.1.

DRAWS ON THE CLASS A-R NOTES AND CLASS A-R COMMITMENT (a)

Pursuant to the Class A-R Note Purchase Agreement and subject to compliance with the conditions set forth therein and herein, the Issuer (or the Collateral Manager on behalf of the Issuer) may request and the Holders of the Class A-R Notes (or any Liquidity Provider with respect to such Holders) shall be obligated to make, advances under the Class A-R Notes (each such advance, a Class A-R Draw) in an amount up to their respective Class A-R Commitment, to fund, during both the Ramp-Up Period and the Reinvestment Period, Future Advance Amounts relating to Future Funding Assets and to acquire Substitute Collateral Interests. After the Reinvestment Period and/or the occurrence of an Event of Default, the Issuer will fund Future Advance Amounts relating to Future Funding Assets from amounts on deposit in the Future Funding Asset Account. Class A-R Draws may be made on any Business Day from and including the Closing Date to but excluding the Commitment Termination Time (the date of such Class A-R Draw, the Class A-R Draw Date).

(b)

Draws may be made from time to time in accordance with the Class A-R Note Purchase Agreement. The Issuer shall duly and punctually perform each of its obligations under the Class A-R Note Purchase Agreement. The Issuer shall not be required to borrow any amount under the Class A-R Notes at any time unless the applicable servicer or the Collateral Manager, as applicable, has determined that a Future Advance is required under the related Underlying Instruments and the amounts on deposit in the Future Funding Asset Account, if any, are insufficient to make sure Future Advance. The obligation of the Issuer to make any such Class A-R Draw is subject to the conditions to make a Class A-R Draw in Sections 4.01 and 4.02 of the Class A-R Note Purchase Agreement.

(c)

On the Mandatory Class A-R Draw Date, subject to the notice provisions set forth in each Class A-R Note Purchase Agreement, the Issuer (or the Collateral Manager on behalf of the Issuer) shall make a Class A-R Draw in an amount equal to the lesser of (x) the Aggregate Class A-R Undrawn Amount, and (ii) the Total Net Unfunded Future Advance Amount the proceeds of which will be deposited in the Future Funding Asset Account. 243

Processed and formatted by SEC Watch - Visit SECWatch.com

Immediately following such draw, the Class A-R Commitments will terminate.

17.2.

(d)

The Trustee shall (at the direction of the Collateral Manager) upon receipt of the proceeds of any Class A-R Draw, deposit such proceeds into the Future Funding Asset Account where such amounts shall be applied in accordance with Section 10.8.

(e)

The aggregate Class A-R Commitments shall not exceed the Maximum Class A-R Commitment. To the extent that the principal amount of the Class A-1 Notes is reduced pursuant to a Mandatory Redemption, Special Amortization or redemption in connection with a Rating Confirmation Failure, then Class A-R Commitments will be reduced so that the Class A-R Commitments equal the Class A-R Proportion of the outstanding principal amount of the Class A-1 Notes. The portion of each such reduction of the Class A-R Commitment applicable to each Class A-R Note shall be the pro rata share of the unfunded Class A-R Commitments represented by such Class A-R Note. Thus, the Class A-R Commitments will be reduced by the total amount of principal payments allocable to the Class A-R Notes which are paid to the Class A-R Notes and the remainder deposited as follows: (i) an amount equal to the Total Net Unfunded Future Advance Amount will be deposited in the Future Funding Asset Account, and (ii) any remainder will be deposited in the Collection Account as Collateral Principal Collections.

(f)

Prior to the Commitment Termination Time, the Aggregate Class A-R Undrawn Amount must be at least equal to the Total Net Unfunded Future Advance Amount.

CLASS A-R INTEREST AND CLASS A-R COMMITMENT FEE. (a)

With respect to any Payment Date or Class A-R Prepayment Date, interest on the Class A-R Notes will be payable in arrears in an amount equal to (i) the product of (1) the Average Drawn Class A-R Note Portion during the Interest Period with respect to such Payment Date, (2) the Class A-R Note Interest Rate, and (3) the actual number of days elapsed in such Interest Period, divided by (ii) 360; provided, that interest accrued in respect of amounts borrowed under the Class A-R Notes during the period following the Calculation Date through such Payment Date will be payable (without penalty interest thereon) on the next succeeding Payment Date. Interest on the Class A-R Notes will be computed on the basis of a 360-day year and the actual number of days elapsed. Interest will be payable to the Holders of the Class A-R Notes, pro rata, based on their Class A-R Interest Allocation Percentage.

(b)

The Class A-R Commitment Fee will be payable in arrears on each Payment Date and will rank pari passu with the payment of interest on 244

Processed and formatted by SEC Watch - Visit SECWatch.com

the Class A Senior Notes. Interest at the Class A-R Note Interest Rate will accrue on any portion of the Class A-R Commitment Fee that is not paid when due. 17.3.

PREPAYMENTS OF CLASS A-R NOTES. (a)

During the Reinvestment Period, upon at least two Business Days irrevocable notice to the Holders of the Class AR Notes, the Class A-R Notes may be prepaid (in whole or in part) without payment of premium, at the option of the Issuer (at the direction of the Collateral Manager) (i) prior to any payments on any other Class of Rated Notes, on any Payment Date from Collateral Principal Collections to the extent Collateral Principal Collections are available for such application pursuant to the Priority of Payments and from amounts on deposit in the Future Funding Asset Account or (ii) from excess amounts on deposit in the Collateral Principal Collection Sub-Account and the Future Funding Asset Account on an Interim Payment Date, but subject to the payment by the Issuer of Class A-R Breakage Costs, if any. The Collateral Manager (on behalf of the Issuer) must provide not less than two Business Days’ notice to the Class A-R Note Agent (with a copy to the Trustee) in connection with any Class A-R Prepayment to be made on an Interim Payment Date. Any Class A-R Breakage Costs shall be paid in accordance with the Priority of Payments on the Payment Date following the applicable Class A-R Prepayment Date.

(b)

If any Class A-R Prepayment is made on a day other than a Payment Date, the Trustee shall pay the Class A-R Noteholders (i) accrued and unpaid interest in respect of the amount of such Class A-R Prepayment on such date and (ii) any Class A-R Breakage Costs resulting from such Class A-R Prepayment in accordance with the Priority of Payments on the first Payment Date following the Due Period in which such Class A-R Prepayment is made. Any funds received from the Trustee after 1:00 p.m. (New York City time) on any Business Day shall be deemed to be received on the next Business Day.

(c)

The aggregate principal amount of any partial voluntary Class A-R Prepayment, in respect of the Class A-R Notes (taken as a whole) will be at least $800,000 (and integral multiples of $1000 in excess thereof) or, if the aggregate outstanding amount under the Class A-R Notes is less than $800,000, such lesser amount. Any Class A-R Draw will be made by the Collateral Manager on behalf of the Issuer, pro rata, according to the unused portion of the Class A-R Commitment of each Class A-R Noteholder. The Issuer shall make all Class A-R Prepayments pro rata based on the Aggregate Outstanding Amount of the Class A-R Notes at the time such prepayment is made. Subject to compliance with certain draw conditions specified in the Class A-R Note Purchase Agreement and 245

Processed and formatted by SEC Watch - Visit SECWatch.com

herein, all such prepaid amounts may be re-borrowed until the Commitment Termination Time. 17.4.

CLASS A-R RATING CRITERIA

At the time of its purchase of a Class A-R Note and prior to the Commitment Termination Time, each Holder of a Class A-R Note must satisfy the Class A-R Rating Criteria. If any Holder of Class A-R Notes at any required time fails to satisfy the Class A-R Rating Criteria and such failure continues for five consecutive Business Days and such Holder shall not have deposited cash in a Holder Sub-Account in such amount and at such time as required by the Class A-R Note Purchase Agreement to which such Holder is a party, the Collateral Manager on behalf of the Issuer shall use reasonable efforts promptly to replace such Holder with another entity that meets the Class A-R Rating Criteria (by requiring the replaced Holder to transfer all of its rights and obligations in respect of the Class A-R Notes to the transferee entity). The purchase of Class A-R Notes (whether in connection with the initial placement or in a subsequent transfer) by any purchaser who does not satisfy the Class A-R Rating Criteria set forth in clause (i) of the definition thereof at the time of such purchase but who is then entitled to the benefits of a Liquidity Facility described in clause (iii) of such definition shall not be permitted unless Rating Confirmation is obtained with respect to the acquisition of Class A-R Notes by such purchaser; provided however, that a Liquidity Provider may purchase Class A-R Notes pursuant to the related Liquidity Facility, which Liquidity Provider will be subject to the Class A-R Rating Criteria and other provisions of the Class A-R Note Purchase Agreement; and provided further that if the Holder of a Class A-R Note is a CP Conduit, it shall have the unconditional right to assign its rights and obligations under the Class A-R Note Purchase Agreement. 17.5.

CLASS A-R HOLDER COLLATERAL ACCOUNT (a)

The Trustee shall, prior to the Closing Date, establish a Securities Account which shall be designated as the Class A-R Holder Collateral Account, which shall be held in trust for the benefit of the Holders of the Class A-R Notes (and, to the extent of amounts applied in accordance with the Class A-R Note Purchase Agreement for such purpose, for the benefit of the Holders of the Notes) and each Liquidity Provider and over which the Trustee shall have exclusive control and the sole right of withdrawal. Any and all funds at any time on deposit in, or otherwise to the credit of, the Class A-R Holder Collateral Account shall be held in trust by the Trustee for the benefit of the Holders of the Class A-R Notes. If at any time any Holder of a Class A-R Note shall be required to deposit funds into the Class A-R Holder Collateral Account pursuant to the terms of the Class A-R Note Purchase Agreement, then (i) the Collateral Manager shall direct the Trustee to and the Trustee shall create a segregated sub-account of the Class A-R Holder Collateral Account for such Class A-R Holder (each, a Holder Sub-Account) and (ii) the Class A-R Note Agent shall deposit all funds received from such Holder into such Holder Sub-Account. All payments of principal of the Class A-R Notes otherwise payable to such Holder shall be deposited in such Holder Sub-Account to the extent 246

Processed and formatted by SEC Watch - Visit SECWatch.com

provided in the Class A-R Note Purchase Agreement. The only permitted withdrawal from or application of funds credited to a Holder Sub-Account shall, notwithstanding the occurrence of any Event of Default, be to satisfy such Holder’s obligations under the Class A-R Note Purchase Agreement, as specified in this Section 17.5 and to return such amounts to such Holder in accordance with Sections 17.5(c) and (d). (b)

The deposit of funds into a Holder Sub-Account pursuant to Section 17.5 by any Holder of a Class A-R Note shall not constitute a Draw by the Issuer and shall not constitute a utilization of the Class A-R Commitment of such Holder, and the funds so deposited shall not constitute principal outstanding under such Class A-R Note. However, from and after the establishment of a Holder Sub-Account with respect to any Holder of Class A-R Notes until otherwise provided below, (i) the obligation of such Holder to advance funds under its Class A-R Notes as part of any Class A-R Draw under this Indenture and the Class A-R Note Purchase Agreement shall be satisfied by the Trustee, acting at the direction of the Collateral Manager, withdrawing funds from such Holder Sub-Account in the amount of such Holder’s share of such Class A-R Draw (determined in accordance with the Class A-R Note Purchase Agreement), and (ii) all payments of principal with respect to advances made by such Holder under its Class A-R Notes (whether or not originally funded from such Holder Sub-Account) (and, in the case of any defaulting Holder, all payments of interest thereon) shall be satisfied by the Trustee depositing or causing the deposit of the related funds into such Holder Sub-Account in the amount of such Holder’s share of such Class A-R Draw (determined in accordance with the Class A-R Note Purchase Agreement), with notice of such deposit to the Class A-R Note Agent and the Class A-R Noteholder. The Trustee acting at the direction of the Collateral Manager shall have full power and authority to withdraw funds (with notice of any such withdrawal to the Class A-R Note Agent) from each such Holder Sub-Account at the time of, and in connection with, the making of any such Class A-R Draw and to deposit funds (with notice of any such deposit to the Class A-R Note Agent) into each such Holder Sub-Account, all in accordance with the terms of and for the purposes set forth in this Indenture and the related Class A-R Note Purchase Agreement.

(c)

If at any time the amount of funds on deposit in the Holder Sub-Account relating to any Holder of Class A-R Notes, net of any reinvestment earnings in respect of Class A-R Eligible Investments, exceeds the undrawn amount of the Class A-R Commitment of such Holder (whether due to a reduction in the Class A-R Commitment or otherwise), then the Collateral Manager on behalf of the Issuer shall instruct the Trustee to remit to such Holder a specified portion of such funds then held in the related Holder Sub-Account in an amount equal to such excess. 247

Processed and formatted by SEC Watch - Visit SECWatch.com

(d)

If at any time a Holder of Class A-R Notes is no longer required to deposit or maintain funds in the Class A-R Holder Collateral Account pursuant to the terms of its Class A-R Note Purchase Agreement to which such Holder is a party, then the Collateral Manager shall notify the Trustee of such fact and direct the Trustee to remit all funds then held in the relevant Holder Sub-Account (after giving effect to any Class A-R Draw in respect of such Class A-R Notes to be made on such date) (other than reinvestment earnings in respect of Class A-R Eligible Investments which shall be remitted to such Holder as provided in Section 17.5(c)) to such Holder (with notice thereof to the Class A-R Note Agent), and thereafter all payments of principal and interest with respect to advances made by such Holder shall be paid directly to such Holder in accordance with the terms of this Indenture and the Class A-R Note Purchase Agreement.

(e)

The Trustee agrees to give the Collateral Manager, the Issuer and the related Holder immediate notice if it becomes aware that the Class A-R Holder Collateral Account or any funds on deposit therein, or otherwise to the credit of the Class A-R Holder Collateral Account, shall become subject to any writ, order, judgment, warrant of attachment, execution or similar process. The Issuer shall not have any legal, equitable or beneficial interest in the Class A-R Holder Collateral Account.

(f)

For so long as any amounts are on deposit in a Holder Sub-Account, the Trustee shall, at the written direction of the related Class A-R Noteholder (which may be in the form of standing instructions), invest and reinvest such funds in investments which satisfy the definition of the term Eligible Investments but which mature not later than the day following the date of acquisition thereof (collectively, Class A-R Eligible Investments). Investment earnings received during each Due Period in respect of Class A-R Eligible Investments in the Holder Sub-Account of a Holder of Class A-R Notes will (so long as such Holder is not a Defaulting Holder) be applied to fund a shortfall in such Class A-R Noteholders’ obligation to fund a Class A-R Draw, and any earnings in excess of such shortfall will be paid to such Holder on the related Payment Date. In the absence of such instructions, such funds will remain uninvested. 248

Processed and formatted by SEC Watch - Visit SECWatch.com

In Witness Whereof, we have set our hands as of the date first above written. Executed as a Deed by N-STAR REL CDO VIII LTD., as Issuer

By: /s/ Derrie Boggess Name: Derrie Boggess Title: Director N-STAR REL CDO VIII LLC, as Co-Issuer By: /s/ Donald J. Puglisi Name: Donald J. Puglisi Title: President

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee

By: /s/ Karen J. Ridgeway Name: Karen J. Ridgeway Title: Vice President

Processed and formatted by SEC Watch - Visit SECWatch.com

CONFIRMED AND ACCEPTED, as of the date first above written: NS ADVISORS, LLC, as Advancing Agent By: /s/ Daniel R. Gilbert Name: Daniel R. Gilbert Title: Executive Vice President

Exhibit 10.25 EXECUTION COPY

Dated as of February 28, 2007

N-STAR REAL ESTATE CDO IX, LTD., as Issuer

LASALLE BANK NATIONAL ASSOCIATION, as Trustee

INDENTURE

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS S e ction

Page

PRELIMINARY STATEMENT

1

GRANTING CLAUSES

1

1.1. 1.2. 1.3.

Definitions and Interpretation Definitions Assumptions as to Collateral Debt Securities, Fees, Etc. Rules of Construction

2 2 64 66

2.1. 2.2. 2.3. 2.4. 2.5. 2.6.

The Secured Notes Forms Generally Authorized Amount; Applicable Periodic Interest Rate; Stated Maturity Date; Denominations Execution, Authentication, Delivery and Dating Registration, Transfer and Exchange of Secured Notes Mutilated, Defaced, Destroyed, Lost or Stolen Secured Notes Payment of Principal and Interest; Rights Preserved

67 67 68 69 70 78 78

ARTICLE I

ARTICLE II

ARTICLE III Conditions Precedent 3.1. General Provisions 3.2. Security for the Secured Notes 3.3. Custodianship; Transfer of Collateral Debt Securities and Eligible Investments

85 85 87 89

ARTICLE IV Satisfaction and Discharge 4.1. Satisfaction and Discharge of Indenture 4.2. Application of Trust Money 4.3. Repayment of Funds Held by Note Paying Agent

92 92 93 93

ARTICLE V

Events of Default; Remedies 5.1. Events of Default 5.2. Acceleration of Maturity; Rescission and Annulment 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee 5.4. Remedies 5.5. Preservation of Collateral 5.6. Trustee May Enforce Claims Without Possession 5.7. Application of Funds Collected 5.8. Limitation on Suits 5.9. Unconditional Rights of Secured Noteholders to Receive Principal and Interest 5.10. Restoration of Rights and Remedies 5.11. Rights and Remedies Cumulative 5.12. Delay or Omission Not Waiver 5.13. Control by Controlling Class 5.14. Waiver of Past Defaults 5.15. Undertaking for Costs i

93 93 95 96 99 100 102 102 102 103 103 103 104 104 104 105

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

5.16. 5.17. 5.18.

Waiver of Stay or Extension Laws Sale of Collateral Action on the Secured Notes

105 105 106

ARTICLE VI The Trustee 6.1. Certain Duties and Responsibilities 6.2. Notice of Default 6.3. Certain Rights of Trustee 6.4. Authenticating Agents 6.5. Not Responsible for Recitals or Issuance of Secured Notes 6.6. May Hold Secured Notes 6.7. Funds Held in Trust 6.8. Compensation and Reimbursement 6.9. Corporate Trustee Required; Eligibility 6.10. Resignation and Removal; Appointment of Successor 6.11. Acceptance of Appointment by Successor 6.12. Merger, Conversion, Consolidation or Succession to Business of Trustee 6.13. Co-Trustees 6.14. Certain Duties Related to Delayed Payment of Proceeds; Other Notices 6.15. Representations and Warranties of the Bank 6.16. Exchange Offers, Proposed Amendments, etc. 6.17. Fiduciary for Secured Noteholders Only; Agent For Other Secured Parties 6.18. Withholding

106 106 108 108 110 111 111 111 111 113 113 114 114 115 116 116 117 117 117

ARTICLE VII Covenants 7.1. Payment of Principal and Interest 7.2. Maintenance of Office or Agency 7.3. Funds for Secured Note Payments to be Held in Trust 7.4. Existence of Issuer 7.5. Protection of Collateral 7.6. Opinions as to Collateral 7.7. Performance of Obligations 7.8. Negative Covenants 7.9. Statement as to Compliance 7.10. Issuer May Consolidate, Etc., Only on Certain Terms 7.11. Successor Substituted 7.12. No Other Business 7.13. Change or Withdrawal of Rating 7.14. Reporting 7.15. Secured Note Calculation Agent 7.16. Listing 7.17. Amendment of Certain Documents 7.18. Purchase of Collateral; Information Regarding Collateral; Rating Confirmation

118 118 118 119 120 121 123 123 124 126 126 128 128 128 128 129 130 130 130

ii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

ARTICLE VIII 8.1. 8.2. 8.3. 8.4. 8.5.

Supplemental Indentures Supplemental Indentures Without Consent of Secured Noteholders Supplemental Indentures with Consent of Secured Noteholders Execution of Supplemental Indentures Effect of Supplemental Indentures Reference in Secured Notes to Supplemental Indentures

132 132 135 137 137 138

ARTICLE IX 9.1. 9.2. 9.3. 9.4. 9.5. 9.6. 9.7.

Redemption of Secured Notes Redemption of Secured Notes Redemption Procedures; Auction Record Date; Notice to Trustee of Redemption Notice of Redemption Notice of Withdrawal Secured Notes Payable on Redemption Date Special Amortization

138 138 138 140 141 141 141 142

ARTICLE X

Accounts, Accountings and Releases Collection of Funds General Provisions Applicable to Accounts Collateral Account Uninvested Proceeds Account Interest Reserve Account Collection Account Expense Reserve Account Non-Monthly Pay Asset Interest Reserve Account Discretionary Ramp-Up Interest Reserve Account Payment Account Derivative Contract Counterparty Accounts Derivative Contract Issuer Account Reports by Trustee Accountings Release of Securities Reports by Independent Accountants Reports to Rating Agencies Tax Matters Tax Information Cure Advances Purchase of Related Senior Loans by Holders of Subordinate Mortgage Loan Interests or Mezzanine Loans

142 142 143 144 144 144 145 145 146 146 147 147 148 149 150 155 156 157 157 157 159 159

ARTICLE XI 11.1.

Application of Monies Disbursements of Funds from Payment Account; Priority of Payments

160 160

ARTICLE XII 12.1. 12.2. 12.3.

Purchase and Sale of Collateral Debt Securities Sale of Collateral Debt Securities Portfolio Characteristics Conditions Applicable to all Transactions Involving Sale or Grant

173 173 175 178

10.1. 10.2. 10.3. 10.4. 10.5. 10.6. 10.7. 10.8. 10.9. 10.10. 10.11. 10.12. 10.13. 10.14. 10.15. 10.16. 10.17. 10.18. 10.19. 10.20. 10.21.

iii

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

ARTICLE XIII 13.1. 13.2.

Secured Parties’ Relations Subordination Standard of Conduct

179 179 185

ARTICLE XIV 14.1. 14.2. 14.3. 14.4. 14.5. 14.6. 14.7. 14.8. 14.9. 14.10. 14.11. 14.12. 14.13. 14.14.

Miscellaneous Form of Documents Delivered to Trustee Acts of Secured Noteholders Notices, etc., to Trustee, the Issuer and the Rating Agencies Notices and Reports to Secured Noteholders; Waiver Effect of Headings and Table of Contents Successors and Assigns Severability Benefits of Indenture Governing Law Submission to Jurisdiction Counterparts Waiver of Jury Trial Judgment Currency Confidential Treatment of Documents

185 185 186 187 188 189 189 189 189 190 190 190 190 190 191

ARTICLE XV 15.1. 15.2. 15.3. 15.4.

Assignment of Agreements, etc. Assignment No Impairment Termination, etc. Issuer Agreements, etc.

191 191 191 192 192

ARTICLE XVI 16.1.

Hedge Agreements Hedge Agreements

192 192

Schedules Schedule A Schedule B Schedule C Schedule D-1 Schedule D-2 Schedule E Schedule F Schedule G Schedule H

Schedule of Collateral Debt Securities as of the Closing Date LIBOR Formula Schedule of Temporary Ramp-Up Securities S&P’s Recovery Rate Matrix Moody’s Recovery Rate Matrix Auction Procedures S&P’s Notching Criteria S&P’s Types of Asset-Backed Securities Ineligible for Notching S&P’s Industry Classification Groups

Exhibits Exhibit A-1 Exhibit A-2 Exhibit B-1 Exhibit C-1 Exhibit C-2

Form of Regulation S Global Note Form of Rule 144A Global Note Form of Definitive Retained Note Form of Rule 144A Transfer Certificate Form of Regulation S Transfer Certificate iv

Processed and formatted by SEC Watch - Visit SECWatch.com

TABLE OF CONTENTS (continued) S e ction

Page

Exhibit C-3 Exhibit D Exhibit E Exhibit F

Exhibit G Exhibit H Exhibit I Exhibit J

Form of Definitive Retained Note Transfer Certificate Form of Funding Certificate Secured Noteholder’s Certificat Definitions for Use in Exhibit F and G; Form of Representations, Warranties and Covenants for Mortgage Loan Interests, Subordinate Mortgage Loan Interests and Mezzanine Loans; Schedule F-2 to Exhibit F; Form of Representations, Warranties and Covenants for Credit Lease Loans Form of Representations, Warranties and Covenants for certain CMBS Securities, REIT Debt Securities, Real Estate CDO Securities, Trust Preferred Securities and CRE Debt Obligations Form of Real Estate Interest Servicing Agreement Form of Asset Transfer Agreement Form of Master Trust Agreement v

THIS INDENTURE dated as of February 28, 2007 among: N-STAR REAL ESTATE CDO IX, LTD., an exempted company incorporated and existing under the law of the Cayman Islands; and LASALLE BANK NATIONAL ASSOCIATION, a national banking association, organized under the law of the United States, as Trustee. PRELIMINARY STATEMENT The Issuer is duly authorized to execute and deliver this Indenture to provide for the issuance of the Secured Notes as provided in this Indenture. All covenants and agreements made by the Issuer herein are for the benefit and security of the Secured Parties. The Issuer is entering into this Indenture, and the Trustee is accepting the trusts created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. All things necessary to make this Indenture a valid agreement of the Issuer in accordance with its terms have been done. GRANTING CLAUSES The Issuer hereby Grants to the Trustee, for the benefit and security of the Secured Parties, all of its right, title and interest in, to and under, in each case, whether now owned or existing, or hereafter acquired or arising, the following property (other than the Excepted Property) (a) the Collateral Debt Securities listed on Schedule A, the Temporary Ramp-Up Securities listed on Schedule C, the Collateral Debt Securities acquired after the Closing Date and any Equity Securities which, in each case, are delivered to the Trustee (directly or through a Securities Intermediary) after the Closing Date pursuant to the terms hereof and all payments thereon or with respect thereto, (b) the Collection Account (including each Collateral Sub-Account established therein), each Derivative Contract Issuer Account, the Discretionary Ramp-Up Interest Reserve Account, the Non-Monthly Pay Asset Interest Reserve Account, the Payment Account, the Expense Reserve Account (including each Collateral Sub-Account), the Collateral Account, the Uninvested Proceeds Account, all amounts credited to such accounts, and Eligible Investments purchased with funds credited to such accounts and all income from the investment of funds therein, (c) the rights of the Issuer under each of the Transaction Documents to which the Issuer is a party and all payments to the Issuer thereunder or with respect thereto, (d) all Cash or other property delivered to the Trustee (directly or through a Securities Intermediary) and (e) all proceeds, whether voluntary or involuntary, of and to any of the property of the Issuer described in the preceding clauses (collectively, the Collateral). Such Grants are made to the Trustee to hold in trust, to secure the Secured Notes equally and ratably without prejudice, priority or distinction between any Secured Note and any other Secured Note by reason of difference in time of issuance or otherwise, except as expressly provided in this Indenture, and to secure (i) the payment of all amounts due on the Secured Notes and under any Hedge Agreement and the Collateral Management Agreement in accordance with their respective terms, (ii) the payment of all other sums payable under this Indenture and (iii) compliance with the provisions of this Indenture, any Hedge Agreement and the Collateral Management Agreement, all as provided in this Indenture (collectively, the Secured Obligations). Except to the extent otherwise provided in this Indenture, the Issuer does hereby constitute and irrevocably appoint the Trustee the true and lawful attorney of the Issuer, with full power (in the name of the Issuer or otherwise), to exercise all rights of the Issuer with respect to the Collateral held for the benefit and security of the Secured Parties and to ask, require, demand, receive, settle, compromise, compound and give acquittance for any and all moneys and claims for moneys due and to become due

Processed and formatted by SEC Watch - Visit SECWatch.com

under or arising out of any of the Collateral held for the benefit and security of the Secured Parties, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Trustee may deem to be necessary or advisable in the premises. The power of attorney granted pursuant to this Indenture and all authority hereby conferred are granted and conferred solely to protect the Trustee’s interest in the Collateral held for the benefit and security of the Secured Parties and shall not impose any duty upon the Trustee to exercise any power. This power of attorney shall be irrevocable as one coupled with an interest prior to the payment in full of all the obligations secured hereby. Except to the extent otherwise provided in this Indenture, this Indenture shall constitute a security agreement under the law of the State of New York. Upon the occurrence of any Event of Default and in addition to any other rights available under this Indenture or any other instruments included in the Collateral held for the benefit and security of the Secured Parties or otherwise available at law or in equity, the Trustee shall have all rights and remedies of a secured party on default under the law of the State of New York and other applicable law to enforce the assignments and security interests contained herein and, in addition, shall have the right, subject to compliance with any mandatory requirements of applicable law, to sell or apply any rights and other interests assigned or pledged hereby in accordance with the terms hereof at public or private sale. It is expressly agreed that anything therein contained to the contrary notwithstanding, the Issuer shall remain liable under any instruments included in the Collateral to perform all the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and except as otherwise expressly provided herein, the Trustee shall not have any obligations or liabilities under such instruments by reason of or arising out of this Indenture, nor shall the Trustee be required or obligated in any manner to perform or fulfill any obligations of the Issuer under or pursuant to such instruments or to make any payment, to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim, or to take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. The designation of the Trustee in any transfer document or record is intended and shall be deemed, first, to refer to the Trustee as custodian on behalf of the Issuer and second, to refer to the Trustee as secured party on behalf of the Secured Parties; provided that the Grant made by the Issuer to the Trustee pursuant to the granting clauses hereof shall apply to any Collateral bearing such designation. The Trustee acknowledges such Grants, accepts the trust hereunder in accordance with the provisions hereof, and agrees to perform the duties herein in accordance with the required standard of care set forth herein such that the interests of the Secured Parties may be protected. Each of the Secured Parties hereby agrees and acknowledges that it shall not have any claim on the funds and property from time to time deposited in or credited to the Income Note Distribution Account and the proceeds thereof. ARTICLE I DEFINITIONS AND INTERPRETATION 1.1.

DEFINITIONS

Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Indenture. Whenever any reference is made to an amount the determination of which is governed by Section 1.2, the provisions of Section 1.2 2

Processed and formatted by SEC Watch - Visit SECWatch.com

shall be applicable to such determination or calculation, whether or not reference is specifically made to Section 1.2, unless some other method of calculation or determination is expressly specified in the particular provision. In addition, terms defined in Article 9 of the UCC and used but not capitalized herein have the meanings assigned thereto in Article 9 of the UCC. Account means any of the Collection Account (including each Collateral Sub-Account established therein), the Collateral Account, the Uninvested Proceeds Account, the Payment Account, the Discretionary Ramp-Up Interest Reserve Account, the Non-Monthly Pay Asset Interest Reserve Account, the Expense Reserve Account (including each Collateral Sub-Account established therein), each Derivative Contract Issuer Account, if any, and each Derivative Contract Counterparty Account. Account Control Agreement means that certain Account Control Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, among the Issuer, the Trustee and the Custodian. Accountants’ Report means a report of a firm of Independent certified public accountants of recognized national reputation appointed by the Issuer (or the Collateral Manager on its behalf) on the Closing Date pursuant to Section 10.16(a), which may be the firm of Independent accountants that reviews or performs procedures with respect to the financial reports prepared by the Issuer. Accountholder means the holder of the Accounts pursuant to the Account Control Agreement. Act has the meanings specified in Section 14.2. Administrative Expenses means amounts (including any applicable indemnities) due from, or accrued for, the account of the Issuer with respect to any Payment Date to (i) the Trustee and the Underlying Trustee pursuant to the Master Trust Agreement; (ii) the Income Note Paying Agent pursuant to the Income Note Paying Agency Agreement; (iii) the Collateral Administrator pursuant to the Collateral Administration Agreement; (iv) the independent accountants, agents and counsel of the Issuer for fees and expenses (including tax reports); (v) the Rating Agencies for fees and expenses in connection with any Class of Notes rated by each such Rating Agency (including expenses for credit estimates and ongoing surveillance of the ratings of the Secured Notes); (vi) the Administrator pursuant to the Corporate Services Agreement; (vii) the Collateral Manager and its counsel for fees, expenses and indemnities under the Transaction Documents to the extent set forth therein (including amounts payable under the Collateral Management Agreement but excluding the Collateral Management Fee); (viii) any Servicer pursuant to the Servicing Agreement for expenses and indemnities set forth therein and any servicing fees to the extent not paid directly out of collections received pursuant to the terms of the Servicing Agreement; (ix) any other Person in respect of any governmental fee, charge or tax (including all filing, registration and annual return fees payable to the Cayman Islands’ government and registered office fees); and (x) any other Person in respect of any other fees or expenses permitted under the Indenture and the documents delivered pursuant to or in connection with this Indenture, the Income Note Paying Agency Agreement, the Collateral Management Agreement and the Notes; provided that Administrative Expenses may not include (a) any amounts due or accrued with respect to the actions taken on, or prior to, the Closing Date; (b) any amounts due as reimbursement for servicing advances pursuant to any Servicing Agreement or Cure Advances; or (c) any indemnities, servicing fees or expenses otherwise actually paid under any Servicing Agreement. Administrator means Walkers SPV Limited and any successor thereto appointed under the Corporate Services Agreement. 3

Processed and formatted by SEC Watch - Visit SECWatch.com

Affected Party has the meaning given to such term in the applicable Hedge Agreement or Synthetic Security. Affiliate means any person, directly or indirectly through one or more intermediaries, controlling, controlled by or under common control with the person; provided that (i) with respect to the Issuer, “Affiliate” shall be deemed not to include Walkers SPV Limited or any entity which Walkers SPV Limited controls and (ii) control of a person shall mean the power, direct or indirect, (a) to vote more than 50% of the securities having ordinary voting power for the election of directors of such person or (b) to direct or cause the direction of the management and policies of such person whether by contract or otherwise. Agent Members means members of, or participants in, the Clearing Agencies. Aggregate Fees and Expenses means, on any Payment Date, the sum of (i) the Trustee Fee with respect to such Payment Date and any unpaid Trustee Fee accrued with respect to a previous Payment Date, (ii) the Senior Collateral Management Fee and all expenses of the Collateral Manager payable by the Issuer pursuant to the Collateral Management Agreement with respect to such Payment Date and any unpaid Senior Collateral Management Fee and unpaid expenses of the Collateral Manager accrued with respect to a previous Payment Date, (iii) the Trustee Expenses and other expenses (including other Administrative Expenses) of the Issuer (including the fees to be paid to the Irish Stock Exchange), (iv) taxes payable by the Issuer, if any, and (v) all other expenses of the Issuer (including Administrative Expenses) payable on such Payment Date pursuant to Sections 11.1(a)(1) and 11.1(b)(1) (in each case to the extent not included in clauses (i) through (iv) above). Aggregate Outstanding Amount means, when used with respect to any of the Secured Notes at any time, the aggregate principal amount of such Secured Notes Outstanding at such time. Except as otherwise provided herein, (i) the Aggregate Outstanding Amount of any Class C Notes at any time shall include the Class C Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class C Notes at such time, (ii) the Aggregate Outstanding Amount of any Class D Notes at any time shall include the D Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class D Notes at such time, (iii) the Aggregate Outstanding Amount of any Class E Notes at any time shall include the Class E Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class E Notes at such time, (iv) the Aggregate Outstanding Amount of any Class F Notes at any time shall include the Class F Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class F Notes at such time, (v) the Aggregate Outstanding Amount of any Class G Notes at any time shall include the Class G Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class G Notes at such time, (vi) the Aggregate Outstanding Amount of any Class H Notes at any time shall include the Class H Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class H Notes at such time, (vii) the Aggregate Outstanding Amount of any Class J Notes at any time shall include the Class J Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class J Notes at such time and (viii) the Aggregate Outstanding Amount of any Class K Notes at any time shall include the Class K Cumulative Applicable Periodic Interest Shortfall Amount with respect to such Class K Notes at such time. Applicable Periodic Interest Rate means, for any Interest Period, (i) with respect to the Class A Notes, the applicable Class A Note Interest Rate, (ii) with respect to the Class B Notes, the applicable Class B Note Interest Rate, (iii) with respect to the Class C Notes, the applicable Class C Note Interest Rate, (iv) with respect to the Class D Notes, the applicable Class D Note Interest Rate, (v) with respect to the Class E Notes, the applicable Class E Note Interest Rate, (vi) with respect to the Class F Notes, the applicable Class F Note Interest Rate, (vii) with respect to the Class G Notes, the applicable Class G Note Interest Rate, (viii) with respect to the Class H Notes, the applicable Class H Note Interest Rate, (ix) with 4

Processed and formatted by SEC Watch - Visit SECWatch.com

respect to the Class J Notes, the applicable Class J Note Interest Rate and (x) with respect to the Class K Notes, the applicable Class K Note Interest Rate. Applicable Recovery Rate means, with respect to any Collateral Debt Security on any Measurement Date, the Fitch Recovery Rate, the Moody’s Recovery Rate and the S&P Recovery Rate applicable to such Collateral Debt Security on such date. Approved Replacement Person means a replacement or additional Key Manager appointed in accordance with the procedures described in Section 16 of the Collateral Management Agreement. Articles means the Amended and Restated Memorandum and Articles of Association of the Issuer, filed under the Companies Law (2004 Revision) of the Cayman Islands, as modified and supplemented and in effect from time to time. Asset Purchase Agreement means any purchase agreement between (i) a seller of Real Estate Interests or, to the extent that the seller thereof is the Collateral Manager or any of its affiliates, CMBS Securities, CRE Debt Obligations, Real Estate CDO Securities, REIT Debt Securities or Trust Preferred Securities and (ii) the Issuer, which shall contain provisions regarding representations and warranties and remedies in case of a breach thereof substantially in the form set forth in Exhibit F in the case of Real Estate Interests and Exhibit G in the case of CMBS Securities, CRE Debt Obligations, Real Estate CDO Securities, REIT Debt Securities or Trust Preferred Securities. Asset-Backed Securities are debt securities that entitle the holders thereof to receive payments that depend primarily on the cash flow from a specified pool of financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities (including, for the avoidance of doubt, leases). Asset Transfer Agreement means any asset transfer agreement substantially in the form of Exhibit I entered into by the Issuer pursuant to which the seller will sell, transfer, or otherwise convey, assign or cause the assignment of certain Collateral Debt Securities to the Issuer. Assumed Reinvestment Rate means, with respect to any Account or fund securing the Secured Notes, the greater of (i) LIBOR minus 0.50% and (ii) zero. Auction has the meaning specified in Section 9.2. Auction Call Redemption has the meaning specified in Section 9.1(c). Auction Date has the meaning specified in Section 9.2; provided that, for the purposes of Section 5.5, “Auction Date” means the date upon which an Auction of the Collateral Debt Securities is conducted in connection with an Event of Default. Auction Procedures has the meaning specified in Section 9.2. Auction Purchase Agreement has the meaning specified in Schedule E. Authenticating Agent means, with respect to the Secured Notes or any Class of the Secured Notes, the Person designated by the Trustee, if any, to authenticate such Secured Notes on behalf of the Trustee pursuant to Section 6.4. 5

Processed and formatted by SEC Watch - Visit SECWatch.com

Authorized Officer means (i) with respect to the Issuer, any Officer of the Issuer who is authorized to act for the Issuer in matters relating to, and binding upon, the Issuer, (ii) with respect to the Collateral Manager, any officer of the Collateral Manager who is authorized to act for the Collateral Manager in matters relating to, and binding upon, the Collateral Manager, (iii) with respect to the Trustee or any other bank or trust company acting as trustee of an express trust or as custodian, a Trust Officer and (iv) with respect to the Income Note Paying Agent, any officer who is authorized to act for the Income Note Paying Agent in matters relating to, and binding upon, the Income Note Paying Agent. 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. Available Funds means, with respect to any Payment Date, the amount of any positive balance (of Cash or Eligible Investments) in the Collection Account and, if the Trustee has been so directed by 100% of the Holders of the Income Notes, any amount designated by such Holders on deposit in the Interest Reserve Account, as of the Calculation Date relating to such Payment Date and, with respect to any other date, such amount as of that date. Average Life means, on any Calculation Date with respect to any Collateral Debt Security, the quotient obtained by the Collateral Manager by dividing (i) the sum of the products of (a) the number of years (rounded to the nearest one tenth thereof) from such Calculation Date to the respective dates of each successive distribution of principal of such Collateral Debt Security (assuming that (1) no Collateral Debt Securities default or are sold, (2) any optional redemption of the Collateral Debt Securities occurs in accordance with their respective terms and (3) any extension of the Real Estate Interests is exercised) and (b) the respective amounts of principal of such scheduled distributions by (ii) the sum of all successive scheduled distributions of principal on such Collateral Debt Security. Balance means at any time, with respect to Cash or Eligible Investments in any Account at such time, the aggregate of the (i) current balance of Cash, demand deposits, time deposits, certificates of deposit and federal funds; (ii) principal amount of interest-bearing corporate and government securities, money market accounts and repurchase obligations; and (iii) purchase price (but not greater than the face amount) of non-interest-bearing government and corporate securities and commercial paper. Bank means LaSalle Bank National Association, a national banking association organized under the laws of the United States, in its individual capacity and not as Trustee. Bankruptcy Code means the U.S. Bankruptcy Code, Title 11 of the United States Code, as amended or where the context requires, the applicable insolvency provisions of the laws of the Cayman Islands. Beneficial Owner means, with respect to any Global Note, each Person that appears on the records of a Clearing Agency (other than each such Clearing Agency to the extent that it is an accountholder with the other Clearing Agency for the purpose of operating the “bridge” between them) as entitled to a particular amount of Notes by reason of an interest in a Global Note (for all purposes other than with respect to the payment of principal of and interest on the Secured Notes, the right to which will be vested, as against the Issuer and the Trustee, solely in the Person in whose name the Global Note is registered in the Note Register (in the case of the Notes) or the Income Note Register (in the case of the Income Notes)); provided that the Trustee and the Income Note Paying Agent may conclusively rely upon the certificate of a Clearing Agency as to the identity of such Persons holding an interest in a Global Note. 6

Processed and formatted by SEC Watch - Visit SECWatch.com

Benefit Plan Investor means (i) an “employee benefit plan” (as defined in Section 3(3) of ERISA), that is subject to part 4 of Title I of ERISA, (ii) a “plan” (as defined in Section 4975(e)(1) of the Code), including, without limitation, individual retirement accounts and Keogh plans or (iii) an entity whose underlying assets include plan assets by reason of such an employee benefit plan’s or plan’s investment in such entity, including, without limitation, as applicable, an insurance company general account. Board of Directors means, with respect to the Issuer, the directors of the Issuer duly appointed in accordance with the Articles. Board Resolution means, with respect to the Issuer, a resolution of the Board of Directors of the Issuer. Business Day means any day that is not a Saturday, Sunday or other day on which commercial banking institutions in New York, New York, Chicago, Illinois or any other city in which the Corporate Trust Office of the Trustee is located are authorized or obligated by law or executive order to be closed; provided that, if any action is required of the Irish Paying Agent, solely for purposes of determining when such action of the Irish Paying Agent is required, days on which commercial banking institutions in Dublin, Ireland are authorized or obligated by law or executive order to be closed will also be considered in determining whether such day is a “Business Day”; provided, further that if any action is required of the Issuer (or of the Administrator on its behalf), solely for purposes of determining when such action of the Issuer is required, days on which commercial banking institutions in the Cayman Islands are authorized or obligated by law or executive order to be closed will also be considered in determining whether such day is a “Business Day.” Calculation Date means, with respect to any Payment Date, the last day of the related Due Period. Call Period has the meaning specified in Section 9.1(a) hereof. Cash means such funds denominated with currency of the United States as at the time shall be legal tender for payment of all public and private debts, including funds credited to a deposit account or a Securities Account. Cashflow Hedge Agreement means any Hedge Agreement entered into for the purpose of protecting the Issuer against a cashflow timing mismatch with respect to one or more Collateral Debt Securities. CDO of CDO Securities means securities that entitle the Holders thereof to receive payments that depend on the cash flow from a portfolio of assets, the majority in principal amount of which are collateralized debt obligations. CDS Principal Balance means the aggregate Principal Balance of (i) Collateral Debt Securities included in the Collateral (including any Collateral Debt Securities that have become Defaulted Securities or Written Down Securities) and (ii) Eligible Investments, in each case, purchased with the proceeds of the issuance of the Notes or thereafter with Collateral Principal Collections. Certificated Security has the meaning specified in Section 8-102(a)(4) of the UCC. Certificate of Authentication has the meaning specified in Section 2.3(f). 7

Processed and formatted by SEC Watch - Visit SECWatch.com

Class means each of the classes comprised of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes, the Class K Notes and the Income Notes. Class A Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class A Notes in full by their Stated Maturity Date and the timely payment of interest on such Class A Notes by their Stated Maturity Date. Class A Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class A Note Scenario Default Rate from the Class A Note Break-Even Default Rate. Class A Note Interest Rate means the Class A-1 Note Interest Rate, the Class A-2 Note Interest Rate or the Class A-3 Note Interest Rate, as applicable. Class A Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class A Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class A Notes means the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes. Class A-1 Note Interest Rate means LIBOR plus 0.255%. Class A-1 Notes means the U.S.$512,000,000 aggregate principal amount of Class A-1 Floating Rate Notes due 2052. Class A-2 Note Interest Rate means LIBOR plus 0.28%. Class A-2 Notes means the U.S.$96,000,000 aggregate principal amount of Class A-2 Floating Rate Notes due 2052. Class A-3 Note Interest Rate means LIBOR plus 0.30%. Class A-3 Notes means the U.S.$48,000,000 aggregate principal amount of Class A-3 Floating Rate Notes due 2052. Class A/B Coverage Tests means the Class A/B Interest Coverage Test and the Class A/B Principal Coverage Test. Class A/B Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is equal to the Interest Coverage Amount as of such Measurement Date and where (ii) is the sum of the Periodic Interest for the Class A Notes and the Class B Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Non-Monthly Pay Asset Interest Reserve Account for the Payment Date immediately following such Measurement Date. Class A/B Interest Coverage Test means, for so long as any Class A Notes or Class B Notes remain Outstanding, a test that is satisfied as of any Measurement Date if the Class A/B Interest Coverage Ratio as of such date of determination is equal to or greater than 117.75%; provided that for any 8

Processed and formatted by SEC Watch - Visit SECWatch.com

Measurement Date occurring on the Effective Date through the Payment Date immediately subsequent to the Effective Date, the Class A/B Interest Coverage Test will be satisfied if Class A/B Interest Coverage Ratio is equal to or greater than 100%. Class A/B Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (i) to (ii), where (i) is the Principal Coverage Amount as of such Measurement Date and (ii) is the sum of the Aggregate Outstanding Amount of the Class A Notes and the Class B Notes Outstanding as of such Measurement Date. Class A/B Principal Coverage Test means, for so long as any Class A Notes or Class B Notes remain Outstanding, a test satisfied on any Measurement Date if the Class A/B Principal Coverage Ratio as of such date of determination is equal to or greater than 108.72%. Class B Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class B Notes in full by their Stated Maturity Date and the timely payment of interest on such Class B Notes by their Stated Maturity Date. Class B Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class B Note Scenario Default Rate from the Class B Note Break-Even Default Rate. Class B Note Interest Rate means LIBOR plus 0.35%. Class B Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class B Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class B Notes means the U.S.$37,280,000 aggregate principal amount of Class B Floating Rate Notes due 2052. Class C Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class C Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes or Class B Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class C Notes. Class C Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class C Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class C/D/E Coverage Tests means the Class C/D/E Interest Coverage Test and the Class C/D/E Principal Coverage Test. Class C/D/E Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (x) to (y), where (x) is equal to the Interest Coverage Amount as of such Measurement Date and where (y) is the sum of the Periodic Interest for the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes for the Payment Date immediately following such 9

Processed and formatted by SEC Watch - Visit SECWatch.com

Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the NonMonthly Pay Asset Interest Reserve Account for the Payment Date immediately following such Measurement Date. Class C/D/E Interest Coverage Test means, for so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes remain Outstanding, a test that is satisfied as of any Measurement Date if the Class C/D/E Interest Coverage Ratio as of such date of determination is equal to or greater than 106.60%; provided that for any Measurement Date occurring on the Effective Date through the Payment Date immediately subsequent to the Effective Date, the Class C/D/E Interest Coverage Test will be satisfied if Class C/D/E Interest Coverage Ratio is equal to or greater than 100%. Class C/D/E Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (x) to (y), where (x) is the Principal Coverage Amount as of such Measurement Date and (y) is the sum of the aggregate principal amount of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes Outstanding as of such Measurement Date. Class C/D/E Principal Coverage Test means, for so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes remain Outstanding, a test satisfied on any Measurement Date if the Class C/D/E Principal Coverage Ratio as of such date of determination is equal to or greater than 104.86%. Class C Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class C Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class C Notes by their Stated Maturity Date. Class C Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class C Note Scenario Default Rate from the Class C Note Break-Even Default Rate. Class C Note Interest Rate means 5.7891%. Class C Notes means the U.S.$12,800,000 aggregate principal amount of Class C Deferrable Fixed Rate Notes due 2052. Class C Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class C Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class D Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class D Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes or Class C Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class D Notes. Class D Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class D Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. 10

Class D Note Interest Rate means LIBOR plus 0.57%. Class D Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class D Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class D Notes by their Stated Maturity Date. Class D Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class D Note Scenario Default Rate from the Class D Note Break-Even Default Rate. Class D Notes means the U.S.$23,200,000 aggregate principal amount of Class D Deferrable Floating Rate Notes due 2052. Class D Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class D Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class E Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class E Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class E Notes. Class E Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all

Processed and formatted by SEC Watch - Visit SECWatch.com

Class E Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class E Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by S&P by application of the S&P MO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class E Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class E Notes by their Stated Maturity Date. Class E Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class E Note Scenario Default Rate from the Class E Note Break-Even Default Rate. Class E Note Interest Rate means LIBOR plus 0.68%. Class E Notes means the U.S.$4,800,000 aggregate principal amount of Class E Deferrable Floating Rate Notes due 2052. Class E Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class E Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. 11

Processed and formatted by SEC Watch - Visit SECWatch.com

Class F Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class F Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class F Notes. Class F Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class F Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class F Note Interest Rate means LIBOR plus 1.05%. Class F Notes means the U.S.$3,600,000 aggregate principal amount of Class F Deferrable Floating Rate Notes due 2052. Class F/G/H Coverage Tests means the Class F/G/H Interest Coverage Test and the Class F/G/H Principal Coverage Test. Class F/G/H Interest Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (x) to (y), where (x) is equal to the Interest Coverage Amount as of such Measurement Date and where (y) is the sum of the Periodic Interest for the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes for the Payment Date immediately following such Measurement Date; provided that the Interest Coverage Amount shall be calculated after giving effect to any scheduled payment to the Non- Monthly Pay Asset Interest Reserve Account for the Payment Date immediately following such Measurement Date. Class F/G/H Interest Coverage Test means, for so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes remain Outstanding, a test that is satisfied as of any Measurement Date if the Class F/G/H Interest Coverage Ratio as of such date of determination is equal to or greater than 101.00%; provided that for any Measurement Date occurring on the Effective Date through the Payment Date immediately subsequent to the Effective Date, the Class F/G/H Interest Coverage Test will be satisfied if Class F/G/H Interest Coverage Ratio is equal to or greater than 100%. Class F/G/H Principal Coverage Ratio means, on any Measurement Date, the ratio (expressed as a percentage) of (x) to (y), where (x) is the Principal Coverage Amount as of such Measurement Date and (y) is the sum of the aggregate principal amount of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, the Class G Notes and the Class H Notes Outstanding as of such Measurement Date. Class F/G/H Principal Coverage Test means, for so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes remain Outstanding, a test satisfied on any Measurement Date if the Class F/G/H Principal Coverage Ratio as of such date of determination is equal to or greater than 102.84%. Class F Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of 12

Processed and formatted by SEC Watch - Visit SECWatch.com

Payments such that sufficient funds will remain for the payment of principal of the Class F Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class F Notes by their Stated Maturity Date. Class F Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class F Note Scenario Default Rate from the Class F Note Break-Even Default Rate. Class F Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class F Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class G Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class G Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class G Notes. Class G Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class G Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class G Note Interest Rate means LIBOR plus 1.30%. Class G Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class G Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class G Notes by their Stated Maturity Date. Class G Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class G Note Scenario Default Rate from the Class G Note Break-Even Default Rate. Class G Notes means the U.S.$14,080,000 aggregate principal amount of Class G Deferrable Floating Rate Notes due 2052. Class G Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class G Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class H Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class H Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes or Class G Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class H Notes. Class H Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class H Applicable Periodic Interest Shortfall Amounts with respect 13

Processed and formatted by SEC Watch - Visit SECWatch.com

to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class H Note Interest Rate means LIBOR plus 1.60%. Class H Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class H Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class H Notes by their Stated Maturity Date. Class H Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class H Note Scenario Default Rate from the Class H Note Break-Even Default Rate. Class H Notes means the U.S.$7,200,000 aggregate principal amount of Class H Deferrable Floating Rate Notes due 2052. Class H Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class H Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class J Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class J Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class J Notes. Class J Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class J Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class J Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class J Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class J Notes by their Stated Maturity Date. Class J Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class J Note Scenario Default Rate from the Class J Note Break-Even Default Rate. Class J Note Interest Rate means 7.8016% per annum. Class J Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class J Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. 14

Processed and formatted by SEC Watch - Visit SECWatch.com

Class J Notes means the U.S.$7,040,000 aggregate principal amount of Class J Deferrable Fixed Rate Notes due 2052. Class K Applicable Periodic Interest Shortfall Amount means, with respect to any Interest Period, the amount of unpaid interest for such Interest Period that will be added to the principal amount of the Class K Notes and paid thereafter in accordance with the Priority of Payments in the event that any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes or Class J Notes are Outstanding and funds are not available in accordance with the Priority of Payments on any Payment Date to pay the full amount of Periodic Interest on the Class K Notes. Class K Cumulative Applicable Periodic Interest Shortfall Amount means, with respect to any date of determination, the sum of all Class K Applicable Periodic Interest Shortfall Amounts with respect to all Payment Dates preceding such date of determination, less any amounts applied on all preceding Payment Dates pursuant to the Priority of Payments to reduce such sum. Class K Note Break-Even Default Rate means the maximum percentage of defaults that the portfolio of Collateral Debt Securities can sustain, as determined by application of the S&P CDO Monitor, after giving effect to S&P’s assumptions on recoveries, defaults and timing and to the Priority of Payments such that sufficient funds will remain for the payment of principal of the Class K Notes in full by their Stated Maturity Date and the ultimate payment of interest on such Class K Notes by their Stated Maturity Date. Class K Note Default Differential means, with respect to any Calculation Date, the rate obtained by subtracting the Class K Note Scenario Default Rate from the Class K Note Break-Even Default Rate. Class K Note Interest Rate means 8.4305% per annum. Class K Note Scenario Default Rate means an estimate of the cumulative default rate for the portfolio of Collateral Debt Securities consistent with S&P’s rating of the Class K Notes on the Closing Date, determined by S&P by application of the S&P CDO Monitor. Class K Notes means the U.S.$6,000,000 aggregate principal amount of Class K Deferrable Fixed Rate Notes due 2052. Clearing Agency means DTC, Euroclear or Clearstream. Clearing Corporation has the meaning specified in Section 8-102(a)(5) of the UCC. Clearstream means Clearstream Banking, société anonyme. CLO Securities means securities that entitle the holders thereof to receive payments that depend (except for rights and other assets designed to assure the servicing or timely distribution of proceeds to holders of the CLO Securities) on the cashflow from a portfolio of primarily commercial loans. Closing Date means February 28, 2007. CMBS Conduit Securities means Commercial Mortgage Backed Securities (a) issued by a single-seller or multi-seller conduit under which the holders of such Commercial Mortgage Backed Securities have recourse to a specified pool of assets (but not other assets originated by the conduit that support payments on other series of securities) and (b) that entitle the holders thereof to receive payments 15

Processed and formatted by SEC Watch - Visit SECWatch.com

that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Commercial Mortgage Backed Securities) on the cash flow from a pool of commercial mortgage loans. CMBS Credit Tenant Lease Securities means Commercial Mortgage Backed Securities (other than CMBS Large Loan Securities and CMBS Conduit Securities but including Tenant Lease Loan Interests) that (i) have a public rating from a Rating Agency, (ii) incorporate a servicer or similar party to service the related leased property in a manner that satisfies Rating Agency servicing criteria for the servicing of commercial mortgage loans of this type and (iii) entitle the holders thereof to receive payments that depend on the cash flow from a single or a pool of commercial mortgage loans made to finance the acquisition, construction and improvement of properties leased to corporate tenants (or on the cash flow from such leases); provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the CMBS Securities such as a financial guaranty insurance policy. CMBS Franchise Securities means Commercial Mortgage Backed Securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such Commercial Mortgage Backed Securities) on the cash flow from a pool of (substantially all) mortgage loans made to operators of franchises that provide oil, gasoline, restaurant or food services and provide other services related thereto. CMBS Large Loan Securities means Commercial Mortgage Backed Securities (other than CMBS Conduit Securities) that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Commercial Mortgage Backed Securities) on the cash flow from a commercial mortgage loan or a small pool of commercial mortgage loans made to finance the acquisition or improvement of real properties. CMBS Re-REMIC Securities means any security that is secured directly by, referenced to or representing ownership of, a pool at least 85% of which consists of CMBS Conduit Securities, other CMBS Securities or certificates representing a beneficial interest therein, but not including any Synthetic Security. For the avoidance of doubt, a CMBS Re-REMIC Security shall include any security backed by more than one credit default swap or referencing more than one Reference Obligation or a synthetic collateralized debt obligation or a synthetic resecuritization that (in each case) primarily references more than one CMBS Conduit Security or other CMBS Security or certificates representing a beneficial interest therein. CMBS Securities means CMBS Conduit Securities, CMBS Franchise Securities, CMBS Large Loan Securities, CMBS Single Borrower Securities, CMBS Re-REMIC Securities or CMBS Credit Tenant Lease Securities, as the case may be. CMBS Single Borrower Securities means CMBS Securities (other than CMBS Large Loan Securities and CMBS Credit Tenant Lease Securities) that entitle the holders thereof to receive payments that depend on the cash flow from one or more loans with a single borrower or group of affiliated borrowers secured by one or more properties; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the CMBS Securities such as a financial guaranty insurance policy. Code means the Internal Revenue Code of 1986, as amended. Collateral has the meaning specified in the granting clauses. 16

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Account has the meaning specified in Section 10.3. Collateral Administration Agreement means the Collateral Administration Agreement, dated, February 28, 2007, by and among the Issuer, the Collateral Manager and the Collateral Administrator, as the same may be amended and modified from time to time in accordance with its terms. Collateral Administrator means LaSalle Bank National Association, solely in its capacity as Collateral Administrator under the Collateral Administration Agreement, unless a successor Person shall have become the Collateral Administrator pursuant to the applicable provisions of Collateral Administration Agreement, in which case Collateral Administrator shall mean such successor Person. Collateral Assignment of Hedge Agreement means the collateral assignment of each Hedge Agreement, dated the date that the Issuer enters into the Hedge Agreement, among the Issuer, the Trustee and the Hedge Counterparty, and any other Collateral Assignment of the Hedge Agreement in respect of the Hedge Agreement entered into between the Issuer, the Trustee and a Hedge Counterparty after the Closing Date. Collateral Concentration Limitations will be satisfied if, as of any Measurement Date after the Effective Date, and after giving effect to each purchase of a Collateral Debt Security, each of the following conditions (collectively, the Collateral Concentration Limitations) is satisfied in the aggregate (or, in the case of a Collateral Concentration Limitation not satisfied immediately prior to such purchase, such purchase maintains or improves compliance with such Collateral Concentration Limitation): (i)

General Limitations (a)

the aggregate Principal Balance of all Collateral Debt Securities that are PIK Bonds (excluding the Collateral Debt Securities identified on Annex B as KDIAK 2006-1 and ANSONIA 2006-1) does not exceed the greater of 7.5% of the CDS Principal Balance or U.S.$60,000,000;

(b)

the aggregate amount of the CDS Principal Balance for which no related interest rate Hedge Agreement is in place does not exceed 5% of the amount equal to (a) the principal amount of the Floating Rate Notes on the first day of the related Due Period minus (b) the aggregate Principal Balance of the Floating Rate Collateral Debt Securities on the first day of such Due Period;

(c)

the aggregate Principal Balance of all Collateral Debt Securities that provide for periodic payments of interest in cash less frequently than monthly (other than Collateral Debt Securities that are the subject of a Cash Flow Hedge Agreement) does not exceed 35% of the CDS Principal Balance;

(d)

the aggregate Principal Balance of all Collateral Debt Securities having a stated maturity date or rated final distribution date later than the Stated Maturity Date does not exceed 10% of the CDS Principal Balance (the “10% bucket”), provided, that in no event may the stated maturity date or rated final distribution date of any CMBS Security or Real Estate CDO Security be more than 10 years later than the Stated Maturity Date and of any Real Estate Interest be more than 5 years prior to the Stated Maturity Date; provided, further, that for the CMBS Securities that fall into the 10% bucket, on a look-through basis, none of the underlying loans may mature (with extension options) later than 5 years prior to the Stated Maturity Date; provided, further, that in no event may the stated maturity date or rated final distribution date of any REIT Debt Security or CRE 17

Processed and formatted by SEC Watch - Visit SECWatch.com

Debt Obligation be later than the Stated Maturity Date; provided further, that in no event may the stated maturity date or rated final distribution date of any Trust Preferred Security be more than 5 years later than the Stated Maturity Date. (ii)

(iii)

Collateral Debt Security Type Limitations (a)

the aggregate Principal Balance of all Collateral Debt Securities that are CMBS Securities does not exceed the greater of 85% of the CDS Principal Balance or U.S.$680,000,000; provided that no more than the greater of 50% of the CDS Principal Balance or U.S.$400,000,000 shall consist of CMBS Large Loan Securities, not more than the greater of 10% of the CDS Principal Balance or U.S.$80,000,000 shall consist of CMBS Credit Tenant Lease Securities and not more than the greater of 20% of the CDS Principal Balance or U.S.$ 160,000,000, shall consist of CMBS Re-REMIC Securities;

(b)

the sum of the aggregate Principal Balances of all REIT Debt Securities, Trust Preferred Securities and CRE Debt Obligations does not exceed the greater of 30% of the CDS Principal Balance or U.S.$240,000,000; provided that not more than the greater of 4.0% of the CDS Principal Balance or U.S.$32,000,000 shall consist of Trust Preferred Securities and not more than the greater of 20% of the CDS Principal Balance or U.S.$160,000,000 shall consist of CRE Debt Obligations;

(c)

the aggregate Principal Balance of all Collateral Debt Securities that are Real Estate CDO Securities does not exceed the greater of 20% of the CDS Principal Balance or U.S.$ 160,000,000;

(d)

the aggregate Principal Balance of all Collateral Debt Securities that are Real Estate Interests does not exceed the greater of 5.0% of the CDS Principal Balance or U.S.$40,000,000;

(e)

the aggregate Principal Balance of all Collateral Debt Securities that are Synthetic Securities does not exceed the greater of 20% of the CDS Principal Balance or U.S.$ 160,000,000;

Single Issue Limitations (a)

(iv)

the aggregate Principal Balance of all Collateral Debt Securities that are part of the same Issue does not exceed the greater of 3.5% of the CDS Principal Balance or U.S.$28,000,000, except for up to 4 Issues not to exceed the greater of 5.0% of the CDS Principal Balance or U.S.$40,000,000;

Property Type Limitations: the aggregate Principal Balance of all CMBS Conduit Securities, CMBS Large Loan Securities, CMBS Credit Tenant Lease Securities, CMBS Franchise Securities and Real Estate Interests related to Mortgaged Properties that are classified as: (A) multifamily properties does not exceed the greater of 50% of the CDS Principal Balance or U.S.$400,000,000; (B) retail properties does not exceed the greater of 40% of the CDS Principal Balance or U.S.$320,000,000; (C) office properties does not exceed the greater of 40% of the CDS Principal Balance or U.S.$320,000,000; (D) lodging properties does not exceed the greater of 30% of the CDS Principal Balance or U.S.$240,000,000; (E) healthcare properties does not exceed the greater of 20% of the CDS Principal Balance or U.S.$160,000,000 (provided, further, that skilled-nursing healthcare properties does not exceed the greater of 10% of the CDS Principal Balance or U.S.$80,000,000 and assisted living health care properties does not exceed 18

Processed and formatted by SEC Watch - Visit SECWatch.com

the greater of 10% of the CDS Principal Balance or U.S.$ 80,000,000); (F) industrial properties does not exceed the greater of 25% of the CDS Principal Balance or U.S.$200,000,000; (G) self storage properties does not exceed the greater of 10% of the CDS Principal Balance or U.S.$80,000,000; and (H) any other property type other than those specified in clauses (A) through (G) above does not exceed the greater of 10% of the CDS Principal Balance or U.S.$80,000,000; (v)

Geographic Limitations: the aggregate Principal Balance of all CMBS Conduit Securities, CMBS Large Loan Securities, CMBS Credit Tenant Lease Securities, CMBS Franchise Securities and Real Estate Interests related to Mortgaged Properties located in: (A) California does not exceed the greater of 40% of the CDS Principal Balance or U.S.$320,000,000; (B) New York does not exceed the greater of 40% of the CDS Principal Balance or U.S.$320,000,000; (C) Texas does not exceed the greater of 25% of the CDS Principal Balance or U.S.$200,000,000; (D) Florida does not exceed the greater of 30% of the CDS Principal Balance or U.S.$240,000,000; and (E) any other single state other than California, New York, Texas and Florida does not exceed the greater of 20% of the CDS Principal Balance or U.S.$160,000,000;

For purposes of determining compliance with any Collateral Concentration Limitation, (a) all calculated percentages will be rounded to the nearest hundredth of 1% (e.g., 5.13%), (b) Temporary Ramp-Up Securities will be excluded from the calculation of the Collateral Concentration Limitations and (c) with respect to each Synthetic Security, satisfaction of the Collateral Concentration Limitations, for purposes of clauses (i)(a), (ii)(a)-(d), (iii), (iv) and (v) above, shall be based on the related Reference Obligation and, for purposes of clauses (i)(b)-(d) and (ii)(e) above, shall be based on the Synthetic Security itself; provided that if the Collateral Manager determines that a Synthetic Security should, for purposes of clause (i)(a) above, be based instead on the Synthetic Security, the Collateral Manager may seek Rating Agency Confirmation from S&P with respect to the treatment of such Synthetic Security and any similar Synthetic Security entered into subsequently. Notwithstanding the foregoing, during the Ramp-Up Period the Collateral Quality Tests need not be met. At all times, the dollar amount limitation set forth in any individual Collateral Concentration Limitation will be disregarded for the purposes of the Reinvestment Criteria, but will be taken into account solely for purposes of any reports to be prepared under the Indenture. Collateral Debt Security means an item of Collateral which satisfies the Eligibility Criteria specified in Section 12.2. Collateral Interest Collections means, with respect to any Due Period and the related Payment Date, without duplication, the sum of (i) (a) all cash payments of interest with respect to any Collateral Debt Securities and Eligible Investments included in the Collateral (including any Sale Proceeds of a Collateral Debt Security sold at a price greater than or equal to its Principal Balance representing unpaid interest accrued thereon to the date of the sale thereof to the extent not treated as Collateral Principal Collections at the option of the Collateral Manager) and (b) all Synthetic Security Periodic Payments payable to the Issuer under a Synthetic Security, net, in the case of a Derivative Contract, of any Synthetic Security Periodic Payments payable by the Issuer to the Derivative Contract Counterparty during the related Collection Period, but excluding in the case of the foregoing clauses (a) and (b): (1) all funds received on a Defaulted Security (including any unpaid interest) and any unpaid interest accrued on a Deferred Interest PIK Bond or a Written Down Security to the date of sale which are received during the related Due Period, and (2) any servicing fees and other fees, expenses or indemnities paid directly to any Servicer pursuant to any Servicing Agreement and any other amounts paid out of collections of interest pursuant to any Servicing Agreement to reimburse the related Servicer for servicing advances made by it thereunder which are received during the related Due Period, (ii) all payments on Eligible Investments 19

Processed and formatted by SEC Watch - Visit SECWatch.com

purchased with Collateral Interest Collections, (iii) payments received or scheduled to be received from a Hedge Counterparty under any Hedge Agreement (including the Initial Hedge Agreement) on the related Payment Date, excluding any payments received from a Hedge Counterparty upon reduction of the notional amount and any termination payments (provided that so long as the Notes are Outstanding, any termination payments received from a Hedge Counterparty will be used to enter into a substitute Hedge Agreement to the extent required to maintain the then-current rating of the Notes by each Rating Agency), (iv) all amendment and waiver fees, all late payment fees and all other fees and commissions received during the related Due Period (other than fees and commissions received in connection with the sale, restructuring, workout or default of Collateral Debt Securities or in connection with Defaulted Securities or Written Down Securities) (excluding any payments representing exit fees, extension fees or prepayment premiums paid in connection with Real Estate Interests), (v) the Principal Balance of any Eligible Investments purchased with Collateral Interest Collections, (vi) all interest accrued on the Closing Date on Collateral Debt Securities included in the Collateral, (vii) any amounts on deposit in the Non-Monthly Pay Asset Interest Reserve Account, (viii) any amounts in the Discretionary Ramp-Up Interest Reserve Account and the Interest Reserve Account that are transferred to the Payment Account, (ix) after the Effective Date, at the option of the Collateral Manager, any amount on deposit in the Expense Reserve Account in excess of U.S.$25,000, (x) all income received during the related Due Period on any Eligible Investments then in any Derivative Contract Counterparty Accounts, to the extent transferred to the Collection Account pursuant to and in accordance with Section 10.11 and (xi) all proceeds from the foregoing; provided, however, that Collateral Interest Collections shall not include (i) the funds and other property (including the paid-up share capital of the Issuer) with respect to the Income Notes and the bank account in which such funds and the proceeds thereof are held, (ii) principal of any Collateral Debt Security representing capitalized interest after the date of purchase thereof by the Issuer, (iii) Purchased Accrued Interest or (iv) any amounts contributed by the Income Noteholders as capital contributions pursuant to Section 4.5 of the Income Note Paying Agency Agreement. Collateral Management Agreement means the Collateral Management Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, between the Issuer and the Collateral Manager. Collateral Management Fee means the Senior Collateral Management Fee and the Subordinate Collateral Management Fee. Collateral Manager means NS Advisors, LLC, a Delaware limited liability company, unless a successor Person shall have become Collateral Manager pursuant to the applicable provisions of the Collateral Management Agreement, in which case Collateral Manager shall mean such successor Person. Collateral Principal Collections means, (i) with respect to any Due Period and the related Payment Date, all amounts received by the Issuer during such Due Period that do not constitute Collateral Interest Collections minus (ii) any amounts paid directly out of collections of principal pursuant to any Servicing Agreement to reimburse the related Servicer for servicing advances made by it and other amounts due to any Servicer and not paid out of Collateral Interest Collections. Collateral Principal Collections shall include, without limitation, (A) principal of any Collateral Debt Security representing capitalized interest after the date of purchase thereof by the Issuer, (B) any Uninvested Proceeds which have not been invested on or prior to the Effective Date and (C) any amounts contributed by the Income Noteholders as capital contributions pursuant to Section 4.5 of the Income Note Paying Agency Agreement. Collateral Principal Collections Sub-Account has the meaning specified in Section 10.6(a) hereof. 20

Collateral Principal Payments means Collateral Principal Collections excluding Sale Proceeds and any amounts received in respect of Eligible Investments. Collateral Quality Tests will be satisfied if, as of any Measurement Date, the Collateral Debt Securities comply, in the aggregate, with all of the requirements set forth below (collectively, the Collateral Quality Tests): (1)

the Fitch Weighted Average Rating Factor does not exceed 10;

(2)

(a) the Weighted Average Fixed Rate Coupon as of such date equals or exceeds 5.95% and (b) the Weighted Average Spread as of such date equals or exceeds 1.60%;

(3)

the Weighted Average Life Test is satisfied;

(4)

the S&P CDO Monitor Test is satisfied;

(5)

the S&P Minimum Weighted Average Recovery Rate Test is satisfied;

(6)

the Moody’s WARF Test is satisfied;

(7)

the Moody’s Recovery Rate Test is satisfied; and

(8)

the Herfindahl Score of the Collateral Debt Securities is at least 43.

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Sub-Account means any sub-account established within an Account. Collateralization Event means, provided that no Substitution Event has occurred, any of the following events: (a) the Hedge Ratings Determining Party’s short-term rating from Moody’s is lower than “P-1” or the long-term rating from Moody’s is below “A2” or, if the Hedge Ratings Determining Party does not have a short-term rating from Moody’s, the long-term rating of such Hedge Ratings Determining Party from Moody’s is below “Al”; (b) the Hedge Ratings Determining Party’s short-term rating from Fitch is lower than “F1” or the long-term rating of the Hedge Ratings Determining Party from Fitch is lower than “A”, or (c) the short term rating of the Hedge Ratings Determining Party from S&P is lower than “A-1” or, solely in the case of an interest rate swap, if the Hedge Ratings Determining Party does not have a short term rating from S&P, the long term rating of such Hedge Ratings Determining Party is lower than “A+”. Collection Account means the Securities Account designated the “Collection Account” and established in the name of the Trustee pursuant to Section 10.6, including the Collateral Principal Collections Sub-Account. Collections means, with respect to any Payment Date, the sum of (i) the Collateral Interest Collections collected during the applicable Due Period and (ii) the Collateral Principal Collections collected during the applicable Due Period. Commercial Mortgage Backed Security means securities backed by obligations (including certificates of participations in obligations) that are principally secured by mortgages on real property or interests therein having a multifamily or commercial use, such as regional malls, retail space, office buildings, warehouse or industrial properties, hotels, nursing homes and senior living centers. Commission means the United States Securities and Exchange Commission. 21

Processed and formatted by SEC Watch - Visit SECWatch.com

Controlling Class means the Class A-1 Notes voting as a single Class, so long as any Class A-1 Notes are Outstanding, and then the Class A-2 Notes, so long as any Class A-2 Notes are Outstanding, and then the Class A-3 Notes, so long as any Class A-3 Notes are Outstanding, and then the Class B Notes, so long as any Class B Notes are Outstanding, and then the Class C Notes, so long as any Class C Notes are Outstanding, and then the Class D Notes, so long as any Class D Notes are Outstanding, and then the Class E Notes, so long as any Class E Notes are Outstanding, and then the Class F Notes, so long as any Class F Notes are Outstanding, and then the Class G Notes, so long as any Class G Notes are Outstanding, and then the Class H Notes, so long as any Class H Notes are Outstanding, and then the Class J Notes, so long as any Class J Notes are Outstanding, and then the Class K Notes, so long as the K Notes are Outstanding, based on the Aggregate Outstanding Amount thereof. Controlling Class Objection means written notice to the Collateral Manager by the Holders of a majority in aggregate principal amount of Outstanding Notes of the Controlling Class objecting in their reasonable discretion to a proposed replacement Key Manager. Controlling Person means any other person (other than a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of the Issuer, a person who provides investment advice for a fee (direct or indirect) with respect to the assets of the Issuer, or any “affiliate” (within the meaning of 29 C.F.R. Section 2510.3-101(0(3)) of any such person. Corporate Services Agreement means that certain Corporate Services Agreement, dated as of the Closing Date, as the same may be amended or supplemented from time to time, between the Issuer and the Administrator. Corporate Trust Office means the designated corporate trust office of the Trustee, currently located at 181 West Madison Street, 32nd Floor, Chicago, Illinois 60602, Attention: CDO Trust Services Group – N-Star Real Estate CDO IX, Ltd., telephone number 312-904-0467, fax number 312-602-3935, or such other address as the Trustee may designate from time to time by notice to the Secured Noteholders, the Income Noteholders, the Collateral Manager and the Issuer or the principal corporate trust office of any successor Trustee. Coverage Tests means the Class A/B Coverage Tests, the Class C/D/E Coverage Tests and the Class F/G/H Coverage Tests. Coverage Ratios means the Interest Coverage Ratios and the Principal Coverage Ratios. CRE Debt Obligations means (i) a loan, security or similar full recourse obligation made by a bank or other financial institution based on the credit of the operating entity obligor or (ii) any participation interest in, or assignment of, an asset which satisfies the criteria in clause (i) of this definition, which obligor in the case of clauses (i) and (ii) is a real estate operating company, real estate development company, homebuilding company or any other company whose business is significantly related to real estate, or any subsidiary thereof; provided that no Real Estate Interests, REIT Debt Securities or Trust Preferred Securities shall constitute CRE Debt Obligations. Credit Improved Security means a Collateral Debt Security or, with respect to a Synthetic Security, the Reference Obligation thereof, that, since the date of purchase by the Issuer, in the Collateral Manager’s reasonable business judgment, has improved in credit quality. Credit Lease Loans means mortgage loans secured by mortgages on commercial real estate properties that are subject to a lease to a single tenant. 22

Processed and formatted by SEC Watch - Visit SECWatch.com

Credit Risk Event means, with respect to any Collateral Debt Security an event or circumstance that constitutes a change in the condition of the issuer of such Collateral Debt Security (or of available information with respect to such issuer) that evidences, in the good faith judgment of the Collateral Manager, (A) a significant risk of such Collateral Debt Security materially declining in credit quality, or (B) a significant risk, with a lapse of time, of such Collateral Debt Security becoming a Defaulted Security or a Written Down Security. Credit Risk Security means any Collateral Debt Security with respect to which there shall have occurred a Credit Risk Event. Credit Support Annex means the ISDA Credit Support Annex to a Hedge Agreement between a Hedge Counterparty and the Issuer. Cure Advance means, in respect of any Real Estate Interest that is a Subordinate Loan Interest or a Mezzanine Loan, amounts advanced by a Holder of Income Notes pursuant to the Income Note Paying Agency Agreement to permit the Issuer to exercise its right to cure monetary defaults with respect to any commercial mortgage loan or mezzanine loan that ranks senior in priority to the related Real Estate Interest in respect of the related commercial property, in each case in accordance with the applicable Underlying Instrument. Current Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Debt Securities and the proceeds of the disposition thereof held as Cash, (b) Uninvested Proceeds held as cash and (c) Eligible Investments purchased with Uninvested Proceeds or the proceeds of the disposition of Pledged Collateral Debt Securities, existing immediately prior to the sale, maturity or other disposition of a Pledged Collateral Debt Security or immediately prior to the acquisition of a Pledged Collateral Debt Security, as the case may be. Custodian has the meaning specified in Section 3.3(a). Daily Official List means the Daily Official List of the Irish Stock Exchange. Deemed Floating Asset Hedge means, with respect to a Fixed Rate Collateral Debt Security, an interest rate swap having (i) a notional schedule equal to the Principal Balance as it is reduced by expected amortization of such Fixed Rate Collateral Debt Security over time and (ii) payment dates identical to the Payment Dates of the Issuer under the Indenture; provided that, (w) at the time of entry into the Deemed Floating Asset Hedge, (i) the expected principal payments on the Fixed Rate Collateral Debt Security comprising a Deemed Floating Rate Collateral Debt Security will not extend beyond the Stated Maturity Date and (ii) the scheduled notional amount of such Deemed Floating Asset Hedge at any time is equal to the expected principal amount of the related Fixed Rate Collateral Debt Security (as calculated at such time), (x) the Rating Agencies and the Trustee are notified prior to the Issuer’s entry into a Deemed Floating Asset Hedge, and each will be provided with the identity of the proposed hedge counterparty and copies of the hedge documentation and notional schedule, (y) such Deemed Floating Asset Hedge will require Rating Agency Confirmation from S&P and Moody’s to the extent it is not a Form-Approved Hedge Agreement and (z) such Deemed Floating Asset Hedge is priced at then-current market rates. Deemed Floating Rate Collateral Debt Security means a Fixed Rate Collateral Debt Security the interest rate of which is hedged into a Floating Rate Collateral Debt Security using a Deemed Floating Asset Hedge; provided that at the time of entry into the Deemed Floating Asset Hedge the Average Life of such Deemed Floating Rate Collateral Debt Security would not increase or decrease by more than one year from its expected average life if it were to prepay at either 50% or 150% of its pricing speed. 23

Processed and formatted by SEC Watch - Visit SECWatch.com

Pursuant to this Indenture, a Deemed Floating Rate Collateral Debt Security will be deemed a Floating Rate Collateral Debt Security with a spread over LIBOR equal to the related Deemed Floating Spread. Deemed Floating Spread means the difference between the stated rate at which interest accrues on each Fixed Rate Collateral Debt Security that comprises a Deemed Floating Rate Collateral Debt Security (excluding all Defaulted Securities and Deferred Interest PIK Bonds) and the fixed rate that the Issuer agrees to pay on the Deemed Floating Asset Hedge at the time such swap is executed. Default means any Event of Default or any occurrence that, with notice or the lapse of time or both, would become an Event of Default. Defaulted Derivative Contract Counterparty Termination Payment means an amount payable by the Issuer to a Derivative Contract Counterparty that is due following the designation of an “Early Termination Date” (as such term is defined in the related Derivative Contract) (other than in respect of an “Illegality” or a “Tax Event” (as each such term is defined in the related Derivative Contract)), in respect of which the related Derivative Contract Counterparty is the “Defaulting Party” or the sole “Affected Party”. Defaulted Interest means any interest due and payable in respect of any Class A Note or Class B Note or, if no Class A Notes or Class B Notes are Outstanding, in respect of any Class C Note or, if no Class C Notes are Outstanding, in respect of any Class D Note, or if no Class D Notes are Outstanding, in respect of any Class E Note, or if no Class E Notes are Outstanding, in respect of any Class F Note, or if no Class F Notes are Outstanding, in respect of any Class G Note, or if no Class G Notes are Outstanding, in respect of any Class H Note, or if no Class H Notes are Outstanding, in respect of any Class J Note, or if no Class J Notes are Outstanding, in respect of any Class K Note, and any interest on such Defaulted Interest that (in each case) is not punctually paid or duly provided for on the applicable Payment Date (including the applicable Stated Maturity Date) of the applicable Secured Note. Defaulted Securities Amount means, with respect to any Defaulted Security in the Collateral, of the lesser of (i) the product of the Principal Balance of such Defaulted Security and the lowest of the Applicable Recovery Rates of such Defaulted Security and (ii) the product of the Principal Balance of such Defaulted Security and the Market Value of such Defaulted Security. Defaulted Security means any Collateral Debt Security or any other security included in the Collateral: (i)

as to which (a) the issuer thereof has defaulted in the payment of principal or interest (without giving effect to any applicable notice or grace period or waiver, unless the Collateral Manager certifies to the Trustee that in the Collateral Manager’s reasonable judgment such default of up to the lesser of (1) three Business Days and (2) the grace period provided for in the Underlying Instruments is due solely to non-credit and non-fraud related reasons and the Collateral Manager has so certified in writing to the Trustee or (b) pursuant to its Underlying Instruments, there has occurred any default or event of default which entitles the holders thereof, with notice or passage of time or both, to accelerate the maturity (whether by mandatory prepayments, mandatory redemption or otherwise) of all or a portion of the outstanding principal amount of such security, unless (1) in the case of a default or event of default consisting of a failure of the obligor on such security to make required interest payments and/or scheduled principal payments, such security has resumed current payments of interest and scheduled principal in cash (including all past due interest and scheduled principal) and, in the Collateral Manager’s reasonable judgment, will continue to make such current payments of interest in cash (provided that no restructuring has been effected) or (2) in the case of any other default or event of default, such default or event of 24

Processed and formatted by SEC Watch - Visit SECWatch.com

default is no longer continuing (provided that no event of default has been waived with respect to (A) a default in the payment of principal or interest or (B) insolvency in the event that all outstanding amounts have not been paid) and such security satisfies the criteria for inclusion of securities in the definition of “Collateral Debt Security”; (ii)

that ranks pari passu with or subordinate to any other indebtedness for borrowed money owing by the issuer of such security, if any (for purposes hereof, Other Indebtedness; provided, however, that such Other Indebtedness of such issuer will not include series of such Other Indebtedness that may be issued or owing by a separate special purpose entity and is not guaranteed by the issuer) if such issuer had defaulted in the payment of principal or interest in respect of such Other Indebtedness (without giving effect to any applicable notice or grace period or waiver, unless the Collateral Manager certifies to the Trustee that in the Collateral Manager’s reasonable judgment such default of up to the lesser of (a) three Business Days and (b) the grace period provided for in the Underlying Instruments is due solely to non-credit and non-fraud related reasons and the Collateral Manager has so certified in writing to the Trustee), unless, in the case of a default or event of default consisting of a failure of the obligor on such security to make required interest payments and/or scheduled principal payments, such Other Indebtedness has resumed current payments of interest and scheduled principal (including all due interest and scheduled principal) in cash (whether or not any waiver or restructuring has been effected) and, in the Collateral Manager’s reasonable judgment, will continue to make such current payments of interest and scheduled principal in cash; provided that a security shall be considered a Defaulted Security pursuant to this clause (ii) only if the Collateral Manager knows, after due inquiry as required pursuant to the Collateral Management Agreement, that the issuer thereof is (or is reasonably expected by the Collateral Manager to be, as of the next scheduled payment distribution date) in default (without giving effect to any applicable grace period or waiver) as to payment of principal and/or interest on another obligation (and such default has not been cured or waived) which is senior or pari passu in right of payment to such Collateral Debt Security;

(iii)

with respect to which any bankruptcy, insolvency or receivership proceeding has been initiated in respect of the issuer of such Collateral Debt Security, or there has been proposed or effected any distressed exchange or other debt restructuring where the issuer of such Collateral Debt Security has offered the debt holders a new security or package of securities that, in the judgment of the Collateral Manager either (a) amounts to a diminished financial obligation or (b) has the purpose of helping the issuer to avoid default. For the avoidance of doubt in applying and interpreting this definition of Defaulted Security, the Collateral Manager shall be deemed to have knowledge of all information that Authorized Officers of the Collateral Manager have actually received, and shall be responsible under the Collateral Management Agreement for obtaining and reviewing information available to it either in its capacity as an investment manager of national standing or as holder of such Collateral Debt Security;

(iv)

if such Collateral Debt Security has been rated “C” or lower by Moody’s or “CC” or lower by S&P or Fitch or if S&P has withdrawn its rating and has not provided the Issuer with a shadow rating;

(v)

which is a Written Down Security unless S&P has affirmed its rating of such Written Down Security;

(vi)

that is a Synthetic Security (A) that has a single Reference Obligation which would (if owned by the Issuer) constitute a Defaulted Security or (B) with respect to which the Derivative Contract Counterparty is a “Defaulting Party” or the sole “Affected Party” (as such terms are defined therein) thereunder; or 25

Processed and formatted by SEC Watch - Visit SECWatch.com

(vii)

any Trust Preferred Security with respect to which interest has been deferred or capitalized and remains outstanding. Defaulting Party has the meaning given to such term in the applicable Hedge Agreement or Synthetic Security.

Deferred Interest PIK Bond means a PIK Bond with respect to which interest has been deferred or capitalized or has not paid interest when scheduled (other than a Defaulted Security) for each consecutive payment date occurring over a period of the lesser of (i) six months or (ii) two consecutive payment dates, but only until such time as payment of interest on such PIK Bond has resumed and all capitalized and deferred interest and any interest thereon has been paid in cash in accordance with the terms of the Underlying Instruments. Deferred Interest PIK Bond Amount means, with respect to each Deferred Interest PIK Bond in the Collateral, the lesser of (i) the product of the Principal Balance of such Deferred Interest PIK Bond and the lowest of the Applicable Recovery Rates of such Deferred Interest PIK Bond and (ii) the product of the Principal Balance of such Deferred Interest PIK Bond and the Market Value of such Deferred Interest PIK Bond. Definitive Offered Note has the meaning specified in Section 2.1(c). Definitive Retained Note has the meaning specified in Section 2.1(d). Definitive Retained Note Transfer Certificate has the meaning specified in Section 2.4(d)(1). Depositary means, with respect to the Secured Notes issued in the form of one or more Global Notes, the Person designated as Depositary pursuant to Section 2.2(e), or any successor thereto, appointed pursuant to the applicable provisions of this Indenture. Depositary Participant means a broker, dealer, bank or other financial institution or other Person for whom from time to time the Depositary effects book-entry transfers and pledges of notes deposited with the Depositary. Derivative Contract means a credit derivative, total return swap or other similar contract or agreement that satisfies the other requirements set forth in the definition of “Synthetic Security” and is executed by the Issuer with a Derivative Contract Counterparty, in respect of which the Issuer has exposure synthetically through such contract to one or more (including a pool of) Reference Obligations or obligors; provided that any Derivative Contract executed by the Issuer shall (i) contain appropriate limited recourse and non-petition provisions equivalent (mutatis mutandis) to those set forth herein and Rating Agency Confirmation from S&P shall have been obtained before entering into such Derivative Contract and (ii) require the Issuer to deposit into the Derivative Contract Counterparty Account an amount equal to its maximum potential exposure under such Derivative Contract. Derivative Contract Counterparty means an entity required to make periodic premium payments to the Issuer pursuant to the terms of a Derivative Contract and which satisfies the Derivative Contract Counterparty Rating Requirement. Derivative Contract Counterparty Account means each account established for the benefit of a Derivative Contract Counterparty in connection with a Derivative Contract pursuant to Section 10.11 hereof. 26

Processed and formatted by SEC Watch - Visit SECWatch.com

Derivative Contract Counterparty Rating Requirement means with respect to any Derivative Contract Counterparty, that such entity has (or its guarantor under a guarantee meeting S&P’s then-current criteria for guarantees has) (A) (i) a long term debt rating of at least “Aa3” by Moody’s or (ii) a long term debt rating of at least “Al” by Moody’s and a short-term debt rating of “P-1” and (B) a short term rating of at least “A-1+” by S&P (or “A-1” by S&P if the premium (and any other relevant amount (such as coupon) required under the relevant Derivative Contract) to be paid by such Derivative Contract Counterparty is posted at least one payment period in advance for the term of the Derivative Contract) and is not on negative watch. Derivative Contract Issuer Account means each account established for the benefit of the Issuer in connection with a Derivative Contract pursuant to Section 10.12 hereof Derivative Security means a security in the form of a credit-linked note, trust certificate, collateralized bond obligation or collateralized loan or similar obligation that satisfies the other requirements set forth in the definition of “Synthetic Security” and is in respect of which the Issuer has exposure synthetically to one or more (including a pool of) Reference Obligations or obligors through a swap or other agreement executed by the issuer of such security with a person other than the Issuer and in respect of which the Issuer has no ongoing payment obligations; provided, however, that a Derivative Security shall not include any security backed by more than one credit default swap or referencing more than one Reference Obligation or a synthetic collateralized debt obligation or synthetic resecuritization that (in each case) primarily references CMBS Conduit Securities or other CMBS Securities or certificates representing a beneficial interest therein (which, for the avoidance of doubt, shall (in each case) be treated as a CMBS Re-REMIC Security). Discretionary Ramp-Up Interest Reserve Account means the Securities Account designated the “Discretionary Ramp-Up Interest Reserve Account” and established in the name of the Trustee pursuant to Section 10.9. Discretionary Ramp-Up Interest Reserve Amount means, on the Closing Date, the amount equal to approximately U.S.$1,000,000. Distribution means any payment of principal, interest or fee or any dividend or premium payment made on, or any other distribution in respect of, an obligation or security. Dollar or U.S.$ means currency of the United States as at the time shall be legal tender for all debts, public and private. DTC means The Depository Trust Company and its nominees and their respective successors. Due Date means each date on which a Distribution is due on a Pledged Security. Due Period means, with respect to each Payment Date, the period beginning on the day following the last day of the preceding Due Period relating to the preceding Payment Date (or, in the case of the Due Period that is applicable to the first Payment Date, beginning on the Closing Date) and ending on the close of business on the fourth Business Day preceding such Payment Date; provided that, if the occurrence of a non-business day causes a scheduled distribution on any Collateral Debt Security or other security held as Collateral to be received during the period between the end of the Due Period in which such payment would otherwise have been received and the related Payment Date, such payment will be deemed to have been received during such Due Period. 27

Processed and formatted by SEC Watch - Visit SECWatch.com

Effective Date means the date that is the earliest of (i) the 270 days following the Closing Date, (ii) the date on which the Issuer has purchased Collateral Debt Securities, excluding Temporary Ramp-Up Securities, having an aggregate par amount of U.S.$ 800,000,000 or (iii) such earlier date (if any) that is designated by the Collateral Manager by notice to the Trustee under the Indenture; provided that in the event that such day does not fall on a Business Day, the Effective Date shall be the next succeeding Business Day. Eligibility Criteria has the meaning specified in Section 12.2. Eligible Investments means any U.S. dollar denominated investment that, at the time it is delivered to the Trustee, is one or more of the following obligations or securities, including, without limitation, those investments for which the Trustee or an Affiliate of the Trustee provides services: (i)

cash;

(ii)

direct Registered obligations of, and Registered obligations the timely payment of principal of and interest on which is fully and expressly guaranteed by, the United States of America, or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America;

(iii)

demand and time deposits in, interest bearing trust accounts and certificates of deposit of, bankers’ acceptances issued by, or federal funds sold by any depository institution or trust company (including the Trustee) incorporated under the laws of the United States of America or any state thereof and subject to the supervision and examination by federal and/or state banking authorities so long as the commercial paper and/or debt obligations of such depository institution or trust company (or, in the case of the principal depository institution in a holding company system, the commercial paper or debt obligations of such holding company) at the time of such investment or contractual commitment providing for such investment have a credit rating of: (a)

in the case of long-term debt obligations, not less than “Aa2” by Moody’s, “AA+” by S&P and “AA” if rated by Fitch; or

(b)

in the case of commercial paper and short-term debt obligations including time deposits, “P-1” by Moody’s, “A-1+” by S&P and “F1” if rated by Fitch (provided that, in the case of commercial paper and short-term debt obligations with a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment a long-term credit rating of not less than “AA+” by S&P and a long-term credit rating of not less than “AA”, if rated by Fitch; provided, however, that (1) so long as LaSalle Bank National Association is rated at least “A-1” by S&P and not on negative watch and (2) LaSalle Bank National Association is the Trustee, overnight time deposits with LaSalle Bank National Association shall be an Eligible Investment);

(iv)

Registered securities other than mortgage-backed securities bearing interest or sold at a discount issued by any corporation under the laws of the United States of America or any state thereof that have a credit rating of “Aa2” by Moody’s, “AA+” by S&P and “AA” if rated by Fitch at the time of such investment or contractual commitment providing for such investment;

(v)

unleveraged repurchase obligations (if treated as debt for tax purposes by the issuer) with respect to any security described in clause (ii) above, entered into with a depository institution or trust company (acting as principal) described in clause (iii) or entered into with broker-dealers registered with the Commission (acting as principal) whose short-term debt has a credit rating of 28

Processed and formatted by SEC Watch - Visit SECWatch.com

“P-1” by Moody’s, “A-1+” by S&P and “F1+” if rated by Fitch at the time of such investment in the case of any repurchase obligation for a security having a maturity not more than 183 days from the date of its issuance and whose long-term debt has a credit rating of at least “Aa2” by Moody’s, “AA+” by S&P and “AA” if rated by Fitch at the time of such investment in the case of any repurchase obligation for a security having a maturity more than 183 days from the date of its issuance; (vi)

commercial paper or other short-term obligations having at the time of such investment a credit rating of (a) (1)“F1” by Fitch and that have a maturity of not more than 30 days from its date of issuance or (2) “F1+” by Fitch and that have a maturity of more than 30 days but less than one year from its date of issuance and (b) “P-1” by Moody’s and “A-1+” by S&P that are registered and are either bearing interest or are sold at a discount from the face amount thereof and that have a maturity of not more than 183 days from its date of issuance; provided that in the case of commercial paper with a maturity of longer than 91 days, the issuer of such commercial paper (or, in the case of a principal depository institution in a holding company system, the holding company of such system), if rated by the Rating Agencies, must also have at the time of such investment a long-term credit rating of at least “Aa2” by Moody’s, “AA+” by S&P and “AA” if rated by Fitch;

(vii)

money market funds with respect to any investments described in clauses (ii) through (vi) above having, at the time of such investment, a credit rating of not less than “Aaa” by Moody’s, “AAA/AAAm/AAAm-G” by S&P (if such funds are rated by S&P) and a credit rating of “AAA” if rated by Fitch, respectively (including those for which the Trustee is investment manager or advisor), provided that such fund or vehicle is formed and has its principal office outside the United States; and

(viii)

in the case of Eligible Investments held in the Uninvested Proceeds Account only, Temporary Ramp Up Securities; and

(ix)

any other investments approved in writing by the Rating Agencies;

provided that (a) Eligible Investments purchased with funds in any account will be held until maturity except as otherwise specifically provided herein and will include only such obligations or securities as mature no later than the Business Day prior to the Payment Date next succeeding the date of investment in such obligations or securities, unless such Eligible Investments are investments of the type described in clause (i) or (iii) above, in which event such Eligible Investments may mature on such Payment Date and (b) none of the foregoing obligations or securities will constitute Eligible Investments if all, or substantially all, of the remaining amounts payable thereunder will consist of interest and not principal payments, if such security is purchased at a price in excess of 100% of par, if such security is subject to substantial non-credit related risk, as determined by the Collateral Manager in its judgment, if any income from or proceeds of disposition of the obligation or security is or will be subject to deduction or withholding for or on account of any withholding or similar tax or the acquisition (including the manner of acquisition), ownership, enforcement or disposition of the obligation or security will subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation, or if such security has an assigned rating with an “r”, “t”, “p”, “pi” or “q” subscript, or if such security is a mortgage-backed security or if such security is subject to an Offer; provided, further, that, notwithstanding the foregoing, Eligible Investments with a maturity greater than one Business Day and a rating of “A-1” by S&P may only be held by the Issuer in an amount up to 20% of the aggregate Principal Balance of the Notes Outstanding. 29

Eligible SPV Jurisdiction means Bahamas, Bermuda, the Cayman Islands, the Channel Islands, the Netherlands Antilles, Luxembourg or any other similar jurisdiction (so long as Rating Agency Confirmation is obtained in connection with the inclusion of such other jurisdiction) generally imposing either no or nominal taxes on the income of companies organized under the laws of such jurisdiction. Emerging Market Issuer means a sovereign or non-sovereign issuer located in a country that is in Latin America, Asia, Africa, Eastern Europe or the Caribbean or in a country the dollar-denominated sovereign debt obligations of which are rated lower than “Aa” by Moody’s, “AA” by S&P and “AA” by Fitch; provided that an issuer of Asset-Backed Securities located in any Eligible SPV Jurisdiction shall not be an Emerging Market Issuer for purposes hereof if the underlying collateral of such Asset-Backed Securities consists solely of obligations of obligors located in the United States and Qualifying Foreign Obligors. Entitlement Holder has the meaning specified in Section 8-102(a)(7) of the UCC. Entitlement Order has the meaning specified in Section 8-102(a)(8) of the UCC. Equity Security means any security that does not entitle the holder thereof to receive periodic payments of interest and one or more installments of principal acquired by the Issuer as a result of the exercise or conversion of Collateral Debt Securities, in conjunction with the purchase of Collateral Debt Securities or in exchange for a Collateral Debt Security. ERISA means the U.S. Employee Retirement Income Security Act of 1974, as amended. Euroclear means Euroclear Bank S.A/N.V., as operator of the Euroclear system. Event of Default has the meaning specified in Section 5.1. Excepted Property means the U.S.$1,000 of capital contributed to the Issuer in respect of the Issuer’s Ordinary Shares in accordance

Processed and formatted by SEC Watch - Visit SECWatch.com

with the Articles and U.S.$1,000 representing a profit fee to the Issuer. Exchange Act means the United States Securities Exchange Act of 1934, as amended. Expense Reserve Account means the Securities Account designated the “Expense Reserve Account” and established in the name of the Trustee pursuant to Section 10.7. Fee Basis Amount means an amount equal to, for any Payment Date, the CDS Principal Balance (excluding the aggregate Principal Balance of Defaulted Securities) on the first day of the related Due Period. Financial Asset has the meaning specified in Section 8-102(a)(9) of the UCC. Financing Statement means a financing statement relating to the Collateral naming the Issuer as debtor and the Trustee on behalf of the Secured Parties as secured party. Fitch means Fitch, Inc., Fitch Ratings, Ltd. and their subsidiaries, including Derivative Fitch, Ltd. and any successor(s) thereto. Fitch Industry Classification Group means any of the Fitch industry and sub-industry classification groups as currently set forth in “Global Rating Criteria for Collateralised Debt Obligations” 30

Processed and formatted by SEC Watch - Visit SECWatch.com

available at www.fitchratings.com and www.derivativefitch.com. Fitch may, from time to time, modify or replace this criteria which may have modified or replaced this report if Fitch provides notice thereof to the Issuer, the Collateral Manager and the Trustee. Fitch Rating means (A) with respect to any Collateral Debt Security other than a Trust Preferred Security, for determining the Fitch Rating as of any date of determination:

(B)

(i)

if such Collateral Debt Security is rated by Fitch, the Fitch Rating shall be such rating as published in any publicly available source;

(ii)

if such Collateral Debt Security is not rated by Fitch, or the Fitch Rating cannot be determined by the method in clause (i) above, and a rating is publicly available from both S&P and Moody’s, the Fitch Rating shall be the lower of such ratings; and if a rating is publicly available from only one of S&P and Moody’s, the Fitch Rating shall be the equivalent of such rating by S&P or Moody’s, as the case may be; and

(iii)

in all other circumstances, the Fitch Rating shall be the private rating assigned by Fitch upon request of the Collateral Manager;

with respect to any Collateral Debt Security that is a Trust Preferred Security, (i) if the issuing entity (or the direct or indirect parent of such issuing entity) of such Trust Preferred Security has a public rating by Fitch, that public rating shall apply, or (ii) if such Trust Preferred Security has no public rating by Fitch, it shall be the private rating assigned by Fitch upon request of the Collateral Manager.

provided, further, that (a) if such Collateral Debt Security has been put on rating watch negative for possible downgrade by any Rating Agency, then the rating used to determine the Fitch Rating under clause (ii) above shall be one (1) rating subcategory below such rating by that Rating Agency, (b) if such Collateral Debt Security has been put on rating watch positive for possible upgrade by any Rating Agency, then the rating used to determine the Fitch Rating under clause (ii) above shall be one rating subcategory above such rating by that Rating Agency and (c) notwithstanding the rating definition described above, Fitch reserves the right to issue a rating estimate for any Collateral Debt Security at any time. Fitch Rating Factor means, for the purpose of computing the Fitch Weighted Average Rating Factor, with respect to any Collateral Debt Security or Eligible Investment on any relevant date, the number set forth in the table below opposite the Fitch Rating of such Collateral Debt Security or Eligible Investment: Fitch Ratin g

AAA AA+ AA AAA+ A ABBB+ BBB

Fitch Ratin g Factor

Fitch Ratin g

Fitch Ratin g Factor

.019 .057 .089 1.15 1.65 1.85 2.44 3.13 3.74

BB BBB+ B BCCC+ CCC CC C

13.53 18.46 22.84 27.67 34.98 43.36 48.52 77.00 95.00

31

Processed and formatted by SEC Watch - Visit SECWatch.com Fitch Ratin g

BBBBB+

Fitch Ratin g Factor

Fitch Ratin g

Fitch Ratin g Factor

7.26 10.18

DDD-D

100.00

Fitch Recovery Rate means, with respect to a Collateral Debt Security on any Calculation Date, an amount equal to the percentage corresponding to the domicile, original rating, seniority and tranche thickness of such item of Collateral Debt Security as currently set forth in the Fitch Recovery Rate Matrix available in the last version of Fitch’s Default Vector Model, which can be downloaded from www.Derivativefitch.com and www.fitchratings.com. Fitch may, from time to time, modify or replace this criteria and Fitch may apply the current criteria which may have modified or replaced this report if Fitch provides notice thereof to the Issuer, the Collateral Manager and the Trustee. Fitch Weighted Average Rating Factor means the number determined on any Calculation Date by dividing (i) the summation of the series of products obtained (a) for any Collateral Debt Security that is not a Defaulted Security or Deferred Interest PIK Bond, by multiplying (1) the Principal Balance on such Calculation Date of each such Collateral Debt Security by (2) its respective Fitch Rating Factor on such Calculation Date and (b) for any Defaulted Security or Deferred Interest PIK Bond, by multiplying (1) the Applicable Recovery Rate for such Defaulted Security or Deferred Interest PIK Bond by (2) the Principal Balance on such Calculation Date of each such Defaulted Security or Deferred Interest PIK Bond by (3) its respective Fitch Rating Factor on such Calculation Date by (ii) the sum of (a) the aggregate Principal Balance on such Calculation Date of all Collateral Debt Securities and Eligible Investments that are not Defaulted Securities or Deferred Interest PIK Bonds, plus (b) the summation of the series of products obtained by multiplying (1) the Applicable Recovery Rate for each Defaulted Security or Deferred Interest PIK Bond by (2) the Principal Balance on such Calculation Date of such Defaulted Security or Deferred Interest PIK Bond, and rounding the result up to the nearest whole number. Fixed Rate Collateral Debt Security means any Collateral Debt Security which bears a fixed rate of interest. Fixed Rate 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 zero and the excess, if any, of the Weighted Average Fixed Rate Coupon for such Measurement Date over 5.95%, and (b) the aggregate Principal Balance of all Collateral Debt Securities that are Fixed Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities, Deferred Interest PIK Bonds and Deemed Floating Rate Collateral Debt Securities) and the denominator of which is the aggregate Principal Balance of all Collateral Debt Securities that are Floating Rate Collateral Debt Securities or Deemed Floating Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities and Deferred Interest PIK Bonds). Fixed Rate Notes means the Class C Notes, the Class J Notes and the Class K Notes. Floating Rate Collateral Debt Security means any Collateral Debt Security which bears interest based upon LIBOR, prime rate or another floating rate index. Floating Rate Notes means, collectively, the Class A Notes, the Class B Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes. 32

Processed and formatted by SEC Watch - Visit SECWatch.com

Form-Approved Hedge Agreement means a Hedge Agreement relating to a specific Hedge Counterparty with respect to which (a) the related Collateral Debt Security could be purchased by the Issuer without any required action by the Rating Agencies and (b) the documentation of which conforms in all material respects to a form for such Hedge Counterparty which does not require Rating Agency Confirmation (as certified to the Trustee by the Collateral Manager, following receipt of confirmation by the Collateral Manager from the Hedge Counterparty and the Rating Agencies); provided that (i) such Form-Approved Hedge Agreement shall not provide for any upfront payments to be made to any Hedge Counterparty (other than the Initial Hedge Agreement), (ii) any revised Form-Approved Hedge Agreement with respect to a particular Hedge Counterparty shall be approved by each of the Rating Agencies at least ten days prior to the initial use thereof, (iii) any Rating Agency may withdraw its consent to the use of a particular Form-Approved Hedge Agreement by written notice to the Trustee, the Collateral Manager and the relevant Hedge Counterparty (provided that such withdrawal of consent shall not affect any existing Hedge Agreement entered into with such Hedge Counterparty) and (iv) the Issuer (or the Collateral Manager on its behalf) shall deliver to the Trustee and each Rating Agency a copy of each Form-Approved Hedge Agreement specifying the Hedge Counterparty to which it relates upon receipt of Rating Agency Confirmation with respect thereto, and the Trustee’s records (when taken together with any correspondence received from the Rating Agencies pursuant to clause (ii)) shall be conclusive evidence of such form. Four-Month Period means, at any time during the Reinvestment Period, the period of four months following the earliest date as of which the number of Key Managers that are employed on a substantially full-time basis in the position of managing director or other management-level employee by the Collateral Manager (or any of its successors or assigns permitted pursuant to Section 16 of the Collateral Management Agreement) becomes less than one. Franchise Loan Securities means securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities) on the cashflow from a pool of franchise loans made to operators of franchises which, for the avoidance of doubt, do not include CMBS Franchise Securities. GAAP has the meaning specified in Section 6.3(k). Global Notes means the Rule 144A Global Notes and the Regulation S Global Notes. Grant means to grant, bargain, sell, warrant, alienate, remise, demise, release, convey, assign, transfer, mortgage, pledge, create and grant a security interest in and right of set-off against, deposit, set over and confirm. A Grant of the Pledged Securities, or of any other instrument, shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate continuing right to claim for, collect, receive and receipt for principal, interest and fee payments in respect of the Pledged Securities or such other instruments, and all other amounts payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto. Hedge Agreement means, collectively, any of one or more interest rate protection agreements (including the Initial Hedge Agreements) or any Cashflow Hedge Agreement, as amended from time to time, together with any replacement hedge agreements on substantially identical terms (or that otherwise satisfies the conditions of Section 16.1(d)), entered into pursuant to Section 16.1 or a Deemed Floating Asset Hedge. 33

Processed and formatted by SEC Watch - Visit SECWatch.com

Hedge Counterparty means (a) with respect to each Initial Hedge Agreement entered into on the Closing Date, the Initial Hedge Counterparty (or any permitted assignee or successor) and (b) any hedge counterparty (or any permitted assignee or successor) under a Hedge Agreement (including under a Deemed Floating Asset Hedge or any Cashflow Hedge Agreement) that satisfies the Hedge Counterparty Ratings Requirement. Hedge Counterparty Collateral Account means each Securities Account designated the “Hedge Counterparty Collateral Account” and established in the name of the Trustee pursuant to Section 16.1(e). Hedge Counterparty Ratings Requirement means, with respect to any Hedge Ratings Determining Party: (a) either (i) the short-term rating of the Hedge Ratings Determining Party by Moody’s is not lower than “P1” and the long-term rating of such Hedge Ratings Determining Party is not lower than “A2”, or (ii) if the Hedge Ratings Determining Party does not have a short-term rating from Moody’s, the long term rating of such Hedge Ratings Determining Party is not lower than “Al”; (b) both (x) the short-term rating of such Hedge Ratings Determining Party by Fitch is not lower than “F1” and (y) the long-term rating of such Hedge Ratings Determining Party by Fitch is not withdrawn, suspended or downgraded below “A”; or if there is no short-term rating by Fitch, the long-term rating of such Hedge Ratings Determining Party by Fitch is not lower than “A”; and (c) either (i) the short-term rating of such Hedge Ratings Determining Party is not lower than “A-1” by S&P or (ii) if such Hedge Ratings Determining Party does not have a short-term rating from S&P, the long-term rating of such Hedge Ratings Determining Party by S&P is not lower than “A+”. Hedge Payment Amount means, with respect to the Hedge Agreement and any Payment Date, the amount, if any, then payable by the Issuer to the Hedge Counterparty, including any amounts so payable in respect of a termination of any Hedge Agreement. Hedge Ratings Determining Party means (a) unless clause (b) applies with respect to any Hedge Agreement, any Hedge Counterparty or any transferee thereof or (b) any Affiliate of the Hedge Counterparty or any transferee thereof that unconditionally and absolutely guarantees (with the form of such guarantee meeting S&P’s then-current published criteria with respect to guarantees) the obligations of such Hedge Counterparty or such transferee, as the case may be, under the related Hedge Agreement. For the purpose of this definition, no direct or indirect recourse against one or more shareholders of any such Hedge Counterparty or any such transferee (or against any Person in control of, or controlled by, or under common control with, any such shareholder) shall be deemed to constitute a guarantee, security or support of the obligations of any such Hedge Counterparty or any such transferee. Hedge Receipt Amount means, with respect to any Hedge Agreement and any Payment Date, the amount, if any, then payable to the Issuer by the related Hedge Counterparty, including any amounts so payable in respect of a termination of such Hedge Agreement. Herfindahl Index means an index calculated by the Collateral Manager by dividing (i) one by (ii) the sum of, with respect to each Collateral Debt Security, (x) the aggregate Principal Balance of all Collateral Debt Securities issued by a single obligor divided by (y) the CDS Principal Balance, raised to the second power. For purposes of calculating the Herfindahl Index, (i) all certificated Collateral Debt Securities of a single Issue will be treated as a single Collateral Debt Security and (ii) each U.S.$ 500,000 increment of cash in any Account shall be treated as a single Collateral Debt Security. Herfindahl Score means a measurement of the diversity of a pool of loans of unequal size calculated in accordance with the Herfindahl Index. 34

Processed and formatted by SEC Watch - Visit SECWatch.com

Highest Auction Price means, in connection with a Redemption, the bid or bids for the Collateral Debt Securities resulting in the highest auction price of one or more Subpools of Collateral Debt Securities. Holder or Noteholder means (i) with respect to any Secured Note, any Secured Noteholder and (ii) with respect to any Income Note, any Income Noteholder, as the context may require. Income Note Distribution Account means the account designated the “Income Note Distribution Account” and established by the Income Note Paying Agent in the name of the Income Note Paying Agent for the benefit of the Issuer pursuant to the Income Note Paying Agency Agreement. Income Note Excess Funds means all remaining Collateral Interest Collections and Collateral Principal Collections as set forth in Sections 11.1(a)(34) and 11.1(b)(28). Income Note Paying Agency Agreement means that certain Income Note Paying Agency Agreement, dated as of the date hereof, as the same may be amended or supplemented from time to time, between the Issuer and the Income Note Paying Agent. Income Note Paying Agent means LaSalle Bank National Association, and any successors or assigns in its capacity as Income Note Paying Agent under the Income Note Paying Agency Agreement. Income Note Paying Agent Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by, or otherwise owing to, the Income Note Paying Agent during the preceding Due Period in accordance with the Income Note Paying Agency Agreement. Income Note Redemption Approval Condition means, in connection with a Tax Redemption at the direction of the Controlling Class or an Auction Call Redemption, the requirement that, unless and to the extent the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes have waived payment in full of the Income Notes Stated Amount, the Income Noteholders receive in connection with such Tax Redemption or Auction Call Redemption an amount equal to (x) the Income Notes Stated Amount minus (y) the aggregate amount of all cash distributions on the Income Notes (whether in respect of distributions or redemption payments made to the Income Note Paying Agent for distribution to the Income Noteholders) on or prior to the relevant Auction Date. Income Note Register means, with respect to the Income Notes, the Income Note Register maintained by the Income Note Registrar. Income Note Registrar means LaSalle Bank National Association and any successors or assigns in its capacity as Income Note Registrar under the Income Note Paying Agency Agreement. Income Noteholder means, with respect to any Income Note, the Person in whose name such Income Note is registered in the Income Note Register. Income Notes means the U.S.$28,000,000 Income Notes due 2052. Income Notes Stated Amount means U.S.$28,000,000. Indenture means this instrument and, if from time to time supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, as so supplemented or amended. 35

Processed and formatted by SEC Watch - Visit SECWatch.com

Independent means, as to any Person, any other Person (including, in the case of an accountant, or lawyer, a firm of accountants or lawyers and any member thereof) who (i) does not have and is not committed to acquire any material direct or any material indirect financial interest in such Person or in any Affiliate of such Person, (ii) is not connected with such Person as an Officer, employee, promoter, underwriter, voting trustee, partner, director or Person performing similar functions and (iii) if required to deliver an opinion or certificate to the Trustee pursuant to this Indenture, states in such opinion or certificate that the signer has read this definition and that the signer is Independent within the meaning hereof. “Independent” when used with respect to any accountant may include an accountant who audits the books of such Person if in addition to satisfying the criteria set forth above the accountant is independent with respect to such Person within the meaning of Rule 101 of the Code of Ethics of the American Institute of Certified Public Accountants. Initial Hedge Agreements mean, collectively, each of the interest rate swap agreements entered into between the Issuer and the Initial Hedge Counterparty on the Closing Date. Initial Hedge Counterparty means Citigroup Financial Products Inc. under the Initial Hedge Agreement and any of its successors, assigns or replacements under the Initial Hedge Agreement appointed in accordance with the terms of this Indenture and the Initial Hedge Agreement. Initial Payment Date means the Payment Date occurring in June 7, 2007. Initial Purchaser means Citigroup Global Markets Inc, as initial purchaser of the Offered Notes. Instrument has the meaning specified in Section 9-102(a)(47) of the UCC. Interest Coverage Amount means, as of any Measurement Date, an amount equal to (i) the amount received or scheduled to be received as Collateral Interest Collections during the related Due Period, less (ii)(a) the amount payable as Aggregate Fees and Expenses on the related Payment Date, (b) any amounts paid or scheduled to be paid to the Hedge Counterparty on the related Payment Date (excluding any termination payments) and (c) for purposes of calculating the Class A/B Interest Coverage Ratio, the Class C/D/E Interest Coverage Ratio and the Class F/G/H Interest Coverage Ratio, any amounts scheduled to be paid to the Non-Monthly Pay Asset Interest Reserve Account on the related Payment Date; provided that (a) following the date on which a Collateral Debt Security becomes a Defaulted Security, scheduled Collateral Interest Collections shall not include any amount scheduled to be received on Defaulted Securities or any amount scheduled to be received on securities that are currently deferring interest until (1) such scheduled amounts are actually received in cash, or (2) the cumulative aggregate amounts actually received on a Defaulted Security exceed the Principal Balance of such Defaulted Security, (b) the expected interest income on Floating Rate Collateral Debt Securities and Eligible Investments shall be calculated using the then-current interest rate applicable thereto and (c) with respect to any Written Down Security, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount. Interest Coverage Ratios means the Class A/B Interest Coverage Ratio, the Class C/D/E Interest Coverage Ratio and the Class F/G/H Interest Coverage Ratio. Interest Coverage Tests means the Class A/B Interest Coverage Test, the Class C/D/E Interest Coverage Test and the Class F/G/H Interest Coverage Test. Interest Only Security means any security that by its terms provides for periodic payments of interest and does not provide for the repayment of a stated principal amount. 36

Processed and formatted by SEC Watch - Visit SECWatch.com

Interest Period means (i) with respect to the Initial Payment Date, the period from and including the Closing Date to but excluding the Initial Payment Date and (ii) thereafter with respect to each Payment Date, the period beginning on the first day following the end of the preceding Interest Period and ending on (and including) the day before the next Payment Date. Interest Reserve Account means the account established by the Trustee, held in the name of the Trustee for the benefit and on behalf of the Holders of the Income Notes (i) into which the Trustee will deposit, at the request of 100% of the Holders of the Income Notes, on each Payment Date, any Income Note Excess Funds designated by such Holders in accordance with the Priority of Payments and (ii) from which any unused amounts on deposit therein will be distributed in accordance with the directions of 100% of the Holders of the Income Notes as described in Section 10.5. Investment Advisers Act means the United States Investment Advisers Act of 1940, as amended. Investment Company Act means the United States Investment Company Act of 1940, as amended. Irish Paying Agent means NCB Stockbrokers Limited. Issue of Collateral Debt Securities means Collateral Debt Securities issued by the same issuer secured by the same collateral pool. Issuer means N-Star Real Estate CDO IX, Ltd., an exempted company incorporated and existing under the law of the Cayman Islands, unless a successor Person shall have become the Issuer pursuant to the applicable provisions of this Indenture, and thereafter “Issuer” shall mean such successor Person. Issuer Order and Issuer Request mean, respectively, a written order or a written request, which may be in the form of a standing order or request in each case dated and signed in the name of the Issuer (or, as expressly provided herein, the Collateral Manager on its behalf) by an Authorized Officer of the Issuer (or, as expressly provided herein, the Collateral Manager). Key Manager means any of David T. Hamamoto, Jean-Michel (Mitch) Wasterlain or any such other additional person as may be appointed Key Managers in accordance with the Collateral Management Agreement (or if David T. Hamamoto, Jean-Michel (Mitch) Wasterlain or any such additional Key Managers have been replaced with one or more Approved Replacement Persons, such Approved Replacement Persons). Key Manager Event means any of the following: (a) the failure by the Collateral Manager to propose a replacement Key Manager within the applicable Four-Month Period, (b) the failure by the Collateral Manager, within the Four-Month Period, to propose a different replacement Key Manager following receipt of a Controlling Class Objection or (c) the receipt of another Controlling Class Objection within ten Business Days after delivery of such a proposal for a different replacement Key Manager to the Holders of the Notes of the Controlling Class. LIBOR means, with respect to each Interest Period (other than the first Interest Period), a floating rate equal to the London interbank offered rate for one-month U.S. Dollar deposits determined in the manner described in Schedule B. LIBOR for the first Interest Period will be determined on the second London Banking Day prior to the Closing Date. LIBOR Calculation Date has the meaning specified in Schedule B. 37

Processed and formatted by SEC Watch - Visit SECWatch.com

Listed Bidders has the meaning specified in Schedule E. London Banking Day has the meaning specified in Schedule B. Majority means (a) with respect to any Class or Classes of Secured Notes, the Holders of more than 50% of the Aggregate Outstanding Amount of the Secured Notes of such Class or Classes of Secured Notes, as the case may be and (b) with respect to Income Notes, the Holders of more than 50% of the Income Notes Stated Amount. Margin Stock means “margin stock” as defined under Regulation U issued by the Board of Governors of the Federal Reserve System. Market Value means, on any date of determination, the average of three or more bid-side prices expressed as a percentage of the par amount, obtained from independent, nationally recognized financial institutions in the relevant market for one or more Collateral Debt Securities, each unaffiliated with each other and the Collateral Manager, as certified by the Collateral Manager (to the extent that such bid-side prices may be obtained by the Collateral Manager using its commercially reasonable efforts and commercially reasonable business judgment). If three or more bid-side prices cannot be so obtained, then the Market Value on such date of determination will be the lower of two bid-side prices, if two bid-side prices are obtained in the manner described above, and the sole bid-side price if only one bid-side price is obtained in the manner described above. If no bids can be obtained in the manner described above, the Market Value will be (1) in respect of an amount equal to but not greater than 7.5% of the Principal Balance of the Proposed Portfolio, the price, expressed as a percentage of the par amount, as determined by the Collateral Manager in its commercially reasonable judgment or (2) the S&P Recovery Rate with respect to such Collateral Debt Security, to the extent not calculated pursuant to clause (1) above. Market Value CDO Securities means collateralized debt obligation securities with respect to which the coverage ratios are primarily determined by reference to the market value of the underlying portfolio of investments as prescribed by the applicable rating agencies. Measurement Date means any of the following: (a) the Effective Date; (b) any date after the Effective Date upon which the Issuer disposes or acquires (which date of acquisition shall be deemed to be the date on which the Issuer enters into binding commitments to acquire such Collateral Debt Security) any Collateral Debt Security; (c) each Calculation Date; (d) the last Business Day of each calendar month (other than the calendar month preceding the month in which a Calculation Date occurs and any calendar month prior to and including the month in which the Effective Date occurs); and (e) with reasonable notice to the Issuer, the Collateral Manager and the Trustee, any other Business Day that any Rating Agency or Holders of more than 50% of the then Aggregate Outstanding Amount of any Class of Secured Notes requests to be a “Measurement Date”; 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 day that is a Business Day; provided, further that for the purposes of determining the Issuer’s compliance with any Coverage Test, the Measurement Date will be on or subsequent to the Effective Date. Mezzanine Loans means mezzanine loans secured by ownership interests in entities owning commercial properties. Moneyline Telerate Page 3750 means the display page so designated on Moneyline Telerate Service (or such other page as may replace that page on that service, or such other service as may be nominated as the information vendor, for the purposes of displaying rates comparable to LIBOR). 38

Monitoring Fee means, with respect to each Payment Date, an amount equal to 0.10% per annum of the Fee Basis Amount payable to the Collateral Manager pursuant to the Collateral Management Agreement. Moody’s means Moody’s Investors Service, Inc. Moody’s Rating of any Collateral Debt Security will be determined as follows: (i)

(x) if such Collateral Debt Security is publicly rated by Moody’s, the Moody’s Rating will be such rating, or, (y) if such Collateral Debt Security is not publicly rated by Moody’s, but the Issuer has requested that Moody’s assign a rating to such Collateral Debt Security, the Moody’s Rating will be the rating so assigned by Moody’s;

(ii)

with respect to a CMBS Security, REIT Debt Security, Trust Preferred Security, CRE Debt Obligation or Real Estate CDO Security, if such CMBS Security, REIT Debt Security, Trust Preferred Security, CRE Debt Obligation or Real Estate CDO Security is not rated by Moody’s, then the Moody’s Rating of such CMBS Security, REIT Debt Security or Real Estate CDO Security, as applicable, may be determined using any one of the methods below: (A)

with respect to any REIT Debt Security, Trust Preferred Security or CRE Debt Obligation not publicly rated by Moody’s that is a REIT Debt Security, Trust Preferred Security or CRE Debt Obligation, as applicable, if such REIT Debt Security, Trust Preferred Security or CRE Debt Obligation, as applicable, is publicly rated by S&P, then the Moody’s Rating thereof will be (x) one subcategory below the Moody’s equivalent rating assigned by S&P if the rating assigned by S&P is “BBB-” or greater and (y) two rating subcategories below the Moody’s equivalent rating

Processed and formatted by SEC Watch - Visit SECWatch.com

assigned by S&P if the rating assigned by S&P is below “BBB-”; (B)

with respect to any CMBS Conduit Security or CMBS Credit Tenant Lease Security not publicly rated by Moody’s, (x) if Moody’s has rated a tranche or class of CMBS Conduit Security or CMBS Credit Tenant Lease Security senior to the relevant issue, then the Moody’s Rating thereof will be one and one-half rating subcategories below the Moody’s equivalent of the lower of the rating assigned by S&P and Fitch to such CMBS Conduit Security or CMBS Credit Tenant Lease Security and (y) if Moody’s has not rated any such tranche or class and S&P and Fitch have rated the subject CMBS Conduit Security or CMBS Credit Tenant Lease Security, then the Moody’s Rating thereof will be two rating subcategories below the Moody’s equivalent of the lower of the rating assigned by S&P and Fitch;

(C)

with respect to any CMBS Large Loan Security or CMBS Re-REMIC Security not publicly rated by Moody’s, the Issuer or the Collateral Manager on behalf of the Issuer will request Moody’s to assign a rating to such CMBS Large Loan Security or CMBS Re-REMIC Security on a case-by-case basis;

(D)

with respect to any other type of CMBS Security, REIT Debt Security or Real Estate CDO Security not referred to in clauses (A) through (C) above will be determined pursuant to subclause (y) of clause (i) above; 39

Processed and formatted by SEC Watch - Visit SECWatch.com

(iii)

with respect to corporate guarantees on any REIT Debt Security, if such corporate guarantees are not publicly rated by Moody’s but another security or obligation of the guarantor or obligor (an Other Security) is publicly rated by Moody’s, and no rating has been assigned in accordance with clause (i) above, the Moody’s Rating of such Collateral Debt Security will be determined as follows: (A)

if the corporate guarantee is a senior secured obligation of the guarantor or obligor and the other security is also a senior secured obligation, the Moody’s Rating of such Collateral Debt Security will be the rating of the other security;

(B)

if the corporate guarantee is a senior unsecured obligation of the guarantor or obligor and the other security is a senior secured obligation, the Moody’s Rating of such Collateral Debt Security will be one rating subcategory below the rating of the other security;

(C)

if the corporate guarantee is a subordinated obligation of the guarantor or obligor and the other security is a senior secured obligation that is: (1) rated “Ba3” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be three rating subcategories below the rating of the other security; or (2) rated “B 1” or lower by Moody’s, the Moody’s Rating of such corporate guarantee will be two rating subcategories below the rating of the other security;

(D)

if the corporate guarantee is a senior secured obligation of the guarantor or obligor and the other security is a senior unsecured obligation that is: (1) rated “Baa3” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be the rating of the other security; or (2) rated “Bal “ or lower by Moody’s, the Moody’s Rating of such corporate guarantee will be one rating subcategory above the rating of the other security;

(E)

if the corporate guarantee is a senior unsecured obligation of the guarantor or obligor and the other security is also a senior unsecured obligation, the Moody’s Rating of such corporate guarantee will be the rating of the other security;

(F)

if the corporate guarantee is a subordinated obligation of the guarantor or obligor and the other security is a senior unsecured obligation that is: (1) rated “Bl” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be two rating subcategories below the rating of the other security; or (2) rated “B2” or lower by Moody’s, the Moody’s Rating of such corporate guarantee will be one rating subcategory below the rating of the other security;

(G)

if the corporate guarantee is a senior secured obligation of the guarantor or obligor and the other security is a subordinated obligation that is: (1) rated “Baa3” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be one rating subcategory above the rating of the other security; (2) rated below “Baa3” but not rated “B3” by Moody’s, the Moody’s Rating of such corporate guarantee will be two rating subcategories above the rating of the other security; or (3) rated “B3” by Moody’s, the Moody’s Rating of such corporate guarantee will be “B2”;

(H)

if the corporate guarantee is a senior unsecured obligation of the guarantor or obligor and the other security is a subordinated obligation that is: (1) rated 40

Processed and formatted by SEC Watch - Visit SECWatch.com

“Baa3” or higher by Moody’s, the Moody’s Rating of such corporate guarantee will be one rating subcategory above the rating of the other security; or (2) rated “Bal” or lower by Moody’s, the Moody’s Rating of such corporate guarantee will also be one rating subcategory above the rating of the other security; and (I)

if the REIT Debt Security is a subordinated obligation of the guarantor or obligor and the other security is also a subordinated obligation, the Moody’s Rating of such corporate guarantee will be the rating of the other security;

(iv)

with respect to a Real Estate Interest, if such Real Estate Interest is not rated by Moody’s, the Moody’s Rating will be the rating so assigned by Moody’s; or

(v)

if such Collateral Debt Security is a Real Estate CDO Security, no notching is permitted and the Moody’s Rating will be the rating so assigned by Moody’s.

Notwithstanding the foregoing, the aggregate Principal Balance of all Collateral Debt Securities rated pursuant to clauses (ii) and (iii) above shall not exceed 20% of the CDS Principal Balance. Moody’s Rating Factor means with respect to any Collateral Debt Security, the number set forth in the table below opposite the Moody’s Rating of such Collateral Debt Security. Moody’s Rating

Aaa Aal Aa2 Aa3 Al A2 A3 Baal Baa2 Baa3

Moody’s Rating Factor

Moody’s Rating

Moody’s Rating Factor

1 10 20 40 70 120 180 260 360 610

Bal Ba2 Ba3 B1 B2 B3 Caal Caa2 Caa3 Ca or lower

940 1,350 1,766 2,220 2,720 3,490 4,770 6,500 8,070 10,000

Moody’s Recovery Rate means, with respect to a Collateral Debt Security on any Calculation Date, an amount equal to the percentage for such Collateral Debt Security set forth in the Moody’s Recovery Rate Matrix attached as Schedule D-2 hereto. Moody’s Recovery Rate Test means a test that will be satisfied as of any Measurement Date if the Moody’s Weighted Average Recovery Rate is at least 20%. Moody’s WARF means, as of any Measurement Date, the number obtained by summing the products obtained by multiplying the Principal Balance of each Collateral Debt Security which is not a Defaulted Security held by the Issuer as of such Measurement Date by its Moody’s Rating Factor, dividing such sum by the aggregate Principal Balance of all such Collateral Debt Securities (excluding Defaulted Securities) and rounding the result to the nearest whole number. Moody’s WARF Test means a test that will be satisfied on the Effective Date and on any Measurement Date thereafter if the WARF is not more than 825. 41

Processed and formatted by SEC Watch - Visit SECWatch.com

Moody’s Weighted Average Recovery Rate means the rate on any Measurement Date calculated as a fraction (expressed as a percentage rounded to the nearest 0.1%) the numerator of which is the sum of the products obtained by multiplying the Principal Balance of each Collateral Debt Security (excluding Defaulted Securities) by the applicable Moody’s Recovery Rate and the denominator of which is the CDS Principal Balance (excluding Defaulted Securities). Mortgaged Property means with respect to any CMBS Conduit Security, CMBS Large Loan Security, CMBS Credit Tenant Lease Security, Real Estate Interest or any other applicable CMBS Security, the real property encumbered by any mortgage, deed of trust or other similar security instrument securing such loan and creating a lien on the related borrower’s fee estate or leasehold estate in one or more properties. Non-Monthly Pay Asset Interest Reserve Account means the account established by the Trustee, held in the name of the Trustee for the benefit and on behalf of the Secured Parties and into which the Trustee will deposit, on each Payment Date, the Non-Monthly Pay Asset Interest Reserve Amount, if any, in accordance with the Priority of Payments or, at the request of 100% of the Holders of the Income Notes, from any Income Note Excess Funds designated by such Holders pursuant to Section 10.8. Non-Monthly Pay Asset Interest Reserve Amount means the following: (i)

on the Closing Date, U.S.$0;

(ii)

as of any Calculation Date after the Effective Date, the sum of (i) the aggregate amount of Quarterly Pay Security Interest Reserve Amounts for the related Due Period plus (ii) the aggregate amount of Semi-Annual Pay Security Interest Reserve Amounts for the related Due Period.

Nonrecoverable Cure Advance means a Cure Advance made or proposed to be made that the Collateral Manager has determined (subject to a Servicer Override) that the amount so advanced or proposed to be advanced will not be recoverable from subsequent collections from the specific Collateral Debt Security with respect to which such Cure Advance was made or proposed to be made. Note Paying Agent means any Person authorized by the Issuer to pay the principal of or interest on any Secured Notes on behalf of the Issuer as specified in Section 7.2. Note Register and Note Registrar have the respective meanings specified in Section 2.4(a). Note Transfer Agent has the meaning specified in Section 2.4(a). Note Valuation Report has the meaning specified in Section 10.14(a). Notes means, collectively, the Secured Notes and the Income Notes. Offer means, with respect to any security, (a) any offer by the issuer of such security or by any other Person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related Underlying Instruments) or to convert or exchange such security into or for Cash, securities or any other type of consideration or (b) any solicitation by the issuer of such security or any other Person to amend, modify or waive any provision of such security or any related Underlying Instrument. 42

Processed and formatted by SEC Watch - Visit SECWatch.com

Offering means the offering of the Secured Notes and the Income Notes under the Offering Circular. Offering Circular means the Offering Circular, prepared and delivered on or prior to the Closing Date in connection with the offer and sale of the Secured Notes and the Income Notes, as amended or supplemented from time to time. Officer means, (a) with respect to the Issuer and any corporation, the Chairman of the Board of Directors (or, with respect to the Issuer, any director), the President, any Vice President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of such entity; and (b) with respect to any bank or trust company acting as trustee of an express trust or as custodian, any Trust Officer. One-Month LIBOR means the rate for one-month U.S. Dollar deposits which appears on Moneyline Telerate Page 3750 or such other page as may replace Moneyline Telerate page 3750, as of 11:00 am. (London time) on the date of determination, as reported by Bloomberg Financial Markets Commodities News. Opinion of Counsel means a written opinion addressed to the Trustee and each Rating Agency (each, a Recipient), in form and substance reasonably satisfactory to each Recipient, of an attorney at law admitted to practice before the highest court of any state of the United States or the District of Columbia (or the Cayman Islands, in the case of an opinion relating to the laws of the Cayman Islands), which attorney may, except as otherwise expressly provided in this Indenture, be inside or outside counsel for the Issuer and which attorney shall be reasonably satisfactory to the Trustee. Whenever an Opinion of Counsel is required hereunder, such Opinion of Counsel may rely on opinions of other counsel who are so admitted and so satisfactory which opinions of other counsel shall accompany such Opinion of Counsel and shall either be addressed to each Recipient or shall state that each Recipient shall be entitled to rely thereon. Optional Redemption has the meaning specified in Section 9.1(a). Ordinary Shares means the 1,000 ordinary shares, par value U.S.$1.00 per share issued by the Issuer. Outstanding means with respect to the Notes as of any Measurement Date, any and all Notes theretofore authenticated and delivered under the Indenture and the Income Note Paying Agency other than Notes cancelled, redeemed, exchanged or replaced in accordance with the terms of the Indenture or the Income Note Paying Agency Agreement, as applicable; provided that in determining whether the Holders of the requisite percentage of Notes have given any direction, notice, consent, approval or objection, any Notes held or beneficially owned by the Collateral Manager or any of its Affiliates or by an account or fund for which the Collateral Manager or any of its Affiliates acts as the investment advisor with discretionary authority will be disregarded with respect to any vote or consent relating to the removal or termination of the Collateral Manager or the assignment by the Collateral Manager of its rights and obligations under the Collateral Management Agreement, except for any assignments or transfers by the Collateral Manager of its rights and obligations to Affiliates of the Collateral Manager, subject to any applicable requirements under the Investment Advisers Act. Paying Agents means, collectively, the Note Paying Agent and the Income Note Paying Agent. Payment Account means the Securities Account designated the “Payment Account” and established in the name of the Trustee pursuant to Section 10.10. 43

Processed and formatted by SEC Watch - Visit SECWatch.com

Payment Date means the 7th day of each calendar month, or if such day is not a Business Day, the next succeeding Business Day, commencing in June 2007 and ending on the applicable Stated Maturity Date (which shall be the final Payment Date). Periodic Interest means the amount of interest payable (i) in respect of each Class of Floating Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of the Business Day immediately preceding the relevant Payment Date, multiplying the resulting figure by the actual number of days in such Interest Period, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards), and (ii) in respect of each Class of Fixed Rate Notes, calculated with respect to each such Class for the relevant Interest Period by multiplying the Applicable Periodic Interest Rate by the Aggregate Outstanding Amount of the related Class at the close of the Business Day immediately preceding the relevant Payment Date, multiplying the resulting figure by (a) for the first Interest Period, 97 days, and (b) for every other Interest Period, 30 days, dividing by 360 and rounding the resulting figure to the nearest U.S.$0.01 (U.S.$0.005 being rounded upwards). Permitted NS Purchaser means (i) NorthStar OS IX, LLC or (ii) NS Holdings V, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(a) under the Securities Act. Permitted Servicer means an entity the primary business of which is servicing commercial real estate loans and/or mezzanine loans related to commercial real estate, with a minimum servicing portfolio of $100,000,000; provided that NS Advisors, LLC shall be deemed to be a Permitted Servicer so long as it (or an Affiliate) maintains the designation of “Qualified CRE CDO Special Servicer” from S&P. Person means any individual, corporation, partnership, limited liability partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof or any similar entity. PIK Bond means any security that, pursuant to the terms of the related Underlying Instruments, permits the payment of interest thereon to be deferred or capitalized as additional principal thereof or not pay interest when scheduled (but without being a Defaulted Security) or that issues identical securities in lieu of payments of interest in cash; provided that any Trust Preferred Security that permits the payment of interest thereon to be deferred shall not be considered a PIK Bond. Placement Agent means Citigroup Global Markets Inc, as placement agent for the Retained Notes and the Income Notes. Placement Agreement means the agreement, dated as of the Closing Date, between the Issuer and the Placement Agent relating to the placement of the Retained Notes and the Income Notes. Pledged Collateral Debt Security means as of any date of determination, any Collateral Debt Security that has been Granted to the Trustee and has not been released from the lien of this Indenture pursuant to Section 10.15. Pledged Securities means on any date of determination, (a) the Collateral Debt Securities, Temporary Ramp-Up Securities, Equity Securities and the Eligible Investments that have been Granted to the Trustee and (b) all non-Cash proceeds thereof, in each case, to the extent not released from the lien of this Indenture pursuant hereto. 44

Processed and formatted by SEC Watch - Visit SECWatch.com

Pledgee Counterparty has the meaning specified in Section 10.11. Pledgor Counterparty has the meaning specified in Section 10.12. Principal Balance means, with respect to any Collateral Debt Security or Eligible Investment, as of any date of determination, the outstanding principal amount of such Collateral Debt Security or Eligible Investment; provided that the Principal Balance of (i) any Collateral Debt Security which permits the deferral or capitalization of interest will not include any outstanding balance of the deferred and/or capitalized interest, (ii) any Equity Security will be zero, (iii) any putable Collateral Debt Security which matures after the Stated Maturity Date will be the lower of the put price and the outstanding principal amount, (iv) any Collateral Debt Security or Eligible Investment in which the Trustee does not have a first priority perfected security interest shall be deemed to be zero and (v) except as otherwise expressly specified herein, the Principal Balance of a Synthetic Security which is a Derivative Contract shall be equal to the notional amount of such Synthetic Security. Principal Coverage Amount means, on any Measurement Date, an amount equal to the sum of: (i)

the aggregate Principal Balance of all Collateral Debt Securities (other than Defaulted Securities, Written Down Securities and Deferred Interest PIK Bonds) included in the Collateral on such date;

(ii)

the aggregate Principal Balance of the Eligible Investments in the Collateral Account on such date that represent Collateral Principal Collections;

(iii)

with respect to each Defaulted Security, the Defaulted Securities Amount;

(iv)

with respect to each Written Down Security, the Reduced Principal Balance; and

(v)

with respect to each Deferred Interest PIK Bond, the Deferred Interest PIK Bond Amount.

Principal Coverage Ratios means the Class A/B Principal Coverage Ratio, the Class C/D/E Principal Coverage Ratio and the Class F/G/H Principal Coverage Ratio. Principal Coverage Tests means the Class A/B Principal Coverage Test, the Class C/D/E Principal Coverage Test and the Class F/G/H Principal Coverage Test. Principal Only Security means any Collateral Debt Security that does not provide for payment of interest or provides that all payments of interest will be deferred until the final maturity date of such Collateral Debt Security. Priority of Payments means, collectively, the priority of payments specified in Section 11.1(a), (b) and (c) or upon an Event of Default, the priority of payments in connection therewith. Proceeding means any suit in equity, action at law or other judicial or administrative proceeding. Prohibited Asset means any of the following types of asset-backed securities that do not (in each case) otherwise satisfy the definition of Specified Type): aircraft lease securities, enhanced equipment 45

Processed and formatted by SEC Watch - Visit SECWatch.com

trust certificates, structured settlement securities, tobacco settlement securities, manufactured housing securities, 12(b)-1 fee securities, future flow securities, emerging markets securities, sub and reperforming credit card securities, Franchise Loan Securities, Market Value CDO Securities, CLO Securities or CDO of CDO Securities. Proposed Portfolio means the portfolio (measured by Principal Balance) of (a) the Pledged Collateral Debt Securities and the proceeds of disposition thereof held as Cash, (b) Uninvested Proceeds held as Cash and (c) Eligible Investments purchased with Uninvested Proceeds or the proceeds of disposition of Pledged Collateral Debt Securities resulting from the sale, maturity or other disposition of a Pledged Collateral Debt Security or a proposed acquisition of a Collateral Debt Security, as the case may be. Purchase Agreement means the agreement, dated as of the Closing Date, between the Issuer and the Initial Purchaser relating to the purchase of the Offered Notes. Purchased Accrued Interest means all payments of interest received, or amounts collected that are attributable to interest received on Collateral Debt Securities and Eligible Investments, to the extent such payments or amounts constitute accrued interest purchased with Collateral Principal Collections or Uninvested Proceeds except for purchased accrued interest on Collateral Debt Securities purchased on the Closing Date. Qualified Bidder List means a list of not less than three Persons that are Independent from one another and the Issuer prepared by the Collateral Manager and delivered to the Trustee prior to an Auction, as may be amended and supplemented by the Collateral Manager from time to time upon written notice to the Trustee; provided that (i) the Qualified Bidder List may include the Collateral Manager as a Qualified Bidder if it is Independent from the other Persons on such list and (ii) any such notice referred to above shall only be effective on any Auction Date if it was received by the Trustee at least two Business Days prior to such Auction Date. Qualified Bidders means the Persons whose names appear from time to time on the Qualified Bidder List. Qualified Institutional Buyer has the meaning given in Rule 144A under the Securities Act. Qualified Purchaser means (i) a “qualified purchaser” as defined in Section 2(a)(51) of the Investment Company Act and the rules thereunder, (ii) a “knowledgeable employee” with respect to the Issuer as defined in rule 3c-5 under the Investment Company Act or (iii) a company beneficially owned exclusively by one or more “qualified purchasers” and/or “knowledgeable employees” with respect to the Issuer. Qualifying Foreign Obligor means a corporation, partnership or other entity organized or incorporated under the law of any of Australia, Canada, France, Germany, Ireland, Italy, Mexico, New Zealand, Sweden, Switzerland or the United Kingdom, so long as the unguaranteed, unsecured and otherwise unsupported long-term U.S. Dollar-denominated sovereign debt obligations of such country are rated “AA” or better by S&P and “AA” or better by Fitch. Qualified REIT Subsidiary means a corporation that is wholly owned by a REIT, as defined in Section 856(i)(2) of the Code or any successor provision, and is disregarded as being a separate entity from such REIT for United States federal income tax purposes. 46

Quarterly Pay Security means a security that provides for periodic payments of interest in cash quarterly. Quarterly Pay Security Interest Reserve Amount means, with respect to each Collateral Debt Security that is a Quarterly Pay Security and not entitled to the benefit of a Cashflow Hedge Agreement, as of any Calculation Date, the amount equal to (i) the amount of interest received by the Issuer on the most recent payment date with respect to such Quarterly Pay Security multiplied by (ii) (A) three minus the number of months since the most recent payment date with respect to such Quarterly Pay Security (rounded up to the nearest whole number) divided by (B) three; provided that for any Quarterly Pay Security with respect to which no scheduled interest payments remain, the Quarterly Pay Security Interest Reserve Amount shall be zero. Ramp-Up Collateral Debt Security means each additional Collateral Debt Security selected by the Collateral Manager for purchase by the Issuer and pledged to the Trustee during the Ramp-Up Period. Ramp-Up Period means the period commencing on the Closing Date and ending on the Effective Date. Rating means, as the context requires, a Fitch Rating, a Moody’s Rating or an S&P Rating. Rating Agency means each of Fitch, Moody’s and S&P. Rating Agency Confirmation means, with respect to any specified action or determination, for so long as any of the Secured Notes are Outstanding and rated by Moody’s, S&P or Fitch, respectively, the receipt of written confirmation by Moody’s, S&P and Fitch, that such specified action or determination will not result in the downgrade, qualification or withdrawal or other adverse action with respect to their thencurrent ratings on the Secured Notes (including any private or confidential rating) unless Rating Agency Confirmation is specified herein to be

Processed and formatted by SEC Watch - Visit SECWatch.com

required by only Moody’s, S&P or Fitch, in which case such Rating Agency Confirmation will be sufficient. For the purposes of this definition, “Rating Agencies” will be deemed to not include Fitch except with respect to the Effective Date any proposed action or matter relating to any amendment to, or modification of, the Indenture, the Collateral Administration Agreement and any other document relating to the offering of the Secured Notes; provided that notification will be made to Fitch within 30 days of any instance in which Rating Agency Confirmation is required by either Moody’s or S&P and that Fitch reserves the right to request further information regarding such action or event. Rating Confirmation has the meaning specified in Section 7.18(e). Rating Confirmation Failure has the meaning specified in Section 7.18(e). Real Estate CDO Securities means securities that entitle the holders thereof to receive payments that depend on the cash flow from or the credit exposure to a portfolio consisting of at least 85% (i) REIT Debt Securities, (ii) CMBS Securities, (iii) other Specified Types or (iv) a combination of the foregoing; provided that such dependence may in addition be conditioned upon rights or additional assets designed to assure the servicing or timely distribution of proceeds to holders of the Real Estate CDO Securities such as a financial guaranty insurance policy; provided that a Real Estate CDO Security shall not include a CMBS Re-REMIC Security. Real Estate Interests means debt interests (other than CRE Debt Obligations, REIT Debt Securities, Trust Preferred Securities, Real Estate CDO Securities and Tenant Lease Loan Interests) that entitle the holders thereof to receive payments substantially all of which depend on the cash flow from or 47

Processed and formatted by SEC Watch - Visit SECWatch.com

sale proceeds of mortgage loans on commercial and multifamily properties, including senior and subordinate mortgage loans, participation interests in mortgage loans on commercial and multifamily properties, including subordinate interests, mezzanine loans secured by ownership interests in entities owning commercial properties, mortgage loans secured by mortgages on commercial real estate properties that are subject to a lease to a single tenant. Real Estate Trust Preferred Securities means securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities) on the cash flow from either an individual trust security or a pool of trust securities issued (in each case) by a wholly-owned trust subsidiary of an entity whose business is significantly related to real estate, real estate management or real estate ownership and that issues an obligation to such trust subsidiary in exchange for the net issuance proceeds of such securities. Record Date means the date on which the Holders of Secured Notes entitled to (i) vote with respect to any matters under the Indenture are determined, such date being the 15th day (whether or not a Business Day) prior to the date the Trustee delivers notice with respect to such vote and (ii) receive a payment in respect of principal or interest on the succeeding Payment Date or Redemption Date are determined, such date as to any Payment Date or Redemption Date being the 15th day (whether or not a Business Day) prior to such Payment Date or Redemption Date. Redemption means an Optional Redemption, an Auction Call Redemption or a Tax Redemption. Redemption Date means the Payment Date upon which the Secured Notes are redeemed pursuant to an Optional Redemption, an Auction Call Redemption or a Tax Redemption. Redemption Date Statement has the meaning specified in Section 10.14(b). Redemption Premium means the premium payable to Holders of each Class of Fixed Rate Notes in connection with an Optional Redemption of such Class of Fixed Rate Notes in an amount equal to the excess, if any, of (i) the present value (discounted to the applicable Redemption Date using the Reinvestment Yield on a monthly basis using a 360 day year of twelve 30 day months as the discount rate) of the remaining payments of interest and principal due on such Class of Fixed Rate Notes, assuming that the entire outstanding principal amount of such Class of Fixed Rate Notes will be paid on the Payment Date occurring in February 2019 and that each intervening payment of interest on such Class of Fixed Rate Notes will be made on the related Payment Date in its entirety (and therefore there is no Defaulted Interest on such Class of Fixed Rate Notes) over (ii) the then Outstanding aggregate principal amount of such Class of Fixed Notes. Redemption Price means (i) with respect to each Class of Secured Notes, (a) their then-outstanding aggregate principal amount plus (b) accrued interest thereon to the date of redemption to the extent not already paid (including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Periodic Interest Shortfall Amount, Class F Cumulative Applicable Periodic Interest Shortfall Amount, Class G Cumulative Applicable Periodic Interest Shortfall Amount, Class H Cumulative Applicable Periodic Interest Shortfall Amount, Class J Cumulative Applicable Periodic Interest Shortfall Amount and the Class K Cumulative Applicable Periodic Interest Shortfall Amount) plus (c) in the case of an Optional Redemption only and with respect to any Fixed Rate Notes, the applicable Redemption Premium (unless otherwise waived by each of the Noteholders of such Class of Fixed Rate Notes) and (ii) if the Income Notes are redeemed, the “Redemption Price” for the Income Notes, except to the extent the Income Note Redemption Approval Condition applies, means an amount equal to the aggregate of any 48

Processed and formatted by SEC Watch - Visit SECWatch.com

amounts distributable on the Income Notes in respect of such redemption pursuant to the Priority of Payments, and in any instance where the Income Note Redemption Approval Condition applies, an amount equal to the amounts necessary to satisfy the Income Note Redemption Approval Condition. Redemption Spread means, with respect to the Class C Notes, 0.5238%, the Class J Notes, 0.5238% and the Class K Notes, 0.5238%. Reduced Principal Balance means, with respect to each Written Down Security, the amount to which the original Principal Balance of such Written Down Security is reduced. Reference Banks has the meaning specified in Schedule B. Reference Obligation means the debt securities or other obligations or types of obligations constituting in each case a Specified Type and otherwise satisfying the Eligibility Criteria and upon which, in whole or in part, the payment rights of the holder of a Synthetic Security or CMBS Re-REMIC Security are based. Reference Obligor means, with respect to a Reference Obligation, the obligor on such Reference Obligation. Registered means in registered form for U.S. federal income tax purposes and issued after July 18, 1984; provided that a certificate of interest in a trust that is treated as a grantor trust for U.S. federal income tax purposes will not be treated as Registered unless each of the obligations or securities held by the trust was issued after that date. Registered Form has the meaning specified in Section 8-102(a)(13) of the UCC. Regulation S means Regulation S under the Securities Act. Regulation S Definitive Note has the meaning specified in Section 2.4(c)(1)(vi). Regulation S Global Note has the meaning specified in Section 2.1(a). Regulation S Note has the meaning specified in Section 2.1(a). Regulation S Transfer Certificate has the meaning specified in Section 2.4(c)(1)(iii). 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 Criteria means, with respect to any reinvestment of Collateral Principal Payments and Sale Proceeds, the following criteria: (i)

after the Effective Date, the Collateral Quality Tests are satisfied, or, if any Collateral Quality Test was not satisfied immediately prior to such investments, the extent of compliance with such Collateral Quality Test will be maintained or improved immediately following such reinvestment;

(ii)

after the Effective Date, the Collateral Concentration Limitations are satisfied, or, if any of the Collateral Concentration Limitations was not satisfied immediately prior to such investments, such compliance with the Collateral Concentration Limitations will be maintained or improved following such reinvestment; 49

Processed and formatted by SEC Watch - Visit SECWatch.com

(iii)

after the Effective Date, the Coverage Tests are satisfied, or, if any Coverage Test was not satisfied immediately prior to such investments, such Coverage Test will be maintained or improved following such reinvestment;

(iv)

no Event of Default has occurred and is continuing; and

(v)

in the case of Credit Improved Securities only, upon giving effect to the reinvestment, (1) the Coverage Tests are satisfied and each S&P Scenario Default Rate is improved such that the difference between such S&P Break-Even Default Rate, less the related S&P Scenario Default Rate generated by the CDO Monitor as a result of such reinvestment is equal to or greater than the difference immediately prior to such reinvestment, (2) the Coverage Ratios (taking into consideration any amounts received from or payable to the related Hedge Counterparty upon termination of the related Hedge Agreement) are no less than the Coverage Ratios as of the Effective Date or (3) the sum of the Sale Proceeds and the amount, if any, received from or payable to the related Hedge Counterparty upon termination of the related Hedge Agreement is equal to or higher than the Principal Balance of the Credit Improved Security being sold and such proceeds are reinvested in one or more Substitute Collateral Debt Securities having an aggregate Principal Balance of not less than 100% of the Principal Balance of the Credit Improved Security being sold.

Reinvestment Period means the period beginning on the Closing Date and ending on and including the Payment Date in June 2012; provided, however, that if (i) a Key Manager Event occurs and (ii) the Holders of a majority in aggregate principal amount of the Outstanding Notes of the Controlling Class direct in writing that the Trustee terminate the Reinvestment Period, then the Reinvestment Period shall instead end upon the Trustee’s issuance of written notice of such termination to the Collateral Manager. Reinvestment Yield means with respect to any class of the Fixed Rate Notes, the rate equal to the sum of the Redemption Spread with respect to such Fixed Rate Note and the applicable yield to maturity implied by (i) the yields reported as of 10:00 a.m. (New York City time) on the tenth Business Day preceding the related Optional Redemption Date on the display page designated as “Page 678” on the Telerate Service (or such other display as may replace Page 678 on the Telerate Service) for actively traded U.S. Treasury securities having a maturity as nearly as practicable equal to the Payment Date occurring in February 2019 or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the tenth Business Day preceding the Optional Redemption Date, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity as nearly as practicable equal to the Payment Date occurring in February 2019. REIT means a real estate investment trust, as defined in Section 856 of the Code or any successor provision. REIT Debt Securities means, collectively, REIT Debt Securities—Diversified, REIT Debt Securities—Health Care, REIT Debt Securities—Hotel, REIT Debt Securities—Industrial, REIT Debt Securities—Mortgage, REIT Debt Securities—Multi-Family, REIT Debt Securities—Office, REIT Debt Securities—Residential, REIT Debt Securities—Retail and REIT Debt Securities—Storage. REIT Debt Securities—Diversified means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to 50

Processed and formatted by SEC Watch - Visit SECWatch.com

holders of the Collateral Debt Securities) of a portfolio of diverse real property interests; provided that any Collateral Debt Security falling within any other REIT Debt Security description set forth herein will be excluded from this definition. REIT Debt Securities—Health Care means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including hospitals, clinics, sport clubs, spas and other health care facilities and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Hotel means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including hotels, motels, youth hostels, bed and breakfasts and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Industrial means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including warehouse, industrial and distribution facilities, factories, refinery plants, breweries and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Mortgage means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of mortgages, commercial mortgage-backed securities, collateralized mortgage obligations and other similar mortgage-related securities (including Collateral Debt Securities issued by a hybrid form of such trust that invests in both commercial real estate and commercial mortgages). REIT Debt Securities—Multi-Family means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including multi-family dwellings such as apartment blocks, condominiums and co-operative owned buildings. REIT Debt Securities—Office means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of a portfolio of properties including office buildings, conference facilities and other similar real property interests used in the commercial real estate business. REIT Debt Securities—Residential means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of residential mortgages (other than multi-family dwellings) and other similar real property interests. 51

Processed and formatted by SEC Watch - Visit SECWatch.com

REIT Debt Securities—Retail means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) of regional malls, neighborhood shopping centers, big box centers, retail stores, restaurants, bookstores, clothing stores and other similar real property interests used in one or more similar businesses. REIT Debt Securities—Storage means Collateral Debt Securities issued by a real estate investment trust (as defined in Section 856 of the Code or any successor provision) whose assets consist (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of the Collateral Debt Securities) a portfolio of properties including storage facilities and other similar real property interests used in one or more similar businesses. REIT Trust Preferred Securities means securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities) on the cash flow from either an individual trust security or a pool of trust securities issued (in each case) by a wholly-owned trust subsidiary of a REIT, or of an operating partnership subsidiary of a REIT, that issues obligations to such trust subsidiary in exchange for the net issuance proceeds of such securities. Relevant Jurisdiction means, as to any obligor on any Collateral Debt Security, any jurisdiction (a) in which the obligor is incorporated, organized, managed and controlled or considered to have its seat, (b) where an office through which the obligor is acting for purposes of the relevant Collateral Debt Security is located, (c) in which the obligor executes Underlying Instruments or (d) in relation to any payment, from or through which such payment is made. 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 and maintained by the Bond Market Association. Repurchased Security means any Real Estate Interest or other Collateral Debt Security acquired by the Issuer in accordance with an Asset Transfer Agreement, which the related Seller is required to repurchase from the Issuer pursuant to the terms thereof. Requisite Noteholders means the Holders of 662/3% or more of the Outstanding aggregate principal amount of (i) the Class A-1 Notes, so long as any Class A-1 Notes remain Outstanding, (ii) thereafter the Class A-2 Notes, so long as any Class A-2 Notes remain Outstanding, (iii) thereafter the Class A-3 Notes, so long as any Class A-3 Notes remain Outstanding, (iv) thereafter the Class B Notes, so long as any Class B Notes remain Outstanding, (v) thereafter the Class C Notes, so long as any Class C Notes remain Outstanding, (vi) thereafter the Class D Notes, so long as any Class D Notes remain Outstanding, (vii) thereafter the Class E Notes, so long as any Class E Notes remain Outstanding, (viii) thereafter the Class F Notes, so long as any Class F Notes remain Outstanding, (ix) thereafter the Class G Notes, so long as any Class G Notes remain Outstanding, (x) thereafter the Class H Notes, so long as any Class H Notes remain Outstanding, (xi) thereafter the Class J Notes, so long as any Class J Notes remain Outstanding and (xii) thereafter the Class K Notes, so long as any Class K Notes remain Outstanding. Reserved Matters has the meaning specified in Section 8.2(j). Retained Notes means the Class J Notes and the Class K Notes. 52

Processed and formatted by SEC Watch - Visit SECWatch.com

Rule 144A means Rule 144A under the Securities Act. Rule 144A Definitive Note has the meaning specified in Section 2.4(c)(1)(vi). Rule 144A Global Note has the meaning specified in Section 2.1(b). Rule 144A Information means such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto). Rule 144A Note has the meaning specified in Section 2.1(b). Rule 144A Transfer Certificate has the meaning specified in Section 2.4(c)(1)(ii). S&P means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and any successor or successors thereto. S&P Break-Even Default Rate means collectively, the Class A Break-Even Default Rate, the Class B Break-Even Default Rate, the Class C Break-Even Default Rate, the Class D Break-Even Default Rate, the Class E Break-Even Default Rate, the Class F Break-Even Default Rate, the Class G Break-Even Default Rate, the Class H Break-Even Default Rate, the Class J Break-Even Default Rate and the Class K BreakEven Default Rate. S&P CDO Monitor means the dynamic, analytical computer model provided by S&P to the Collateral Manager and the Trustee (together with such instructions and assumptions as are necessary to run such model) on or prior to the Effective Date used to determine the credit risk of a portfolio of Collateral Debt Securities, as may be modified by S&P from time to time. S&P CDO Monitor Test means the test which is satisfied, as of any Calculation Date, if each of the Class A Note Default Differential, the Class B Note Default Differential, the Class C Note Default Differential, the Class D Note Default Differential, the Class E Note Default Differential, the Class F Note Default Differential, the Class G Note Default Differential, the Class H Note Default Differential, the Class J Note Default Differential and the Class K Note Default Differential of the Current Portfolio or the Proposed Portfolio, as applicable, is positive. The S&P CDO Monitor Test will be considered to be improved if the Class A Note Default Differential of the Proposed Portfolio is greater than the Class A Note Default Differential of the Current Portfolio, the Class B Note Default Differential of the Proposed Portfolio is greater than the Class B Note Default Differential of the Current Portfolio, the Class C Note Default Differential of the Proposed Portfolio is greater than the Class C Note Default Differential of the Current Portfolio, the Class D Note Default Differential of the Proposed Portfolio is greater than the Class D Note Default Differential of the Current Portfolio, the Class E Note Default Differential of the Proposed Portfolio is greater than the Class E Note Default Differential of the Current Portfolio, the Class F Note Default Differential of the Proposed Portfolio is greater than the Class F Note Default Differential of the Current Portfolio, the Class G Note Default Differential of the Proposed Portfolio is greater than the Class G Note Default Differential of the Current Portfolio, the Class H Note Default Differential of the Proposed Portfolio is greater than the Class H Note Default Differential of the Current Portfolio, the Class J Note Default Differential of the Proposed Portfolio is greater than the Class J Note Default Differential of the Current Portfolio and the Class K Note Default Differential of the Proposed Portfolio is greater than the Class K Note Default Differential of the Current Portfolio. S&P Industry Classification Group means any of the S&P industrial classification groups as set forth on Schedule H and any additional classification groups established by S&P with respect to the Collateral Debt Securities and provided, in each case, by the Collateral Manager or S&P to the Trustee. 53

Processed and formatted by SEC Watch - Visit SECWatch.com

S&P Minimum Average Recovery Rate means, as of any date of determination, a rate expressed as a percentage equal to the number obtained by (i) summing the products obtained by multiplying the Principal Balance of each Collateral Debt Security by its S&P Recovery Rate set forth in a schedule of the Indenture and (ii) dividing such sum by the CDS Principal Balance less cash and Eligible Investments representing Collateral Principal Collections and (iii) rounding up to the first decimal place. S&P Minimum Weighted Average Recovery Rate Test means a test that will be satisfied as of any Measurement Date if the S&P Minimum Average Recovery Rate is greater than or equal to (i) 39.75% with respect to the Class A Notes, (ii) 42.85% with respect to the Class B Notes, (iii) 46.46% with respect to the Class C Notes, (iv) 46.46% with respect to the Class D Notes, (v) 46.46% with respect to the Class E Notes, (vi) 49.28% with respect to the Class F Notes, (vii) 49.28% with respect to the Class G Notes, (viii) 49.28% with respect to the Class H Notes, (ix) 51.82% with respect to the Class J Notes and (x) 51.82% with respect to the Class K Notes. S&P Rating means a rating of any Collateral Debt Security determined as follows: (i)

if S&P has assigned a rating to such Collateral Debt Security either publicly or privately (in the case of a private rating, with appropriate consents for use of such private rating), the S&P Rating shall be the rating assigned thereto by S&P; provided that, solely for purposes of determining compliance with the S&P CDO Monitor Test, if such Collateral Debt Security is placed on a watch list for possible upgrade or downgrade by S&P, the S&P Rating applicable to such Collateral Debt Security shall be one rating subcategory above or below, respectively, the S&P Rating applicable to such Collateral Debt Security immediately prior to such Collateral Debt Security being placed on such watch list;

(ii)

if such Collateral Debt Security is not rated by S&P but the Issuer or the Collateral Manager on behalf of the Issuer has requested that S&P assign a rating to such Collateral Debt Security, the S&P Rating shall be the rating so assigned by S&P; provided that pending receipt from S&P of such rating, if such Collateral Debt Security is not eligible for notching in accordance with Schedule G, such Collateral Debt Security shall have a S&P Rating of “CCC-,” otherwise such S&P Rating shall be the rating assigned according to Schedule F until such time as S&P shall have assigned a rating thereto; or

(iii)

if any Collateral Debt Security is a Collateral Debt Security that has not been assigned a rating by S&P and is not a Collateral Debt Security listed in Schedule G, as identified by the Collateral Manager, the S&P Rating of such Collateral Debt Security shall be determined by reference to Schedule F to determine the S&P Rating; provided that for purposes of this clause (iii), CRE Debt Obligations shall be considered debt of “Real Estate Operating Companies” for purposes of Schedule F; provided, further, (a) if any Collateral Debt Security shall, at the time of its purchase by the Issuer, be listed for a possible upgrade or downgrade on either Moody’s or Fitch’s then current credit rating watch list, then the S&P Rating of such Collateral Debt Security shall be one subcategory above or below, respectively, the rating then assigned to such item in accordance with Schedule A; (b) for purposes of determining compliance with S&P CDO Monitor Test, if the rating assigned to such Collateral Debt Security pursuant to this subparagraph (iii) is placed on a watch list for possible upgrade or downgrade by any Rating Agency, the S&P Rating applicable to such Collateral Debt Security shall be one rating subcategory above or below, respectively, the S&P Rating applicable to such Collateral Debt Security immediately prior to such Collateral Debt Security being placed on such watch list and (c) the aggregate Principal Balance that may be given a rating based on this subparagraph 54

Processed and formatted by SEC Watch - Visit SECWatch.com

(iii) may not exceed 20% of the aggregate Principal Balance of all Collateral Debt Securities. Notwithstanding the foregoing, if any Collateral Debt Security shall, at the time of its purchase by the Issuer, be listed for a possible upgrade or downgrade on the then current S&P credit rating watch list, then the S&P Rating of such Collateral Debt Security shall be one subcategory above or below, respectively, the rating then assigned to such item by S&P, as applicable; provided that if such Collateral Debt Security is removed from such list at any time, it shall be deemed to have its then-current actual rating by S&P. S&P Recovery Rate means, with respect to a Collateral Debt Security on any Calculation Date, an amount equal to the percentage for such Collateral Debt Security set forth in the S&P Recovery Rate Matrix attached as Schedule D-1 hereto (determined in accordance with procedures prescribed by S&P for such Collateral Debt Security on such Calculation Date or, in the case of Defaulted Securities, the S&P Rating immediately prior to default). S&P Scenario Default Rate means collectively, the Class A Scenario Default Rate, the Class B Scenario Default Rate, the Class C Scenario Default Rate, the Class D Scenario Default Rate, the Class E Scenario Default Rate, the Class F Scenario Default Rate, the Class G Scenario Default Rate, the Class H Scenario Default Rate, the Class J Scenario Default Rate and the Class K Scenario Default Rate. S&P Servicer means a master servicer on the S&P Select Servicer List as a U.S. Commercial Mortgage Master Servicer and a special servicer on the S&P Select Servicer List as a U.S. Commercial Mortgage Special Servicer. S&P Weighted Average Recovery Rate means, as of any Calculation Date, a rate expressed as a percentage equal to the number obtained by (i) summing the products obtained by multiplying the Principal Balance of each Collateral Debt Security by its S&P Recovery Rate and (ii) dividing such sum by the aggregate Principal Balance of the Collateral Debt Securities and (iii) rounding up to the first decimal place. For this purpose, the Principal Balance of a Defaulted Security or Deferred Interest PIK Bond will be deemed to be equal to its outstanding principal amount (excluding any capitalized interest thereon). S&P’s Preferred Format means an electronic spreadsheet file to be provided to S&P, which file shall include the following information, if available (to the extent such information is not confidential) with respect to each Collateral Debt Security: (a) the name and country of domicile of the issuer thereof and the particular issue held by the Issuer, (b) the CUSIP or other applicable identification number associated with such Collateral Debt Security, (c) the par value of such Collateral Debt Security, (d) the type of issue (including, by way of example, whether such Collateral Debt Security is a bond, loan or asset-backed security), using such abbreviations as may be selected by the Trustee, (e) a description of the index or other applicable benchmark upon which the interest payable on such Collateral Debt Security is based (including, by way of example, fixed rate, step-up rate, zero coupon and LIBOR), (f) the coupon (in the case of a Collateral Debt Security which bears interest at a fixed rate) or the spread over the applicable index (in the case of a Collateral Debt Security which bears interest at a floating rate), (g) the S&P Industry Classification Group for such Collateral Debt Security, (h) the Stated Maturity Date of such Collateral Debt Security, (i) the S&P Rating of such Collateral Debt Security or the issuer thereof, as applicable, (j) the Principal Balance in cash and in Eligible Investments, (k) the priority category assigned by S&P to such Collateral Debt Security, if available, and (1) such other information as the Trustee may determine to include in such file. Sale has the meaning specified in Section 5.17(a). 55

Sale Proceeds means all proceeds (including accrued interest) received with respect to Collateral Debt Securities and Equity Securities as a result of sales of such Collateral Debt Securities and Equity Securities pursuant to the Indenture, net of any reasonable amounts expended by the Collateral Manager or the Trustee in their good faith determination in connection with such sale or disposition. Schedule of Collateral Debt Securities means the list of Collateral Debt Securities securing the Secured Notes that is attached as Schedule A. Scheduled Distribution means, with respect to any Pledged Security, for each Due Date, the scheduled payment in Cash of principal and/or interest and/or fees due on such Due Date with respect to such Pledged Security, determined in accordance with the assumptions specified in Section 1.2. Second Currency has the meaning specified in Section 14.13. Secured Note Calculation Agent has the meaning specified in Section 7.15. Secured Notes means, collectively, the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes. Secured Noteholder means, with respect to any Secured Note, the Person in whose name such Note is registered; provided that Beneficial Owners or Agent Members will have no rights under the Indenture with respect to Global Notes, and the Secured Noteholder may be treated by the Issuer and the Trustee (and any agent of any of the foregoing) as the owner of such Global Notes for all purposes whatsoever.

Processed and formatted by SEC Watch - Visit SECWatch.com

Secured Notes Interest Shortfall Amount means, on any Calculation Date until (but excluding) the first Calculation Date after the Effective Date, the aggregate amount of interest due and payable (without giving effect to any applicable deferments of interest) on the Secured Notes for which Collateral Interest Collections (excluding, prior to the first Calculation Date after the Effective Date, amounts in the Discretionary Ramp-Up Interest Reserve Account) are insufficient to make payments in full thereon in accordance with the Priority of Payments. Secured Parties means the Trustee, for the benefit of the Secured Noteholders, the Collateral Manager and each Hedge Counterparty. Securities Account has the meaning specified in Section 8-501(a) of the UCC. Securities Act means the United States Securities Act of 1933, as amended. Securities Intermediary has the meaning specified in Section 8-102(a)(14) of the UCC. Security has the meaning specified in Section 8-102(a)(15) of the UCC. Semi-Annual Pay Security means a security that provides for periodic payments of interest in Cash semi-annually. Semi-Annual Pay Security Interest Reserve Amount means, with respect to each Collateral Debt Security that is a Semi-Annual Pay Security and not entitled to the benefit of a Cashflow Hedge Agreement, as of any Calculation Date, the amount equal to (i) the amount of interest received by the Issuer on the most recent payment date with respect to such Semi-Annual Pay Security multiplied by 56

Processed and formatted by SEC Watch - Visit SECWatch.com

(ii) (A) six minus the number of months since the most recent payment date with respect to such Semi-Annual Pay Security (rounded up to the nearest whole number) divided by (B) six; provided that for any Semi-Annual Pay Security with respect to which no scheduled interest payments remain, the Semi-Annual Pay Security Interest Reserve Amount shall be zero. Senior means having a higher position or priority in respect of rights (including, unless otherwise specified, a right to payment) vis-àvis one or more other parties or classes, including among Classes of Notes. Senior Collateral Management Fee means with respect to each Payment Date, a senior fee equal to the sum of (a) the Monitoring Fee and (b) the Senior Structuring Fee payable to the Collateral Manager pursuant to the Collateral Management Agreement; provided that the Senior Collateral Management Fee will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Senior Collateral Management Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Senior Collateral Management Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Senior Collateral Management Fee accrued but not paid prior to the resignation or removal of the Collateral Manager shall continue to be payable to the Collateral Manager on the Payment Date immediately following the effectiveness of such resignation or removal. Senior Loan means senior debt secured directly or indirectly by the same commercial real estate securing any Real Estate Interest. Senior Structuring Fee means, with respect to each Payment Date, an amount equal to 0.05% per annum of the Fee Basis Amount payable to the Collateral Manager pursuant to the Collateral Management Agreement. Servicing Agreement means a servicing agreement between the Servicer and the Issuer substantially in the form attached hereto as Exhibit H, relating to the servicing of any Real Estate Interests, or in such other form satisfying the Rating Agency Condition. Servicer means a Permitted Servicer appointed pursuant to a Servicing Agreement as servicer of the Real Estate Interests owned by the Issuer. Servicer Override means the Servicer’s right to override, based on its application of the servicing standards set forth in the Servicing Agreement, certain decisions made by the Collateral Manager, including material servicing actions and cure decisions. Special Amortization Pro Rata Condition means with respect to any Payment Date that (I) the aggregate CDS Principal Balance as of the related Calculation Date is at least equal to 50% of the aggregate CDS Principal Balance on the Effective Date, (II) the Collateral Quality Tests are satisfied, (III) no Principal Coverage Test is failing as of such Payment Date and (IV) no Principal Coverage Test has previously failed for two or more Calculation Dates unless, as of the related Payment Date, the Principal Coverage Ratio related to such Principal Coverage Test equals or exceeds the related Principal Coverage Ratio in existence on the Effective Date. Special Purpose Vehicle means any special purpose vehicle organized under the laws of a Tax Haven Jurisdiction. Specified Currency has the meaning specified in Section 14.13. 57

Processed and formatted by SEC Watch - Visit SECWatch.com

Specified Person has the meaning specified in Section 2.5(a). Specified Place has the meaning specified in Section 14.13. Specified Types means CMBS Securities, REIT Debt Securities, Real Estate CDO Securities, CRE Debt Obligations, Trust Preferred Securities and Real Estate Interests. Spread has the meaning specified in the definition of Reinvestment Criteria. 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 greater of zero and the excess, if any, of the Weighted Average Spread for such date over 1.60%, and (b) the aggregate Principal Balance of all Floating Rate Collateral Debt Securities and Deemed Floating Rate Collateral Debt Securities (excluding, in each case, Defaulted Securities, Written Down Securities or Deferred Interest PIK Bonds) and the denominator of which is the aggregate Principal Balance of all Collateral Debt Securities that are Fixed Rate Collateral Debt Securities (excluding Defaulted Securities, Written Down Securities, Deferred Interest PIK Bonds and Deemed Floating Rate Collateral Debt Securities). Stated Maturity Date means August 7, 2052. Step-Down Security means a Collateral Debt Security which by the terms of the related underlying instrument provides for a decrease, in the case of a Fixed Rate Collateral Security, in the per annum interest rate on such security or, in the case of a Floating Rate Collateral Security, in the spread over the applicable index or benchmark rate, solely as a function of the passage of time; provided that a StepDown Security will not include any such security providing for payment of a constant rate of interest at all times after the date of acquisition by the Issuer. Subordinate means having a lower position or priority in respect of rights (including, unless otherwise specified, a right to payment) vis-à-vis one or more other parties or Classes, including among Classes of Notes. Subordinate Collateral Management Fee means the fee payable to the Collateral Manager at a per annum rate in arrears on each Payment Date pursuant to the Collateral Management Agreement, in an amount (as certified by the Collateral Manager to the Trustee) equal to 0.25% of the Fee Basis Amount for such Payment Date; provided that the Subordinate Collateral Management Fee will be payable on each Payment Date only to the extent of funds available for such purpose in accordance with the Priority of Payments. Any unpaid Subordinate Collateral Management Fee will be deferred and paid on the next succeeding Payment Date to the extent funds are available for such purpose. Any unpaid Subordinate Collateral Management Fee that is deferred due to the operation of the Priority of Payments will not accrue interest. Any Subordinate Collateral Management Fee accrued but not paid prior to the resignation or removal of the Collateral Manager shall continue to be payable to the Collateral Manager on the Payment Date immediately following the effectiveness of such resignation or removal. Subordinate Interests has the meaning specified in Section 13.1(a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (1) or (m) as applicable. Subordinate Loan Interest means a Real Estate Interest that is a subordinate interest in a commercial mortgage loan (including a subordinate participation interest in a commercial mortgage loan) or a subordinate commercial mortgage loan. 58

Processed and formatted by SEC Watch - Visit SECWatch.com

Subpool means each of the groups of the Collateral Debt Securities designated by the Collateral Manager in accordance with the Auction Procedures on which the Listed Bidders may provide a separate bid in an Auction. Substitute Collateral Debt Security means a debt obligation meeting the Eligibility Criteria acquired by or on behalf of the Issuer with Collateral Principal Proceeds or Sale Proceeds that are reinvested in accordance with the provisions of the Indenture. Substitute Party has the meaning specified in Section 16.1(c). Substitution Event means, in connection with the any Hedge Counterparty, any of the following: (i)

The short-term rating of the Hedge Ratings Determining Party from Moody’s is “P-3” or lower or the long-term rating of the Hedge Ratings Determining Party from Moody’s is withdrawn, suspended or downgraded to “Baa1” or lower or, if the related Hedge Ratings Determining Party does not have a short-term rating, the long-term rating of the related Hedge Ratings Determining Party from Moody’s is withdrawn, suspended or downgraded to “Baa1” or lower;

(ii)

The short-term rating from S&P of the Hedge Ratings Determining Party is withdrawn, suspended or downgraded below “A3” or, if no short-term rating is available, the long-term rating from S&P of the Hedge Ratings Determining Party is withdrawn, suspended or downgraded below “BBB-”;

(iii)

The short-term rating of the Hedge Ratings Determining Party from Fitch is lower than “F2” or the long-term rating of the Hedge Ratings Determining Party from Fitch is lower than “BBB+”; or

(iv)

the failure by any Hedge Counterparty to take any of the actions specified upon the occurrence of a Collateralization Event within the period of 30 days thereafter (the expiration of which shall constitute a termination event).

Synthetic Security means a Derivative Contract or a Derivative Security pursuant to which the Issuer sells credit protection with respect to one or more (including a pool of) Reference Obligations or obligors; provided that: (a)

for physical settlement to the Issuer, such Synthetic Security must also provide (or warrant) that delivery of any deliverable obligations thereunder to the Issuer and transfer of such deliverable obligations by the Issuer to a third party will not require or cause the Issuer to assume, and will not subject the Issuer to, any obligation or liability (other than immaterial, nonpayment obligations and any assignment or transfer fee in respect of loans), or the issuer thereof will indemnify the Issuer against such obligations and liabilities;

(b)

such Synthetic Security shall have a Fitch Rating, an S&P Rating and an S&P Recovery Rate and a Moody’s Recovery Rate and a Moody’s Rating Factor assigned by the respective Rating Agency;

(c)

Rating Agency Confirmation from S&P and Moody’s is received at or prior to the time of acquisition of the Synthetic Security; 59

Processed and formatted by SEC Watch - Visit SECWatch.com

(d)

the Reference Obligation is a Specified Type and, if purchased by the Issuer, would satisfy the Eligibility Criteria;

(e)

such Synthetic Security shall not be a security wherein the Issuer is buying credit protection or otherwise acquiring a “short” position in any one or more Reference Obligations; and

(f)

for purposes of calculating the Weighted Average Fixed Rate Coupon and the Weighted Average Spread, such Synthetic Security will be deemed to be a Floating Rate Collateral Debt Security.

Synthetic Security Counterparty means a Derivative Contract Counterparty or other entity (other than the Issuer) required to make payments on a Derivative Contract pursuant to the terms of the Derivative Contract. Synthetic Security Periodic Payments means, with respect to a Synthetic Security, periodic payments made pursuant thereto other than (i) any credit protection or cash or physical settlement amount payable upon a credit event and (ii) any breakage amount or other termination amount owing upon a termination, in whole or in part, of such Synthetic Security. Tax Event means a new, or change in any, U.S. or foreign tax statute, treaty, regulation, rule, ruling, practice, procedure or judicial decision or interpretation, occurring in each case after the Closing Date, which results in (i) any portion of any payment due from any issuer or obligor under any Collateral Debt Security becoming properly subject to the imposition of U.S. or foreign withholding tax, which withholding tax is not compensated for by a “gross up” provision under the terms of the related Collateral Debt Security, (ii) any jurisdiction imposing net income, profits, or similar tax on the Issuer, (iii) the Issuer being required to deduct or withhold from any payment under a Hedge Agreement for or on account of any tax and the Issuer being obligated to make a gross up payment (or otherwise pay additional amounts) to a Hedge Counterparty, or (iv) a Hedge Counterparty being required to deduct or withhold from any payment under a Hedge Agreement for or on account of any tax for whatever reason if such Hedge Counterparty is not required to pay to the Issuer such additional amount as is necessary to 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 where the sum of the amount of (i) such a tax or taxes imposed on the Issuer or withheld from payments to the Issuer to the extent the Issuer receives less than the full amount that the Issuer would have received had no such deduction occurred, and (ii) such gross up payments required to be made by the Issuer to the extent they exceed the amounts that the Issuer would have been required to pay had no deduction or withholding been required, in the aggregate, equals 10% or more of the amount of aggregate interest payments on all of the related Collateral Debt Securities during the related Due Period. Tax Haven Jurisdiction means (i) any sovereign jurisdiction that is commonly used as the place of organization for an entity for the purpose of reducing or eliminating tax liabilities for such entity, which shall be limited to: the Bahamas, the Cayman Islands, Bermuda, the British Virgin Islands, the Netherlands Antilles, the Netherlands, Luxembourg or the Channel Islands or (ii) upon receipt of Rating Agency Confirmation from Moody’s and S&P, any other jurisdiction. Tax Redemption has the meaning specified in Section 9.1(b). Tax Subsidiary has the meaning specified in Section 7.7(e). Taxed Collateral Debt Security has the meaning specified in Section 7.7(e). 60

Processed and formatted by SEC Watch - Visit SECWatch.com

Taxes means any present or future taxes, duties, assessments or governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by any governmental authority having power to tax. Temporary Ramp-Up Security means a security that (i) is a direct unsecured debt obligation of the Federal National Mortgage Corporation or the Federal Home Mortgage Corporation, (ii) bears interest at a fixed rate, (iii) is acquired by the Issuer on the Closing Date in furtherance of interest rate hedging of the Issuer’s portfolio by being sold on or prior to the Effective Date in conjunction with the acquisition of one or more Ramp-Up Collateral Debt Securities that are Fixed Rate Collateral Debt Securities and (iv) is rated in the highest rating category by at least one Rating Agency. Tenant Lease Loan Interests means any debt securities that entitle the holders thereof to receive payments that depend (except for rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities) on the cash flow from one or more properties leased to corporate tenants. Transaction Documents means the Indenture, the Collateral Management Agreement, the Account Control Agreement, any Hedge Agreements, the Corporate Services Agreement, the Master Trust Agreement, the Collateral Administration Agreement, the Income Note Paying Agency Agreement, any Servicing Agreement, any Asset Purchase Agreements, the Purchase Agreement, the Placement Agreement, the asset transfer agreements in respect of certain Collateral Debt Securities transferred to the Issuer on the Closing Date and the Forward Purchase Agreement. Trust Officer means, when used with respect to the Trustee, any Officer within the CDO Trust Services Group of the Corporate Trust Office working on the transaction described in this Indenture and (or any successor group of the Trustee) authorized to act for and on behalf of the Trustee, including any vice president, assistant vice president or other Officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such Officers, respectively, or to whom any corporate trust matter is referred at the CDO Trust Services Group of the Corporate Trust Office because of such person’s knowledge of and familiarity with the particular subject. Trust Preferred Securities means collectively REIT Trust Preferred Securities and Real Estate Trust Preferred Securities. Trustee means LaSalle Bank National Association, and any successors or assigns, in its capacity as trustee under this Indenture. Trustee Expenses means, with respect to any Payment Date, an amount equal to the sum of all expenses or indemnities incurred by or otherwise owing to the Trustee during the preceding Due Period in accordance with the Indenture or any other Transaction Document, other than the Trustee Fee, including, without limitation, any expenses or indemnities incurred by the Trustee and the Bank in its capacities as Collateral Administrator, Calculation Agent, Note Paying Agent, Income Note Paying Agent, Registrar and the Underlying Trustee. Trustee Fee means, with respect to any Payment Date, the fee payable to the Trustee in an aggregate amount equal to 0.010% per annum of the CDS Principal Balance as of the first day of the related Due Period; provided that so long as any Class of Secured Notes remain Outstanding, such fee shall in no event be an annual amount less than U.S.$25,000. UCC means the Uniform Commercial Code as in effect in the State of New York. 61

Processed and formatted by SEC Watch - Visit SECWatch.com

Underlying Instrument means each of the agreements pursuant to which a Pledged Security has been issued or created and each other agreement that governs the terms of or secures the obligations represented by such Pledged Security or of which holders of such Pledged Security are the beneficiaries. Uninvested Proceeds means, at any time, the net proceeds received by the Issuer on the Closing Date from the initial issuance of the Notes, to the extent such proceeds have not theretofore been invested in Collateral Debt Securities. Uninvested Proceeds Account has the meaning specified in Section 10.4. United States or U.S. means the United States of America, including the States thereof and the District of Columbia. Unregistered Securities has the meaning specified in Section 5.17(c). U.S. Person has the meaning given in Regulation S under the Securities Act. USA PATRIOT Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56 (2001). Weighted Average Fixed Rate Coupon means, as of any Measurement Date, the sum (rounded up to the next 0.001%) of: (a)

the number obtained by (i) multiplying the Principal Balance of each Fixed Rate Collateral Debt Security (except Collateral Debt Securities that are currently deferring interest) held in the portfolio as of such date by the then-current interest rate (net of any servicing fees and expenses), (ii) summing the amounts determined pursuant to clause (i) for all Fixed Rate Collateral Debt Securities held in the portfolio as of such date and (iii) dividing such sum by the aggregate Principal Balance of all Fixed Rate Collateral Debt Securities held in the portfolio as of such date; provided that for purposes of calculating the Weighted Average Fixed Rate Coupon, any Collateral Debt Securities that are Defaulted Securities, any Written Down Amount with respect to Written Down Securities and any Equity Securities will be excluded, except for those Defaulted Securities that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument; provided, further, that in the case of a fixed rate Step-Down Security, the coupon on any date will be deemed the lowest coupon scheduled to apply to such Step-Down Security on or after such date; plus

(b)

if the number obtained in clause (a) is less than 5.95%, the Spread Excess.

Weighted Average Life means, on any Calculation Date with respect to all Collateral Debt Securities (excluding any Defaulted Securities), the number obtained by the Collateral Manager by (i) summing the products obtained by multiplying (a) the Average Life at such time of each Collateral Debt Security by (b) the outstanding Principal Balance of such Collateral Debt Security and (ii) dividing such sum by the aggregate Principal Balance at such time of all Collateral Debt Securities. Weighted Average Life Test means a test that shall be satisfied as of any Measurement Date during any period set forth below if the Weighted Average Life of all Collateral Debt Securities as of such Measurement Date is less than or equal to the number of years set forth in the table below: 62

Processed and formatted by SEC Watch - Visit SECWatch.com As of an y C alculation Date O ccurrin g Du rin g th e Pe riod Be low

W e ighte d Ave rage Life (in Ye ars)

Closing Date – <1.0 year >1.0 year – <2.0 years >2.0 years – <3.0 years >3.0 years – <4.0 years >4.0 years – <5.0 years >5.0 years – Stated Maturity Date

10.0 years 9.0 years 8.0 years 7.0 years 6.0 years 5.0 years

Weighted Average Spread means, as of any Measurement Date, the sum (rounded up to the next 0.001%) of: (a)

the number obtained by (i) summing the products obtained by multiplying (A) for each Floating Rate Collateral Debt Security (other than any Defaulted Security, Written Down Security or Deferred Interest PlK Bond), the stated spread above LIBOR (net of any servicing fees and expenses) at which interest accrues on such Collateral Debt Security as of such date and, for each Deemed Floating Rate Collateral Debt Security (other than any Defaulted Security, Written Down Security or Deferred Interest PIK Bond), the Deemed Floating Spread (net of any servicing fees and expenses, without duplication) by (B) the principal balance of such Collateral Debt Security as of such date and (ii) dividing such sum by the aggregate Principal Balance of all Floating Rate Collateral Debt Securities and all Deemed Floating Rate Collateral Debt Securities; provided that for purposes of calculating the Weighted Average Spread, Collateral Debt Securities that are Defaulted Securities, the Written Down Amount with respect to Written Down Securities and Equity Securities will be excluded, except for those Defaulted Securities that at the time of such calculation have fully become current on all past due interest and scheduled principal and are paying full current interest in cash pursuant to the terms of their respective Underlying Instrument provided, further, that in the case of a floating rate Step-Down Security, the spread on any date will be deemed to be the lowest spread scheduled to apply to such Step-Down Security on or after such date; provided, further, that for purposes of calculating the Weighted Average Spread, the spread of any Floating Collateral Debt Securities that bear interest based on a floating-rate index other than One-Month LIBOR will be deemed to be the excess of (x) the rate at which such Floating Rate Collateral Debt Securities pay interest over (y) One-Month LIBOR; plus

(b)

if the number obtained pursuant to the calculations in clause (a) is less than 1.60%, the Fixed Rate Excess. Withholding Tax Security means a Collateral Debt Security if:

(i)

any payments thereon to the Issuer are subject to withholding tax imposed by any jurisdiction (other than U.S. backup withholding tax or other similar withholding tax); and

(ii)

under the underlying documentation with respect to such Collateral Debt Security, the issuer of or counterparty with respect to such Collateral Debt Security is not required to make “gross-up” payments to the Issuer that cover the full amount of such withholding tax on an after-tax basis.

Written Down Amount means, with respect to each Written Down Security, the amount by which the original Principal Balance of such Written Down Security is reduced as notified by or on behalf of the related issuer or trustee to the holders of such Written Down Security (including appraisal reductions on CMBS Securities). 63

Processed and formatted by SEC Watch - Visit SECWatch.com

Written Down Security means any Collateral Debt Security as to which the aggregate par amount of such Collateral Debt Security and all other securities secured by the same pool of collateral that rank pari passu with or senior in priority of payment to such Collateral Debt Security exceeds the aggregate par amount (including reserved interest or other amounts available for overcollateralization) of all collateral securing such securities (excluding defaulted collateral); provided that the Issuer shall immediately send notice to S&P by facsimile and e-mail upon any Collateral Debt Security becoming a Written Down Security. 1.2.

ASSUMPTIONS AS TO COLLATERAL DEBT SECURITIES, FEES, ETC.

The provisions set forth in this Section 1.2 shall be applied in connection with all calculations required to be made pursuant to this Indenture with respect to Scheduled Distributions on any Pledged Security, or any payments on any other assets included in the Collateral, and with respect to the income that can be earned on Scheduled Distributions on such Pledged Securities and on any other amounts that may be received for deposit in the Collection Account. (a)

All calculations with respect to Scheduled Distributions on the Pledged Securities securing the Secured Notes shall be made by the Issuer or the Collateral Administrator on behalf of the Issuer using (in the case of the Collateral Debt Securities) the assumptions that (i) no Pledged Security defaults or is sold, (ii) prepayment of any Pledged Security during any month occurs at a rate equal to the average rate of prepayment during the period of six consecutive months immediately preceding the current month (or, with respect to any Pledged Security that has not been outstanding for at least six consecutive calendar months, at the rate of prepayment assumed at the time of issuance of such Pledged Security), (iii) any clean-up call with respect to a Pledged Security will be exercised when economic to the Person or Persons entitled to exercise such call and (iv) no other optional redemption of any Pledged Security will occur except for those that have actually occurred or as to which irrevocable notice thereof shall have been given.

(b)

For purposes of determining compliance with the Interest Coverage Tests, except as otherwise specified in the Interest Coverage Tests, there shall be excluded all payments in respect of Defaulted Securities and Deferred Interest PIK Bonds unless the Trustee or Collateral Manager has actual knowledge such payments will be made in Cash and will be received on or before the Due Date therefor and all other scheduled payments (whether of principal, interest, fees or other amounts) including payments to the Issuer under any Hedge Agreement, as to which the Trustee or Collateral Manager has actual knowledge will not be made in Cash or will not be received when due. For purposes of calculating the Class A/B Interest Coverage Ratio, the Class C/D/E Interest Coverage Ratio and Class F/G/H Interest Coverage Ratio: (1)

the expected interest income on Collateral Debt Securities and Eligible Investments and the expected interest payable on the Secured Notes and amounts, if any, payable under the Hedge Agreement will be calculated using the interest rates applicable thereto on the applicable date of determination;

(2)

accrued original issue discount on Eligible Investments will be deemed to be a scheduled interest payment thereon due on the date such original issue discount is scheduled to be paid; and

(3)

it will be assumed that no principal payments are made on the Secured Notes during the applicable periods. 64

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

For each Due Period, the Scheduled Distribution on any Pledged Security (other than (i) a Defaulted Security, (ii) a Deferred Interest PIK Bond or (iii) an Equity Security, which, in each case except as otherwise provided herein, shall be assumed to have a Scheduled Distribution of zero and with respect to any Written Down Security, the Interest Coverage Amount shall exclude any interest accrued on any Written Down Amount) shall be the sum of (x) the total amount of payments and collections in respect of such Pledged Security (including the proceeds of the sale of such Pledged Security received during the Due Period) that, if paid as scheduled, will be available in the Collection Account at the end of the Due Period for payment on the Secured Notes or other amounts payable pursuant to this Indenture and of certain expenses of the Issuer plus (y) any such amounts received in prior Due Periods that were not disbursed on a previous Payment Date (provided that such sum shall be computed without regard to any amounts excluded from the determination of compliance with the Coverage Tests pursuant to Section 1.2(b)).

(d)

Subject to Section 1.2(b), each Scheduled Distribution receivable with respect to a Pledged Security shall be assumed to be received on the applicable Due Date, and each such Scheduled Distribution shall be assumed to be immediately deposited in the Collection Account and, except as otherwise specified, to earn interest at the Assumed Reinvestment Rate. All such funds shall be assumed to continue to earn interest until the date on which they are required to be available in the Collection Account for transfer to the Payment Account and application, in accordance with the terms hereof, to payments of principal of or interest on the Secured Notes or other amounts payable pursuant to this Indenture.

(e)

With respect to any Collateral Debt Security as to which any interest or other payment thereon is subject to withholding tax of any Relevant Jurisdiction, each Distribution thereon shall, for purposes of the Coverage Tests and each Collateral Quality Test, be deemed to be payable net of such withholding tax unless the issuer thereof or obligor thereon is required to make additional payments sufficient on an after tax basis to cover any withholding tax imposed on payments to the Issuer with respect thereto (including in respect of any such additional payment). On any date of determination, the amount of any Scheduled Distribution due on any future date shall be assumed to be made net of any such uncompensated withholding tax based upon withholding tax rates in effect on such date of determination.

(f)

For purpose of determining compliance with the Interest Coverage Tests, it will be assumed that any amount required to be paid for taxes, filing and registration fees on the Payment Date immediately following the relevant Due Period shall be equal to the aggregate amount for which the Trustee has received an invoice or demand for payment on or prior to the relevant Measurement Date.

(g)

Any reference in the definition of “Senior Collateral Management Fee” or “Subordinate Collateral Management Fee” in Section 1.1(a) to an amount calculated with respect to a period at a per annum rate shall be computed on the basis of a 360day year and the actual number of days elapsed during the applicable Due Period.

(h)

Unless otherwise specified, test calculations that evaluate to a percentage will be rounded to the nearest one-hundredth, and test calculations that evaluate to a number or decimal will be rounded to the nearest one hundredth. 65

Processed and formatted by SEC Watch - Visit SECWatch.com

1.3.

(i)

Unless otherwise specified, all calculations required to be made and all reports which are to be prepared pursuant to this Indenture with respect to the Collateral Debt Securities, shall be made on the basis of the date on which the Issuer makes a commitment to acquire or to sell an asset, as applicable (the trade date), not the settlement date for such sale.

(j)

For the purpose of determining fees constituting Administrative Expenses payable under the Priority of Payments hereunder, periods longer or shorter than a one-month period shall be prorated based on the number of days in such period.

(k)

If the Issuer or the Collateral Manager determines that a Collateral Debt Security would fall within the definition of more than one Specified Type, then the Issuer or the Collateral Manager shall classify that obligation in a manner it deems appropriate and reasonable.

RULES OF CONSTRUCTION Unless the context otherwise clearly requires: (a)

the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined;

(b)

whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms;

(c)

the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”;

(d)

the word “will” shall be construed to have the same meaning and effect as the word “shall”;

(e)

any definition of or reference to any agreement, statute, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein);

(f)

any reference herein to any Person, or to any Person in a specified capacity, shall be construed to include such Person’s successors and assigns or such Person’s successors in such capacity, as the case may be;

(g)

all references in this instrument to designated “Sections”, “clauses” and other subdivisions are to the designated Sections, clauses and other subdivisions of this instrument as originally executed, and the words “herein”, “hereof’, “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Section, clause or other subdivision; and

(h)

unless otherwise stated to the contrary herein, any payments to be made by the Issuer (or by the Trustee on behalf of the Issuer) in respect of a Class of Notes shall be payable pari passu between any subclasses of such Class of Notes. 66

ARTICLE II THE SECURED NOTES 2.1.

FORMS GENERALLY (a)

The Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes offered and sold in reliance on Regulation S (each, a Regulation S Note) shall be issued in fully Registered form without interest coupons substantially in the form of the note attached as Exhibit A-1 (each, a Regulation S Global Note) with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office in Chicago, Illinois, as custodian for DTC and registered in the name of DTC or a nominee of DTC, duly executed by the Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be.

(b)

The Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes offered and sold in the United States pursuant to an exemption from the registration requirements of the Securities Act (Rule 144A Notes) shall be issued in fully Registered form without interest coupons substantially in the form of the note attached as Exhibit A-2 (each, a Rule 144A Global Note), with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and such legends as may be applicable thereto, which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for DTC and registered in the name of DTC or a nominee of DTC, duly executed by the Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided. The Aggregate Outstanding Amount of each Rule 144A Global Note may

Processed and formatted by SEC Watch - Visit SECWatch.com

from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as the case may be. (c)

Regulation S Global Notes and Rule 144A Global Notes may also be exchanged under the limited circumstances set forth in Section 2.4 for notes in definitive fully Registered form without interest coupons (each, a Definitive Offered Note), which may be either a Regulation S Definitive Offered Note or a Rule 144A Definitive Offered Note, with such legends as may be applicable thereto, which shall be duly executed by the Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided.

(d)

The Retained Notes offered or sold in the United States or to U.S. Persons pursuant to Rule 144A or another applicable exemption from registration under the Securities Act shall be issued in the form of physical certificates in definitive fully Registered form without interest coupons substantially in the form of the certificated note attached as Exhibit B-1 (each, a Definitive Retained Note), as the case may be, with such legends as may be applicable thereto, which shall be duly executed by the Issuer and authenticated by the Trustee or the Authenticating Agent as hereinafter provided.

(e)

The Issuer in issuing the Secured Notes may use “CUSIP” or “private placement” numbers (if then generally in use), and, if so, the Trustee will indicate the “CUSIP” or 67

Processed and formatted by SEC Watch - Visit SECWatch.com

“private placement” numbers of the Secured Notes in notices of redemption and related materials as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Secured Notes or as contained in any notice of redemption and related materials. 2.2.

AUTHORIZED AMOUNT; APPLICABLE PERIODIC INTEREST RATE; STATED MATURITY DATE; DENOMINATIONS (a)

The aggregate principal amount of Secured Notes which may be issued under this Indenture may not exceed U.S.$772,000,000, excluding Secured Notes issued upon registration of, transfer of, or in exchange for, or in lieu of, other Secured Notes pursuant to Section 2.4, 2.5 or 8.5.

(b)

Such Secured Notes shall be divided into sixteen Classes having designations, original principal amounts, original Applicable Periodic Interest Rates and Stated Maturities as follows:

De signation

Class A-1 Notes Class A-2 Notes Class A-3 Notes Class B Notes Class C Notes Class D Notes Class E Notes Class F Notes Class G Notes Class H Notes Class J Notes Class K Notes

O rigin al Prin cipal Am ou n t

Applicable Pe riodic In te re st Rate

S e cu re d Note S tate d Matu rity Date

U.S.$512,000,000 U.S.$96,000,000 U.S.$48,000,000 U.S.$37,280,000 U.S.$12,800,000 U.S.$23,200,000 U.S.$4,800,000 U.S.$3,600,000 U.S.$14,080,000 U.S.$7,200,000 U.S.$7,040,000 U.S.$6,000,000

LIBOR + 0.255% LIBOR + 0.28% LIBOR + 0.30% LIBOR + 0.35% 5.7891% LIBOR + .57% LIBOR + .68% LIBOR + 1.05% LIBOR + 1.30% LIBOR + 1.60% 7.8016% 8.4305%

August 2052 August 2052 August 2052 August 2052 August 2052 August 2052 August 2052 August 2052 August 2052 August 2052 August 2052 August 2052

The Secured Notes will be issuable in minimum denominations of U.S.$250,000 and, in each case, only in integral multiples of U.S.$1,000 in excess of such minimum denominations. After issuance, (x) a Secured Note may fail to be in compliance with the minimum denomination requirement as a result of the repayment of principal thereon in accordance with the Priority of Payments and (y) the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes or the Class K Notes may fail to be in an amount which is an integral multiple of U.S.$1,000 due to the addition to the principal amount thereof of deferred interest. (c)

Interest shall accrue on the Aggregate Outstanding Amount of each Class of Secured Notes (determined as of the first day of each Interest Period and after giving effect to any 68

Processed and formatted by SEC Watch - Visit SECWatch.com

payment of principal occurring on such day) from the Closing Date and will be payable in arrears on each Payment Date. Interest on each Class of Secured Notes and interest on Defaulted Interest will be calculated in accordance with the definition of Periodic Interest.

2.3.

(d)

The Secured Notes shall be redeemable as provided in Article IX.

(e)

The Depositary for the Global Notes shall initially be DTC.

(f)

The Secured Notes shall be numbered, lettered or otherwise distinguished in such manner as may be consistent herewith, determined by the Authorized Officer of the Issuer executing such Secured Notes as evidenced by its execution of such Secured Notes.

EXECUTION, AUTHENTICATION, DELIVERY AND DATING (a)

The Secured Notes shall be executed on behalf of the Issuer by an Authorized Officer of the Issuer. The signatures of such Authorized Officers on the Secured Notes may be manual or facsimile (including in counterparts).

(b)

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

(c)

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

(d)

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

(e)

Secured Notes issued upon transfer, exchange or replacement of other Secured Notes shall be issued in authorized denominations reflecting the original aggregate principal amount of the Secured Notes so transferred, exchanged or replaced, but shall represent only the current Aggregate Outstanding Amount of the Secured Notes so transferred, exchanged or replaced. In the event that any Secured Note is divided into more than one Secured Note in accordance with this Section 2, the original principal amount of such Secured Note shall be proportionately divided among the Secured Notes delivered in exchange therefor and shall be deemed to be the original aggregate principal amount of such subsequently issued Secured Notes.

(f)

No Secured Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Secured Note a certificate of authentication (the Certificate of Authentication), substantially in the form provided for herein, executed by the Trustee or by the Authenticating Agent by the manual signature of one of their Authorized Officers, and such certificate upon any Secured Note shall be 69

Processed and formatted by SEC Watch - Visit SECWatch.com

conclusive evidence, and the only evidence, that such Secured Note has been duly authenticated and delivered hereunder. 2.4.

REGISTRATION, TRANSFER AND EXCHANGE OF SECURED NOTES (a)

Registration of Secured Notes. The Trustee is hereby appointed as the registrar hereunder (the Note Registrar). The Trustee is hereby appointed as a transfer agent with respect to the Secured Notes (the Note Transfer Agent). The Note Registrar shall (acting solely for this purpose as agent for the Issuer) keep a register (the Note Register) at the Corporate Trust Office in which, subject to such reasonable regulations as it may prescribe, the Note Registrar shall provide for the registration of Secured Notes and the registration of transfers of Secured Notes. Upon any resignation or removal of the Note Registrar, the Issuer (after consultation with the Collateral Manager) shall propose a replacement for approval by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class. The Issuer may not terminate the appointment of the Note Registrar or any Note Transfer Agent without the consent of each Holder of Secured Notes. Subject to this Section 2.4, upon surrender for registration of transfer of any Secured Notes at the office or agency of the Issuer to be maintained as provided in Section 7.2, the Issuer shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Secured Notes of any authorized denomination and of a like aggregate principal amount. At the option of the Holder, Secured Notes may be exchanged for Secured Notes of like terms, in any authorized denominations and of like aggregate principal amount, upon surrender of the Secured Notes to be exchanged at such office or agency. Whenever any Secured Note is surrendered for exchange, the Issuer shall execute and the Trustee shall authenticate and deliver the Secured Notes that the Secured Noteholder making the exchange is entitled to receive. All Secured Notes issued and authenticated upon any registration of transfer or exchange of Secured Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Secured Notes surrendered upon such registration of transfer or exchange. Every Secured Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to a Holder for any registration of transfer or exchange of Secured Notes, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith and delivery charges, if any, not made by regular mail.

(b)

The initial sale of each Note may be made in accordance with Section 4(2) of (or another applicable exemption from registration under) the Securities Act or in accordance with Regulation S under the Securities Act. 70

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

Transfers of Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes Class G Notes and Class H Notes. (1)

Subject to Section 2.4(c)(4), exchanges or transfers of beneficial interests in a Global Note may be made only in accordance with the rules and regulations of the Depositary and the transfer restrictions contained in the legend on such Global Note and exchanges or transfers of interests in a Global Note may be made only in accordance with the following: (i)

Subject to Section 2.4(c)(1)(ii) through (vi), transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor’s nominee.

(ii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Regulation S Global Note for a beneficial interest in a Rule 144A Global Note upon provision to the Trustee and the Issuer of a written certification in the form of Exhibit C-1 (a Rule 144A Transfer Certificate).

(iii)

The Trustee shall cause the exchange or transfer of any beneficial interest in a Rule 144A Global Note for a beneficial interest in a Regulation S Global Note upon provision to the Trustee and the Issuer of a written certification substantially in the form of Exhibit C-2 (a Regulation S Transfer Certificate).

(iv)

An owner of a beneficial interest in a Regulation S Global Note may transfer such interest in the form of a beneficial interest in such Regulation S Global Note without the provision of written certification; provided that (1) such transfer is made to a Person who is not a U.S. Person in an offshore transaction in reliance on an exemption from the registration requirements of the Securities Act under Regulation S, and (2) the transferee, by purchase of such interest in such Regulation S Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Regulation S Transfer Certificate.

(v)

An owner of a beneficial interest in a Rule 144A Global Note may transfer such interest in the form of a beneficial interest in such Rule 144A Global Note without the provision of written certification; provided that the transferee, by purchase of such interest in such Rule 144A Global Note, will be deemed to have made all representations, warranties and acknowledgements set forth in the Rule 144A Transfer Certificate.

(vi)

In the event Definitive Offered Notes are issued pursuant to Section 2.4(c)(5), the Trustee shall cause the transfer of (i) any beneficial interest in a Global Note for a Definitive A-H Note that is a Regulation S Note (a Regulation S Definitive Note), upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any beneficial interest in a Global Note for a Definitive A-H Note that is a Rule 144A 71

Processed and formatted by SEC Watch - Visit SECWatch.com

Note (a Rule 144A Definitive Note), upon provision to the Trustee, the Issuer and the Note Registrar of a Rule 144A Transfer Certificate. (2)

Subject to Section 2.4(c)(4), in the event Definitive Offered Notes are issued pursuant to Section 2.4(c)(5), the Trustee shall cause the transfer of (i) any Definitive A-H Note for a beneficial interest in a Regulation S Global Note, upon provision to the Trustee and the Issuer of a Regulation S Transfer Certificate or (ii) any Definitive A-H Note for a beneficial interest in a Rule 144A Global Note, upon provision to the Trustee and the Issuer of a Rule 144A Transfer Certificate.

(3)

Upon acceptance for exchange or transfer of a beneficial interest in a Global Note for a Definitive A-H Note, or upon acceptance for exchange or transfer of a Definitive A-H Note for a beneficial interest in a Global Note, each as provided herein, the Trustee shall approve the instruction at the Depositary to adjust the principal amount of such Global Note on its records to evidence the date of such exchange or transfer and the change in the principal amount of such Global Note.

(4)

Subject to the restrictions on transfer and exchange set forth in this Section 2.4 and to any additional restrictions on transfer or exchange specified in the Definitive Offered Notes, the Holder of any Definitive A-H Note may transfer or exchange the same in whole or in part (in a principal amount equal to the minimum authorized denomination or any larger authorized amount) by surrendering such Definitive A-H Note at the Corporate Trust Office or at the office of any Note Transfer Agent, together with (x) in the case of any transfer, an executed instrument of assignment and (y) in the case of any exchange, a written request for exchange. Following a proper request for transfer or exchange, the Trustee shall (provided it has available in its possession an inventory of Definitive Offered Notes), within five Business Days of such request if made at such Corporate Trust Office, or within ten Business Days if made at the office of a Note Transfer Agent (other than the Trustee), authenticate and make available at such Corporate Trust Office or at the office of such Note Transfer Agent, as the case may be, to the transferee (in the case of transfer) or Secured Noteholder (in the case of exchange) or send by first class mail (at the risk of the transferee in the case of transfer or Secured Noteholder in the case of exchange) to such address as the transferee or Secured Noteholder, as applicable, may request, a Definitive A-H Note or Notes, as the case may require, for a like aggregate principal amount and in such authorized denomination or denominations as may be requested. The presentation for transfer or exchange of any Definitive Note shall not be valid unless made at the Corporate Trust Office or at the office of a Note Transfer Agent or by a duly authorized attorney-in-fact. Beneficial interests in Global Notes shall be exchangeable for Definitive Offered Notes only under the limited circumstances described in Section 2.4(c)(5).

(5)

Interests in a Global Note deposited with or on behalf of the Depositary pursuant to Section 2.1 hereunder shall be transferred (A) to the Beneficial Owners thereof in the form of Definitive Offered Notes only if such transfer otherwise complies with this Section 2.4 (including Section 2.4(c)(1) and (2) and (1) the Depositary notifies the Issuer that it is unwilling or unable to continue as Depositary for the Secured Notes, (2) the Depositary ceases to be a “clearing agency” registered under the Exchange Act and a successor Depositary is not appointed by the Issuer within 90 days of such notice or (3) as a result of any amendment to or 72

Processed and formatted by SEC Watch - Visit SECWatch.com

change in the laws or regulations of the Cayman Islands, or of any authority therein or thereof having power to tax, or in the interpretation or administration of such laws or regulations which become effective on or after the Closing Date, the Issuer, the Trustee or any Note Paying Agent becomes aware that it is or will be required to make any deduction or withholding from any payment in respect of the Global Notes which would not be required if the Global Notes were not represented by a global certificate or (B) to the purchaser thereof in the form of one or more Definitive Notes in accordance with the provisions of Section 2.4(c)(1). (6)

If interests in any Global Note are to be transferred to the Beneficial Owners thereof in the form of Definitive Offered Notes pursuant to Section 2.4(c)(5), such Global Note shall be surrendered by the Depositary, or its custodian on its behalf, to the Corporate Trust Office or to the Note Transfer Agent located in Chicago, Illinois and the Trustee shall authenticate and deliver without charge, upon such transfer of interests in such Global Note, an equal aggregate principal amount of Definitive Notes of authorized denominations. The Definitive Offered Notes transferred pursuant to this Section 2.4 shall be executed, authenticated and delivered only in the denominations specified in Section 2.2(b) and registered in such names as the Depositary shall direct in writing.

(7)

For so long as one or more Global Notes are Outstanding: (i)

the Trustee and its directors, officers, employees and agents may deal with the Depositary for all purposes (including the making of distributions on, and the giving of notices with respect to, the Global Notes);

(ii)

unless otherwise provided herein and subject to Section 2.4(c)(7)(i) above, the rights of Beneficial Owners shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such Beneficial Owners and the Depositary;

(iii)

for purposes of determining the identity of and principal amount of Secured Notes beneficially owned by a Beneficial Owner, the records of the Depositary shall be conclusive evidence of such identity and principal amount and the Trustee may conclusively rely on such records when acting hereunder;

(iv)

the Depositary will make book-entry transfers among the Depositary Participants of the Depositary and will receive and transmit distributions of principal of and interest on the Global Notes to such Depositary Participants; and

(v)

the Depositary Participants of the Depositary shall have no rights under this Indenture under or with respect to any of the Global Notes held on their behalf by the Depositary, and the Depositary may be treated by the Trustee and its agents, employees, officers and directors as the absolute owner of the Global Notes for all purposes whatsoever. 73

(d)

Transfers of the Retained Notes. (1)

If a holder of a beneficial interest in a Definitive Retained Note wishes at any time to transfer its interest in such Definitive Retained Note, such holder may transfer or cause the transfer of such interest for an equivalent beneficial interest in one or more such Definitive Retained Notes or Regulation S Global Notes as provided below. Upon receipt by the Issuer and the Note Registrar of (A) such holder’s Definitive Retained Note properly endorsed for assignment to the transferee and (B) in the case of a transfer to a holder taking an interest in a Definitive Retained Note, a certificate in the form of Exhibit C-3 (each a Definitive Retained Note Transfer Certificate) or, in the case of a transfer to a holder taking an interest in a Regulation S Global Note, a Regulation S Transfer Certificate substantially in the form of Exhibit C-2 given by the transferee of such beneficial interest then the Note Registrar shall cancel such Definitive Retained Note, record the transfer in the Note Register and either (i) authenticate and deliver one or more Definitive Retained Notes bearing the same designation as the Definitive Retained Notes endorsed for transfer, registered in the names specified in the assignment described in clause (A) above, or (ii) the Trustee shall cause the transfer to the Regulation S Global Note in principal amounts designated by the transferee (the Class and the aggregate of such amounts being the same as the beneficial interest in the Definitive Retained Notes surrendered by the transferor), and in the minimum denominations and integral multiples in excess thereof. In addition, the Note Registrar shall not register any transfer of Definitive Retained Notes to a proposed transferee of Definitive Retained Notes that has represented that it is a Benefit Plan Investor or a Controlling Person if the transfer would result in Benefit Plan Investors owning 25% or more of the value of the outstanding Retained Notes (as determined without regard to interests held by Controlling Persons, and otherwise contemplated by the applicable regulations under ERISA) immediately after such transfer, based on assurances received from investors. Without limiting the generality of the forgoing, the Note Registrar shall not register any transfer of Definitive Retained Notes represented by Regulation S Notes to a proposed transferee of such Definitive Retained Notes that has represented that it is or may become a Benefit Plan Investor or a Controlling Person. Without limiting the generality of the foregoing, a transfer of beneficial interests in a Definitive Retained Note not represented by a Regulation S Note will not be permitted unless a representation is obtained from each transferee of a Definitive

Processed and formatted by SEC Watch - Visit SECWatch.com

Retained Note, for the benefit of the Issuer, the Trustee, the Initial Purchaser and the Placement Agent, regarding whether it is, or is not and will not be, a Benefit Plan Investor or Controlling Person. In the case of a Definitive Retained Note represented by a Regulation S Note, each transferee will be deemed to represent that it is not and will not be a Benefit Plan Investor or Controlling Person. Any purported transfer in violation of the foregoing requirements shall be null and void ab initio, and the Note Registrar shall not register any such purported transfer and shall not authenticate and deliver such Definitive Retained Notes. (2)

If a holder of a beneficial interest in one or more Definitive Retained Notes wishes at any time to exchange its interest in such Definitive Retained Notes for an interest in one or more such Definitive Retained Notes of different principal amounts, such holder may exchange or cause the exchange of such interest for an equivalent beneficial interest in the Definitive Retained Notes bearing the same 74

Processed and formatted by SEC Watch - Visit SECWatch.com

designation as the Definitive Retained Notes endorsed for exchange as provided below. Upon receipt by the Note Registrar of (A) such holder’s Definitive Retained Notes properly endorsed for such exchange and (B) written instructions from such holder designating the number and principal amounts of the applicable Definitive Retained Notes to be issued (the aggregate principal amounts of such Definitive Retained Notes being the same as the Definitive Retained Notes surrendered for exchange), then the Note Registrar shall cancel such Definitive Retained Notes, record the exchange in the Note Register and authenticate and deliver one or more Definitive Retained Notes bearing the same designation endorsed for exchange, registered in the same names as the Definitive Retained Notes surrendered by such holder or such different names as are specified in the endorsement described in clause (A) above, in different principal amounts designated by such holder (the Class and the aggregate principal amounts being the same as the beneficial interest in the Definitive Retained Notes surrendered by such holder), and the minimum denominations and integral multiples in excess. (e)

Denominations; Qualified Purchaser Status. No Person may hold a beneficial interest in any Secured Note except in a denomination authorized for the Secured Notes of such Class under Section 2.2(b). In addition, no transfer of a Secured Note (or any interest therein) may be made to any Person that is a U.S. Person unless such Person is (A) a Qualified Institutional Buyer (or, with respect to the Retained Notes and the Income Notes, an Institutional Accredited Investor or a Permitted NS Purchaser) and (B) a Qualified Purchaser. In addition, no transfer of a Secured Note (or any interest therein) may be made to any Person that is a U.S. Person unless such Person (A) was not formed for the purpose of investing in the Issuer (except when each beneficial owner of the purchaser is a Qualified Purchaser), (B) has received the necessary consent from its beneficial owners if it is a private investment company formed before April 30, 1996, (C) 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, (D) is not a pension, profit, sharing or other retirement trust fund or plan in which the partners, beneficiaries or participants, as applicable, may designate the particular investments to be made, and in a transaction that may be effected without loss of any applicable Investment Company Act exemption, (E) will provide notice to any subsequent transferee of the transfer restrictions provided in the legend, (F) will hold and transfer in a principal amount of not less than U.S.$250,000, for it or for each account for which it is acting, and (G) will provide the Issuer from time to time such information as it may reasonably request in order to ascertain compliance with the foregoing. Any purported transfer that is not in compliance with this Section 2.4 or the legends on the Secured Notes will be void ab initio, and will not operate to transfer any rights to the transferee, notwithstanding any instructions to the contrary to the Issuer, the Trustee or any intermediary. If any purported transfer of Secured Notes or any beneficial interest therein to a purported transferee does not comply with the requirements set forth in this Section 2.4 or the legends on the Secured Notes, then the purported transferor of such Secured Notes or beneficial interest therein shall be required to cause the purported transferee to surrender the Secured Notes or any beneficial interest therein in return for a refund of the consideration paid therefor by such transferee (together with interest thereon) or to cause the purported transferee to dispose of such Secured Notes or beneficial interest promptly in one or more open market sales to one or more persons each of whom satisfies the requirements of this Section 2.4 and the legends on the Secured Notes and such purported transferor shall take, and shall cause such transferee to take, all further action necessary 75

Processed and formatted by SEC Watch - Visit SECWatch.com

or desirable, in the judgment of the Trustee, to ensure that such Secured Notes or any beneficial interest therein are held by persons in compliance therewith. (f)

(g)

Requirement to Sell. (1)

If, notwithstanding the restrictions set forth in this Section 2.4, the Issuer determines that any beneficial owner of a Rule 144A Note (A) is a U.S. Person and (B) is not a Qualified Institutional Buyer and also a Qualified Purchaser, the Issuer may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Secured Note (or interest therein) to a Person that is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser, with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30-day period, (x) upon written direction from the Issuer, the Trustee shall, and is hereby irrevocably authorized by such beneficial owner to cause its interest in such Secured Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9-611 of the UCC as applied to securities that are customarily sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is both (1) a Qualified Institutional Buyer and (2) a Qualified Purchaser and (y) pending such transfer, no further payments will be made in respect of such Secured Note (or beneficial interest therein) held by such beneficial owner.

(2)

If, notwithstanding the restrictions set forth in this Section 2.4, the Issuer determines that any beneficial owner of a Regulation S Note is (A) a U.S. Person or (B) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), the Issuer may require, by notice to such beneficial owner that such beneficial owner sell all of its right, title and interest to such Secured Note (or interest therein) to a Person that is not (1) a U.S. Person or (2) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), with such sale to be effected within 30 days after notice of such sale requirement is given. If such beneficial owner fails to effect the transfer required within such 30day period, (x) upon written direction from the Issuer, the Trustee shall, and is hereby irrevocably authorized by such beneficial owner to cause its interest in such Secured Note to be transferred in a commercially reasonable sale (conducted by the Trustee in accordance with Sections 9-610 and 9-611 of the UCC as applied to securities that are customarily sold on a recognized market or that may decline speedily in value) to a Person that certifies to the Trustee, in connection with such transfer, that such Person is neither (1) a U.S. Person nor (2) a Benefit Plan Investor or a Controlling Person (for the purposes of ERISA), and (y) pending such transfer, no further payments will be made in respect of such Secured Note (or beneficial interest therein) held by such beneficial owner.

Legends. Any Secured Note issued upon the transfer, exchange or replacement of Secured Notes shall bear such applicable legend set forth in the relevant Exhibit hereto unless there is delivered to the Trustee, the Note Registrar and the Issuer such satisfactory evidence, which may include an Opinion of Counsel, as may be reasonably required by any of the Trustee, the Note Registrar and the Issuer to the effect that neither such applicable legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A or another exemption 76

Processed and formatted by SEC Watch - Visit SECWatch.com

from registration under the Securities Act and to ensure that neither the Issuer nor the pool of Collateral becomes an investment company required to be registered under the Investment Company Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Issuer, shall authenticate and deliver Secured Notes that do not bear such applicable legend. (h)

Expenses; Acknowledgment of Transfer. Transfer, registration and exchange shall be permitted as provided in this Section 2.4 without any charge to the Secured Noteholder except for a sum sufficient to cover any tax or other governmental charge payable in connection therewith or the expenses of delivery (if any) not made by regular mail and payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith pursuant to Section 2.4(a). Registration of the transfer of a Secured Note by the Trustee shall be deemed to be the acknowledgment of such transfer on behalf of the Issuer.

(i)

Surrender upon Final Payment. Upon final payment due on the date on which all outstanding unpaid principal of a Secured Note becomes due and payable as therein or herein provided, whether at the Stated Maturity Date or by declaration of acceleration, call for redemption or otherwise, the Holder thereof shall present and surrender such Secured Note at the Corporate Trust Office of the Trustee in Chicago, Illinois.

(j)

Repurchase and Cancellation of Secured Notes. The Issuer will not purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the Outstanding Secured Notes except upon the redemption of the Secured Notes in accordance with the terms of this Indenture and the Secured Notes. The Issuer will promptly cancel all Secured Notes acquired by them pursuant to any payment, purchase, redemption, prepayment or other acquisition of Secured Notes pursuant to any provision of this Indenture and no Secured Notes may be issued in substitution or exchange for any such Secured Notes.

(k)

Compliance with Transfer Restrictions. Notwithstanding anything contained herein to the contrary, neither the Trustee nor the Note Registrar shall be responsible for ascertaining whether any transfer complies with the registration provisions of or exemptions from the Securities Act, applicable state securities laws, the rules of any Depositary, ERISA, the Code or the Investment Company Act; provided that if a certificate is specifically required by the express terms of this Section 2.4 to be delivered to the Trustee or the Note Registrar by a purchaser or transferee of a Secured Note, the Trustee or the Note Registrar, as the case may be, shall be under a duty to receive and examine the same to determine whether the transfer contemplated thereby substantially complies with the express terms of this Indenture and shall promptly notify the party delivering the same if such transfer does not comply with such terms. To the extent applicable to the Issuer, the Issuer shall impose additional restrictions to comply with the USA PATRIOT Act, and any such transfer restrictions shall be binding on each Holder or Beneficial Owner of a Secured Note. The Issuer shall notify the Trustee and the Note Registrar of the imposition of any such transfer restrictions.

(I)

Physical Secured Notes. The Issuer will promptly make available to the Trustee without charge, a reasonable supply of Definitive Notes in definitive, fully Registered Form, without interest coupons. 77

Processed and formatted by SEC Watch - Visit SECWatch.com

2.5.

MUTILATED, DEFACED, DESTROYED, LOST OR STOLEN SECURED NOTES

If (a) any mutilated or defaced Secured Note is surrendered to a Note Transfer Agent, or if there shall be delivered to the Issuer, the Trustee and the Note Transfer Agent (each, a Specified Person) evidence to their reasonable satisfaction of the destruction, loss or theft of any Secured Note, and (b) there is delivered to the Specified Persons such security or indemnity as may reasonably be required by them to save each of them harmless then, in the absence of notice to the Specified Persons that such Secured Note has been acquired by a bona fide purchaser, the Issuer shall execute and shall direct the Trustee to authenticate, and upon Issuer Request the Trustee shall authenticate and deliver, in lieu of any such mutilated, defaced, destroyed, lost or stolen Secured Note, a new Secured Note of the same Class as such mutilated, defaced, destroyed, lost or stolen Secured Note, of like tenor (including the same date of issuance) and equal principal amount, registered in the same manner, dated the date of its authentication, bearing interest from the date to which interest has been paid on the mutilated, defaced, destroyed, lost or stolen Secured Note and bearing a number not contemporaneously outstanding. If, after delivery of such new Secured Note, a bona fide purchaser of the predecessor Secured Note presents for payment, transfer or exchange such predecessor Secured Note, the Specified Persons shall be entitled to recover such new Secured Note from the Person to whom it was delivered or any Person taking therefrom, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Specified Persons in connection therewith. In case any such mutilated, defaced, destroyed, lost or stolen Secured Note has become due and payable, the Issuer in its (as applicable) discretion may, instead of issuing a new Secured Note, pay such Secured Note without requiring surrender thereof except that any mutilated Secured Note shall be surrendered. Upon the issuance of any new Secured Note under this Section 2.5, the Issuer, the Trustee or any Note Transfer Agent may require the payment by the registered Holder thereof of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Secured Note issued pursuant to this Section 2.5 in lieu of any mutilated, defaced, destroyed, lost or stolen Secured Note, shall constitute an original additional contractual obligation of the Issuer and such new Secured Note shall be entitled, subject to the second paragraph of this Section 2.5, to all the benefits of this Indenture equally and proportionately with any and all other Secured Notes duly issued hereunder. The provisions of this Section 2.5 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, defaced, destroyed, lost or stolen Secured Notes. 2.6.

PAYMENT OF PRINCIPAL AND INTEREST; RIGHTS PRESERVED (a)

Each Class of Secured Notes shall accrue interest during each Interest Period applicable to such Class in the manner and at the Applicable Periodic Interest Rate specified in Section 2.2. Interest on each Class of Secured Notes shall be due and payable on each Payment Date; provided that (i) interest on the Class A-2 Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A-1 Notes (together with any Defaulted Interest thereon), (ii) interest on the Class A-3 Notes is subordinated in right of payment to the prior 78

Processed and formatted by SEC Watch - Visit SECWatch.com

payment in full on each Payment Date of the interest due and payable on the Class A-1 Notes and the Class A-2 Notes (together with any Defaulted Interest thereon), (iii) interest on the Class B Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), (iv) interest on the Class C Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon) and on the Class B Notes (together with any Defaulted Interest thereon), (v) interest on the Class D Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon) and on the Class C Notes (together with any Defaulted Interest thereon), (vi) interest on the Class E Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon) and on the Class D Notes (together with any Defaulted Interest thereon), (vii) interest on the Class F Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon) and on the Class E Notes (together with any Defaulted Interest thereon), (viii) interest on the Class G Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon) and on the Class F Notes (together with any Defaulted Interest thereon), (ix) interest on the Class H Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon), on the Class F Notes (together with any Defaulted Interest thereon) and on the Class G Notes (together with any Defaulted Interest thereon), (x) interest on the Class J Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon), on the Class F Notes (together with any Defaulted Interest thereon), on the Class G Notes (together with any Defaulted Interest thereon) and on the Class H Notes (together with any Defaulted Interest thereon), (xi) interest on the Class K Notes is subordinated in right of payment to the prior payment in full on each Payment Date of the interest due and payable on the Class A Notes (together with any Defaulted Interest thereon), on the Class B Notes (together with any Defaulted Interest thereon), on the Class C Notes (together with any Defaulted Interest thereon), on the Class D Notes (together with any Defaulted Interest thereon), on the Class E Notes (together with any Defaulted Interest thereon), on the 79

Processed and formatted by SEC Watch - Visit SECWatch.com

Class F Notes (together with any Defaulted Interest thereon), on the Class G Notes (together with any Defaulted Interest thereon), on the Class H Notes (together with any Defaulted Interest thereon) and on the Class J Notes (together with any Defaulted Interest thereon) and (xii) interest on all Secured Notes is subordinated in right of payment to the prior payment in full on each Payment Date of other amounts in accordance with Section 11.1. Except as provided in Section 5.5, no payment shall be made by the Issuer hereunder other than on a Payment Date. So long as any Class A Notes or Class B Notes are Outstanding, any Class C Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class C Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class C Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, any Class D Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class D Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class D Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding, any Class E Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class E Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class E Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding, any Class F Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class F Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class F Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes are Outstanding, any Class G Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class G Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class G Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes or Class G Notes are Outstanding, any Class H Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class H Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class H Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. 80

So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes are Outstanding, any Class J Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class J Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class J Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. So long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes or Class J Notes are Outstanding, any Class K Applicable Periodic Interest Shortfall Amount shall be deferred and added to the then Aggregate Outstanding Amount of the Class K Notes and shall not be considered “due and payable” for the purposes of Section 5.1(a) until the Payment Date on which funds are available to pay such Class K Applicable Periodic Interest Shortfall Amount in accordance with Section 11.1. (b)

The principal of each Secured Note shall be payable no later than the Stated Maturity Date thereof unless the unpaid principal of such Secured Note becomes due and payable at an earlier date by declaration of acceleration, call for redemption or otherwise; provided that: (1)

so long as any Class A-1 Notes are Outstanding, except as provided in Article IX, the payment of principal of the Class A-2 Notes, the Class A-3 Notes, the B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes (x) may only occur after principal of the Class A-1 Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A-1 Notes and other amounts payable in accordance with Section 11.1;

(2)

so long as any Class A-1 Notes or Class A-2 Notes are Outstanding, except as provided in Article IX, the payment

Processed and formatted by SEC Watch - Visit SECWatch.com

of principal of the Class A-3 Notes, the B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes, (x) may only occur after principal of the Class A-1 Notes and Class A-2 Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A-1 Notes and Class A-2 Notes and other amounts payable in accordance with Section 11.1; (3)

so long as any Class A Notes are Outstanding, except as provided in Article IX, the payment of principal of the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes (x) may only occur after principal of the Class A Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and other amounts payable in accordance with Section 11.1;

(4)

so long as any Class A Notes or Class B Notes are Outstanding, except as provided in Article IX, the payment of principal of the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H 81

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes, the Class J Notes and the Class K Notes (x) may only occur after principal of the Class A Notes and the Class B Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes and Class B Notes and other amounts payable in accordance with Section 11.1; (5)

so long as any Class A Notes, Class B Notes or Class C Notes are Outstanding, except as provided in Article IX, the payment of principal of the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes (x) may only occur after principal of the Class A Notes, the Class B Notes and the Class C Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes and the Class C Notes and other amounts payable in accordance with Section 11.1;

(6)

so long as any Class A Notes, Class B Notes, Class C Notes or Class D Notes are Outstanding, except as provided in Article IX, the payment of principal of the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes (x) may only occur after principal of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes and other amounts payable in accordance with Section 11.1;

(7)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes are Outstanding, except as provided in Article IX, the payment of principal of the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes (x) may only occur after principal of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and other amounts payable in accordance with Section 11.1;

(8)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes are Outstanding, except as provided in Article IX, the payment of principal of the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes (x) may only occur after principal of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes and other amounts payable in accordance with Section 11.1;

(9)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes or Class G Notes are Outstanding, except as provided in Article IX, the payment of principal of the Class H Notes, the Class J Notes and the Class K Notes (x) may only occur after principal of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E 82

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes, the Class F Notes and the Class G Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes and other amounts payable in accordance with Section 11.1; (10)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes are Outstanding, except as provided in Article IX, the payment of principal of the Class J Notes and the Class K Notes (x) may only occur after principal of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes and other amounts payable in accordance with Section 11.1; and

(11)

so long as any Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes or Class J Notes are Outstanding, except as provided in Article IX, the payment of principal of the Class K Notes (x) may only occur after principal of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes and the Class J Notes has been paid in full and (y) shall be subordinated to the payment on each Payment Date of the principal and interest due and payable on the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes and the Class J Notes and other amounts payable in accordance with Section 11.1.

(c)

So long as the Coverage Tests are satisfied, principal will not be payable on any Class of Secured Notes except (i) upon the occurrence of a Redemption, (ii) in the case of any Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes to pay amounts in respect of the Class C Cumulative Applicable Periodic Interest Shortfall Amount, the Class D Cumulative Applicable Periodic Interest Shortfall Amount, the Class E Cumulative Applicable Periodic Interest Shortfall Amount, the Class F Cumulative Applicable Periodic Interest Shortfall Amount, the Class G Cumulative Applicable Periodic Interest Shortfall Amount, the Class H Cumulative Applicable Periodic Interest Shortfall Amount, the Class J Cumulative Applicable Periodic Interest Shortfall Amount or the Class K Cumulative Applicable Periodic Interest Shortfall Amount, as the case may be, in accordance with Section 11.1 and (iii) on each Payment Date, in accordance with Section 11.1.

(d)

As a condition to the payment of any principal of or interest on any Secured Note without the imposition of withholding tax, any Note Paying Agent shall require the previous delivery of properly completed and signed applicable U.S. federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or applicable successor 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 Internal Revenue Service Form W-8 (or applicable successor form) in the case of a person that is not a “United States person” within the 83

Processed and formatted by SEC Watch - Visit SECWatch.com

meaning of Section 7701(a)(30) of the Code) or other certification acceptable to it to enable the Issuer, the Trustee and any Note Paying Agent to determine their duties and liabilities with respect to any taxes or other charges that they may be required to pay, deduct or withhold in respect of such Secured Note or the Holder of such Secured Note under any present or future law or regulation of the Cayman Islands or the United States or any present or future law or regulation of any political subdivision thereof or taxing authority therein or to comply with any reporting or other requirements under any such law or regulation. (e)

All payments made by the Issuer under the Secured Notes will be made without any deduction or withholding for or on the account of any tax unless such deduction or withholding is required by applicable law, as modified by the practice of any relevant governmental authority, then in effect. If the Issuer is so required to deduct or withhold, then the Issuer will not be obligated to pay any additional amounts in respect of such withholding or deduction.

(f)

Payments in respect of principal of and interest on the Secured Notes shall be payable by wire transfer in immediately Available Funds to a Dollar account maintained by the Secured Noteholders in accordance with wire transfer instructions received by any Note Paying Agent on or before the Record Date or, if no wire transfer instructions are received by a Note Paying Agent, by a Dollar check drawn on a bank in the United States mailed to the address of such Secured Noteholder as it appears on the Note Register at the close of business on the Record Date for such payment.

(g)

The principal of and interest on any Secured Note which is payable on a Redemption Date or in accordance with Section 11.1 on a Payment Date and is punctually paid or duly provided for on such Redemption Date or Payment Date shall be paid to the Person in whose name that Secured Note (or one or more predecessor Secured Notes) is registered at the close of business on the Record Date for such payment. All such payments that are mailed or wired and returned to the Note Paying Agent shall be held for payment as herein provided at the office or agency of the Issuer to be maintained as provided in Section 7.2. Payments to Holders of the Secured Notes of each Class shall be made in the proportion that the Aggregate Outstanding Amount of the Secured Notes of such Class registered in the name of each such Holder on the Record Date for such payment bears to the Aggregate Outstanding Amount of all Secured Notes of such Class on such Record Date.

(h)

Payment of any Defaulted Interest may be made in any other lawful manner in accordance with Section 11.1 if notice of such payment is given by the Trustee to the Issuer and the Secured Noteholders, and such manner of payment shall be deemed practicable by the Trustee.

(i)

All reductions in the principal amount of a Secured Note (or one or more predecessor Secured Notes) effected by payments of installments of principal made on any Payment Date or Redemption Date shall be binding upon all future Holders of such Secured Note and of any Secured Note issued upon the registration of transfer thereof, or in exchange therefor, or in lieu thereof, whether or not such payment is noted on such Secured Note.

(j)

Notwithstanding anything to the contrary herein, the obligations of the Issuer under the Secured Notes or this Indenture or arising in connection herewith are limited recourse 84

Processed and formatted by SEC Watch - Visit SECWatch.com

obligations of the Issuer payable solely from the Collateral and following realization of the Collateral, all obligations of and all claims against the Issuer hereunder or arising in connection herewith shall be extinguished and shall not thereafter revive. No recourse shall be had against any Officer, member, director, employee, security holder or incorporator of the Issuer or its respective successors or assigns for the payment of any amounts payable under the Secured Notes or this Indenture. It is understood that the foregoing provisions of this Section 2.6(j) shall not (i) prevent recourse to the Collateral for the sums due or to become due under any security, instrument or agreement which is part of the Collateral or (ii) constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Secured Notes or secured by this Indenture until such Collateral has been realized, whereupon any outstanding indebtedness or obligation shall be extinguished. It is further understood that the foregoing provisions of this Section 2.6(j) shall not limit the right of any Person to name the Issuer as a party defendant in any action or suit or in the exercise of any other remedy under the Secured Notes or this Indenture, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity. (k)

Subject to the foregoing provisions of this Section 2.6 and the provisions of Sections 2.4 and 2.5, each Secured Note delivered under this Indenture and upon registration of, transfer of, or in exchange for, or in lieu of any other Secured Note shall carry the rights of unpaid interest and principal that were carried by such other Secured Note. ARTICLE III CONDITIONS PRECEDENT

3.1.

GENERAL PROVISIONS

The Secured Notes may be executed by the Issuer and delivered to the Trustee for authentication and thereupon the same shall be authenticated and delivered by the Trustee (or an Authenticating Agent on its behalf) upon Issuer Request, upon receipt by the Trustee of the following: (a)

an Officer’s certificate of the Issuer, (A) evidencing the authorization by Board Resolution of the execution and delivery of, and the performance of the Issuer’s obligations under, each Transaction Document, in each case as may be amended on or prior to, and as in effect on, the Closing Date, and the execution, authentication and delivery of the Secured Notes and specifying the Stated Maturity Date, the principal amount and the Applicable Periodic Interest Rate with respect to each Class of Secured Notes to be authenticated and delivered, and (B) certifying that (1) the attached copy of such Board Resolution is a true and complete copy thereof, (2) such resolutions have not been rescinded and are in full force and effect on and as of the Closing Date and (3) the Officers authorized to execute and deliver such documents hold the offices and have the signatures indicated thereon;

(b)

either (A) a certificate of the Issuer, or other official document evidencing the due authorization, approval or consent of any governmental body or bodies, at the time having jurisdiction in the premises, together with an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee and the Initial Hedge Counterparty on which the Trustee and the Initial Hedge Counterparty are entitled to rely to the effect that no other authorization, approval or consent of any governmental body is required for the 85

Processed and formatted by SEC Watch - Visit SECWatch.com

valid issuance of the Secured Notes, or (B) an Opinion of Counsel to the Issuer satisfactory in form and substance to the Trustee and the Initial Hedge Counterparty to the effect that no such authorization, approval or consent of any governmental body is required for the valid issuance of the Secured Notes except as may have been given; and (c)

(1)

an opinion of Clifford Chance US LLP, special New York counsel to the Issuer, dated the Closing Date, in form and substance satisfactory to the Trustee;

(2)

an opinion of Walkers, special Cayman Islands counsel to the Issuer, dated the Closing Date, in form and substance satisfactory to the Trustee;

(3)

an opinion of Kennedy Covington Lobdell & Hickman, L.L.P., counsel to the Trustee, dated the Closing Date, in form and substance satisfactory to the Trustee;

(4)

an opinion of Thacher Proffitt & Wood LLP, counsel to the Collateral Manager, dated the Closing Date, in form and substance satisfactory to the Trustee; and

(5)

an opinion of in-house counsel to the Initial Hedge Counterparty, dated the Closing Date, in form and substance satisfactory to the Trustee;

(d)

an Officer’s certificate of the Issuer, stating that the Issuer is not in Default under this Indenture and that the issuance of the Secured Notes will not result in a breach of any of the terms, conditions or provisions of, or constitute a Default under, the Articles, any indenture or other agreement or instrument to which the Issuer is a party or by which it is bound, or any order of any court or administrative agency entered in any Proceeding to which the Issuer is a party or by which it may be bound or to which it may be subject; that no Event of Default shall have occurred and be continuing; that all of the representations and warranties contained herein are true and correct as of the Closing Date; that all conditions precedent provided in this Indenture relating to the authentication and delivery of the Secured Notes applied for (including in Section 3.2) have been complied with; and that all expenses due or accrued with respect to the Offering or relating to actions taken on or in connection with the Closing Date have been paid;

(e)

an Accountants’ Report (A) confirming the information with respect to each Collateral Debt Security (other than its price) set forth on a schedule setting forth each Collateral Debt Security and the information provided by the Issuer with respect to every other asset forming part of the Collateral, by reference to such sources as shall be specified therein, and (B) specifying the procedures undertaken by them to review data and computations relating to the foregoing statement;

(f)

executed counterparts of this Indenture, the Account Control Agreement, the Collateral Administration Agreement, the Collateral Management Agreement and the other Transaction Documents;

(g)

an executed copy of the Initial Hedge Agreement and an executed copy of the Collateral Assignment of Hedge Agreement with respect thereto (and all acknowledgments thereto);

(h)

execution and delivery of the Financing Statement for filing against the Issuer with the Recorder of Deeds in the District of Columbia; and 86

Processed and formatted by SEC Watch - Visit SECWatch.com

(i) 3.2.

evidence of an entry having been made in the Issuer’s Register of Mortgages and Charges in respect of the charge.

SECURITY FOR THE SECURED NOTES Prior to the issuance of the Secured Notes on the Closing Date, the Issuer shall cause the following conditions to be satisfied: (a)

Grant of Security Interest; Delivery of Collateral Debt Securities. The Grant pursuant to the granting clauses of this Indenture of all of the Issuer’s right, title and interest in and to the Collateral and the transfer of all Collateral Debt Securities purchased by the Issuer on the Closing Date (as set forth in Schedule A) to the Trustee in the manner provided in Section 3.3(b).

(b)

Certificate of the Issuer. The delivery to the Trustee of a certificate of an Authorized Officer of the Issuer or the Collateral Manager, for and on behalf of the Issuer, dated as of the Closing Date, to the effect that (x) the Issuer has no assets other than the Collateral, (y) the Issuer has no investments that do not qualify as Collateral Debt Securities or Eligible Investments and (z) in the case of each Collateral Debt Security identified on Schedule A and pledged to the Trustee for inclusion in the Collateral on the Closing Date: (1)

the Issuer is the owner of such Collateral Debt Security free and clear of any liens, claims or encumbrances of any nature whatsoever except for those which are being released on the Closing Date and except for those Granted pursuant to this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on such Collateral Debt Security prior to the first Payment Date and owed by the Issuer to the seller of such Collateral Debt Security;

(2)

the Issuer has acquired its ownership in such Collateral Debt Security in good faith without notice of any adverse claim (within the meaning given to such term by Section 8-102(a)(1) of the UCC), except as described in clause (1) above;

(3)

the Issuer has not assigned, pledged or otherwise encumbered any interest in such Collateral Debt Security (or, if any such interest has been assigned, pledged or otherwise encumbered, it has been released) other than interests Granted pursuant to this Indenture;

(4)

the Issuer has full right to Grant a security interest in and assign and pledge all of its right, title and interest in such Collateral Debt Security to the Trustee;

(5)

the information set forth with respect to such Collateral Debt Security on Schedule A is correct and each such Collateral Debt Security is transferred to the Trustee as required by Section 3.2(a) (or, if any such Collateral Debt Security is not so transferred to the Trustee on the Closing Date, the Issuer has entered into a binding agreement to purchase such Collateral Debt Security for settlement within 10 days after the Closing Date);

(6)

each such Collateral Debt Security satisfies the requirements of the definition of “Collateral Debt Security” and is not a Defaulted Security; and 87

Processed and formatted by SEC Watch - Visit SECWatch.com

(7)

upon Grant by the Issuer, the Trustee has a first priority perfected security interest in the Collateral (assuming that any Clearing Corporation, Securities Intermediary or other entity not within the control of the Issuer involved in the Grant of Collateral takes the actions required of it under Section 3.3(b) for perfection of that interest) and a “securities entitlement” (as defined in the UCC) with respect to Financial Assets.

(c)

Rating Letters. The delivery to the Trustee of an Officer’s certificate of the Issuer, to the effect that (i) attached thereto are true and correct copies of (A) a letter signed by Fitch confirming that the Class A-1 Notes have been rated “AAA”, the Class A-2 Notes have been rated “AAA”, the Class A-3 Notes have been rated “AAA”, the Class B Notes have been rated at least “AA”, the Class C Notes have been rated at least “A+”, the Class D Notes have been rated at least “A”, the Class E Notes have been rated at least “A-”, the Class F Notes have been rated at least “BBB+”, the Class G Notes have been rated at least “BBB”, the Class H Notes have been rated at least “BBB-”, the Class J Notes have been rated at least “BB+” and the Class K Notes have been rated at least “BB”; (B) a letter signed by Moody’s confirming that the Class A-1 Notes have been rated “Aaa”, the Class A-2 Notes have been rated “Aaa”, the Class A-3 Notes have been rated “Aaa”, the Class B Notes have been rated at least “Aa2”, the Class C Notes have been rated at least “Al”, the Class D Notes have been rated at least “A2,” the Class E Notes have been rated at least “A3,” the Class F Notes have been rated at least “Baal,” the Class G Notes have been rated at least “Baa2,” the Class H Notes have been rated at least “Baa3,” the Class J Notes have been rated at least “Ba1” and the Class K Notes have been rated at least “Ba2” and (C) a letter signed by S&P confirming that the Class A-1 Notes have been rated “AAA”, the Class A-2 Notes have been rated “AAA”, the Class A-3 Notes have been rated “AAA”, the Class B Notes have been rated at least “AA”, the Class C Notes have been rated at least “A+”, the Class D Notes have been rated at least “A,” the Class E Notes have been rated at least “A-”, the Class F Notes have been rated at least “BBB+,” the Class G Notes have been rated at least “BBB,” the Class H Notes have been rated at least “BBB-,” the Class J Notes have been rated at least “BB+” and the Class K Notes have been rated at least “BB” and (ii) each such rating is in full force and effect on the Closing Date.

(d)

Accounts. The delivery by the Trustee of evidence of the establishment of the Payment Account, the Collection Account (including each Collateral Sub-Account established therein), the Expense Reserve Account, the Discretionary Ramp-Up Interest Reserve Account, the Non-Monthly Pay Asset Interest Reserve Account, the Collateral Account and the Uninvested Proceeds Account, each to be established on the Closing Date.

(e)

Funding Certificate. The delivery to the Trustee of a funding certificate (the Funding Certificate), duly executed by an Authorized Officer of the Issuer, relating to, among other things, the disposition of the proceeds of the issuance of the Secured Notes, dated the Closing Date, in substantially the form of Exhibit D hereto.

(f)

Purchases. The delivery to the Trustee of a certification of the Issuer that it shall have entered into one or more binding agreements to purchase, for settlement on or following the Closing Date in accordance with customary settlement procedures in the relevant markets, Collateral Debt Securities having an aggregate Principal Balance of not less than U.S. $600,000,000. 88

Processed and formatted by SEC Watch - Visit SECWatch.com

3.3.

CUSTODIANSHIP; TRANSFER OF COLLATERAL DEBT SECURITIES AND ELIGIBLE INVESTMENTS (a)

The Trustee shall hold all Certificated Securities and Instruments in physical form at the office of a custodian appointed by it in Illinois (together with any successor, the Custodian). Initially, such Custodian shall be LaSalle Bank National Association with its address: 181 West Madison Street, 32nd Floor, Chicago, Illinois 60602, Attention: CDO Trust Services Group — NStar Real Estate CDO IX, Ltd. Any successor custodian shall be a state or national bank or trust company that is not an Affiliate of the Issuer, has a long-term debt rating of at least “BBB+” by S&P and has a combined capital and surplus of at least U.S.$250,000,000.

(b)

Each Collateral Debt Security, Equity Security and Eligible Investment shall be credited to the appropriate Account. Each time that the Issuer shall direct or cause the acquisition of any Collateral Debt Security, Equity Security or Eligible Investment, the Trustee (on behalf of the Issuer) shall, if such Collateral Debt Security, Equity Security or Eligible Investment has not already been transferred to the Collateral Account and credited thereto, cause the transfer of such Collateral Debt Security, Equity Security or Eligible Investment to the Custodian to be held in and credited to the Collateral Account for the benefit of the Trustee in accordance with the terms of this Indenture. The security interest of the Trustee in the funds or other property utilized in connection with such acquisition shall, immediately and without further action on the part of the Trustee, be released. The security interest of the Trustee shall nevertheless come into existence and continue in the Collateral Debt Security, Equity Security or Eligible Investment so acquired, including all rights of the Issuer in and to any contracts related to and proceeds of such Collateral Debt Security, Equity Security or Eligible Investment.

(c)

On the Closing Date, on each day thereafter, if any, that any Collateral is acquired or otherwise becomes subject to the lien of this Indenture and on the Effective Date, the Issuer represents and warrants to the Trustee as follows: (1)

This Indenture creates a valid and continuing security interest (as defined in the applicable Uniform Commercial Code) in the Collateral in favor of the Trustee on behalf and for the benefit of the Secured Parties, which security interest is prior to all other liens and security interests, and is enforceable as such as against creditors of and purchasers from the Issuer and, upon delivery of the Collateral Debt Securities and filing of the appropriate financing statements in the appropriate filing offices, the lien and security interest created by this Indenture shall be a perfected first priority security interest in favor of the Trustee for the benefit of the Secured Parties.

(2)

The Issuer owns and has good and marketable title to the Collateral free and clear of any liens, claims, encumbrances or defects of any nature whatsoever except for those which are being released on the Closing Date or on the date of purchase by the Issuer or those created pursuant to or contemplated under this Indenture and encumbrances arising from due bills, if any, with respect to interest, or a portion thereof, accrued on any Collateral Debt Security prior to the first payment date and owed by the Issuer to the seller of such Collateral Debt Security. 89

Processed and formatted by SEC Watch - Visit SECWatch.com

(3)

The Issuer has acquired its ownership in each such Collateral Debt Security, or will acquire in the case of any Collateral Debt Securities which the Issuer has on or before the Closing Date committed to purchase, but which will not have settled on or before the Closing Date or any additional Collateral Debt Securities or Substitute Collateral Debt Securities acquired by the Issuer after the Closing Date, in good faith without notice of any adverse claim, except as described in clause (2) above.

(4)

The Issuer (a) has delivered each such Collateral Debt Security, or will deliver any Collateral Debt Securities which the Issuer has on or before the Closing Date committed to purchase, but which will not have settled on or before the Closing Date, or any additional Collateral Debt Securities or Substitute Collateral Debt Securities acquired by the Issuer after the Closing Date, to the Trustee and (b) has not assigned, pledged, sold, granted a security interest in or otherwise encumbered any interest in such Collateral Debt Security other than interests granted pursuant to this Indenture.

(5)

The Issuer has full right to grant all security interests granted herein.

(6)

All Collateral is comprised of either “securities”, “instruments”, “tangible chattel paper”, “accounts”, “security entitlements” or “general intangibles”, in each case as defined in the applicable Uniform Commercial Code.

(7)

Each of the Accounts, and all subaccounts thereof, constitute securities accounts as defined in the applicable Uniform Commercial Code.

(8)

All items of the Collateral that constitute security entitlements have been and will have been credited to one of the securities accounts. The securities intermediary for each of the Accounts has agreed to treat all assets credited to the securities accounts as financial assets under the applicable Uniform Commercial Code.

(9)

Other than the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Collateral. The Issuer has not authorized the filing of, and is not aware of any financing statements against the Issuer that include a description of collateral covering the Collateral other than any financing statement relating to the security interest granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder or that has been terminated. The Issuer is not aware of any judgment, Pension Benefit Guarantee Corporation lien or tax lien filings against it.

(10)

The Issuer has caused or will have caused, within ten days of the Closing Date, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Collateral granted to the Trustee on behalf and for the benefit of the Secured Parties hereunder that constitutes chattel paper, instruments, accounts, securities entitlements or general intangibles under the applicable Uniform Commercial Code, if any.

(11)

The Trustee or the Accountholder has in its possession all original copies of the instruments that constitute or evidence the Collateral, if any. The instruments, 90

Processed and formatted by SEC Watch - Visit SECWatch.com

loan agreements and leases that constitute or evidence the Collateral do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties. All financing statements filed or to be filed against the Issuer in favor of the Trustee on behalf and for the benefit of the Secured Parties in connection herewith describing the Collateral contain a statement to the following effect: “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Trustee on behalf and for the benefit of (A) itself and for the benefit of the Noteholders, (B) the Collateral Manager and (C) each Hedge Counterparty.” (12)

The authoritative copy of any chattel paper that constitutes or evidences the Collateral, if any, has been communicated to the Trustee and has no marks or notations indicating that it has been pledged, assigned or otherwise conveyed to any Person other than the Trustee on behalf and for the benefit of the Secured Parties.

(13)

The Issuer has received or will receive all consents and approvals required by the terms of the underlying loan agreement, indenture or other underlying documentation, if any, relating to the Collateral to the transfer to the Trustee on behalf and for the benefit of the Secured Parties of its interest and rights in the Collateral hereunder.

(14)

The Issuer, the Accountholder and the Trustee have entered into the Account Control Agreement pursuant to which the Accountholder has agreed to comply with all instructions originated by the Trustee relating to the Accounts without further consent by the Issuer.

(15)

None of the Accounts is in the name of any person other than the Trustee, held on behalf and for the benefit of the Secured Parties. The Issuer has not consented to the Trustee or the Accountholder maintaining any of the Accounts to comply with entitlement orders or instructions of any Person other than the Trustee.

(16)

Notwithstanding any other provision of this Indenture or any other related Transaction Document, the representations in this Section 3.3(c) shall be continuing and deemed to be updated on any day a new item of Collateral is acquired, and remain in full force and effect until such time as all obligations under this Indenture and the Notes have been finally and fully paid and performed and shall survive the termination of this Indenture for any other reason.

(17)

The parties to this Indenture (i) shall not, without obtaining a Rating Agency Confirmation, waive any of the representations in this Section 3.3(c); (ii) shall provide each of the Rating Agencies with prompt written notice of any breach of the representations contained in this Section 3.3(c) upon becoming aware thereof; and (iii) shall not, without obtaining a Rating Agency Confirmation (as determined after any adjustment or withdrawal of the ratings following notice of such breach), waive a breach of any of the representations in this Section 3.3(c). 91

ARTICLE IV SATISFACTION AND DISCHARGE 4.1.

SATISFACTION AND DISCHARGE OF INDENTURE

This Indenture shall be discharged and shall cease to be of further effect with respect to the Collateral securing the Secured Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Secured Notes, (iii) rights of Secured Noteholders to receive payments of principal thereof and interest thereon, (iv) the rights, obligations and immunities of the Trustee hereunder, (v) the rights, obligations and immunities of the Collateral Manager hereunder and under the Collateral Management Agreement and (vi) the rights of the Secured Parties as beneficiaries hereof with respect to the property deposited with the Trustee and payable to all or any of them; and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when: (a)

either: (1)

all Secured Notes theretofore authenticated and delivered (other than (A) Secured Notes which have been mutilated, defaced, destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.5 and (B) Secured Notes for whose payment funds have theretofore irrevocably been deposited in trust and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 7.3) have been delivered to the Trustee for cancellation; or

(2)

all Secured Notes not theretofore delivered to the Trustee for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity Date within one year, or (C) are to be called for redemption pursuant to Section 9.1 under an arrangement satisfactory to the Trustee for the giving of notice of redemption by the Issuer pursuant to Section 9.3 and the Issuer has irrevocably deposited or caused to be deposited with the Trustee, in trust for such purpose, Cash or non-callable direct obligations of the United States in an amount

Processed and formatted by SEC Watch - Visit SECWatch.com

sufficient, according to the Priority of Payments as verified by a firm of nationally recognized Independent certified public accountants, to pay and discharge the entire indebtedness on all Secured Notes not theretofore delivered to the Trustee for cancellation, including all principal and interest (including Class C Cumulative Applicable Periodic Interest Shortfall Amount, Class D Cumulative Applicable Periodic Interest Shortfall Amount, Class E Cumulative Applicable Periodic Interest Shortfall Amount, Class F Cumulative Applicable Periodic Interest Shortfall Amount, Class G Cumulative Applicable Periodic Interest Shortfall Amount, Class H Cumulative Applicable Periodic Interest Shortfall Amount, Class J Cumulative Applicable Periodic Interest Shortfall Amount and Class K Cumulative Applicable Periodic Interest Shortfall Amount accrued to the date of such deposit) (in the case of Secured Notes which have become due and payable) or to the Stated Maturity Date or the Redemption Date, as the case may be; provided that (x) such obligations are entitled to the full faith and credit of the United States and (y) this subclause (2) shall not apply if an election to act in accordance with the provisions of Section 5.5(a) shall have been made and not rescinded; 92

Processed and formatted by SEC Watch - Visit SECWatch.com

(b)

the Issuer has paid or caused to be paid all other sums payable hereunder (including amounts payable pursuant to any Hedge Agreement, the Income Note Paying Agency Agreement, the Corporate Services Agreement, the Collateral Management Agreement and the Collateral Administration Agreement) and no other amounts will become due and payable by the Issuer; and

(c)

the Issuer has delivered to the Trustee and the Initial Hedge Counterparty Officer’s certificates and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the rights and obligations of the Issuer, the Trustee and the Hedge Counterparty and, if applicable, the Secured Noteholders, as the case may be, under Sections 2.6, 4.1, 4.2, 5.9, 5.18, 6.7, 6.8, 7.1 and 7.3 shall survive. 4.2.

APPLICATION OF TRUST MONEY

All funds deposited with the Trustee pursuant to Section 4.1 for the payment of principal of and interest on the Secured Notes and amounts payable pursuant to any Hedge Agreement, the Collateral Management Agreement, the Income Note Paying Agency Agreement, the Corporate Services Agreement and the Collateral Administration Agreement shall be held in trust and applied by it in accordance with the provisions of the Secured Notes and this Indenture, including the Priority of Payments, for the payment either directly or through any Note Paying Agent, as the Trustee may determine, to the Person entitled thereto of the respective amounts in respect of which such funds has been deposited with the Trustee; but such funds need not be segregated from other funds except to the extent required herein or required by law. 4.3.

REPAYMENT OF FUNDS HELD BY NOTE PAYING AGENT

In connection with the satisfaction and discharge of this Indenture with respect to the Secured Notes, all funds then held by any Note Paying Agent other than the Trustee under the provisions of this Indenture shall, upon demand of the Issuer, be paid to the Trustee to be held and applied pursuant to Section 7.3 and in accordance with the Priority of Payments and thereupon such Note Paying Agent shall be released from all further liability with respect to such funds. ARTICLE V EVENTS OF DEFAULT; REMEDIES 5.1.

EVENTS OF DEFAULT

Event of Default is defined as any one of the following wherever used herein and means any one of the following events as set forth in Section 5.1(a) through (h) (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a)

a default for five Business Days in the payment, when due and payable, of any interest on any Class A Note or Class B Note or, if there are no Class A Notes or Class B Notes Outstanding, on any Class C Note or, if there are no Class A Notes, Class B Notes or Class C Notes Outstanding, on any Class D Note or, if there are no Class A Notes, 93

Processed and formatted by SEC Watch - Visit SECWatch.com

Class B Notes, Class C Notes or Class D Notes Outstanding, on any Class E Note, or, if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes or Class E Notes Outstanding, on any Class F Note, or, if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes or Class F Notes Outstanding, on any Class G Note, or, if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes or Class G Notes Outstanding, on any Class H Note, or, if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes or Class H Notes Outstanding, on any Class J Note, or if there are no Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes, Class G Notes, Class H Notes or Class J Notes Outstanding, on any Class K Note; (b)

a default in the payment of any principal, when due and payable of any Secured Note (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent or the Note Registrar, such default continues for a period of five Business Days);

(c)

the failure on any Payment Date to disburse amounts available in accordance with Section 11.1 (except as provided in Section 5.1(a) and (b) above) and a continuation of such failure for three Business Days (or, in the case of a default in payment resulting solely from an administrative error or omission by the Trustee, the Administrator, any Note Paying Agent or the Note Registrar, such default continues for a period of five Business Days);

(d)

on any Measurement Date, the Class A/B Principal Coverage Ratio is less than 100%;

(e)

the Issuer or the pool of Collateral becomes an investment company required to be registered under the Investment Company Act;

(f)

a default in the performance, or breach, of any other covenant (it being understood that non-compliance with any of the Coverage Tests, the Collateral Concentration Limitations or the Collateral Quality Tests will not constitute a default or breach) or of any representation or warranty of the Issuer under the Indenture of any representation or if any certificate or writing delivered pursuant thereto proves to be incorrect when made, which default or breach has a material adverse effect on the Secured Noteholders and continues for a period of 30 days (or, in the case of a default, breach or failure of a representation or warranty regarding the Collateral, 15 days) of the earlier of knowledge by the Issuer or the Collateral Manager or notice to the Issuer and the Collateral Manager by the Trustee or to the Issuer and the Collateral Manager by the Holders of at least 25%, of the then Aggregate Outstanding Amount of the Secured Notes of any Class, specifying such default, breach or failure and requiring it to be remedied and stating that such notice is a “Notice of Default” under this Indenture;

(g)

the entry of a decree or order by a court having competent jurisdiction adjudging the 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 under the Bankruptcy Code or any other applicable law, or appointing a receiver, liquidator, assignee, or sequestrator (or other similar official) of the Issuer or of any substantial part of its property; 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 90 consecutive days; or 94

Processed and formatted by SEC Watch - Visit SECWatch.com

(h)

the institution by the 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, 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 of any substantial part of its property, respectively, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of any action by the Issuer in furtherance of any such action.

If the Issuer shall obtain actual knowledge that an Event of Default shall have occurred and be continuing, the Issuer shall (unless the Trustee shall have provided notice of such Event of Default pursuant to Section 6.2) promptly notify the Trustee, the Secured Noteholders, the Hedge Counterparty, the Collateral Manager and each Rating Agency in writing of such Event of Default. 5.2.

ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT (a)

If an Event of Default occurs and is continuing, the Trustee may or, if so directed by the Holders of a Majority in aggregate principal amount of the Outstanding Notes of the Controlling Class, will declare the principal of and accrued interest on all Notes to be immediately due and payable (except that in the case of an Event of Default described in Section 5.1(g) or 5.1(h) above, such an acceleration will occur automatically).

(b)

No Hedge Agreement existing on or after such acceleration may be terminated by the Issuer unless and until liquidation of the Collateral has commenced and annulment of such acceleration may no longer be affected.

(c)

At any time after such acceleration of maturity has been made and before a judgment or decree for payment of the amount due has been obtained by the Trustee as hereinafter provided in this Article V, the Trustee may reverse such acceleration and its consequences if the Trustee determines that: (1)

the Issuer has paid or deposited with the Trustee funds sufficient to pay: (i)

all overdue installments of principal of and interest on the Notes (including interest upon the Class C Cumulative Applicable Periodic Interest Shortfall Amount, the Class D Cumulative Applicable Periodic Interest Shortfall Amount, the Class E Cumulative Applicable Periodic Interest Shortfall Amount, the Class F Cumulative Applicable Periodic Interest Shortfall Amount, the Class G Cumulative Applicable Periodic Interest Shortfall Amount, the Class H Cumulative Applicable Periodic Interest Shortfall Amount, the Class J Cumulative Applicable Periodic Interest Shortfall Amount and the Class K Cumulative Applicable Periodic Interest Shortfall Amount respectively, at the Applicable Periodic Interest Rate and, to the extent that payment of such interest is lawful, upon Defaulted Interest at the Applicable Periodic Interest Rate);

(ii)

all accrued and unpaid amounts (including termination payments, if any) payable by the Issuer pursuant to any Hedge Agreements; 95

Processed and formatted by SEC Watch - Visit SECWatch.com

(iii)

all unpaid taxes and Administrative Expenses, any accrued and unpaid Senior Collateral Management Fee, and other sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and

(2)

the Trustee has determined that all Events of Default of which it has actual knowledge, other than the nonpayment of the principal of or interest on the Secured Notes that have become due solely by such acceleration, have been cured; and

(3)

any Hedge Agreements in effect immediately prior to such acceleration shall remain in effect;

provided that the Trustee shall have obtained (and shall be entitled to rely upon) a certification of an Independent accounting firm of national reputation as to the sufficiency of the amounts in Section 5.2(c)(1) above, which certification shall be conclusive evidence as to such sufficiency. In addition, the Trustee may, but is not required to, obtain, at the Issuer’s expense (and may rely upon), an Opinion of Counsel as to the matters in Sections 5.2(c)(2) and (3) above. At any such time as the Trustee shall reverse such acceleration and its consequences, the Trustee shall preserve the Collateral in accordance with the provisions of Section 5.5; provided that, if the conditions for liquidation of the Collateral are satisfied pursuant to Section 5.5, the Secured Notes may be accelerated pursuant to Section 5.2(a), notwithstanding any previous reversal of acceleration pursuant to this Section 5.2(c). No such reversal of acceleration shall affect any subsequent Default or impair any right consequent thereon. 5.3.

COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE

The Issuer covenants that if a Default shall occur in respect of the payment of any principal of or interest on any Class A-1 Note, the payment of principal of or interest on any Class A-2 Note (but with respect to interest, only after the Class A-1 Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class A-3 Note (but with respect to interest, only after the Class A-1 Notes and Class A-2 Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class B Note (but with respect to interest, only after the Class A Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class C Note (but with respect to interest, only after the Class A Notes and Class B Notes and all interest accrued thereon have been paid in full) the payment of principal of or interest on any Class D Note (but with respect to interest, only after the Class A Notes, the Class B Notes and the Class C Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class E Note (but with respect to interest, only after the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class F Note (but with respect to interest, only after the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class G Note (but with respect to interest, only after the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class H Note (but with respect to interest, only after the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class J 96

Processed and formatted by SEC Watch - Visit SECWatch.com

Note (but with respect to interest, only after the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes and all interest accrued thereon have been paid in full), the payment of principal of or interest on any Class K Note (but with respect to interest, only after the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes and the Class J Notes and all interest accrued thereon have been paid in full), the Issuer will, upon demand of the Trustee or any affected Secured Noteholder, pay to the Trustee, for the benefit of the Holder of such Secured Note, the whole amount, if any, then due and payable on such Secured Note for principal and interest, with interest upon the overdue principal and, to the extent that payments of such interest shall be legally enforceable, upon overdue installments of interest, at the Applicable Periodic Interest Rate and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee and such Secured Noteholder and their respective agents and counsel. If the Issuer fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may, and shall, upon the direction of a Majority of the Holders of the then Aggregate Outstanding Amount of the Notes of Controlling Class (and, if the action of the Issuer pursuant to such direction would have a material adverse effect on any Hedge Counterparty or such Initial Hedge Counterparty), prosecute such Proceeding to judgment or final decree, and may enforce the same against the Issuer or any other obligor upon the Secured Notes and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the Collateral; provided that a Holder of a Secured Note may institute any proceeding if (i) such Holder previously has given to the Trustee written notice of an Event of Default, (ii) except in the case of a default in the payment of principal or interest, the Holders of at least 25% of the then Aggregate Outstanding Amount of the Notes of the Controlling Class have made a written request upon the Trustee to institute such proceedings in its own name as Trustee and such Holders have offered the Trustee reasonable indemnity, (iii) the Trustee has, for 30 days after receipt of notice, request and offer of such indemnity, failed to institute any such proceeding and (iv) no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Secured Parties by such appropriate Proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law. The Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class may, in certain cases, waive any default with respect to such Notes, except (i) a default for more than five Business Days in the payment, when due and payable, of any interest on any Note, (ii) a default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date, (iii) the failure on any Payment Date to disburse amounts available in the Collection Account in accordance with Section 11.1 and continuation of such failure for a period of three Business Days, (iv) certain events of bankruptcy or insolvency with respect to the Issuer or (v) a default in respect of any provision of the Indenture that cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby. In case there shall be pending Proceedings relative to the Issuer or any other obligor upon the Secured Notes or Hedge Agreement under the Bankruptcy Code or any other applicable bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, 97

Processed and formatted by SEC Watch - Visit SECWatch.com

liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its respective property or such other obligor or its property, or in case of any other comparable Proceedings relative to the Issuer or other obligor upon the Secured Notes or Hedge Agreement, or the creditors or property of the Issuer or such other obligor, the Trustee, regardless of whether the principal of any Secured Notes or Hedge Agreement shall then be due and payable as therein expressed or by declaration or otherwise and regardless of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.3, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (a)

to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Secured Notes or Hedge Agreement upon direction by a Majority of the Controlling Class, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee) and of the Secured Noteholders allowed in any Proceedings relative to the Issuer or other obligor upon the Secured Notes or to the creditors or property of the Issuer or such other obligor;

(b)

unless prohibited by applicable law and regulations, to vote on behalf of the Holders of the Secured Notes, upon the direction of such Holders, in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency Proceedings or person performing similar functions in comparable Proceedings; and

(c)

to collect and receive any amounts or other property payable to or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Secured Noteholders and of the Trustee on behalf of the Secured Noteholders and the Trustee; and any trustee, receiver or liquidator, custodian or other similar official is hereby authorized by each of the Secured Noteholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Secured Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other reasonable expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Secured Noteholder or any Hedge Counterparty, any plan of reorganization, arrangement, adjustment or composition affecting the Secured Notes, any Hedge Agreement or the rights of any Holder thereof or any Hedge Counterparty, or to authorize the Trustee to vote in respect of the claim of any Secured Noteholder or any Hedge Counterparty in any such Proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. In any Proceedings brought by the Trustee on behalf of the Holders, the Trustee shall be held to represent, subject to Section 6.17, all the Secured Parties if applicable, pursuant to Section 6.17. Notwithstanding anything in this Section 5.3 to the contrary, the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to this Section 5.3 except in accordance with Section 5.5(a). 98

5.4.

REMEDIES (a)

If an Event of Default shall have occurred and be continuing, and the Notes have been declared due and payable and such declaration and its consequences have not been rescinded and annulled, the Issuer agrees that, in addition to the requirements of Section 5.5(a), the Trustee may, after giving notice to the Noteholders, the Collateral Manager, each Hedge Counterparty and each Rating Agency, and with the consent of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class, and shall, upon written direction by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class, to the extent permitted by applicable law, exercise one or more of the following rights, privileges and remedies: (1)

institute Proceedings for the collection of all amounts then payable on the Notes or otherwise payable under this Indenture, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Collateral any amounts adjudged due;

(2)

institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Collateral;

(3)

exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Secured Parties hereunder; and

(4)

subject to Section 5.4(d) below, exercise any other rights and remedies that may be available at law or in equity;

provided that the Trustee may not sell or liquidate the Collateral or institute Proceedings in furtherance thereof pursuant to

Processed and formatted by SEC Watch - Visit SECWatch.com

this Section 5.4 except in accordance with Section 5.5(a). The Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking firm of national reputation as to the feasibility of any action proposed to be taken in accordance with this Section 5.4 and as to the sufficiency of the proceeds and other amounts receivable with respect to the Collateral to make the required payments of principal of and interest on the Notes and amounts due to any Hedge Counterparty, which opinion shall be conclusive evidence as to such feasibility or sufficiency. (b)

If an Event of Default as described in Section 5.1(f) shall have occurred and be continuing, the Trustee may, and at the request of at least 25% of the Holders of the then Aggregate Outstanding Amount of the Notes of the Controlling Class shall, institute a Proceeding solely to compel performance of the covenant or agreement or to cure the representation or warranty, the breach of which gave rise to the Event of Default under such Section, and enforce any equitable decree or order arising from such proceeding; provided that (i) such request does not conflict with any provision in the Indenture, (ii) the Trustee determines that such action will not involve the Trustee incurring any liability (unless the Trustee is indemnified to its satisfaction against any such liability) and (iii) the Trustee may take other action deemed proper by the Trustee, that is not inconsistent with such direction. 99

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the Placement Agent, any Hedge Counterparty, any Noteholder or Noteholders may bid for and purchase the Collateral or any part thereof and, upon compliance with the terms of sale, may hold, retain, possess or dispose of such property in its or their own absolute right without accountability. Upon any sale of the Collateral, whether made under the power of sale hereby given or by virtue of judicial proceedings, the receipt of the Trustee, or of the Officer making a sale under judicial proceedings, shall be a sufficient discharge to the purchaser or purchasers at any sale for its or their purchase price, and such purchaser or purchasers shall not be obliged to see to the application thereof. Any such sale, whether under any power of sale hereby given or by virtue of judicial proceedings, shall bind the Issuer, the Trustee and the Noteholders, shall operate to divest all right, title and interest whatsoever, either at law or in equity, of each of them in and to the property sold, and shall be a perpetual bar, both at law and in equity, against each of them and their successors and assigns, and against any and all Persons claiming through or under them.

(d)

5.5.

Notwithstanding any other provision of this Indenture, the Trustee may not, prior to the date which is one year, or if longer the applicable preference period then in effect, and one day after the payment in full of all Notes, institute against, or join any other Person in instituting against, the Issuer any bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceedings, or other proceedings under federal or state bankruptcy or similar laws (of any jurisdiction). Nothing in this Section 5.4 shall preclude, or be deemed to stop, the Trustee (i) from taking any action prior to the expiration of the aforementioned one year and one day period, or if longer the applicable preference period then in effect, in (A) any case or proceeding voluntarily filed or commenced by the Issuer or (B) any involuntary insolvency proceeding filed or commenced by a Person other than the Trustee, or (ii) from commencing against the Issuer or any of its properties any legal action which is not a bankruptcy, reorganization, arrangement, insolvency, moratorium, liquidation or similar proceeding.

PRESERVATION OF COLLATERAL (a)

If an Event of Default shall have occurred and be continuing when any Class of Secured Notes is Outstanding, the Trustee shall retain the Collateral securing the Secured Notes and the Hedge Agreement intact, collect and cause the collection of the proceeds thereof and make all payments and deposits, and maintain all accounts in respect of the Collateral and the Secured Notes and any Hedge Agreement in accordance with Section 11.1 and the provisions of Articles X, XII and XIII unless: (1)

the Trustee, pursuant to Section 5.5(c), determines (such determinations may be based upon a certificate from the Collateral Manager) that the anticipated proceeds of a sale or liquidation of the Collateral (after deducting reasonable expenses relating to such sale or liquidation) would be sufficient to discharge in full the Redemption Prices then due on the Secured Notes, any amounts required to be paid under any Hedge Agreement, all unreimbursed Cure Advances, all unpaid Administrative Expenses and any accrued and unpaid Senior Collateral Management Fee (to the extent not waived by the Collateral Manager) and the 100

Processed and formatted by SEC Watch - Visit SECWatch.com

Holders of a Majority of the then Aggregate Outstanding Amount of Notes of the Controlling Class agrees with such determination; or (2)

the Holders of at least 662/3% of the Aggregate Outstanding Amount of the Secured Notes of the Controlling Class (and, unless it will be paid in full all amounts owing to it by the Issuer, each Hedge Counterparty), subject to the provisions hereof, and subject to the Trustee determining that such action will not involve the Trustee incurring any liability, (unless the Trustee is indemnified to its satisfaction against any such liability) direct the sale and liquidation of the Collateral.

For purposes of Section 5.5(a)(2), if any Hedge Counterparty shall fail to vote to direct the sale and liquidation of the Collateral within three Business Days after written notice from the Issuer or the Trustee requesting a vote pursuant to such Section 5.5(a)(2), such Hedge Counterparty shall not be entitled to participate in the vote requested by such notice. The Trustee shall give written notice of the retention of the Collateral to the Issuer with a copy to each Holder of the Controlling Class of Notes and each Hedge Counterparty. So long as such Event of Default is continuing, any such retention pursuant to this Section 5.5(a) may be rescinded at any time when the conditions specified in clause Section 5.5(a)(1) or (2) exist. (b)

Nothing contained in Section 5.5(a) shall be construed to require the Trustee to preserve the Collateral securing the Secured Notes if prohibited by applicable law.

(c)

In determining whether the condition specified in Section 5.5(a)(1) exists, the Trustee shall obtain bid prices with respect to each security contained in the Collateral from two nationally recognized dealers (or if it is unable in good faith to obtain such bid prices from two nationally recognized dealers, one nationally recognized dealer), as specified by the Collateral Manager in writing, which are Independent from each other and the Collateral Manager, at the time making a market in such securities and shall compute the anticipated proceeds of sale or liquidation on the basis of the lower of such bid prices for each such security. In addition, for the purposes of determining issues relating to the execution of a sale or liquidation of the Pledged Securities and the execution of a sale or other liquidation thereof in connection with a determination whether the condition specified in Section 5.5(a)(1) exists, the Trustee may retain and rely on an opinion of an Independent investment banking firm of national reputation. The Trustee shall deliver to the Noteholders, each Hedge Counterparty, the Rating Agencies and the Issuer a report stating the results of any determination required pursuant to Section 5.5(a)(1) no later than ten days after making such determination but in any event prior to the sale or liquidation of the Collateral. The Trustee shall make the determinations required by Section 5.5(a)(1) within 30 days after an Event of Default and at the request of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class at any time during which the Trustee retains the Collateral pursuant to Section 5.5(a)(1). In the case of each calculation made by the Trustee pursuant to Section 5.5(a)(1), the Trustee shall obtain a letter of an Independent certified public accountant confirming the accuracy of the computations of the Trustee and certifying their conformity to the requirements of this Indenture. In determining whether the Holders of the requisite percentage of any Class of Secured Notes or the requisite percentage of Income Noteholders have given any direction or notice or have agreed pursuant to Section 5.5(a), any Holder of a Secured Note of a Class or Income 101

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes who is also a Holder of Secured Notes of another Class or of Income Notes or any Affiliate of any such Holder shall be counted as a Holder of each such Secured Note and/or Income Note for all purposes. (d)

5.6.

If an Event of Default shall have occurred and be continuing at a time when no Secured Note is Outstanding, the Trustee shall retain the Collateral securing the Hedge Agreements and the Secured Notes intact, collect and cause the collection of the proceeds thereof and make and apply all payments and deposits and maintain all accounts in respect of the Collateral and the Secured Notes in accordance with Section 11.1 and the provisions of Article X and Article XII unless a Majority of the Income Noteholders direct the sale and liquidation of the Collateral.

TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION

All rights of action and of asserting claims under this Indenture, or under any of the Secured Notes, may be enforced by the Trustee without the possession of any Hedge Agreement or the Secured Notes or the production thereof in any trial or other Proceedings relative thereto, and any action or Proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the reasonable expenses, disbursements and compensation of the Trustee, each predecessor trustee and their respective agents and attorneys and counsel, shall be for the benefit of the Secured Parties and shall be applied as set forth in Section 5.7. 5.7.

APPLICATION OF FUNDS COLLECTED

Any funds collected by the Trustee with respect to the Hedge Agreements or the Secured Notes pursuant to this Article V and any funds that may then be held or thereafter received by the Trustee with respect to any Hedge Agreements or the Secured Notes hereunder shall be applied subject to Section 13.1 and in accordance with the provisions of Section 11.1(c), at the date or dates fixed by the Trustee. 5.8.

LIMITATION ON SUITS

Only the Trustee may pursue remedies available hereunder and no Holder of any Note shall have any right to institute any Proceedings, judicial or otherwise, with respect to this Indenture, or its Note or otherwise, for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a)

such Holder has previously given to the Trustee written notice of a continuing Event of Default;

(b)

except in the case of a default in the payment of principal or interest, the Holders or Holders of at least 25% of the then Aggregate Outstanding Amount of the Secured Notes of the Controlling Class shall have made a written request to the Trustee to institute Proceedings in respect of such Event of Default in its own name as Trustee hereunder and such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

(c)

the Trustee for 30 days after its receipt of such notice, request and offer of indemnity has failed to institute any such Proceeding; and

(d)

no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class; 102

Processed and formatted by SEC Watch - Visit SECWatch.com

it being understood and intended that no one or more Holders of Secured Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders of the Notes of the same Class or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders of Notes of the same Class. In addition, any action taken by any one or more of the Holders of Notes shall be subject to and in accordance with Sections 13.1 and 11.1(c). Notwithstanding any other provisions of this Indenture but subject to Section 5.8(d), if the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of the Notes of the Controlling Class, each representing less than a Majority of the then Aggregate Outstanding Amount of Notes of this Controlling Class, the Trustee shall follow the instructions of the group representing the higher percentage of aggregate principal amount of Outstanding Notes of the Controlling Class. 5.9.

UNCONDITIONAL RIGHTS OF SECURED NOTEHOLDERS TO RECEIVE PRINCIPAL AND INTEREST

Notwithstanding any other provision in this Indenture (other than Section 2.6(i)), the Holder of any Secured Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest (if any) on such Secured Note as such principal and/or interest become due and payable in accordance with Sections 13.1 and 11.1(c) and, subject to the provisions of Section 5.8, to institute proceedings for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. Holders of the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes shall have no right to institute proceedings for the enforcement of any such payment until such time as no Class of Secured Note that is senior to such Class of them remains Outstanding, which right shall be subject to the provisions of Section 5.8, and shall not be impaired without the consent of any such Holder. 5.10.

RESTORATION OF RIGHTS AND REMEDIES

If the Trustee or any Secured Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Secured Noteholder, then and in every such case the Issuer, the Trustee and the Secured Noteholder shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Secured Parties shall continue as though no such Proceeding had been instituted. 5.11.

RIGHTS AND REMEDIES CUMULATIVE

No right or remedy herein conferred upon or reserved to the Trustee or to the Secured Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing by law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 103

Processed and formatted by SEC Watch - Visit SECWatch.com

5.12.

DELAY OR OMISSION NOT WAIVER

No delay or omission of the Trustee or any Secured Noteholder or any Hedge Counterparty to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee, the Secured Noteholders or any Hedge Counterparty may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Secured Noteholders or such Hedge Counterparty, as the case may be. 5.13.

CONTROL BY CONTROLLING CLASS

Notwithstanding any other provision of this Indenture (but subject to the proviso in the definition of “Outstanding” in Section 1.1(a), the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class shall have the right to cause the institution of and direct the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or of any sale of the Collateral, in whole or in part, provided that:

5.14.

(a)

such direction shall not conflict with any rule of law or with this Indenture;

(b)

the Trustee may take any other action deemed proper by it that is not inconsistent with such direction; provided that, subject to Section 6.1, the Trustee need not take any action that it determines might involve it in liability (unless the Trustee has received an indemnity reasonably satisfactory to it against such liability as set forth below);

(c)

the Trustee shall have been provided with an indemnity reasonably satisfactory to it; and

(d)

any direction to the Trustee to undertake a Sale of the Collateral shall be made only pursuant to, and in accordance with, Sections 5.4 and 5.5.

WAIVER OF PAST DEFAULTS

The Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class may, in certain cases waive any past Default and its consequences, except: (a)

a Default for more than five Business Days in the payment, when due and payable, of any interest on any Secured Note; or

(b)

a Default in the payment of principal on any Note at its Stated Maturity Date or Redemption Date; or

(c)

the failure on any Payment Date to disburse amounts available in the Collection Account in accordance with Section 11.1 and the continuation of such failure for a period of three Business Days; or

(d)

a Default arising under Section 5.1(g) or 5.1(h); or

(e)

a Default in respect of any provision of this Indenture that under Section 8.2 cannot be modified or amended without the waiver or consent of the Holder of each Outstanding Note adversely affected thereby.

In the case of any such waiver, (i) the Issuer, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to 104

Processed and formatted by SEC Watch - Visit SECWatch.com

any subsequent or other Default or impair any right consequent thereto, and (ii) the Trustee shall promptly give written notice of any such waiver to the Collateral Manager and each Holder of Secured Notes. The Rating Agencies shall be notified by the Issuer of any such waiver. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. 5.15.

UNDERTAKING FOR COSTS

All parties to this Indenture agree, and each Holder of any Secured Note by its acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.15 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Secured Noteholder, or group of Secured Noteholders, holding in the aggregate more than 10% in Aggregate Outstanding Amount of the Controlling Class, or to any suit instituted by any Secured Noteholder for the enforcement of the payment of the principal of or interest on any Secured Note on or after the Stated Maturity Date expressed in such Secured Note (or, in the case of redemption, on or after the applicable Redemption Date). 5.16.

WAIVER OF STAY OR EXTENSION LAWS

The Issuer covenants (to the extent that they may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force (including but not limited to filing a voluntary petition under Chapter 11 of the Bankruptcy Code and by the voluntary commencement of a proceeding or the filing of a petition seeking winding up, liquidation, reorganization or other relief under any bankruptcy, insolvency, receivership or similar law now or hereafter in effect), which may affect the covenants, the performance of or any remedies under this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 5.17.

SALE OF COLLATERAL (a)

The power to effect any sale (a Sale) of any portion of the Collateral pursuant to Sections 5.4 and 5.5 shall not be exhausted by any one or more Sales as to any portion of such Collateral remaining unsold, but shall continue unimpaired until the entire Collateral shall have been sold or all amounts secured by the Collateral shall have been paid. The Trustee hereby expressly waives its rights to any amount fixed by law as compensation for any Sale; provided that the Trustee shall be authorized to deduct the reasonable costs, charges and expenses incurred by it in connection with such Sale from the proceeds thereof notwithstanding the provisions of Section 6.7.

(b)

The Trustee may bid for and acquire any portion of the Collateral in connection with a public Sale thereof, by crediting all or part of the net proceeds of such Sale after deducting the reasonable costs, charges and expenses incurred by the Trustee in connection with such Sale notwithstanding the provisions of Section 6.7. The Secured 105

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes and any Hedge Agreement need not be produced in order to complete any such Sale, or in order for the net proceeds of such Sale to be credited against amounts owing on the Secured Notes. The Trustee may hold, lease, operate, manage or otherwise deal with any property so acquired in any manner permitted by law in accordance with this Indenture.

5.18.

(c)

If any portion of the Collateral consists of securities not registered under the Securities Act (Unregistered Securities), the Trustee may, but shall not be required to, seek an Opinion of Counsel, or, if no such Opinion of Counsel can be obtained, with the consent of a Majority of the Controlling Class seek, a no-action position from the Commission or any other relevant federal or state regulatory authorities, regarding the legality of a public or private sale of such Unregistered Securities. In no event will the Trustee be required to register Unregistered Securities under the Securities Act.

(d)

The Trustee shall execute and deliver an appropriate instrument of conveyance transferring its interest in any portion of the Collateral in connection with a sale thereof. In addition, the Trustee is hereby irrevocably appointed the agent and attorneyin-fact of the Issuer to transfer and convey its interest in any portion of the Collateral in connection with a sale thereof, and to take all action necessary to effect such sale. No purchaser or transferee at such a sale shall be bound to ascertain the Trustee’s authority, to inquire into the satisfaction of any conditions precedent or see to the application of any funds.

ACTION ON THE SECURED NOTES

The Trustee’s right to seek and recover judgment on the Secured Notes or under this Indenture shall not be affected by the seeking or obtaining of or application for any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Secured Parties shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer. ARTICLE VI THE TRUSTEE 6.1.

CERTAIN DUTIES AND RESPONSIBILITIES (a)

Except during the continuance of an Event of Default: (1)

the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2)

in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided that, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they substantially conform to the requirements of this Indenture and shall promptly, but in any event within three Business Days in the 106

Processed and formatted by SEC Watch - Visit SECWatch.com

case of an Officer’s certificate furnished by the Issuer, notify the party delivering the same if such certificate or opinion does not conform. If a corrected form shall not have been delivered to the Trustee within 15 days after such notice from the Trustee, the Trustee shall promptly notify the Secured Noteholders and each Hedge Counterparty. (b)

In case an Event of Default actually known to the Trustee has occurred and is continuing, the Trustee shall, prior to the receipt of directions, if any, from a Majority of the Controlling Class, exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(c)

No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(d)

(1)

this Section 6.1(c) shall not be construed to limit the effect of Section 6.1(a);

(2)

the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it shall be proven that the Trustee was negligent in ascertaining the pertinent facts;

(3)

the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Issuer in accordance with this Indenture and/or a Majority (or such other percentage as may be required by the terms hereof) of the Aggregate Outstanding Amount of the Controlling Class (or other Class if required or permitted by the terms hereof) relating to the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;

(4)

no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers contemplated hereunder, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it (if the amount of such funds or risk or liability does not exceed the amount payable to the Trustee pursuant to Section 11.1(a)(1) net of the amounts specified in Section 6.8(a)(1), the Trustee shall be deemed to be reasonably assured of such repayment) unless such risk or liability relates to performance of its ordinary services, including under Section 5, under this Indenture; and

(5)

the Trustee shall not be liable to the Secured Noteholders for any action taken or omitted by it at the direction of the Issuer, the Collateral Manager and/or the Holders of the Secured Notes under the circumstances in which such direction is required or permitted by the terms of this Indenture.

For all purposes under this Indenture, the Trustee shall not be deemed to have notice or knowledge of any Event of Default described in Section 5.1(e), 5.1(f), 5.1(g) or 5.1(h) unless a Trust Officer assigned to and working in the Corporate Trust Office has actual knowledge thereof or unless written notice of any event which is in fact such an 107

Processed and formatted by SEC Watch - Visit SECWatch.com

Event of Default or such a Default, as the case may be, is received by the Trustee at the Corporate Trust Office. For purposes of determining the Trustee’s responsibility and liability hereunder, whenever reference is made in this Indenture to such an Event of Default or such a Default, as the case may be, such reference shall be construed to refer only to such an Event of Default or such a Default, as the case may be, of which the Trustee is deemed to have notice as described in this Section 6.1(d).

6.2.

(e)

Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article VI.

(f)

The Trustee shall, upon receipt of reasonable (but no less than three Business Days) prior written notice, permit any representative of a Holder of a Secured Note or any Hedge Counterparty, during the Trustee’s normal business hours, to examine all books of account, records, reports and other papers of the Trustee relating to the Secured Notes or any Hedge Agreement, to make copies and extracts therefrom (the reasonable out-of-pocket expenses incurred in making any such copies or extracts to be reimbursed to the Trustee by such Holder) and to discuss the Trustee’s actions, as such actions relate to the Trustee’s duties with respect to the Secured Notes or any Hedge Agreement, with the Trustee’s officers and employees responsible for carrying out the Trustee’s duties with respect to the Secured Notes; provided that under no circumstances shall any Hedge Counterparty be permitted to review any documentation containing the names or other indicia of identity of any of the Noteholders unless any such information (including the number of shares held by such Noteholder) has been redacted from such documentation.

(g)

With respect to the security interests created hereunder, the Trustee acts as a fiduciary for the Secured Noteholders only, and serves as a collateral agent for the other Secured Parties.

NOTICE OF DEFAULT

Promptly (and in no event later than three Business Days) after the occurrence of any Default actually known to a Trust Officer of the Trustee or after acceleration has been made pursuant to Section 5.2, the Trustee shall send to the Issuer, the Income Note Paying Agent, each Rating Agency (for so long as any Class of Secured Notes is Outstanding), the Collateral Manager, each Hedge Counterparty and to all Holders of Secured Notes, as their names and addresses appear on the Note Register, notice of all Defaults hereunder known to the Trustee, unless such Default shall have been cured or waived. 6.3.

CERTAIN RIGHTS OF TRUSTEE Except as otherwise provided in Sections 6.1 and Article VIII: (a)

the Trustee may rely and shall be protected in acting or refraining from acting in good faith and in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b)

any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or Issuer Order, as the case may be; 108

(c)

whenever in the administration of this Indenture the Trustee shall (i) deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer’s certificate or (ii) be required to determine the value of any Collateral or funds hereunder or the cashflows projected to be received therefrom, the Trustee may, in the absence of bad faith on its part, rely on reports of nationally recognized accountants, investment bankers or other Persons qualified to provide the information required to make such determination, including nationally recognized dealers in securities of the type being valued and securities quotation services;

(d)

as a condition to the taking or omitting of any action by it hereunder, the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in reliance thereon;

(e)

the Trustee shall be under no obligation to exercise or to honor any of the rights or powers vested in it by this Indenture at the request or direction of any of the Secured Noteholders pursuant to this Indenture, unless such Secured Noteholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might reasonably be incurred by it in compliance with such request or direction;

(f)

the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper documents, but the Trustee, in its discretion, may and, upon the written direction of the Holders of a Majority of the then Aggregate

Processed and formatted by SEC Watch - Visit SECWatch.com

Outstanding Amount of the Notes of any Class, any Hedge Counterparty or any Rating Agency shall make such further inquiry or investigation into such facts or matters as it may see fit or as it shall be directed, and, the Trustee shall be entitled, on reasonable prior notice to the Issuer, to examine the books and records of the Issuer or the Collateral Manager relating to the Secured Notes and the Collateral, personally or by agent or attorney at a time acceptable to the Issuer or the Collateral Manager in their reasonable judgment during normal business hours; provided that the Trustee shall, and shall cause its agents, to hold in confidence all such information, except (i) to the extent disclosure may be required by law by any regulatory authority and (ii) to the extent that the Trustee, in its sole judgment, may determine that such disclosure is consistent with its obligations hereunder; (g)

the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys; provided that the Trustee shall not be responsible for any misconduct or negligence on the part of any agent (other than any Affiliate of the Trustee) appointed and supervised, or attorney appointed, with due care by it hereunder;

(h)

the Trustee shall not be liable for any action it takes or omits to take in good faith that it reasonably and, after the occurrence and during the continuance of an Event of Default, prudently believes to be authorized or within its rights or powers hereunder;

(i)

nothing herein shall be construed to impose an obligation on the part of the Trustee to recalculate, evaluate or verify any report, certificate or information received from the 109

Processed and formatted by SEC Watch - Visit SECWatch.com

Issuer or Collateral Manager (unless and except to the extent otherwise expressly set forth herein or upon the request of any Hedge Counterparty, a Rating Agency or a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class);

6.4.

(j)

the Trustee shall not be responsible or liable for the actions or omissions of, or any inaccuracies in the records of, any nonAffiliated custodian, clearing agency, common depository, Euroclear or Clearstream or for the acts or omissions of the Collateral Manager or the Issuer;

(k)

to the extent any defined term hereunder, or any calculation required to be made or determined by the Trustee hereunder, is dependent upon or defined by reference to generally accepted accounting principles in the United States (GAAP), the Trustee shall be entitled to request and receive (and rely upon) instruction from the Issuer or the accountants appointed pursuant to 10.14 as to the application of GAAP in such connection, in any instance;

(1)

to the extent permitted by law, the Trustee shall not be required to give any bond or surety in respect of the execution of this Indenture or otherwise; and

(m)

the permissive right of the Trustee to take or refrain from taking any actions enumerated in this Indenture shall not be construed as a duty.

AUTHENTICATING AGENTS

If the Trustee so chooses the Trustee may appoint one or more Authenticating Agents with power to act on its behalf and subject to its direction in the authentication of Secured Notes in connection with issuance, transfers and exchanges under Sections 2.4, 2.5 and 8.5, as fully to all intents and purposes as though each such Authenticating Agent had been expressly authorized by those Sections to authenticate such Secured Notes. For all purposes of this Indenture, the authentication of Secured Notes by an Authenticating Agent pursuant to this Section 6.4 shall be deemed to be the authentication of Secured Notes “by the Trustee”. Any entity into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any entity resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any entity succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, without the execution or filing of any further act on the part of the parties hereto or such Authenticating Agent or such successor entity. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and the Issuer. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Issuer. Upon receiving such notice of resignation or upon such a termination, the Trustee shall promptly appoint a successor Authenticating Agent and shall give written notice of such appointment to the Issuer. The Issuer agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services (provided, however, that, so long as an Authenticating Agent is the Trustee, or an Affiliate thereof, such compensation shall be payable by the Trustee, rather than by the Issuer), and reimbursement for its reasonable expenses relating thereto and the Trustee shall be entitled to 110

Processed and formatted by SEC Watch - Visit SECWatch.com

be reimbursed for such payments, subject to Section 6.8. The provisions of Sections 6.8, 6.5 and 6.6 shall be applicable to any Authenticating Agent. 6.5.

NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURED NOTES

The recitals contained herein and in the Secured Notes, other than the Certificate of Authentication thereon, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or sufficiency of this Indenture (except as may be made with respect to the validity of the Trustee’s obligations hereunder), of the Collateral or of the Secured Notes. The Trustee shall not be accountable for the use or application by the Issuer of the Secured Notes or the proceeds thereof or any amounts paid to the Issuer pursuant to the provisions hereof. 6.6.

MAY HOLD SECURED NOTES

The Trustee, any Note Paying Agent, the Note Registrar or any other agent of the Issuer, in its individual or any other capacity, may become the owner or pledgee of Secured Notes and, may otherwise deal with the Issuer or any of its Affiliates, with the same rights it would have if it were not Trustee, Note Paying Agent, Note Registrar or such other agent. 6.7.

FUNDS HELD IN TRUST

Funds held by the Trustee hereunder shall be held in trust to the extent required herein. The Trustee shall be under no liability for interest on any funds received by it hereunder except as otherwise agreed upon with the Issuer and except to the extent of income or other gain on investments which are deposits in or certificates of deposit of the Trustee in its commercial capacity and income or other gain actually received by the Trustee on Eligible Investments. 6.8.

COMPENSATION AND REIMBURSEMENT (a)

The Issuer agrees: (1)

to pay the Trustee on each Payment Date the Trustee Fee and reasonable compensation for all other services, including custodial services, rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

(2)

except as otherwise expressly provided herein, to reimburse the Trustee (subject to any written agreement between the Issuer and the Trustee) in a timely manner upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture or in the enforcement of any provision hereof and expenses related to the maintenance and administration of the Collateral (including securities transaction charges and the reasonable compensation and expenses and disbursements of its agents and legal counsel and of any accounting firm or investment banking firm employed by the Trustee pursuant to Section 5.2, 5.4, 5.5, 6.3(c), 6.3(k), 10.14 or 10.16, except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith but only to the extent any such securities transaction charges have not been waived during a Due Period due to the Trustee’s receipt of a payment from a financial institution with respect to certain Eligible Investments); 111

Processed and formatted by SEC Watch - Visit SECWatch.com

(3)

to indemnify the Trustee and its Officers, directors, employees and agents for, and to hold them harmless against, any loss, liability or expense incurred by it without negligence, willful misconduct or bad faith on their part, arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs and expenses (including reasonable counsel fees) of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties hereunder; and

(4)

to pay the Trustee reasonable additional compensation together with its expenses (including reasonable counsel fees) for any collection action taken pursuant to Section 6.14.

(b)

The Issuer may remit payment for such fees and expenses to the Trustee or, in the absence thereof, the Trustee may from time to time deduct payment of its fees and expenses hereunder from funds on deposit in the Expense Account pursuant to Section 11.1.

(c)

The Trustee hereby agrees not to cause the filing of a petition in bankruptcy against the Issuer for the non-payment to the Trustee of any amounts provided by this Section 6.8 until at least one year, or if longer the applicable preference period then in effect, and one day after the payment in full of all Secured Notes issued under this Indenture.

(d)

The amounts payable to the Trustee pursuant to Sections 6.8(a)(2) through (4) (other than amounts received by the Trustee from financial institutions under Section 6.8(a)(2) above) shall not, except as provided by Section 11.1(a)(30), exceed on any Payment Date the limitation described in Section 11.1(a)(1) for such Payment Date; provided that (A) the Trustee shall not institute any proceeding for enforcement of such lien except in connection with an action pursuant to Section 5.3 or 5.4 for the enforcement of the lien of this Indenture for the benefit of the Secured Parties and (B) the Trustee may only enforce such a lien in conjunction with the enforcement of the rights of the Secured Parties in the manner set forth in Section 5.4.

The Trustee shall, subject to the Priority of Payments, receive amounts pursuant to this Section 6.8 and Section 11.1 only to the extent that the payment thereof will not result in an Event of Default and the failure to pay such amounts to the Trustee will not, by itself, constitute an Event of Default. Subject to Section 6.10, the Trustee shall continue to serve as Trustee under this Indenture notwithstanding the fact that the Trustee shall not have received amounts due it hereunder and hereby agrees not to cause the filing of a petition in bankruptcy against the Issuer for the nonpayment to the Trustee of any amounts provided by this Section 6.8 until at least one year, or, if longer, the applicable preference period then in effect, and one day after the payment in full of all Secured Notes issued under this Indenture. No direction by the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class shall affect the right of the Trustee to collect amounts owed to it under this Indenture. The indemnifications in favor of the Trustee in this Section 6.8 shall (i) survive any resignation or removal of any Person acting as Trustee (to the extent of any indemnified liabilities, costs, expenses and other amounts arising or incurred prior to, or arising out of actions or omissions occurring prior to, such resignation or removal) and (ii) apply to the Trustee in its capacities as Custodian, Note Paying Agent, Secured Note Calculation Agent and Authenticating Agent. 112

Processed and formatted by SEC Watch - Visit SECWatch.com

6.9.

CORPORATE TRUSTEE REQUIRED; ELIGIBILITY

There shall at all times be a Trustee hereunder which shall be a bank, corporation or trust company 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.$250,000,000, subject to supervision or examination by federal or state banking authorities, having a rating of at least “BBB+” by S&P and having an office within the United States. If such entity publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.9, the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.9, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI. 6.10.

RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR (a)

No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article VI shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11.

(b)

The Trustee may resign at any time by giving 90 days prior written notice thereof to the Issuer, the Secured Noteholders, each Hedge Counterparty, the Collateral Manager and each Rating Agency. Upon receiving such notice of resignation, or if the Trustee is removed or becomes incapable of acting, or if a vacancy shall occur in the office of the Trustee for any reason, the Issuer shall (after consultation with the Collateral Manager) promptly propose a successor trustee for approval by the Holders of 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Secured Notes. A proposed successor trustee approved in accordance with the preceding sentence shall be appointed by the Issuer as successor trustee by written instrument, in duplicate, executed by an Authorized Officer of the Issuer, one copy of which shall be delivered to the Trustee so resigning and one copy to the successor trustee or trustees, together with a copy to each Secured Noteholder. If no successor trustee shall have been appointed and an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee or any Holder of a Secured Note or any Hedge Counterparty on behalf of itself and all others similarly situated, subject to Section 5.15, may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c)

The Trustee may be removed at any time by an Act of the Holders of at least 662/3% of the then Aggregate Outstanding Amount of the Notes of each Class of Secured Notes delivered to the Trustee and to the Issuer.

(d)

If at any time: (1)

the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by any Holder; or

(2)

the Trustee shall become incapable of acting or shall be adjudged as bankrupt or insolvent or a receiver or liquidator of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, 113

Processed and formatted by SEC Watch - Visit SECWatch.com

then, in any such case (subject to Section 6.10(a)), (A) the Issuer, by Issuer Order shall remove the Trustee, or (B) subject to Section 5.15, any Holder or any Hedge Counterparty may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e)

6.11.

The Issuer shall give prompt notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first class mail, postage prepaid, to each Rating Agency, each Hedge Counterparty, the Collateral Manager and the Holders as their names and addresses appear in the Note Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. If the Issuer fails to mail such notice within ten days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Issuer.

ACCEPTANCE OF APPOINTMENT BY SUCCESSOR

Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer and the retiring Trustee (with copies to each Hedge Counterparty and the Collateral Manager) an instrument accepting such appointment. Upon delivery of the required instruments, the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any other act, deed or conveyance, shall become vested with all the rights, powers, trusts, duties and obligations of the retiring Trustee; but, on request of the Issuer or a Majority of the then Aggregate Outstanding Amount of the Notes of any Class of Notes, any Hedge Counterparty or the successor Trustee, such retiring Trustee shall, upon payment of its charges, fees, indemnities and expenses then unpaid, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and funds held by such retiring Trustee hereunder, subject nevertheless to its lien, if any, provided for in Section 6.8(d). Upon request of any such successor Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless (a) at the time of such acceptance such successor shall be qualified and eligible under Section 6.9 and the other provisions of this Article VI and (b) a Rating Agency Confirmation shall have been obtained with respect to the appointment of such successor Trustee shall have been satisfied. No appointment of a successor Trustee shall become effective if the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of the Controlling Class objects to such appointment; and no appointment of a successor Trustee shall become effective until the date ten days after notice of such appointment has been given to each Secured Noteholder and each Rating Agency. 6.12.

MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF TRUSTEE

Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided such Person shall be otherwise qualified and eligible under this Article VI, without the execution or filing of any paper or any further act on the part of any of the parties hereto. The successor Trustee will notify each Rating Agency of any such merger, conversion or consolidation. In case any of the Secured Notes have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Secured Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Secured Notes. 114

Processed and formatted by SEC Watch - Visit SECWatch.com

6.13.

CO-TRUSTEES

At any time or times, for the purpose of meeting the legal requirements of any jurisdiction in which any part of the Collateral may at the time be located, the Trustee shall have power to appoint one or more Persons to act as Co-trustee, jointly with the Trustee of all or any part of the Collateral, with the power to file such proofs of claim and take such other actions pursuant to Section 5.6 and to make such claims and enforce such rights of action on behalf of the Holders of the Secured Notes subject to the other provisions of this Section 6.13. The Issuer shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint a Co-trustee. If the Issuer does not join in such appointment within 15 days after the receipt by them of a request to do so, the Trustee shall have power to make such appointment. Should any written instrument from the Issuer be required by any Co-trustee so appointed for more fully confirming to such Cotrustee such property, title, right or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Issuer. The Issuer agrees to pay (subject to the Priority of Payments) for any reasonable fees and expenses in connection with such appointment. Every Co-trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms: (a)

the Secured Notes shall be authenticated and delivered and all rights, powers, duties and obligations hereunder in respect of the custody of securities, funds and other personal property held by, or required to be deposited or pledged with, the Trustee hereunder, shall be exercised solely by the Trustee;

(b)

the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by the appointment of a Co-trustee shall be conferred or imposed upon and exercised or performed by the Trustee or by the Trustee and such Co-trustee jointly, as shall be provided in the instrument appointing such Co-trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by a Co-trustee;

(c)

the Trustee at any time, by an instrument in writing executed by it, may accept the resignation of or remove any Co-trustee appointed under this Section 6.13. A successor to any Co-trustee so resigned or removed may be appointed in the manner provided in this Section 6.13;

(d)

no Co-trustee hereunder shall be personally liable by reason of any act or omission of the Trustee or any other Co-trustee hereunder;

(e)

the Trustee shall not be liable by reason of any act or omission of a Co-trustee;

(f)

any Act of Secured Noteholders delivered to the Trustee shall be deemed to have been delivered to each Co-trustee; and 115

Processed and formatted by SEC Watch - Visit SECWatch.com

(g)

6.14.

each Co-trustee hereunder shall at the time of such acceptance satisfy the qualification required of a Trustee under Section 6.9 and the other provisions of this Article VI.

CERTAIN DUTIES RELATED TO DELAYED PAYMENT OF PROCEEDS; OTHER NOTICES

In the event that the Trustee shall not have received a payment with respect to any Pledged Security within two Business Days after its Due Date, the Trustee shall (i) notify the Issuer and Collateral Manager in writing and (ii) promptly request the issuer of such Pledged Security, the trustee under the related Underlying Instrument or paying agent designated by either of them, as the case may be, to make such payment as soon as practicable after such request but in no event later than three Business. Days after the date of such request. In the event that such payment is not made within such time period, the Trustee, subject to the provisions of Section 6.1(c)(4), shall, subject to the restrictions on the sale of Collateral Debt Securities set forth in Section 12.1, take such action as the Collateral Manager shall direct in writing. Any such action shall be without prejudice to any right to claim a Default under this Indenture. The Trustee will promptly notify the Issuer if the Collateral Manager has determined that (i) any Collateral Debt Security has become a Defaulted Security, a Deferred Interest PIK Bond, a Credit Risk Security, a Credit Improved Security or a Written Down Security or (ii) the Trustee has received an Equity Security in connection with any Collateral Debt Security. 6.15.

REPRESENTATIONS AND WARRANTIES OF THE BANK (a)

Organization. The Bank has been duly organized and is validly existing as a national banking association under the laws of the United States and has the power to conduct its business and affairs as a trustee.

(b)

Authorization; Binding Obligations. The Bank has the power and authority to perform the duties and obligations of Trustee, Note Registrar and Note Transfer Agent or any other capacity to which it is appointed under this Indenture. The Bank has taken all necessary action to authorize the execution, delivery and performance of this Indenture, and all of the documents required to be executed by the Bank pursuant hereto. This Indenture has been duly executed and delivered by the Bank. Upon execution and delivery by the Issuer, this Indenture will constitute the legal, valid and binding obligation of the Bank enforceable in accordance with its terms.

(c)

Eligibility. The Bank is eligible under Section 6.9 to serve as Trustee hereunder.

(d)

No Conflict. Neither the execution, delivery and performance of this Indenture, nor the consummation of the transactions contemplated by this Indenture, (i) is prohibited by, or requires the Bank to obtain any consent, authorization, approval or registration under, any law, statute, rule, regulation, judgment, order, writ, injunction or decree that is binding upon the Bank or any of its properties or assets, or (ii) will violate any provision of, result in any default or acceleration of any obligations under, result in the creation or imposition of any lien pursuant to, or require any consent under, any agreement to which the Bank is a party or by which it or any of its property is bound.

(e)

No Proceedings. There are no proceedings pending, or to the best knowledge of the Bank, threatened against the Bank before any federal, state or other governmental agency, authority, administrator or regulatory body, arbitrator, court or other tribunal, foreign or domestic, that could have a material adverse effect on the Collateral or any action taken or to be taken by the Bank under this Indenture. 116

6.16.

EXCHANGE OFFERS, PROPOSED AMENDMENTS, ETC.

The Collateral Manager may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, take any of the following actions with respect to a Collateral Debt Security or Equity Security as to which an Offer has been made or as to which any consent, waiver, vote or exercise has been requested: (i) exchange such instrument for other securities or a mixture of securities and other consideration pursuant to such Offer (and in making a determination whether or not to exchange any security, none of the restrictions set forth in Article XII shall be applicable); and (ii) give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Debt Security or Equity Security. In the event that the Trustee does not receive instruction from the Collateral Manager, the Trustee shall have no obligation to take action with respect to such exchange or such request for consent, waiver, vote or exercise. In the event that the Trustee receives written notice of any proposed amendment, consent or waiver under the Underlying Instruments of any Collateral Debt Securities (before or after any default), the Trustee shall promptly deliver copies of such notice to the Issuer and the Collateral Manager. The Collateral Manager may, on behalf of the Issuer, instruct the Trustee pursuant to an Issuer Order to, and the Trustee shall, with respect to a Collateral Debt Security as to which a consent or waiver under the Underlying Instruments of such Collateral Debt Security (before or after any default) has been proposed, give consent, grant waiver, vote or exercise any or all other rights or remedies with respect to any such Collateral Debt Security only in accordance with such Issuer Order. In the absence of any instruction from the Collateral Manager, the Trustee shall not engage in any vote with respect to such Collateral Debt Security. 6.17.

FIDUCIARY FOR SECURED NOTEHOLDERS ONLY; AGENT FOR OTHER SECURED PARTIES

With respect to the security interests created hereunder, the pledge of any portion of the Collateral to the Trustee is to the Trustee as representative of the Secured Noteholders and agent for other Secured Parties. In furtherance of the foregoing, the possession by the Trustee

Processed and formatted by SEC Watch - Visit SECWatch.com

of any portion of the Collateral and the endorsement to or registration in the name of the Trustee of any portion of the Collateral (including without limitation as entitlement holder of the Collateral Account) are all undertaken by the Trustee in its capacity as representative of the Secured Noteholders and as agent for the other Secured Parties. The Trustee shall not by reason of this Indenture be deemed to be acting as fiduciary for each Hedge Counterparty or the Collateral Manager, provided that the foregoing shall not limit any of the express obligations of the Trustee under this Indenture. 6.18.

WITHHOLDING

If any withholding tax is imposed on the Issuer’s payment (or allocations of income) under the Secured Notes to any Secured Noteholder, such tax shall reduce the amount otherwise distributable to such Secured Noteholder. The Trustee is hereby authorized and directed to retain from amounts otherwise distributable to any Secured Noteholder sufficient funds for the payment of any tax that is required to be withheld or deducted by the Issuer (but such authorization shall not prevent the Trustee from contesting any such tax in appropriate proceedings and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding tax imposed with respect to any Secured Noteholder shall be treated as Cash distributed to such Secured Noteholder at the time it is withheld by the Trustee and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution, the Trustee may in its sole discretion withhold such amounts in accordance with this Section 6.18. If any Secured Noteholder wishes to apply for a refund of any such withholding tax, the Trustee shall reasonably cooperate with such Secured Noteholder in making such claim so long as such Secured Noteholder agrees to reimburse the Trustee for any out-of-pocket expenses incurred. Nothing herein shall impose an obligation on the part of 117

Processed and formatted by SEC Watch - Visit SECWatch.com

the Trustee to determine the amount of any tax or withholding obligation on the part of the Issuer or in respect of the Income Notes. ARTICLE VII COVENANTS 7.1.

PAYMENT OF PRINCIPAL AND INTEREST

The Issuer will duly and punctually pay all principal (including the Class C Cumulative Periodic Interest Shortfall Amount, the Class D Cumulative Periodic Interest Shortfall Amount, the Class E Cumulative Periodic Interest Shortfall Amount, the Class F Cumulative Periodic Interest Shortfall Amount, the Class G Cumulative Periodic Interest Shortfall Amount, the Class H Cumulative Periodic Interest Shortfall Amount, the Class J Cumulative Periodic Interest Shortfall Amount and the Class K Cumulative Periodic Interest Shortfall Amount) and interest (including Defaulted Interest and interest thereon, if any) in accordance with the terms of the Secured Notes and this Indenture and amounts due under any Hedge Agreement in accordance with this Indenture. Amounts properly withheld under the Code or other applicable law by any Person from a payment to any Secured Noteholder of principal and/or interest shall be considered as having been paid by the Issuer to such Secured Noteholder for all purposes of this Indenture. The Trustee shall, unless prevented from doing so for reasons beyond its reasonable control, give notice to each Secured Noteholder and each Rating Agency of any such withholding requirement no later than ten days prior to the date of the payment from which amounts are required to be withheld; provided that despite the failure of the Trustee to give such notice, amounts withheld pursuant to applicable tax laws shall be considered as having been paid by the Issuer as provided above. 7.2.

MAINTENANCE OF OFFICE OR AGENCY

The Issuer hereby appoints the Trustee as Note Paying Agent for the payment of principal of and interest on the Secured Notes. Secured Notes may be surrendered for registration of transfer or exchange at the Corporate Trust Office. The Issuer hereby appoints NCB Stockbroker Limited, 3 George’s Dock, Dublin 1, Ireland, as offshore Note Paying Agent and as the Issuer’s agent where notices and demands to or upon the Issuer in respect of any Secured Notes listed on the Irish Stock Exchange may be served and where such Secured Notes may be surrendered for registration of transfer or exchange. The Issuer may at any time and from time to time, terminate the appointment of any such agent or appoint any additional agents for any or all of such purposes; provided that (A) the Issuer will maintain in the Borough of Manhattan, The City of New York, an office or agency where notices and demands to or upon the Issuer in respect of the Secured Notes and this Indenture may be served, (B) no Note Paying Agent shall be appointed in a jurisdiction which subjects payments on the Secured Notes to withholding tax and (C) the Issuer may not terminate the appointment of any Note Paying Agent without the consent of each Income Noteholder. The Issuer shall give prompt written notice to the Trustee and each Rating Agency and the Secured Noteholders of the appointment or termination of any such agent and of the location and any change in the location of any such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency in the Borough of Manhattan, The City of New York or shall fail to furnish the Trustee with the address thereof, presentations and surrenders may be made at and notices and demands may be served on the Issuer and Secured Notes may be presented and surrendered for payment to the Note Paying Agent at its office in 118

Processed and formatted by SEC Watch - Visit SECWatch.com

Illinois (and the Issuer hereby appoints the same as its agent to receive such respective presentations, surrenders, notices and demands). For so long as any Class of Secured Notes is listed on the Irish Stock Exchange and such exchange shall so require, the Issuer shall maintain a listing agent, a paying agent and an agent where notices and demands to or upon the Issuer in respect of any Secured Notes listed on the Irish Stock Exchange may be served and where such Secured Notes may be surrendered for registration of transfer or exchange. 7.3.

FUNDS FOR SECURED NOTE PAYMENTS TO BE HELD IN TRUST

All payments of amounts due and payable with respect to any Secured Notes that are to be made from amounts withdrawn from the Payment Account shall be made on behalf of the Issuer by the Trustee or a Note Paying Agent with respect to payments on the Secured Notes. When the Issuer shall have a Note Paying Agent that is not also the Note Registrar, it shall direct the Note Registrar to furnish, no later than the fifth calendar day after each Record Date a list, if necessary, in such form as such Note Paying Agent may reasonably request, of the names and addresses of the Holders and of the certificate numbers of individual Secured Notes held by each such Holder. The initial Note Paying Agent shall be as set forth in Section 7.2. Any additional or successor Paying Agents shall be appointed by Issuer Order with written notice thereof to the Trustee and the Rating Agencies; provided that so long as any Class of Secured Notes is rated by the Rating Agencies and with respect to any additional or successor Note Paying Agent for the Secured Notes, (a) the Note Paying Agent for the Secured Notes has a rating of not less than “AA-” and not less than “A-1+” by S&P or (b) a Rating Agency Confirmation from S&P shall have been obtained with respect to the appointment of such Note Paying Agent. In the event that (i) the Issuer has actual knowledge that such successor Note Paying Agent ceases to have a rating of at least “AA-” and of “A-1+” by S&P or (ii) a Rating Agency Confirmation from S&P shall not have been obtained with respect to the appointment of such Note Paying Agent, the Issuer shall promptly remove such Note Paying Agent and appoint a successor Note Paying Agent. The Issuer shall not appoint any Note Paying Agent (other than an initial Note Paying Agent) that is not, at the time of such appointment, a depository institution or trust company subject to supervision and examination by federal and/or state and/or national banking authorities. The Issuer shall cause each Note Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Note Paying Agent shall agree with the Trustee (and if the Trustee acts as Note Paying Agent, it hereby so agrees), subject to the provisions of this Section 7.3, that such Note Paying Agent will: (a)

allocate all sums received for payment to the Holders of Secured Notes for which it acts as Note Paying Agent on each Payment Date and Redemption Date among such Holders in the proportion specified in the instructions set forth in the applicable Note Valuation Report or Redemption Date Statement or as otherwise provided herein, in each case to the extent permitted by applicable law;

(b)

hold all amounts held by it for the payment of amounts due with respect to the Secured Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided;

(c)

if such Note Paying Agent is not the Trustee, immediately resign as a Note Paying Agent and forthwith pay to the Trustee all amounts held by it in trust for the payment of Secured 119

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes if at any time it ceases to meet the standards set forth above required to be met by a Note Paying Agent at the time of its appointment; (d)

if such Note Paying Agent is not the Trustee, immediately give the Trustee notice of any Default by the Issuer (or any other obligor upon the Secured Notes) in the making of any payment required to be made; and

(e)

if such Note Paying Agent is not the Trustee at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all amounts so held in trust by such Note Paying Agent.

If the Issuer shall have appointed a Note Paying Agent other than the Trustee, the Trustee shall deposit on or prior to the Business Day next preceding each Payment Date or Redemption Date, as the case may be, with such Note Paying Agent, if necessary, an aggregate amount sufficient to pay the amounts then becoming due (to the extent funds are then available for such purpose in the Collection Account, as the case may be), such amount to be held in trust for the benefit of the Persons entitled thereto. Any funds deposited with a Note Paying Agent (other than the Trustee) in excess of an amount sufficient to pay the amounts then becoming due on the Secured Notes with respect to which such deposit was made shall be paid over by such Note Paying Agent to the Trustee for application in accordance with Section 11. The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, direct any Note Paying Agent to pay to the Trustee all amounts held in trust by such Note Paying Agent, such amounts to be held by the Trustee upon the same trusts as those upon which such amounts were held by such Note Paying Agent; and, upon such payment by any Note Paying Agent to the Trustee, such Note Paying Agent shall be released from all further liability with respect to such amounts. Except as otherwise required by applicable law, any funds deposited with the Trustee or any Note Paying Agent in trust for the payment of the principal of or interest on any Secured Note and remaining unclaimed for two years after the same has become due and payable shall be paid to the Issuer on Issuer Request; and the Holder of such Secured Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment of such amounts and all liability of the Trustee or such Note Paying Agent with respect to such trust funds (but only to the extent of the amounts so paid to the Issuer) shall thereupon cease. The Trustee or such Note Paying Agent, before being required to make any such release of payment, may, but shall not be required to, adopt and employ, at the expense of the Issuer, any reasonable means of notification of such release of payment, including mailing notice of such release to Holders whose Secured Notes have been called but have not been surrendered for redemption or whose right to or interest in amounts due and payable but not claimed is determinable from the records of any Note Paying Agent, at the last address of record of each such Holder. 7.4.

EXISTENCE OF ISSUER

The Issuer shall maintain in full force and effect its existence and rights as an exempted company incorporated and registered under the laws of the Cayman Islands and shall obtain and preserve its qualification to do business in each jurisdiction in which such qualifications are or shall be necessary to protect the validity and enforceability of this Indenture, the Secured Notes or any of the Collateral. The Issuer shall ensure that all corporate or other formalities regarding its existence (including holding regular board of directors’ and shareholders’, or other similar, meetings) or registrations are followed (including correcting any known misunderstanding regarding its separate existence). The Issuer 120

Processed and formatted by SEC Watch - Visit SECWatch.com

shall not take any action, or conduct its affairs in a manner, that is likely to result in its separate existence being ignored or in its assets and liabilities being substantively consolidated with any other Person in a bankruptcy, reorganization or other insolvency proceeding. At least one director of the Issuer shall be Independent of other parties to the Transaction Documents. So long as any Note is outstanding, the Issuer shall maintain and implement administrative and operating procedures reasonably necessary in the performance of the Issuer’s obligations hereunder, and the Issuer shall at all times keep and maintain, or cause to be kept and maintained, separate books, records, accounts, financial statements and other information customarily maintained for the performance of the Issuer’s obligations hereunder and shall allocate fairly and reasonably and pay any overhead for shared office space utilized, if any; shall at all times hold itself out to the public and all other persons as a legal entity separate from its equity holders and any other person; and shall not become involved in the day-to-day management of any other person (except as otherwise provided or contemplated in this Indenture or other related documents to which it is a party). Without limiting the foregoing, so long as any Note is outstanding (i) the Issuer shall (a) pay its own liabilities out of its own funds, (b) maintain an arm’s-length relationship with its Affiliates and (c) (if utilized) use separate stationary, invoices and checks and (ii) the Issuer shall not (a) have any subsidiaries (other than any Tax Subsidiary), (b) have any employees (other than its directors), (c) engage in any transaction with any shareholder that would constitute a conflict of interest or (d) pay dividends (other than in accordance with the terms of this Indenture, its Articles and the Income Note Paying Agency Agreement), (e) commingle assets with those of any other entity, or (f) conduct business under an assumed name (i.e. no “DBAs”), provided that the foregoing shall not prohibit the Issuer from entering into the transactions contemplated by the Corporate Services Agreement with the Administrator and the Income Note Paying Agency Agreement with the Income Note Paying Agent. 7.5.

PROTECTION OF COLLATERAL (a)

The Issuer shall from time to time, execute and deliver all such supplements and amendments hereto and all such Financing Statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action as may be necessary or advisable or desirable to secure the rights and remedies of the Secured Parties hereunder and to: (1)

Grant more effectively all or any portion of the Collateral;

(2)

maintain, preserve and perfect the lien (and the first priority nature thereof) of this Indenture or to carry out more effectively the purposes hereof;

(3)

perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations);

(4)

enforce any of the Pledged Securities or other instruments or property included in the Collateral;

(5)

preserve and defend title to the Collateral and the rights therein of the Trustee, each Hedge Counterparty and the Holders of the Secured Notes against the claims of all Persons and parties; or

(6)

pay or cause to be paid any and all taxes levied or assessed upon all or any part of the Collateral. 121

Processed and formatted by SEC Watch - Visit SECWatch.com

The Issuer hereby designates the Trustee its agent and attorney-in-fact to execute any Financing Statement, continuation statement or other instrument delivered to it pursuant to this Section 7.5, and the Trustee, as agent of the Issuer, agrees to file such continuation statements as are necessary to maintain perfection of the Collateral perfected by the filing of Financing Statements, provided that the Issuer retains ultimate responsibility to maintain the perfection of the Collateral perfected by the filing of Financing Statements and any failure of the Trustee to file continuation statements pursuant to this undertaking shall not result in any liability of the Trustee and the Trustee shall be entitled to indemnification pursuant to Section 6.8(a) with respect to any claim, loss, liability or expense incurred by the Trustee with respect to the filing of such continuation statements. The Trustee agrees that it will from time to time, at the direction of any Secured Party, execute and cause to be filed Financing Statements and continuation statements. The Issuer shall otherwise cause the perfection and priority of the security interest in the Collateral and the maintenance of such security interest at all times. Notwithstanding anything to the contrary herein, the right of a Secured Party to provide direction to the Trustee shall not impose upon the Trustee, as Secured Party, any obligation to provide any such direction. The Issuer agrees that a carbon, photographic, photostatic or other reproduction of this Indenture or of a Financing Statement is sufficient as an Indenture or a Financing Statement as the case may be. (b)

The Trustee shall not (i) except in accordance with Section 10.15(a) or (b), as applicable, remove any portion of the Collateral that consists of Cash or is evidenced by an Instrument, certificate or other writing (A) from the jurisdiction in which it was held at the date the most recent Opinion of Counsel was delivered pursuant to Section 7.6 (or from the jurisdiction in which it was held as described in the Opinion of Counsel delivered at the Closing Date pursuant to Section 3.1(c), if no Opinion of Counsel has yet been delivered pursuant to Section 7.6) or (B) from the possession of the Person who held it on such date or (ii) cause or permit ownership or the pledge of any portion of the Collateral that consists of book-entry securities to be recorded on the books of a Person (A) located in a different jurisdiction from the jurisdiction in which such ownership or pledge was recorded at such date or (B) other than the Person on whose books such ownership or pledge was recorded at such date, unless the Trustee shall have first received an Opinion of Counsel to the effect that the lien and security interest created by this Indenture with respect to such property will continue to be maintained after giving effect to such action or actions.

(c)

The Issuer shall pay or cause to be paid taxes, if any, levied on account of the beneficial ownership by the Issuer of any Pledged Securities that secure the Secured Notes; provided that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which disputed amounts or adequate reserves have been made or the failure of which to pay or discharge could not reasonably be expected to have a material adverse effect upon the ability of the Issuer to timely and fully perform any of its payment or other material obligations under this Indenture or upon the interests of the Secured Noteholders in the Collateral.

(d)

The Issuer shall enforce all of its material rights and remedies under the Transaction Documents to which it is a party. 122

Processed and formatted by SEC Watch - Visit SECWatch.com

(e)

7.6.

Without at least 30 days’ prior written notice to the Trustee, the Issuer shall not change its name, or the name under which it does business, from the name shown on the signature pages hereto.

OPINIONS AS TO COLLATERAL

On or before 30 days prior to the Payment Date in June of each calendar year, commencing in 2008, the Issuer shall furnish to the Trustee and each Rating Agency (with copies to each Hedge Counterparty) an Opinion of Counsel (which shall include assumptions and qualifications substantially similar to those set forth in the legal opinion rendered on the Closing Date pursuant to Section 3.1(c)(1)) stating that, in the opinion of such counsel, as of the date of such opinion, the lien and security interest created by this Indenture with respect to the Collateral remains a valid and perfected first priority lien and describing the manner in which such security interest shall remain perfected. 7.7.

PERFORMANCE OF OBLIGATIONS (a)

The Trustee shall notify the Issuer, each Hedge Counterparty and each Secured Noteholder of any request for an amendment, waiver or supplement to any Underlying Instrument included in the Collateral or of any other notice of a vote in respect of any Collateral Debt Security included in the Collateral. The Issuer shall not enter into any such amendment, waiver or supplement; provided that, notwithstanding anything in this Section 7.7(a) to the contrary, the Issuer may enter into any amendment or waiver of or supplement to any such Underlying Instrument if such amendment, supplement or waiver: (1)

is required by the provisions of any Underlying Instrument or by applicable law (other than pursuant to an Underlying Instrument);

(2)

is necessary to cure any ambiguity, inconsistency or formal defect or omission in such Underlying Instrument; or

(3)

(x) is deemed necessary by the Issuer or the Collateral Manager and does not materially and adversely affect the Secured Parties or (y) is effected pursuant to Section 6.16.

The Issuer shall be entitled to rely on an Opinion of Counsel as to material adverse effect and as to whether the entry into an amendment, supplement or waiver is permitted pursuant to this Indenture. (b)

The Issuer may, with the prior written consent of the Holders of a Majority of the then Aggregate Outstanding Amount of the Notes of each Class of Secured Notes and the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes, contract with other Persons, including the Collateral Administrator, the Collateral Manager and the Bank, for the performance of actions and obligations to be performed by the Issuer hereunder by such Persons. Notwithstanding any such arrangement, the Issuer shall remain liable for all such actions and obligations. In the event of such contract, the performance of such actions and obligations by such Persons shall be deemed to be performance of such actions and obligations by the Issuer and the Issuer will punctually perform, and use its best efforts to cause such other Person to perform, all of their obligations and agreements contained in related agreement. 123

Processed and formatted by SEC Watch - Visit SECWatch.com

7.8.

(c)

The Issuer shall treat all acquisitions of Collateral Debt Securities as a “purchase” for tax, accounting and reporting purposes.

(d)

The Issuer shall file, or cause to be filed, any tax returns, including information tax returns, required by any governmental authority.

(e)

In the event that (i) the ownership of a Collateral Debt Security or property acquired in respect of a Collateral Debt Security would result in the Issuer being or becoming subject to U.S. tax on a net income basis or being or becoming subject to the U.S. branch profits tax (in either case, such Collateral Debt Security becoming a Taxed Collateral Debt Security and such property becoming a Taxed Property), and (ii) the Issuer does not sell or otherwise dispose of all or a portion of such Taxed Collateral Debt Security or Taxed Property in accordance with the provisions of the Indenture, the Collateral Manager on behalf of the Issuer shall, prior to such Collateral Debt Security becoming a Taxed Collateral Debt Security or such property becoming a Taxed Property, (a) set up a special purpose subsidiary meeting S&P’s then current published criteria for bankruptcy remote special purpose entities (a Tax Subsidiary) to receive and hold any such Taxed Collateral Debt Security or Taxed Property or transfer such Taxed Collateral Debt Security or Taxed Property to the Tax Subsidiary or (b) contribute such taxed Collateral Debt Security or Taxed Property to a REMIC or other entity, the interests in which, if owned by the Issuer would not cause the Issuer to become subject to U.S. tax on a net income basis or to the U.S. branch profits tax unless the Issuer has received an opinion of nationally recognized counsel to the effect that the Issuer can hold such Taxed Collateral Debt Security directly without causing the Issuer to be treated as engaged in a trade or business in the United States for United States federal income tax purposes. The Issuer shall cause the purposes and permitted activities of any such Tax Subsidiary or entity described in clause (b) to be restricted solely to the acquisition, holding and disposition of such Taxed Collateral Debt Security or Taxed Property and shall require such subsidiary to distribute 100% of the proceeds of any sale of such Taxed Collateral Debt Security or Taxed Property, net of any tax liabilities, to the Issuer.

(f)

As long as any Secured Notes are Outstanding, the Issuer shall enter into one or more Servicing Agreements prior to or concurrent with the acquisition of each Real Estate Interest and shall maintain a Servicing Agreement in respect of each Real Estate Interest until the sale or other liquidation of such Real Estate Interests in accordance with this Indenture.

NEGATIVE COVENANTS (a)

The Issuer will not: (1)

intentionally operate so as to be subject to U.S. federal income taxes on its net income;

(2)

sell, assign, participate, transfer, exchange or otherwise dispose of, or pledge, mortgage, hypothecate or otherwise encumber (or permit such to occur or suffer such to exist), any part of the Collateral, except as expressly permitted by this Indenture;

(3)

claim any credit on, make any deduction from, or dispute the enforceability of, the payment of the principal or interest (or any other amount) payable in respect 124

Processed and formatted by SEC Watch - Visit SECWatch.com

of the Secured Notes (other than amounts required to be paid, deducted or withheld in accordance with any applicable law or regulation of any governmental authority) or assert any claim against any present or future Secured Noteholder by reason of the payment of any taxes levied or assessed upon any part of the Collateral; (4)

(A) incur or assume or guarantee any indebtedness, other than the Secured Notes and this Indenture and the transactions contemplated hereby; (B) issue any additional class of securities other than the Income Notes; or (C) issue any additional shares of stock;

(5)

(A) take any action that would impair the validity or effectiveness of this Indenture or any Grant hereunder or the lien of this Indenture, amend hypothecate, subordinate, terminate, discharge or release any Person from any covenants or obligations with respect to this Indenture or the Secured Notes, except as may be permitted hereby, (B) create or extend any lien, charge, adverse claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) on or to the Collateral or any part thereof, any interest therein or the proceeds thereof, or (C) take any action that would cause the lien of this Indenture not to constitute a valid first priority security interest in the Collateral;

(6)

use any of the proceeds of the Secured Notes issued hereunder (A) to extend “purpose credit” within the meaning given to such term in Regulation U or (B) to purchase or otherwise acquire any Margin Stock;

(7)

permit the aggregate book value of all Margin Stock held by the Issuer on any date to exceed the net worth of the Issuer on such date (excluding any unrealized gains and losses) on such date;

(8)

dissolve or liquidate in whole or in part, except as permitted hereunder; or

(9)

except for any agreements involving the purchase and sale of Collateral Debt Securities having customary purchase or sale terms and documents with customary loan trading documentation (but not excepting any Hedge Agreement), enter into any agreements unless such agreements contain “non-petition” and “limited recourse” provisions with respect to the Issuer, nor shall the Issuer amend any such “non-petition” or “limited recourse” provisions without first obtaining Rating Agency Confirmation from S&P.

(b)

Except as permitted by this Indenture, the Issuer will not do business under any other name other than the name set forth in the Articles and neither the Issuer nor the Trustee shall acquire any Collateral after the Closing Date, sell, transfer, exchange or otherwise dispose of Collateral, or enter into or engage in any business with respect to any part of the Collateral.

(c)

The Issuer will not permit Northstar OS IX, LLC to sell or otherwise transfer any or all of the Ordinary Shares to any transferee unless (1) Rating Agency Confirmation with respect to the transfer of such Ordinary Shares is obtained, (2) (i) such Ordinary Share transferee is a “special purpose entity” formed in compliance with then published Rating Agency criteria and (ii) Northstar OS IX, LLC delivers to each Rating Agency an opinion of counsel of nationally recognized standing to the affect that, upon the event of the 125

Processed and formatted by SEC Watch - Visit SECWatch.com

bankruptcy of any equity owner of the Ordinary Share transferee, a court would not order the substantive consolidation of the assets and liabilities of the Ordinary Share Transferee with those of such equity owner or owners (which shall be in a form and, subject to such assumptions and exceptions, customary of legal opinions of this type) or (3) such Ordinary Share transferee is a charitable trust organized in the Cayman Islands formed for the sole purpose of holding the Ordinary Shares that meets published Rating Agency criteria with respect to the bankruptcy remoteness of Cayman Island exempted companies formed for the purpose of issuing securities in collateralized debt obligation transactions. 7.9.

STATEMENT AS TO COMPLIANCE

On or before the Payment Date in June of each calendar year commencing in 2008, or immediately upon the occurrence of a Default in the fulfillment of an obligation under this Indenture, the Issuer shall deliver to the Trustee, the Income Note Paying Agent, each Secured Noteholder making a written request therefor, the Irish Paying Agent, each Hedge Counterparty, the Collateral Manager and each Rating Agency a certificate of the Issuer stating, as to each signer thereof, that:

7.10.

(a)

the Officer executing such certificate has conducted a review of the activities of the Issuer and of the Issuer’s performance under this Indenture during the 12-month period ending on December 31 of such year (or from the Closing Date until December 31, 2007, in the case of the first such certificate) based on reports and other information delivered to such Officer by the Trustee, the Collateral Manager and the Collateral Administrator and a review of the Accountant’s Reports prepared pursuant to Section 10.16 and such other materials as such Officer deems appropriate; and

(b)

to the best of knowledge of the Issuer, based on such review, the Issuer has fulfilled all of its material obligations under this Indenture throughout the period, or, if there has been a Default in the fulfillment of any such obligation, specifying each such Default known to such Officer and the nature and status thereof, including actions undertaken to remedy the same.

ISSUER MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS (a)

The Issuer shall not consolidate or merge with or into any other Person or transfer or convey all or substantially all of its assets to any Person, unless permitted by Cayman Islands law and unless: (1)

the Issuer shall be the surviving entity, or the Person (if other than the Issuer) formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall be an exempted limited liability company organized and existing under the laws of the Cayman Islands or such other jurisdiction outside the United States as may be approved by a Majority of each Class and each Hedge Counterparty, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, each Hedge Counterparty and each Secured Noteholder, the due and punctual payment of the principal of and interest on all Secured Notes and the performance of every covenant of this Indenture and any Hedge Agreement on the part of the Issuer to be performed or observed, all as provided herein;

(2)

each Rating Agency and each Hedge Counterparty shall have received written notification from the Issuer of such consolidation, merger, transfer or conveyance 126

Processed and formatted by SEC Watch - Visit SECWatch.com

and the identity of the surviving entity and a Rating Agency Confirmation shall have been obtained with respect to the consummation of such transaction; (3)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have agreed with the Trustee (A) to observe the same legal requirements for the recognition of such formed or surviving entity as a legal entity separate and apart from any of its Affiliates as are applicable to the Issuer with respect to its Affiliates and (B) not to consolidate or merge with or into any other Person or transfer or convey the Collateral or all or substantially all of its assets to any other Person except in accordance with the provisions of this Section 7.10;

(4)

if the Issuer is not the surviving entity, the Person formed by such consolidation or into which the Issuer is merged or to which all or substantially all of the assets of the Issuer are transferred or conveyed shall have delivered to the Trustee, each Counterparty and each Rating Agency an Officer’s certificate and an Opinion of Counsel each stating that such Person shall be duly organized, validly existing and (if applicable) in good standing in the jurisdiction in which such Person is organized; that such Person has sufficient power and authority to assume the obligations set forth in Section 7.10(a)(1) above and to execute and deliver an indenture supplemental hereto for the purpose of assuming such obligations; that such Person has duly authorized the execution, delivery and performance of an indenture supplemental hereto for the purpose of assuming such obligations and that such supplemental indenture is a valid, legal and binding obligation of such Person, enforceable in accordance with its terms, subject only to bankruptcy, reorganization, insolvency, moratorium and other laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); that, immediately following the event which causes such Person to become the successor to the Issuer, (A) such Person has good and marketable title, free and clear of any lien, security interest or charge, other than the lien and security interest of this Indenture, to the Collateral; (B) the Trustee continues to have a valid perfected first priority security interest in the Collateral securing all of the Secured Notes; (C) such Person has received an Opinion of Counsel to the effect that such Person will not be subject to net income tax or be treated as engaged in a trade or business within the United States for U.S. federal income tax purposes and such other matters as the Trustee, any Hedge Counterparty or any Secured Noteholder may reasonably require;

(5)

immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(6)

the Issuer shall have delivered to the Trustee, each Hedge Counterparty and each Secured Noteholder an Officer’s certificate and an Opinion of Counsel each stating that such consolidation, merger, transfer or conveyance and such supplemental indenture comply with this Article VII, that all conditions precedent in this Article VII provided for relating to such transaction have been complied with and that no adverse tax consequences will result therefrom to any Secured Noteholder or any Hedge Counterparty; and 127

(7)

7.11.

the Issuer shall have delivered to the Trustee an Opinion of Counsel stating that after giving effect to such transaction, the Issuer will not be required to register as an investment company under the Investment Company Act.

SUCCESSOR SUBSTITUTED

Upon any consolidation or merger, or transfer or conveyance of all or substantially all of the assets of the Issuer or the Issuer, in accordance with Section 7.10, the Person formed by or surviving such consolidation or merger (if other than the Issuer), or, the Person to which such transfer or conveyance is made, shall succeed to, and be substituted for, and may exercise every right and power of, and shall be bound by each obligation or covenant of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein. In the event of any such consolidation, merger, transfer or conveyance, the Person named as the “Issuer” in the first paragraph of this Indenture or any successor which shall theretofore have become such in the manner prescribed in this Article VII may be dissolved, wound-up and liquidated at any time thereafter, and such Person thereafter shall be released from its liabilities as obligor and maker on all the Secured Notes and from its obligations under this Indenture. 7.12.

NO OTHER BUSINESS

The Issuer shall not engage in any business or activity other than (i) issuing and selling the Secured Notes pursuant to this Indenture, (ii) issuing and selling the Income Notes in accordance with the Income Note Paying Agency Agreement (iii) issuing the Ordinary Shares pursuant to the Issuer Charter, (iv) acquiring, pledging, holding and disposing of, solely for its own account, Collateral Debt Securities, Eligible Investments and other Collateral described in clauses (a) to (e) of the granting clauses hereof, and (v) such other activities that are incidental thereto and connected therewith. The Issuer shall not hold itself out as a derivatives dealer willing to enter into either side of, or to offer to enter into, assume, offset, assign or otherwise terminate positions in (i) interest rate, currency, equity or commodity swaps or caps or (ii) derivative financial instruments (including options, forward contracts, short positions and similar instruments) in any commodity, currency, share of stock, partnership or trust, note, bond, debenture or other evidence of indebtedness, swap or cap. The foregoing shall not limit the

Processed and formatted by SEC Watch - Visit SECWatch.com

ability of the Issuer to enter into Hedge Agreements. Furthermore, the Issuer shall not hold itself out, whether through advertising or otherwise, as a bank, insurance company or finance company, or as originating loans, lending funds, making a market in loans or other assets or selling loans or other assets to customers. The Issuer will not amend the Issuer Charter, if such amendment would result in the rating (including any private or confidential rating) of any Class of Secured Notes being reduced or withdrawn. The Issuer shall not engage in any business or activity or hold any asset that would cause the Issuer to be engaged in a U.S. trade or business for U.S. federal income tax purposes, except as the result of ownership of Equity Securities or securities received in an Offer in accordance with the provisions of this Indenture. 7.13.

CHANGE OR WITHDRAWAL OF RATING

The Issuer shall promptly notify the Trustee in writing and upon receipt of such notice the Trustee shall promptly notify the Secured Noteholders and each Hedge Counterparty if at any time the rating of any Class of Secured Notes has been, or is known will be, changed or withdrawn. 7.14.

REPORTING

At any time when the Issuer is not subject to Section 13 or 15(d) of the Exchange Act and is not exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, upon the request of a Holder or Beneficial Owner of a Secured Note or Income Note, the Issuer shall promptly furnish or cause to be furnished Rule 144A Information to such Holder or Beneficial Owner, to a prospective purchaser of such 128

Processed and formatted by SEC Watch - Visit SECWatch.com

Secured Note or Income Note designated by such Holder or Beneficial Owner or to the Trustee for delivery to such Holder or Beneficial Owner or a prospective purchaser designated by such Holder or Beneficial Owner, as the case may be, in order to permit compliance by such Holder or Beneficial Owner with Rule 144A in connection with the resale of such Secured Note or Income Note by such Holder or Beneficial Owner. 7.15.

SECURED NOTE CALCULATION AGENT (a)

The Issuer hereby agrees that for so long as any of the Secured Notes remain Outstanding the Issuer will at all times cause there to be an agent appointed to calculate LIBOR in respect of each Interest Period in accordance with the terms of Schedule B (the Secured Note Calculation Agent), which agent shall be a financial institution, subject to supervision or examination by federal or state authority, having a rating of at least “BBB+” by S&P and having an office within the United States. Whenever the Secured Note Calculation Agent is required to act or exercise judgment, it will do so in good faith and in a commercially reasonable manner. The Issuer has initially appointed the Trustee as Secured Note Calculation Agent for purposes of determining LIBOR for each Interest Period. If the Secured Note Calculation Agent is unable or unwilling to act as such or is removed by the Issuer, the Issuer (after consultation with the Collateral Manager) will propose a leading bank which is engaged in transactions in Dollar deposits in the international Eurodollar market and which does not control or is not controlled by or under common control with the Issuer or any of its Affiliates as a replacement Secured Note Calculation Agent for approval by Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes. The Secured Note Calculation Agent may not resign its duties without a successor having been duly appointed.

(b)

As soon as possible after 11:00 a.m. (London time) on each LIBOR Calculation Date, but in no event later than 11:00 a.m. (New York time) on the Business Day immediately following each LIBOR Calculation Date, the Secured Note Calculation Agent will calculate LIBOR for the next Interest Period and the Periodic Interest payable for such Interest Period in respect of the Outstanding Secured Notes, rounded to the nearest cent, with half a cent being rounded upward, on the related Payment Date to be given to the Issuer, the Trustee, the Collateral Manager, the Depositary, Euroclear, Clearstream, the Note Paying Agent and the Irish Paying Agent. The Secured Note Calculation Agent will also specify to the Issuer and the Collateral Manager the quotations upon which the Applicable Periodic Interest Rate for each Class of Secured Notes is based, and in any event the Secured Note Calculation Agent must notify the Issuer and the Collateral Manager before 5:00 p.m. (New York time) on each applicable LIBOR Calculation Date if it has not determined and is not in the process of determining LIBOR with respect to the Secured Notes and the Periodic Interest with respect to each Class of Secured Notes, together with its reasons for the delay. The Irish Paying Agent also will cause the Applicable Periodic Interest Rate for each Interest Period for each Class of Secured Notes listed on the Irish Stock Exchange, the amount of interest payable in respect of each Class of Secured Notes listed on the Irish Stock Exchange and each Payment Date to be delivered to the Company Announcements Office of the Irish Stock Exchange as soon as possible after the Irish Paying Agent has received notice from the Secured Note Calculation Agent of such Applicable Periodic Interest Rates and amounts. 129

Processed and formatted by SEC Watch - Visit SECWatch.com

7.16.

LISTING

The Issuer will use its commercially reasonable efforts to obtain and maintain the listing of each Class of Secured Notes on the Irish Stock Exchange. 7.17.

AMENDMENT OF CERTAIN DOCUMENTS

The Issuer will not agree to any amendment to or modification of its Articles, the Corporate Services Agreement, the Collateral Management Agreement, the Account Control Agreement or any Hedge Agreement at any time without obtaining Rating Agency Confirmation with respect to any such modification and will not amend, modify or waive any “non-petition” or “limited recourse” provisions of any Transaction Document to which it is a party without obtaining a Rating Agency Confirmation with respect to such modification. The Trustee shall provide each of the Hedge Counterparties, the Holders of Secured Notes of the Controlling Class, the Collateral Manager and the Rating Agencies with a copy of any such amendment or modification at least ten Business Days before effecting such amendment or modification. Prior to entering into any waiver in respect of the any of the foregoing agreements, the Issuer will provide to each Rating Agency and the Trustee with written notice of such waiver. 7.18.

PURCHASE OF COLLATERAL; INFORMATION REGARDING COLLATERAL; RATING CONFIRMATION (a)

The Issuer will use reasonable efforts to purchase or enter into binding agreements to purchase, on or before the Effective Date, Collateral Debt Securities having an aggregate Principal Balance, together with the aggregate Principal Balance of all Eligible Investments purchased with Collateral Principal Collections, of not less than U.S.$800,000,000 (assuming, for these purposes, settlement (in accordance with customary settlement procedures in the relevant markets) of all agreements entered into by the Issuer to acquire Collateral Debt Securities scheduled to settle on or following the Effective Date).

(b)

The Issuer (or the Collateral Manager on behalf of the Issuer) shall cause to be delivered to the Trustee on the Effective Date an amended Schedule A listing all Collateral Debt Securities purchased on or before the Effective Date, which schedule will supersede any prior Schedule A delivered to the Trustee.

(c)

The Collateral Manager, on behalf of the Issuer, shall give prompt written notice to S&P of any purchase of a Collateral Debt Security which includes, as one of its rights or counterparts, the right to distributions from excess proceeds after required fixed payments are made on other classes of securities.

(d)

On or before the Effective Date, the Issuer (or the Collateral Manager on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Secured Notes of the Controlling Class, each Hedge Counterparty and each Rating Agency (in addition to any such Officer’s Certificate, the information set forth in such Officer’s Certificate shall also be provided to S&P in a form that complies with and includes the information required by S&P’s Preferred Format) demonstrating compliance by the Issuer with its obligations under Section 7.18(a) and satisfaction of each applicable Collateral Quality Test (with the exception of S&P’s CDO Monitor Test), each applicable Collateral Concentration Limitation and each applicable Coverage Test or, if on the Effective Date, the Issuer shall be in default in the performance of its obligations under this Section 7.18 or any of the Collateral Quality Tests (with the exception of S&P’s CDO Monitor Test), the Collateral 130

Processed and formatted by SEC Watch - Visit SECWatch.com

Concentration Limitations or the specified Coverage Tests shall fail to be satisfied, the Issuer (or the Collateral Manager on its behalf) shall deliver an Officer’s certificate to the Trustee, the Holders of Secured Notes of the Controlling Class, each Hedge Counterparty and each Rating Agency specifying the details of such default or failure; provided that the failure to satisfy any of the Collateral Quality Tests, Collateral Concentration Limitations or Coverage Tests does not constitute an Event of Default but such failure may result in a Rating Confirmation Failure. (e)

No later than 15 Business Days after the Effective Date, the Issuer (or the Collateral Manager on its behalf) shall deliver or cause to be delivered to the Trustee an accountant’s certificate (the Accountant’s Certificate) (i) confirming the information with respect to each Collateral Debt Security set forth on the amended schedule delivered pursuant to Section 7.18(b) as of the Effective Date, and the information provided by the Issuer with respect to every other asset included in the Collateral, (ii) certifying as of the Effective Date the procedures applied and their associated findings with respect to the Coverage Tests, the Collateral Concentration Limitations and the Collateral Quality Tests and (iii) specifying the procedures undertaken to review data and computations relating to the foregoing clause (ii) held by the Issuer on the Effective Date.

(f)

The Issuer (or the Collateral Manager on its behalf) shall request in writing that each of the Rating Agencies confirm in writing (a Rating Confirmation), within 30 Business Days after the Effective Date (or, in the case of each Rating Agency, any such later date (in no event longer than 60 Business Days after the Effective Date) that shall be acceptable to such Rating Agency), the ratings (including any private or confidential ratings) assigned by it on the Closing Date to the Secured Notes. In the event that the Issuer fails to obtain a Rating Confirmation within such time period (a Rating Confirmation Failure), Collateral Interest Collections and, to the extent Collateral Interest Collections are insufficient therefor, Collateral Principal Collections shall be applied on the next Payment Date and any succeeding Payment Dates, as applicable as provided in Section 11.1 to the extent necessary for each of the Rating Agencies to provide a Rating Confirmation.

(g)

Notwithstanding the foregoing, if the Issuer (or the Collateral Manager on its behalf) has requested in writing that each of the Rating Agencies provide Rating Confirmation within five Business Days after the Effective Date and obtained confirmation by electronic mail, facsimile or telephone that each of the Rating Agencies has received such request and has promptly delivered to the applicable Rating Agency any additional information reasonably requested by such Rating Agency, and any of the Rating Agencies fails to respond to such request within 30 Business Days after the Effective Date, then such failure to respond will not immediately constitute a Rating Confirmation Failure so long as (x) the CDS Principal Balance equals at least U.S.$800,000,000 and (y) the Collateral Quality Tests are satisfied, but such failure to respond shall not constitute receipt of Rating Confirmation; provided that Rating Confirmation Failure will thereafter occur immediately upon receipt from any Rating Agency of an actual notice of Rating Confirmation Failure. If such response is not received from any Rating Agency within 60 Business Days after the Effective Date, the Issuer (or the Collateral Manager on behalf of the Issuer) may repeat such request within 60 Business Days thereafter. In addition, if any rating assigned as of the Closing Date to any Class of Notes has not been confirmed, or is reduced or withdrawn, within 30 Business Days after the Effective Date by any Rating Agency, the Collateral Manager may, on behalf of the Issuer, within 10 Business Days thereafter provide to such Rating Agency a proposal (a Proposal) with respect to 131

Processed and formatted by SEC Watch - Visit SECWatch.com

the Collateral Debt Securities. If such Rating Agency accepts the Proposal, a Rating Confirmation shall be deemed to have occurred with respect to such Rating Agency, so long as the Collateral Manager meets the conditions set forth in such Proposal within the time requirements set forth in such Proposal. If the Collateral Manager, on behalf of the Issuer, elects not to submit a Proposal, if a Proposal is submitted but not accepted or if the Collateral Manager fails to meet the conditions set forth in the Proposal within the time requirements set forth in such Proposal, then a Rating Confirmation Failure shall be deemed to have occurred. (h)

No later than 15 Business Days following the Effective Date, the Trustee shall (i) run the S&P CDO Monitor and report to S&P whether or not the S&P CDO Monitor Test has been satisfied and (ii) report the S&P Scenario Default Rate and the S&P Break-Even Default Rate for each Class of Notes. ARTICLE VIII SUPPLEMENTAL INDENTURES

8.1.

SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF SECURED NOTEHOLDERS

Without the consent of the Holders of any Secured Notes, any Hedge Counterparty (except as specified below) or the Income Noteholders, but with Rating Agency Confirmation for so long as any Class of Notes are rated as such time by any Rating Agency, the Issuer, when authorized by Board Resolutions, and the Trustee, at any time and from time to time subject to the requirement provided below in this Section 8.1 with respect to the ratings of the Secured Notes and subject to Section 8.3, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for certain limited purposes including, inter alia, to: (a)

evidence the succession of another Person to the Issuer and the assumption by any such successor Person of the covenants of the Issuer herein and in the Secured Notes pursuant to Section 7.10 or 7.11;

(b)

add to the covenants of the Issuer or the Trustee for the benefit of the Holders of all of the Secured Notes;

(c)

pledge any additional property to the Trustee;

(d)

add to the conditions, limitations or restrictions on the authorized amount, terms and purposes of the issue, authentication and delivery of the Secured Notes;

(e)

effect the appointment of a successor;

(f)

reduce the permitted minimum denomination of the Secured Notes;

(g)

take any action necessary or advisable to prevent the Issuer, any Note Paying Agent or the Trustee from being subject to withholding or other taxes, fees or assessments, to prevent the Issuer (without adverse effect to the Issuer) from failing to qualify as a Qualified REIT Subsidiary or to prevent the Issuer from being treated as engaged in a U.S. trade or business or otherwise being subjected to U.S. federal, state or local income 132

Processed and formatted by SEC Watch - Visit SECWatch.com

tax on a net income tax basis; provided, further, that such action will not cause the Noteholders to experience any material change to the timing, character or source of income from the Notes and will not be considered a significant modification resulting in an exchange for purposes of section 1.1001-3 of the U.S. Treasury regulations; (h)

modify the restrictions on and procedures for resale and other transfer of the Secured Notes in accordance with any change in any applicable law or regulation (or the interpretation thereof) or to enable the Issuer to rely upon any less restrictive exemption from registration under the Securities Act or the Investment Company Act (in addition to that provided under Section 3(c)(7) thereunder) or to remove restrictions on resale and transfer to the extent not required thereunder;

(i)

grant, convey, transfer, assign, mortgage or pledge any property to or with the Trustee for the benefit of the Secured Parties;

(j)

correct or amplify the description of any property at any time subject to the lien of this Indenture, or to better assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of this Indenture (including any and all actions necessary or desirable as a result of changes in law or regulations) or to subject to the lien of this Indenture any additional property;

(k)

make any change required by the stock exchange on which any Class of Secured Note is listed, if any, in order to permit or maintain such listing;

(l)

correct, amend, cure any manifest error, inconsistency, defect or ambiguity or correct any typographical error in this Indenture;

(m)

modify this Indenture to conform the terms herein to the terms set forth in the then current Offering Circular;

(n)

modify any provision (other than in respect of a Reserved Matter), with respect to restrictions upon the Issuer’s rights to acquire and dispose of Collateral Debt Securities and other assets, that the Issuer or the Collateral Manager determines to be necessary or desirable in order for the Issuer to maintain any desired exemption from registration of the Issuer under the Investment Company Act or of the Notes under the Securities Act;

(o)

with the consent of the Collateral Manager, modify the calculation of the Collateral Quality Tests and the definitions applicable thereto to correspond with published or written changes in the guidelines, methodology or standards established by the Rating Agencies;

(p)

with the consent of the Collateral Manager and the consent of not less than a Majority of the aggregate Outstanding principal amount of the Controlling Class, to modify the calculation of the Coverage Tests and the definitions applicable thereto to correspond with published or written changes in the guidelines, methodology or standards established by the Rating Agencies; or

(q)

agree to any modification of the Indenture or any other Transaction Document (other than in respect of a Reserved Matter), which is, in the opinion of the Trustee, proper to make if, in the opinion of the Trustee (based upon an Opinion of Counsel), such modification will not have a material adverse effect on the interests of Holders of any Class or Classes 133

Processed and formatted by SEC Watch - Visit SECWatch.com

of Notes or any Hedge Counterparty and which is of a formal, minor or technical nature or is to correct a manifest error. In addition, the Trustee may, but is not obligated to, without the consent of the Secured Noteholders or of the Holders of any relevant Class or Classes of Secured Notes, agree to any modification of any other Transaction Document which is of a formal, minor or technical nature or is to correct a manifest error and which is, in the opinion of the Trustee (based upon an Opinion of Counsel as described in Section 8.3), proper to make; provided such modification will not have a material adverse effect on the interests of any Hedge Counterparty or the Holders of any Class or Classes of Notes. The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. No modification to the Indenture will be effective until the Collateral Manager has received written notice of such amendment and, if such amendment affects the rights, obligations or compensation of the Collateral Manager, the Collateral Manager has consented in writing to the terms of the proposed amendment. In addition, the consent of any predecessor Collateral Manager will be required to implement any such supplemental indenture that would change any provision of the Indenture entitling such predecessor Collateral Manager to any fee or other amount payable to it under the Indenture or to reduce or delay the right of such predecessor to such payment. Without obtaining the requisite consents of the applicable parties pursuant to this Section 8.1, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of any Hedge Counterparty, any Holder of Secured Notes or the Income Notes would be materially and adversely affected thereby. In determining whether or not the interests of any Holder of Secured Notes or Income Notes will be materially and adversely affected, the Trustee shall be entitled to rely upon an Opinion of Counsel or a certificate of the Issuer or the Collateral Manager as to whether the interests of any Holder of Secured Notes or of Income Notes would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the Income Note Paying Agent). The Collateral Manager will not be bound by any supplemental indenture that affects the obligations of the Collateral Manager unless the Collateral Manager has consented thereto in writing (which consent will not be unreasonably withheld). The Issuer will not consent to any supplemental indenture that would have a material adverse effect on any Hedge Counterparty without the consent of such Hedge Counterparty (which shall not be unreasonably withheld, conditioned or delayed). At the cost of the Issuer, the Trustee shall provide to the Secured Noteholders, the Collateral Manager, the Income Note Paying Agent, each Hedge Counterparty and each Rating Agency a copy of any proposed supplemental indenture at least ten days prior to the execution thereof by the Trustee and, for so long as any Secured Notes are Outstanding, request a Rating Agency Confirmation from each Rating Agency with respect to such supplemental indenture. As soon as practicable after the execution by the Trustee and the Issuer of any such supplemental indenture, the Trustee shall provide to the Secured Noteholders, the Collateral Manager, the Income Note Paying Agent, each Hedge Counterparty and each Rating Agency a copy of the executed supplemental indenture. For so long as any Secured Notes are Outstanding and rated by either of the Rating Agencies, no supplemental indenture pursuant to this Section 8.1, shall be effective unless and until a Rating Agency Confirmation from each Rating Agency has been received. 134

8.2.

SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURED NOTEHOLDERS

Except as provided below, with the prior written consent of each Hedge Counterparty (but only if the right of such Hedge Counterparty to payments in accordance with the Priority of Payments is adversely affected), the Holders of not less than a majority of the aggregate principal amount of the Outstanding Secured Notes of each Class (in principal amount) adversely affected thereby, receipt of Rating Agency Confirmation and the written consent of Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes (if materially and adversely affected thereby), the Trustee and the Issuer may execute a supplemental indenture to add provisions to, or change in any manner or eliminate any provisions of, the Indenture or modify in any manner the rights of the Holders of the Secured Notes of such Class or of the Income Notes or the Hedge Counterparty under the Indenture. Unless notified (after giving 30 Business Days’ notice of such amendment to the holders of each Class of Notes, the Holders of the Income Notes and each Hedge Counterparty) by holders of a majority in Aggregate Outstanding Amount of the Notes of any Class that such Class of Notes will be materially and adversely affected by the proposed supplemental indenture, the interests of such Class will be deemed not to be materially and adversely affected by such proposed supplemental indenture. With the written consent of the Holders of not less than 75% of the then Aggregate Outstanding Amount of each adversely affected Class of Secured Notes and the written consent of 75% of the Holders of the aggregate principal amount of the Outstanding Income Notes if materially and adversely affected thereby (which consent shall be evidenced by an Officer’s certificate of the Issuer certifying that such consent has been obtained), Rating Agency Confirmation and the written consent of each Hedge Counterparty (which shall be required only if the right of such Hedge Counterparty to payments in accordance with the Priority of Payments is adversely affected), the Trustee and Issuer may, subject to Section 8.3, enter into one or more indentures supplemental hereto in order to: (a)

change the applicable Stated Maturity Date of the Secured Notes or scheduled redemption of the principal of or the due date

Processed and formatted by SEC Watch - Visit SECWatch.com

of any installment of interest on the Secured Notes, reduce the principal amount thereof or the rate of interest thereon, or the Redemption Price with respect thereto, or change the earliest date on which Secured Notes 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 the Secured Notes or change any place where, or the coin or currency in which, Secured Notes or the principal thereof or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity Date thereof (or, in the case of redemption, on or after the Redemption Date); (b)

reduce the percentage, in principal amount, of Holders of Secured Notes of each Class, or the percentage of Income Noteholders, whose consent is required for the authorization of any supplemental indenture or for any waiver of compliance with certain provisions of the Indenture or certain defaults thereunder or their consequences;

(c)

impair or adversely affect the Collateral other than as permitted by the Indenture;

(d)

permit the creation of any security interest ranking prior to or on a parity with the security interest of the Indenture with respect to any part of the Collateral or terminate such security interest on any property at any time subject thereto (other than in accordance with the Indenture) or deprive the Holder of any Secured Note or any Hedge Counterparty of the security afforded by the security interest of the Indenture; 135

Processed and formatted by SEC Watch - Visit SECWatch.com

(e)

reduce the percentage of the aggregate principal amount of Holders of Secured Notes of each Class whose consent is required to request the Trustee to preserve the Collateral or rescind the Trustee’s election to preserve the Collateral pursuant to Section 5.5 or to sell or liquidate the Collateral pursuant to Section 5.4 or 5.5;

(f)

modify any of the provisions of this Section 8.2, except to increase the percentage of the aggregate principal amount of Outstanding Secured Notes of each Class whose Holders’ consent is required for any such action or to provide that other provisions of the Indenture cannot be modified or waived without the written consent of the Holders of 75% of the then Aggregate Outstanding Amount of each affected Class of Secured Notes Outstanding or each Hedge Counterparty;

(g)

modify the definition of the term “Outstanding” or Section 11.1;

(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 or principal of any Secured Note on any Payment Date or to affect the right of the Holders of Secured Notes or any Hedge Counterparty to the benefit of any provisions for the redemption of such Secured Notes contained therein;

(i)

modify provisions related to the bankruptcy or insolvency of the Issuer; or

(j)

modify provisions stating that the obligations of the Issuer are limited recourse obligations of the Issuer payable solely from the Collateral in accordance with the terms of the Indenture (Section 8.2(a) through (j) collectively, the Reserved Matters).

The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties, liabilities or indemnities under this Indenture or otherwise, except to the extent required by law. Not later than 15 Business Days prior to the execution of any proposed supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Issuer, shall mail to the Secured Noteholders, Income Note Paying Agent, each Hedge Counterparty, the Collateral Manager and each Rating Agency a copy of such proposed supplemental indenture (or a description of the substance thereof) and shall request Rating Agency Confirmation with respect to such supplemental indenture. If any Class of Secured Notes is then rated by any Rating Agency, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, Rating Agency Confirmation would not be received with respect to such supplemental indenture, unless each Holder of Secured Notes of each Class whose rating will be reduced or withdrawn has, after notice that the proposed supplemental indenture would result in such reduction or withdrawal of the rating of the Class of Secured Notes held by such Holder, consented to such supplemental indenture. Without having obtained the consent of the applicable parties pursuant to this Section 8.2, the Trustee shall not enter into any such supplemental indenture if, as a result of such supplemental indenture, the interests of any Hedge Counterparty, any Holder of Secured Notes or Income Noteholders would be materially and adversely affected thereby. Unless notified by (i) the Holders of a Majority of the then Aggregate Outstanding Amount of any Class of Secured Notes that such Class will be materially and adversely affected or (ii) the Holders of a Majority of aggregate principal amount of the Income Notes that the Income Noteholders will be materially and adversely affected, the Trustee shall be entitled to rely upon an Opinion of Counsel or certificate of the Issuer or the Collateral Manager as to whether the interests of any Holder of Secured 136

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes or of the Income Noteholders would be materially and adversely affected by any such supplemental indenture (after giving notice of such change to the Income Note Paying Agent). It shall not be necessary for any Act of Secured Noteholders or any consent of Income Noteholders under this Section 8.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act or consent shall approve the substance thereof. Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to this Section 8.2, the Trustee, at the expense of the Issuer, shall mail or make available to the Secured Noteholders, the Income Note Paying Agent (for forwarding to the Income Noteholders), each Hedge Counterparty, the Collateral Manager and each Rating Agency a copy thereof. Any failure of the Trustee to publish or mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. In addition, the Issuer shall cause to be delivered a copy of the executed supplemental indenture to the Repository for posting on the Repository in the manner described in Section 14.3. 8.3.

EXECUTION OF SUPPLEMENTAL INDENTURES

In executing or accepting the additional trusts created by any supplemental indenture permitted by this Article VIII or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Sections 6.1 and 6.3) shall be fully protected in relying in good faith upon an Opinion of Counsel (which may rely on an Officer’s certificate of the Issuer or Collateral Manager), stating that the execution of such supplemental indenture is authorized, or permitted by this Indenture and that all conditions precedent thereto have been complied with. Any such Opinion of Counsel may be supported as to factual (including financial and capital markets) matters by such relevant certificates and other documents as may be necessary or advisable in the judgment of counsel delivering such Opinion of Counsel. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or indemnities under this Indenture or otherwise. Such supplemental indenture will not be binding on the Collateral Manager to the extent that it reduces the rights or increases the obligations of the Collateral Manager, unless such supplemental indenture is consented to in writing by the Collateral Manager. 8.4.

EFFECT OF SUPPLEMENTAL INDENTURES

Upon the execution of any supplemental indenture under this Article VIII, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Secured Notes theretofore and thereafter authenticated and delivered hereunder shall be bound thereby. Notwithstanding anything to the contrary herein, no amendment or modification of or supplement to this Indenture will be effective until the Collateral Manager has received written notice of such amendment, modification or supplement. If such amendment, modification or supplement affects the rights, obligations or compensation of the Collateral Manager, the Collateral Manager shall obtain the consent of any predecessor Collateral Manager with respect to any such amendment, modification or supplemental that would change any provision of this Indenture entitling such predecessor Collateral Manager to any fee or other amount payable to it under this Indenture or to reduce or delay the right of such predecessor to such payments. 137

Processed and formatted by SEC Watch - Visit SECWatch.com

8.5.

REFERENCE IN SECURED NOTES TO SUPPLEMENTAL INDENTURES

Secured Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article VIII may, and if required by the Trustee shall, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Issuer shall so determine, new Secured Notes, so modified as to conform in the opinion of the Trustee and the Issuer to any such supplemental indenture, may be prepared and executed by the Issuer and authenticated and delivered by the Trustee in exchange for Outstanding Secured Notes. ARTICLE IX REDEMPTION OF SECURED NOTES 9.1.

REDEMPTION OF SECURED NOTES

The Secured Notes will be subject to redemption in whole but not in part at their respective Redemption Prices, in each case, in accordance with the procedures, and subject to the satisfaction of the conditions, in Section 9.2 below, in the following circumstances:

9.2.

(a)

on or after the Payment Date occurring in June 2010 and continuing until the Stated Maturity Date (the Call Period), at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes (an Optional Redemption);

(b)

on any Payment Date following the occurrence and during the continuation of a Tax Event, (i) at the direction of the Holders of not less than 662/3% of the aggregate principal amount of the Outstanding Income Notes or (ii) subject to the satisfaction of the Income Note Redemption Approval Condition, at the direction of the Holders of a Majority of the then Aggregate Outstanding Amount of the Controlling Class (such a redemption, a Tax Redemption); and

(c)

automatically and without any direction by any Person, (i) if the Notes have not been redeemed in full on or after the Payment Date occurring in February 2019, and (ii) if any of the conditions set forth in Sections 9.2(a) and (b) below have not been met or if the highest bidder fails to pay the purchase price within six Business Days following such Payment Date, the Payment Date thereafter, unless the Notes are redeemed in full prior to the next Auction Date (such a redemption, an Auction Call Redemption).

REDEMPTION PROCEDURES; AUCTION

In connection with any Redemption, the Trustee and the Collateral Manager will, in accordance with the procedures set forth in Schedule E (the Auction Procedures) and at the expense of the Issuer, conduct an auction (an Auction) of the Collateral Debt Securities included in the Collateral on a date (each such date, an Auction Date) occurring no later than ten Business Days prior to the Payment Date occurring in February 2019, or if the conditions for an Auction Call Redemption Date set forth below are not met on such date, ten Business Days prior to the Payment Date occurring in February 2019 of the following year (or on such earlier Payment Date following the Payment Date occurring in February 2019 as determined by the Collateral Manager in its sole discretion. Any of the Placement Agents, the Collateral Manager, the Income Noteholders, the Trustee or their respective Affiliates may, but will not be required to, bid at the Auction. 138

Processed and formatted by SEC Watch - Visit SECWatch.com

(a)

(b)

Any Redemption will be subject to the satisfaction of each of the following conditions: (1)

the related Auction has been conducted in accordance with the Auction Procedures;

(2)

the Trustee has received bids for the Collateral Debt Securities (or for each of the related Subpools) from at least two Qualified Bidders (including the winning Qualified Bidder) identified on a list of qualified bidders provided by the Collateral Manager to the Trustee;

(3)

the Collateral Manager certifies that the Highest Auction Price would result in the Sale Proceeds from the Collateral Debt Securities (or the related Subpools) for a purchase price (paid in cash) plus the Balance of all Eligible Investments and cash held by the Issuer plus any termination payments payable by a Hedge Counterparty to the Issuer (in excess of any amounts payable by the Issuer to a Hedge Counterparty) resulting from the termination of any Hedge Agreement pursuant to the Redemption being at least equal to the sum of (i) the aggregate Redemption Prices of the Notes plus (ii) any accrued but unpaid fees and expenses of the Issuer pursuant to Section 11.1(b)(1), (24) and (25) (including any termination payments payable by the Issuer resulting from the termination of any Hedge Agreement pursuant to the Redemption) plus (iii) (a) in connection with a Tax Redemption at the direction of the Controlling Class and (b) an Auction Call Redemption, any additional amounts necessary to satisfy the Income Note Redemption Approval Condition; and

(4)

the bidder(s) who offered the Highest Auction Price for the Collateral Debt Securities (or the related Subpools) enter(s) into a written agreement with the Issuer (which the Issuer will execute if the conditions set forth above and in the Indenture are satisfied, which execution will constitute certification by the Issuer that such conditions have been satisfied) that obligates the highest bidder(s) (or the highest bidder for each Subpool) to purchase all of the Collateral Debt Securities (or the relevant Subpool) and provides for payment in full (in Cash) of the purchase price to the Trustee on or prior to the sixth Business Day following the relevant Auction Date.

In addition, any Optional Redemption requires the occurrence of the following: (1)

at least four Business Days before the scheduled Redemption Date, the Collateral Manager has furnished to the Trustee evidence, in form satisfactory to the Trustee, that the Collateral Manager on behalf of the Issuer has entered into a binding agreement or agreements with an institution or institutions (or guarantor or guarantors of the obligations): (A) with regard to which Rating Agency Confirmation has been received; or (B) whose short-term unsecured debt obligations (other than such obligations whose rating is based on the credit of a person other than such institution) have a credit rating from Moody’s, if rated by Moody’s, of “P-1,” Fitch of “F1 “ and of at least “A-1” from S&P; and in each case, to sell, not later than the Business Day immediately preceding the scheduled Redemption Date, in immediately available funds, all or part of the Collateral Debt Securities at an aggregate purchase price at least equal to an amount sufficient together with the balance of all Eligible Investments maturing on or prior to the scheduled Redemption Date and any termination payments 139

Processed and formatted by SEC Watch - Visit SECWatch.com

received by the Issuer under any Hedge Agreements on or prior to the scheduled redemption date, to pay all administrative and other fees and expenses, the Collateral Management Fee and any other amount payable under Section 11.1(b)(1), (24) and (25), to pay any amounts payable under each Hedge Agreement, if any, and to redeem all of the Notes on the scheduled redemption date at the applicable Redemption Price; or (2)

prior to selling any Collateral Debt Securities or any other collateral, the Collateral Manager certifies that the expected proceeds from such sale will, in the aggregate, equal or exceed, in each case, the sum of (a) the Redemption Prices of the Notes plus (b) all expenses of such redemption and all other administrative fees and expenses payable on the related Redemption Date;

provided that all of the conditions set forth in Section 9.2(a) and (b) have been met, the Trustee will sell and transfer the Collateral Debt Securities (or each related Subpool), without representation, warranty or recourse, to the bidder(s) who offered the Highest Auction Price for the Collateral Debt Securities (or the related Subpools) in accordance with and upon completion of the Auction Procedures. If any of the conditions set forth in Section 9.2(a) through (b) are not met, (i) the Redemption will not occur on the Payment Date following the relevant Auction Date, (ii) the Trustee shall give notice of the withdrawal of the Redemption, (iii) subject to clause (iv) below, the Trustee shall decline to consummate such sale and may not solicit any further bids or otherwise negotiate any further sale of Collateral Debt Securities in relation to such Auction and (iv) unless the Secured Notes are redeemed in full prior to the next succeeding Auction Date, the Trustee shall conduct another Auction on the next succeeding Auction Date. The Trustee will deposit the purchase price for the Collateral Debt Securities in the Collection Account, and the Secured Notes and, to the extent funds are available therefor, the Income Notes, will be redeemed on the Payment Date immediately following the relevant Auction Date in the order of priorities set forth in Section 11.1. Any Redemption will only be effected on a Payment Date. Installments of principal and interest due on or prior to a Redemption Date shall continue to be payable to the Holders of such Secured Notes as of the relevant Record Dates according to their terms. Neither the Issuer nor the Trustee shall terminate any Hedge Agreement in conjunction with a Redemption unless the Redemption Conditions are met and the notice of Redemption cannot be withdrawn or rescinded pursuant to Section 9.5. 9.3.

RECORD DATE; NOTICE TO TRUSTEE OF REDEMPTION (a)

The Issuer shall set the Redemption Date and the applicable Record Date and give notice thereof to the Trustee pursuant to Section 9.3(b) below and shall issue an Issuer Request to the Trustee for the provision of the information necessary for the Issuer to compile the Redemption Date Statement in accordance with Section 10.14(b).

(b)

In the event of any Redemption, the Issuer shall, at least 45 days (but not more than 90 days) prior to the Redemption Date, notify the Trustee and each Hedge Counterparty of such Redemption Date, the applicable Record Date, the principal amount of each Class of Notes to be redeemed on such Redemption Date and the Redemption Price of such Notes. 140

Processed and formatted by SEC Watch - Visit SECWatch.com

9.4.

NOTICE OF REDEMPTION

Notice of Redemption will be given by first-class mail, postage prepaid, mailed not less than eight Business Days prior to the applicable Redemption Date, to each Hedge Counterparty, each Rating Agency and each Holder of Secured Notes at such Holder’s address in the Note Register maintained by the Note Registrar in accordance with the provisions of this Indenture and to the Collateral Manager. Secured Notes called for Redemption must be surrendered at the office of any Note Paying Agent appointed pursuant to this Indenture in order to receive the Redemption Price. The Issuer will also deliver notice of Redemption to the Irish Paying Agent if and so long as any Class of Secured Notes to be redeemed is listed on the Irish Stock Exchange. All notices of redemption shall state: (a)

the applicable Redemption Date;

(b)

the applicable Record Date;

(c)

the Redemption Price;

(d)

that all the Notes of the relevant Class are being redeemed in full and that interest on the applicable principal amount of Notes shall cease to accrue on the date specified in the notice; and

(e)

the place or places where such Secured Notes are to be surrendered for payment of the Redemption Price, which shall be the office or agency of the Note Paying Agent to be maintained as provided in Section 7.2.

Notice of redemption shall be given by the Issuer or, at the Issuers’ request, by the Trustee in the name and at the expense of the Issuer. Failure to give notice of redemption, or any defect therein, to any Holder of any Note selected for redemption shall not impair or affect the validity of the redemption of any other Notes. 9.5.

NOTICE OF WITHDRAWAL

With regard to an Optional Redemption or a Tax Redemption, any notice of redemption may be withdrawn by the Issuer up to the fourth Business Day prior to the Redemption Date by written notice to the Trustee and the Collateral Manager only if the Collateral Manager is unable to deliver such sale agreement or agreements or certifications, as the case may be, in form satisfactory to the Trustee. With regard to any Redemption, notice of any withdrawal pursuant to Section 9.2 shall be given by the Trustee to each Holder of Secured Notes at such Holder’s address in the Note Register maintained by the Note Registrar by overnight courier guaranteeing next day delivery (or second day delivery outside the United States) sent not later than the third Business Day prior to such Redemption Date. In addition, the Trustee will, if any Class of Secured Notes to have been redeemed is listed on the Irish Stock Exchange, deliver a notice of such withdrawal to the Irish Stock Exchange not less than three Business Days prior to such Redemption Date. 9.6.

SECURED NOTES PAYABLE ON REDEMPTION DATE

Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after the Redemption Date (unless the Issuer shall default in the payment of the Redemption Price) such 141

Processed and formatted by SEC Watch - Visit SECWatch.com

Secured Notes shall cease to bear interest. Upon final payment on a Note to be redeemed, the Holder shall present and surrender such Note at the place specified in the notice of redemption on or prior to such Redemption Date; provided that if there is delivered to the Issuer (i) such security or indemnity as may be required by it to save it harmless and (ii) an undertaking thereafter to surrender such Note, then, in the absence of notice to the Issuer that the applicable Note has been acquired by a bona fide purchaser, such final payment shall be made without presentation or surrender. Installments of interest on Secured Notes of a Class so to be redeemed whose Stated Maturity Date is on or prior to the Redemption Date shall be payable to the Holders of such Secured Notes, or one or more predecessor Secured Notes, registered as such at the close of business on the relevant Record Date according to the terms and provisions of Section 2.6(e). If any Secured Note called for redemption shall not be paid upon surrender thereof for redemption, the principal thereof shall, until paid, bear interest from the Redemption Date at the Applicable Periodic Interest Rate for each successive Interest Period the Secured Note remains Outstanding. 9.7.

SPECIAL AMORTIZATION

If the Collateral Manager notifies the Trustee in writing that it has determined, in its sole discretion, that investments in additional Collateral Debt Securities would either be impractical or not beneficial, the amount of such Collateral Principal Collections available pursuant to Section 11.1(b)(22)(a), as determined by the Collateral Manager (the Special Amortization Amount), shall be applied to the payment of principal on the Notes on the next succeeding Payment Date (a Special Amortization) in accordance with Section 11.1(b)(22). In order for amounts to be applied for a Special Amortization on any Payment Date, the Collateral Manager is required to deliver, to each of the Trustee and each Rating Agency, advance written notice (which may be included in the related Note Report) (each, a Special Amortization Notice) specifying the identity and principal amount of each Class of Secured Notes to be paid pursuant to such Special Amortization and that the Collateral Manager has been unable to identify for purchase by the Issuer Substitute Collateral Debt Securities that comply with the Reinvestment Criteria and the other applicable requirements of the Indenture. On each Payment Date on which a Special Amortization occurs, each related Hedge Agreement, to the extent provided for therein, will be terminated in part in accordance with the terms and conditions thereof, including compliance with any applicable requirement that the Issuer receive Rating Agency Confirmation from S&P and Moody’s, and any amounts due and payable pursuant to such Hedge Agreement in connection with such termination thereof will be paid on such Payment Date in accordance with the terms thereof subject to the Indenture. ARTICLE X ACCOUNTS, ACCOUNTINGS AND RELEASES 10.1.

COLLECTION OF FUNDS (a)

Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all funds and other property payable to or receivable by the Trustee pursuant to this Indenture, including all payments due on the Pledged Securities, in accordance with the terms and conditions of such Pledged 142

Processed and formatted by SEC Watch - Visit SECWatch.com

Securities. The Trustee shall segregate and hold all such funds and property received by it in trust for the Secured Parties and shall apply such funds as provided in this Indenture. (b)

10.2.

Each of the parties hereto hereby agrees to cause the Custodian or any other Securities Intermediary that holds any funds or other property for the Issuer in an Account to agree with the parties hereto that (1) each Account is a Securities Account in respect of which the Trustee is the Entitlement Holder, (2) each Account is held by a financial institution that has a combined capital and surplus of at least U.S.$250,000,000 and being subject to supervision or examination by federal or state banking authority, (3) the Cash, Securities and other property credited to any Account is to be treated as a Financial Asset under Article 8 of the UCC and (4) the securities intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC) for that purpose will be the State of New York. In no event may any Financial Asset held in any Account be registered in the name of, payable to the order of, or specially Indorsed to, the Issuer unless such Financial Asset has also been Indorsed in blank or to the Custodian or other Securities Intermediary that holds such Financial Asset in such Account. Each Account shall be held and maintained at an office located in Chicago, Illinois.

GENERAL PROVISIONS APPLICABLE TO ACCOUNTS

The Payment Account, Collateral Account, Uninvested Proceeds Account, Collection Account (including each Collateral SubAccount therein), Expense Reserve Account, each Hedge Counterparty Collateral Account, Discretionary Ramp-Up Interest Reserve Account and Non-Monthly Pay Asset Interest Reserve Account shall remain at all times with a financial institution having a long-term debt rating of at least “BBB+” by S&P. (a)

The Trustee agrees to give the Issuer prompt notice (with a copy to the Hedge Counterparty, the Collateral Manager, each Rating Agency and the Income Note Paying Agent) if any Account or any funds on deposit therein, or otherwise standing to the credit of any Account, shall become subject to any writ, order, judgment, warrant of attachment, execution or similar process.

(b)

The Collateral Manager shall direct the Trustee to invest and reinvest any funds on deposit in any of the Accounts (other than the Payment Account). In the event that the Collateral Manager has not delivered investment instructions to the Trustee or after the occurrence of an Event of Default, the Trustee shall invest and reinvest any funds on deposit in any Account (other than the Payment Account) as fully as practicable in investments described in clause (iii) of the definition of Eligible Investments maturing not later than the earlier of (i) 30 days after the date of such investment or (ii) the Business Day immediately preceding the next Payment Date. With respect to each Account, all interest and other income from Eligible Investments purchased with funds on deposit in such Account shall be deposited in such Account, any gain realized from such investments shall be credited to such Account, and any loss resulting from such investments shall be charged to such Account. Any gain or loss with respect to an Eligible Investment shall be allocated in such a manner as to increase or decrease, respectively, Collateral Principal Collections and/or Collateral Interest Collections in the proportion that the amount of Collateral Principal Collections and/or Collateral Interest Collections used to acquire such Eligible Investment bears to the purchase price thereof. The Trustee shall not in any way be held liable by reason of any insufficiency of any such Account resulting from any loss relating to any such investment. Nothing herein shall be 143

Processed and formatted by SEC Watch - Visit SECWatch.com

deemed to relieve the Bank or its Affiliates from any duties or liabilities with respect to investments in obligations of the Bank or any Affiliate thereof. (c)

10.3.

All funds deposited from time to time in the Collection Account, the Uninvested Proceeds Account, the Payment Account, the Expense Reserve Account, the Discretionary Ramp-Up Interest Reserve Account or the Non-Monthly Pay Asset Interest Reserve Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided.

COLLATERAL ACCOUNT

The Trustee shall, prior to the Closing Date, cause the Custodian to establish a Securities Account which shall be designated as the “Collateral Account”, which shall be in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties and into which the Trustee shall from time to time deposit Collateral. All Collateral from time to time deposited in, or otherwise standing to the credit of, the Collateral Account pursuant to this Indenture shall be held by the Trustee as part of the Collateral and shall be applied to the purposes herein provided. The Issuer shall not have any legal, equitable or beneficial interest in the Collateral Account other than in accordance with the Priority of Payments. 10.4.

UNINVESTED PROCEEDS ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Uninvested Proceeds Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties, into which the Trustee shall deposit all Uninvested Proceeds (other than the organizational and structuring fees and expenses of the Issuer (including the legal fees and expenses of counsel to the Issuer, the Initial Purchaser, the Placement Agent and the Collateral Manager), the expenses of offering the Secured Notes and the Income Notes and amounts deposited in the Expense Reserve Account and Discretionary Ramp-Up Interest Reserve Account on such date). On or prior to the Effective Date, the Collateral Manager on behalf of the Issuer may direct the Trustee to, and upon such direction the Trustee shall, apply funds in the Uninvested Proceeds Account to purchase additional Collateral Debt Securities and, pending such investment in additional Collateral Debt Securities, such funds shall be invested in Eligible Investments, as directed by the Collateral Manager, with stated maturities no later than the Business Day immediately preceding the next Payment Date. The Trustee shall transfer any Uninvested Proceeds remaining on deposit in the Uninvested Proceeds Account on the Effective Date to the Collection Account, at the direction of the Collateral Manager, to be treated as either (i) Collateral Interest Collections; provided that a Rating Confirmation Failure has not occurred and Rating Confirmation has been obtained from S&P, or (ii) if a Rating Confirmation Failure has occurred, all amounts in the Uninvested Proceeds Account will be used on the immediately following Payment Date to repay principal on the Notes in accordance with the Priority of Payments, in the amounts necessary for each Rating Agency to confirm its respective ratings of the Notes assigned on the Closing Date or until each Class of Notes is paid in full. If such ratings are reinstated and funds remain in the Uninvested Proceeds Account, such funds will be treated as Collateral Principal Collections on the first Payment Date and distributed in accordance with the Priority of Payments. 10.5.

INTEREST RESERVE ACCOUNT

The Trustee shall from time to time deposit, at the request of 100% of the Holders of the Income Notes, any Income Note Excess Funds designated by such Holders, in accordance with the Priority of Payments, into the Interest Reserve Account. All funds deposited in, or otherwise standing to the credit 144

Processed and formatted by SEC Watch - Visit SECWatch.com

of, the Interest Reserve Account shall be held by the Trustee on behalf of the Holders of the Income Notes and be applied to the purposes described herein. Such funds shall not be subject to the lien of the Indenture, and at the direction of 100% of the Holders of the Income Notes, any unused amounts on deposit in the Interest Reserve Account shall be returned to the Holders of the Income Notes. 10.6.

10.7.

COLLECTION ACCOUNT (a)

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Collection Account” (and which may be a sub-account of the Collateral Account), which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. The Trustee shall cause to be established two sub-accounts of the Collection Account. The Trustee shall deposit Collateral Principal Collections into one sub-account (the Collateral Principal Collections Sub-Account) and Collateral Interest Collections into the other sub-account. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Collection Account (including the Collateral Principal Collection Sub-Account) in Eligible Investments or Substitute Collateral Debt Securities in accordance with the requirements and limitations contained in Section 12.1(c).

(b)

The Trustee, within one Business Day after receipt of any Distribution or other proceeds that are not Cash shall so notify the Issuer and the Issuer shall sell such Distribution or other proceeds for Cash in accordance with Section 12.1.

(c)

The Trustee shall transfer to the Payment Account for application pursuant to Section 11.1(a) and in accordance with the calculations and the instructions contained in the Note Valuation Report prepared by the Issuer pursuant to Section 10.14(a), on or prior to the Business Day prior to each Payment Date, funds on deposit in the Collection Account (including reinvestment income) other than Collections received after the end of the Due Period with respect to such Payment Date.

(d)

The Trustee shall withdraw and apply amounts on deposit in the Collection Account in accordance with any Redemption Date Statement delivered to the Trustee in connection with the redemption of Secured Notes pursuant to Section 9.1.

EXPENSE RESERVE ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Expense Reserve Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. On the Closing Date, the Trustee shall deposit into the Expense Reserve Account an amount equal to U.S.$75,000 together with an amount sufficient to pay any outstanding fees and expenses of the Issuer in relation to the offering of the Secured Notes and the Income Notes which are not paid on the Closing Date. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Expense Reserve Account in Eligible Investments. Any amounts held in the Expense Reserve Account in excess of U.S.$25,000 on the day which is subsequent to the Effective Date (or, if such day is not a Business Day, the next following Business Day) shall be transferred by the Trustee into the Uninvested Proceeds Account. Thereafter, the Trustee shall transfer to the Expense Reserve Account from the Payment Account amounts required to be deposited therein pursuant to Section 11.1(a) and in accordance with the 145

Processed and formatted by SEC Watch - Visit SECWatch.com

calculations and the instruction contained in the Note Valuation Report prepared by the Issuer pursuant to Section 10.14(a). Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Expense Reserve Account shall be to pay (on any day other than a Payment Date) accrued and unpaid Administrative Expenses of the Issuer; provided that the Trustee shall deposit all amounts remaining on deposit in the Expense Reserve Account at the time when substantially all of the Issuer’s assets have been sold or otherwise disposed of into the Collection Account for application as Collateral Interest Collections on the immediately succeeding Payment Date. 10.8.

NON-MONTHLY PAY ASSET INTEREST RESERVE ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “NonMonthly Pay Asset Interest Reserve Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Non-Monthly Pay Asset Interest Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Non-Monthly Pay Asset Interest Reserve Account in Eligible Investments. On each Payment Date, in accordance with the Priority of Payments, the Trustee shall deposit the Non-Monthly Pay Asset Interest Reserve Amount into the Non-Monthly Pay Asset Interest Reserve Account. In addition, at the request of 100% of the Holders of the Income Notes, the Trustee shall deposit any Income Note Excess Funds designated by such Holders, in accordance with the Priority of Payments, into the Non-Monthly Pay Interest Reserve Account. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Non-Monthly Pay Asset Interest Reserve Account shall be to deposit into the Payment Account, on the Business Day prior to each Payment Date, the Balance of the Non-Monthly Pay Asset Interest Reserve Account with such amount to be distributed as Collateral Interest Collections in accordance with the Priority of Payments on the related Payment Date. 10.9.

DISCRETIONARY RAMP-UP INTEREST RESERVE ACCOUNT

The Trustee shall, prior to the Closing Date, cause to be established a Securities Account which shall be designated as the “Discretionary Ramp-Up Interest Reserve Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Discretionary Ramp-Up Interest Reserve Account shall be held in trust by the Trustee for the benefit of the Secured Parties. At the direction of the Issuer (or the Collateral Manager on behalf of the Issuer), the Trustee shall invest all funds on deposit in the Discretionary Ramp-Up Interest Reserve Account in Eligible Investments. On the Closing Date, the Trustee shall deposit the Discretionary Ramp-Up Interest Reserve Amount into the Discretionary Ramp-Up Interest Reserve Account. Prior to the first Payment Date after the Effective Date, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Discretionary Ramp-Up Interest Reserve Account shall be (i) to purchase accrued interest, if any, on any Collateral Debt Security acquired during the Ramp-Up Period or (ii) to deposit into the Payment Account, on the Business Day prior to each Payment Date, an amount, if any, equal to the lesser of (a) the Balance of the Discretionary RampUp Interest Reserve Account or (b) the Secured Notes Interest Shortfall Amount, with such amount to be distributed as Collateral Interest Collections in accordance with the Priority of Payments on the related Payment Date. On the first Payment Date after the Effective Date, upon receipt of Rating Confirmation from S&P, the Balance of the Discretionary Ramp-Up Interest Reserve Account shall be deposited into the Payment Account to be distributed as Collateral Interest Collections in accordance with the Priority of Payments on the related Payment Date. 146

10.10.

PAYMENT ACCOUNT

The Trustee shall, prior to the Closing Date, establish a Securities Account which shall be designated as the “Payment Account”, which shall be held in the name of the Trustee as Entitlement Holder in trust for the benefit of the Secured Parties. Any and all funds at any time on deposit in, or otherwise standing to the credit of, the Payment Account shall be held in trust by the Trustee for the benefit of the Secured Parties. Except as provided in Section 11.1, the only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, the Payment Account shall be to pay the interest on and the principal of the Secured Notes in accordance with their terms and the provisions of this Indenture and, upon Issuer Order, to pay Administrative Expenses, certain Cure Advances and (without duplication of amounts withheld from collections by a Service) certain servicing fees and expenses paid in accordance with any Servicing Agreement and interest thereon and other amounts specified therein, each in accordance with the Priority of Payments. The Issuer shall not have any legal, equitable or beneficial interest in the Payment Account other than in accordance with the Priority of Payments. 10.11.

DERIVATIVE CONTRACT COUNTERPARTY ACCOUNTS

For each Derivative Contract, the Trustee shall establish a segregated trust account in respect of each such Derivative Contract, which shall be designated as a Derivative Contract Counterparty Account and shall be held in trust in the name and for the benefit of and pledged to the related Derivative Contract Counterparty (the Pledgee Counterparty) and over which the Trustee shall have exclusive control and the sole right of withdrawal in accordance with the applicable Derivative Contract and this Indenture. Each Derivative Contract Counterparty Account (including any subaccount) shall be a securities account established with the Securities Intermediary in the name of the Trustee in accordance with Section 6.17. The Derivative Contract Counterparty Account shall remain at all times with the Trustee or a financial institution having a combined capital and surplus of at least U.S.$250,000,000 and a long-term debt rating by each Rating Agency at least equal to “Baa2” by Moody’s and “BBB+” by S&P or its equivalent. Funds in the Derivative Contract Counterparty Account are to be held as security for and applied to pay amounts due the Pledgee

Processed and formatted by SEC Watch - Visit SECWatch.com

Counterparty and shall not be available to pay amounts due the Noteholders unless and to the extent such funds are released as Collateral Interest Collections or Collateral Principal Collections in accordance with this Section 10.11, the applicable Derivative Contract and applicable law. The Issuer shall not have any right to withdraw money from any Derivative Contract Counterparty Account other than in accordance with this Section 10.11, the applicable Derivative Contract and applicable law. As directed by the Collateral Manager, the Trustee shall deposit into each Derivative Contract Counterparty Account all amounts which are required to secure the obligations of the Issuer to the Pledgee Counterparty in accordance with the terms of the related Derivative Contract. The Collateral Manager shall direct any such deposit only to the extent that monies are available therefor as provided herein. As directed by the Collateral Manager in writing and in accordance with the applicable Derivative Contract, amounts on deposit in a Derivative Contract Counterparty Account shall be invested in Eligible Investments. In the absence of direction from the Collateral Manager, the Trustee shall invest such amounts in Eligible Investments of the type described in paragraph (iii) of the deifnition of Eligible Investments. Income on and proceeds of Eligible Investments on deposit in each Derivative Contract Counterparty Account shall be applied, as directed by the Collateral Manager, to the extent required by 147

Processed and formatted by SEC Watch - Visit SECWatch.com

the Derivative Contract, to the payment of any periodic amounts owed by the Issuer to the Pledgee Counterparty on the date any such amounts are due. Any income on or proceeds of Eligible Investments in a Derivative Contract Counterparty Account not required to pay amounts due the Pledgee Counterparty shall be withdrawn from such account at the end of each Due Period and deposited in the Collection Account for distribution as Collateral Interest Collections or Collateral Principal Collections, as the case may be. Upon the occurrence of the designation of an Early Termination Date, Scheduled Termination Date or Termination Date under (and as each of those terms are defined in) the applicable Derivative Contract, amounts contained in the related Derivative Contract Counterparty Account shall be applied by the Trustee, as directed by the Collateral Manager, to pay any amounts then due the Pledgee Counterparty. Any excess amounts held in a Derivative Contract Counterparty Account after payment of all amounts owing from the Issuer to the Pledgee Counterparty in accordance with the terms of the Derivative Contract (other than any Defaulted Derivative Contract Counterparty Termination Payment) shall be withdrawn from such Derivative Contract Counterparty Account and, in the case of (a) any Cash or Eligible Investment readily convertible into Cash, deposited in the Collection Account for application as Collateral Principal Collections (or to the extent constituting income on an Eligible Investment, Collateral Interest Collections), and (b) any security which satisfies the definition of a Collateral Debt Security, the inclusion of which in the Collateral would satisfy the Collateral Concentration Limitations, the Collateral Quality Tests and the Coverage Tests shall be retained by the Issuer as Collateral, subject to the terms of this Indenture or otherwise sold by the Collateral Manager. No property other than Eligible Investments and funds in the Derivative Contract Counterparty Account shall be available to pay amounts due the Pledgee Counterparty; provided that, to the extent funds in the Derivative Contract Counterparty Account are insufficient, Termination Payments shall be paid solely from amounts available therefor in accordance with the Priority of Payments. Amounts contained in any Derivative Contract Counterparty Account shall not be considered to be an asset of the Issuer for purposes of any of the Collateral Quality Tests, the Collateral Concentration Limitations or the Coverage Tests, but the Derivative Contract which relates to such Derivative Contract Counterparty Account shall be so considered an asset of the Issuer. 10.12.

DERIVATIVE CONTRACT ISSUER ACCOUNT

If and to the extent that any Derivative Contract requires the Derivative Contract Counterparty (a Pledgor Counterparty) to secure its obligations to the Issuer with respect to such Derivative Contract, the Trustee shall, on or prior to the date such Derivative Contract is entered into, establish a segregated trust account, which shall be designated as a Derivative Contract Issuer Account. Each Derivative Contract Issuer Account (including any subaccount) shall be a securities account established with the Securities Intermediary in the name of the Trustee in accordance with Section 6.17. The Derivative Contract Issuer Account shall remain at all times with the Trustee or a financial institution having a combined capital and surplus of at least U.S.$250,000,000 and a long-term debt rating by each Rating Agency at least equal to “Baa2” by Moody’s and “BBB+” by S&P or its equivalent. The Trustee shall deposit into each Derivative Contract Issuer Account all amounts which are required to secure the obligations of the Pledgor Counterparty to the Issuer in accordance with the terms of such Derivative Contract. A Pledgor Counterparty shall not have any right to withdraw money from a Derivative Contract Issuer Account. As directed by the Collateral Manager in writing, in accordance with the applicable Derivative Contract, amounts on deposit in a Derivative Contract Issuer Account shall be invested in Eligible Investments. Income received on amounts on deposit in each Derivative Contract Issuer Account shall be 148

Processed and formatted by SEC Watch - Visit SECWatch.com

withdrawn from such account and, to the extent required by the related Derivative Contract, released to the applicable Pledgor Counterparty or otherwise retained in the Derivative Contract Issuer Account. In the absence of direction from the Collateral Manager, the Trustee shall invest such amounts in Eligible Investments of the type described in paragraph (iii) of the definition of Eligible Investments. Upon the occurrence of the designation of an “Early Termination Date”, “Scheduled Termination Date” or “Termination Date” under (and as each of those terms are defined in) the applicable Derivative Contract, amounts contained in the related Derivative Contract Issuer Account shall be applied by the Trustee, as directed by the Collateral Manager, in accordance with the terms of the Derivative Contract, to pay any amounts then due the Issuer. Any excess amounts held in a Derivative Contract Issuer Account, after payment of all amounts owing from the Pledgor Counterparty to the Issuer in accordance with the terms of the Derivative Contract shall be withdrawn from such Derivative Contract Counterparty Account and released to the Pledgor Counterparty in accordance with the terms of the Derivative Contract. Amounts contained in any Derivative Contract Issuer Account shall not be considered to be an asset of the Issuer for purposes of any of the Collateral Quality Tests, the Collateral Concentration Limitations or the Coverage Tests, but the Derivative Contract which relates to such Derivative Contract Issuer Account shall be so considered an asset of the Issuer. 10.13.

REPORTS BY TRUSTEE

The Trustee shall supply, in a timely fashion to each Rating Agency (so long as any Secured Notes are rated by such Rating Agency), each Hedge Counterparty, the Holders of Secured Notes of the Controlling Class, the Collateral Manager, the Income Note Paying Agent, the Initial Purchaser, the Placement Agent and the Issuer any information regularly maintained by the Trustee that each such Person may from time to time request with respect to the Pledged Securities or the Accounts reasonably needed to complete the Note Valuation Report or to provide any other information reasonably available to the Trustee by reason of its acting as Trustee hereunder and required to be provided by Section 10.14. The Trustee shall forward to the Collateral Manager, the Holders of Secured Notes of the Controlling Class, or upon request therefor, any Holder of a Secured Note shown on the Note Register, the Initial Purchaser, the Placement Agent, any Hedge Counterparty or the Income Note Paying Agent, copies of notices and other writings received by it from the issuer of any Collateral Debt Security or from any Clearing Agency with respect to any Collateral Debt Security advising the holders of such security of any rights that the holders might have with respect thereto (including notices of calls and redemptions of securities) as well as all periodic financial reports received from such issuer and Clearing Agencies with respect to such issuer; provided that the Trustee shall not disclose any unpublished S&P Rating assigned by S&P with respect to any Collateral Debt Security without the prior consent of S&P. So long as any Class of Secured Notes is listed on the Irish Stock Exchange, the Irish Paying Agent shall notify the Irish Stock Exchange not later than the Business Day preceding each Payment Date of the amount of principal payments to be made on the Secured Notes of each Class on such Payment Date, any Class C Cumulative Periodic Interest Shortfall Amount, any Class D Cumulative Periodic Interest Shortfall Amount, any Class E Cumulative Periodic Interest Shortfall Amount, any Class F Cumulative Periodic Interest Shortfall Amount, any Class G Cumulative Periodic Interest Shortfall Amount, any Class H Cumulative Periodic Interest Shortfall Amount, any Class J Cumulative Periodic Interest Shortfall Amount, any Class K Cumulative Periodic Interest Shortfall Amount and the Aggregate Outstanding Amount of the Secured Notes of each Class and as a percentage of the original Aggregate Outstanding Amount of the Secured Notes of such Class after giving effect to the principal payments, if any, on such Payment Date. 149

Processed and formatted by SEC Watch - Visit SECWatch.com

As promptly as possible following the delivery of each Note Valuation Report to the Trustee pursuant to Section 10.14(a) or (b), as applicable, the Issuer shall cause a copy of such report to be delivered the Repository for posting on the Repository in the manner described in Section 14.3. In connection therewith, the Issuer acknowledges and agrees that each Note Valuation Report shall be posted to the Repository for use in the manner described in the section headed “Terms of Use” on the Repository. 10.14.

ACCOUNTINGS (a)

Payment Date Accounting. The Issuer shall, not later than the related Payment Date and after the reconciliation process described in this Section 10.14, render an accounting (a Note Valuation Report), determined as of each Calculation Date, and deliver the Note Valuation Report to each Rating Agency, the Trustee and the Collateral Manager and make available via the Trustee’s interne website, initially located at www.cdotrustee.net to the Trustee, the Irish Paying Agent, each Hedge Counterparty, the Income Note Paying Agent, each Note Transfer Agent, the Initial Purchaser, the Placement Agent and, upon written request therefor, any Holder of a Secured Note shown on the Note Register. The Note Valuation Report shall contain the following information (which shall, in the case of any Note Valuation Report delivered to S&P, be presented in a form that complies with and includes the information required by S&P’s Preferred Format) determined, unless otherwise specified below, as of the related Calculation Date: (1)

the calculation showing compliance with each of the Coverage Tests, accompanied by a list setting forth the applicable maximum or minimum value, percentage or ratio which must be maintained pursuant to this Agreement with respect to each of the Coverage Tests and a list setting forth the results of the calculation of each of the Coverage Tests with respect to the Collateral Debt Securities, the calculation showing whether the S&P CDO Monitor Test is satisfied (including the weighted average rating, the default measure, variability measure and correlation measure, the scenario default rate and/or such other information required to be computed with respect to the S&P CDO Monitor Test), and the calculation showing the Fitch Weighted Average Rating Factor, the Weighted Average Fixed Rate Coupon, the Weighted Average Spread, the Weighted Average Life, the S&P Weighted Average Recovery Rate for each Class of Notes, the Moody’s Recovery Rate Test and the Moody’s WARF Test;

(2)

the estimated remaining Average Life of each of the Collateral Debt Securities;

(3)

the Applicable Periodic Interest Rate in respect of each Class of Notes and the amount of Periodic Interest payable to the Holders of the Notes for such Payment Date (in the aggregate and by Class);

(4)

the amount (if any) payable to each Hedge Counterparty pursuant to the related Hedge Agreement;

(5)

the amount (if any) payable by each Hedge Counterparty pursuant to the related Hedge Agreement:

(6)

the Aggregate Fees and Expenses payable on the next Payment Date on an itemized basis; 150

Processed and formatted by SEC Watch - Visit SECWatch.com

(7)

the Aggregate Fees and Expenses paid during a period of 12 months ending on the next Payment Date on an itemized basis;

(8)

for the Collection Account:

(9)

(i)

the Balance on deposit in the Collection Account and the Collateral Principal Collections Sub-Account at the end of the related Due Period;

(ii)

the nature and source of any Collections in the Collection Account and the Collateral Principal Collections Sub-Account, including Collections received since the date of the last Note Valuation Report;

(iii)

the amounts payable from the Collection Account in accordance with the priority set forth in Section 11.1 on the next Payment Date; and

(iv)

the Balance remaining in the Collection Account immediately after all payments and deposits to be made on such Payment Date; and

(v)

the Balance on deposit in the Collateral Principal Collections Sub-Account;

for the Non-Monthly Pay Asset Interest Reserve Account: (i)

the balance on deposit in the Non-Monthly Pay Asset Interest Reserve Account at the end of the related Due Period;

(ii)

the amount payable from the Non-Monthly Pay Asset Interest Reserve Account pursuant to the Priority of Payments on the next Payment Date;

(iii)

the Non-Monthly Pay Asset Interest Reserve Amount to be paid into the Non-Monthly Pay Asset Interest Reserve Account on the next Payment Date; and

(iv)

the Balance remaining in the Non-Monthly Pay Asset Interest Reserve Account immediately after all payments and deposits to be made on such Payment Date;

(10)

for the Discretionary Ramp-Up Interest Reserve Account prior to the Payment Date after the Effective Date, the balance on deposit in the Discretionary Ramp-Up Interest Reserve Account at the end of the related Due Period;

(11)

for the Expense Reserve Account:

(12)

(i)

the amount to be paid into the Expense Reserve Account on the next Payment Date; and

(ii)

the Balance remaining in the Expense Reserve Account immediately after all payments and deposits to be made on such Payment Date;

the nature, source and amount of any proceeds in the Derivative Contract Issuer Account and any sub-accounts thereof; 151

Processed and formatted by SEC Watch - Visit SECWatch.com

(13)

the Hedge Receipt Amount or the Hedge Payment Amount for the related Payment Date, and for each Hedge Agreement, the outstanding notional amount of such Hedge Agreement and the amounts, if any, scheduled to be received or paid, as the case may be, by the Issuer pursuant to such Hedge Agreement for the related Payment Date, separately stating the portion payable in accordance with Section 11.1;

(14)

the aggregate amount of outstanding Cure Advances and any outstanding Nonrecoverable Cure Advances, as well as any outstanding servicing advances made pursuant to the Servicing Agreement;

(15)

the amount of Income Note Excess Funds on the related Payment Date;

(16)

the amount of the Senior Collateral Management Fee and the amount of the Subordinate Collateral Management Fee;

(17)

such other information as the Collateral Manager, the Initial Purchaser, the Placement Agent, the Trustee, S&P, Fitch or any Hedge Counterparty may reasonably request;

(18)

with respect to each Collateral Debt Security, the Principal Balance, the annual coupon rate or spread to the relevant floating rate index, the frequency of coupon payments, the amount of principal payments received, the maturity date, the issuer, the country in which the issuer is incorporated or organized, the S&P Industry Classification Group, the Fitch Industry Classification Group, the S&P Recovery Rate, the S&P Rating and the Fitch Rating (provided that if any Fitch Rating for any Collateral Debt Security is an “estimated” or “shadow” rating, such rating shall be identified as “estimated” or “shadow rated”, shall be disclosed with an asterisk in the place of the applicable estimated or shadow rating and shall include the date as of which such rating was first provided by Fitch to the Issuer); and any S&P Rating which is determined from an implied rating, a credit estimate, a confidential rating or another non-public rating, shall not be distinguished and shall either (i) be reported in a single column with the public ratings of S&P (without distinguishing the source) or (ii) be reported in a separate column labeled “Non-public and Implied S&P Rating”;

(19)

the identity and current ratings of each Derivative Contract Counterparty and, unless the Derivative Security is a Synthetic CDO Security, the Reference Obligation(s) of such related Derivative Security;

(20)

the Principal Balance, the maturity date, the S&P Rating, the Fitch Rating and the issuer of each Eligible Investment included in the Collateral;

(21)

(A) the identity and Principal Balance of each Collateral Debt Security that became a Credit Risk Security, a Defaulted Security, a Credit Improved Security, an Equity Security, a Written Down Security, a Withholding Tax Security, a Deferred Interest PIK Bond, (B) the date, as provided by the Collateral Manager, on which any Collateral Debt Security became a Credit Risk Security, a Defaulted Security, an Equity Security, a Credit Improved Security, a Written Down Security or a Withholding Tax Security, (C) the date by which the Issuer or the Collateral Manager is required to declare its intention to sell or to hold 152

Processed and formatted by SEC Watch - Visit SECWatch.com

such Collateral Debt Security, (D) whether the Collateral Manager has directed the Issuer to sell or not to sell such Collateral Debt Security, and (E) the date by which any such sale must occur; (22)

the identity of each Collateral Debt Security that was upgraded or downgraded or placed on watch for upgrade or downgrade by any Rating Agency since the date of the last Note Valuation Report;

(23)

the Principal Balance and identity of each Collateral Debt Security that was released for sale indicating the reason for such sale and the amount and identity of each Collateral Debt Security that was granted since the date of the last Note Valuation Report;

(24)

the identity and Principal Balance of each Collateral Debt Security that was a Credit Risk Security, a Defaulted Security, an Equity Security, a Credit Improved Security, a Written Down Security, a Withholding Tax Security or a Deferred Interest PIK Bond;

(25)

the purchase price of each Pledged Security granted and the sale price of each Pledged Security subject to a sale since the date of the last Note Valuation Report; and whether such Pledged Security is a Collateral Debt Security, an Eligible Investment or proceeds in the Collection Account;

(26)

the amount of Purchased Accrued Interest;

(27)

a description of any transactions with the Collateral Manager, the Issuer, the Collateral Administrator and the Trustee and any Affiliates thereof;

(28)

the Class A Note Break-Even Default Rate, the Class B Note Break-Even Default Rate, the Class C Note Break-Even Default Rate, the Class D Note Break-Even Default Rate, the Class E Note Break-Even Default Rate, the Class F Note Break-Even Default Rate, the Class G Note Break-Even Default Rate, the Class H Note Break-Even Default Rate, the Class J Note Break-Even Default Rate and the Class K Note Break-Even Default Rate;

(29)

the Class A Note Default Differential, the Class B Note Default Differential, the Class C Note Default Differential, the Class D Note Default Differential, the Class E Note Default Differential, the Class F Note Default Differential, the Class G Note Default Differential, the Class H Note Default Differential, the Class J Note Default Differential and the Class K Note Default Differential; and

(30)

the Class A Note Scenario Default Rate, the Class B Note Scenario Default Rate, the Class C Note Scenario Default Rate, the Class D Note Scenario Default Rate, the Class E Note Scenario Default Rate, the Class F Note Scenario Default Rate, the Class G Note Scenario Default Rate, the Class H Note Scenario Default Rate, the Class J Note Scenario Default Rate and the Class K Note Scenario Default Rate.

(31)

Whether or not, and to what extent, the representations and warranties (and remedies) required pursuant to Sections 12.2(t)(8) and 12.2(t)(9)(ii) and the required servicing arrangements required pursuant to Section 12.2(t)(9)(i) remain 153

Processed and formatted by SEC Watch - Visit SECWatch.com

in effect and are satisfied as of the related Calculation Date with regard to each Collateral Interest. Upon receipt of each Note Valuation Report, the Trustee and the Collateral Manager shall compare the information contained therein to the information contained in their respective records with respect to the Collateral and shall, within two Business Days after receipt of such Note Valuation Report, notify each of the Issuer, each Hedge Counterparty, the Collateral Manager, the Trustee, Fitch and S&P if the information contained in the Note Valuation Report does not conform to the information maintained by the Trustee or the Collateral Manager as applicable, with respect to the Collateral, and detail any discrepancies. In the event that any discrepancy exists, the Trustee and the Issuer, or the Collateral Manager shall attempt to promptly resolve the discrepancy. If such discrepancy cannot be promptly resolved, the Trustee shall within five Business Days after discovery of such discrepancy cause the Independent Accountants of recognized international reputation to review such Note Valuation Report and the Trustee’s and the Collateral Manager’s records to determine the cause of such discrepancy. If such review reveals an error in the Note Valuation Report or the records of the Trustee or the Collateral Manager, as the case may be, such item shall be revised accordingly and, as so revised, shall be utilized in making further calculations. Subject to the terms of this Agreement, the Trustee shall be entitled to rely on the information supplied by the Collateral Manager in relation to the preparation of the Note Valuation Report and shall not be liable for the accuracy or completeness of such information or the lack thereof. In addition to the foregoing information, each Note Valuation Report shall include a statement to the following effect: “The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act), or under any state securities laws, and the Issuer has not been and will not be registered under the United States Investment Company Act of 1940, as amended (the 1940 Act). Each Holder of the Notes, other than those Holders that are not “U.S. persons” (U.S. Person) within the meaning of Regulation S (Regulation S) under the Securities Act and have acquired their Notes outside the United States pursuant to Regulation S, is required to be both (i) (A) with respect to any Secured Note, a “qualified institutional buyer” as defined in Rule 144A under the Securities Act (Qualified Institutional Buyer), (B) solely with respect to the Retained Notes and the Income Notes, either (1) an “accredited investor” as defined in paragraphs (1), (2), (3) or (7) of Rule 501(A) under the Securities Act (each an Institutional Accredited Investor), (2) any of NorthStar OS IX, LLC, NS Advisors, LLC or any “affiliate” thereof within the meaning of Rule 405 under the Securities Act that is an “accredited investor” within the meaning of Rule 501(A) under the Securities Act (each of the foregoing, a Permitted NS Purchaser) or (3) a Permitted NS Purchaser and (ii) a “qualified purchaser” (Qualified Purchaser) within the meaning of Section 3(c)(7) of the 1940 Act, purchasing for its own account or for the account of another Qualified Purchaser, that can make all of the representations in the Indenture applicable to a holder that is a U.S. Person. The beneficial interest in the Notes may be transferred only to a transferee that meets both of the criteria in clauses (i) and (ii) above and can make all of the representations in the Indenture applicable to a Holder that is a U.S. Person, except that any such transfer in reliance on Regulation S can be made only to a transferee that is not a U.S. Person. The Issuer has the right to compel any Holder that does not meet the qualifications and the transfer restrictions set forth in the Indenture to sell its interest in the Notes, or may sell such interest on behalf of such owner, pursuant to the Indenture.” (b)

Redemption Date Instructions. Not less than five Business Days after receiving an Issuer Request requesting information regarding a redemption pursuant to Section 9.1 of the Secured Notes of a Class as of a proposed Redemption Date set forth in such Issuer 154

Processed and formatted by SEC Watch - Visit SECWatch.com

Request, the Trustee shall provide the necessary information (to the extent it is available to the Trustee) to the Issuer, and the Issuer shall compute the following information and provide such information in a statement (the Redemption Date Statement) delivered to the Trustee:

(c)

(1)

the Aggregate Outstanding Amount of the Secured Notes of the Class or Classes to be redeemed as of such Redemption Date;

(2)

the amount of accrued interest due on such Secured Notes as of the last day of the Interest Period immediately preceding such Redemption Date; and

(3)

the amount in the Collection Account available for application to the redemption of such Secured Notes.

If the Trustee shall not have received any accounting provided for in this Section 10.14 on the first Business Day after the date on which such accounting is due to the Trustee, the Trustee shall use reasonable efforts to cause such accounting to be made by the applicable Payment Date or Redemption Date. To the extent the Trustee is required to provide any information or reports pursuant to this Section 10.14 as a result of the failure of the Issuer to provide such information or reports, the Trustee shall be entitled to retain an Independent certified public accountant in connection therewith and the reasonable costs incurred by the Trustee for such Independent certified public accountant shall be reimbursed pursuant to Section 6.8. The Trustee will make the Note Valuation Report available via its internet website initially located at www.cdotrustee.net. All information made available on the Trustee’s website will be restricted and the Trustee will only provide access to such reports to those parties entitled thereto pursuant to the Indenture. In connection with providing access to its website, the Trustee may require registration and the acceptance of a disclaimer.

10.15.

RELEASE OF SECURITIES (a)

If no Event of Default has occurred and is continuing and subject to Article XII, the Issuer shall, in connection with any sale required pursuant to Section 12.1, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the settlement date for any sale of a security certifying that the conditions set forth in Section 12.1 are satisfied, direct the Trustee to release such security from the lien of this Indenture against receipt of payment therefor.

(b)

The Issuer shall, if notified that the issuer of the Pledged Security requires delivery of such Pledged Security as a condition to redemption or payment in full, by Issuer Order executed by an Authorized Officer of the Issuer and delivered to the Trustee at least two Business Days prior to the date set for redemption or payment in full of a Pledged Security, certifying that such security is being redeemed or paid in full, direct the Trustee or, at the Trustee’s instructions, the Custodian, to deliver such security, if in physical form, duly endorsed, or, if such security is a Clearing Corporation Security, to cause it to be presented, to the appropriate paying agent therefor on or before the date set for redemption or payment, in each case against receipt of the redemption price or payment in full thereof. 155

10.16.

(c)

The Trustee shall deposit any proceeds received by it from the disposition of a Pledged Security in the Collection Account.

(d)

The Trustee shall, upon receipt of an Issuer Order at such time as there are no Secured Notes Outstanding and all obligations of the Issuer hereunder have been satisfied, release the Collateral from the lien of this Indenture.

(e)

The Issuer may retain agents (including the Collateral Manager) to assist the Issuer in preparing any notice or other report required under this Section 10.15.

REPORTS BY INDEPENDENT ACCOUNTANTS (a)

At the Closing Date the Issuer (or the Collateral Manager on its behalf) shall appoint a firm of Independent certified public accountants of recognized national reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Indenture. Upon any resignation by such firm, the Issuer shall (after consultation with the Collateral Manager) propose a replacement firm meeting the criteria set forth in the preceding sentence for approval by a Majority of the Controlling Class. Upon approval by a Majority of the Controlling Class, the Issuer shall promptly appoint such firm by Issuer Order delivered to the Trustee, each Hedge Counterparty, the Collateral Manager and each Rating Agency. If the Issuer shall fail to appoint a successor to a firm of Independent certified public accountants which has resigned within 30 days after such resignation, the Issuer shall promptly notify the Trustee of such failure in writing. The fees of such Independent certified public accountants and its successor shall be payable by the Issuer as provided in Section 11.1.

(b)

On or before June of each year (commencing with June, 2008), the Issuer shall cause to be delivered to the Trustee, the

Processed and formatted by SEC Watch - Visit SECWatch.com

Income Note Paying Agent and each Rating Agency an Accountants’ Report specifying the procedures applied and their associated findings with respect to the Note Valuation Reports and any Redemption Date Statements prepared in the preceding year. At least 60 days prior to the Payment Date in June 2008 (and, if at any time a successor firm of Independent certified public accountants is appointed, prior to the Payment Date in May following the date of such appointment), the Issuer shall deliver to the Trustee an Accountant’s Report specifying in advance the procedures that such firm will apply in making the aforementioned findings throughout the term of its service as accountants to the Issuer. The Trustee shall promptly forward a copy of such Accountant’s Report to each Hedge Counterparty, the Rating Agencies, the Income Note Paying Agent and each Holder of Class A Notes (or, if no Class A Notes are Outstanding, each Holder of Class B Notes or, if no Class B Notes are Outstanding, each Holder of Class C Notes or, if no Class C Notes are Outstanding, each Holder of Class D Notes or, if no Class D Notes are Outstanding, each Holder of Class E Notes, or, if no Class E Notes are Outstanding, each Holder of Class F Notes, or, if no Class F Notes are Outstanding, each Holder of Class G Notes, or, if no Class G Notes are Outstanding, each Holder of Class H Notes, or, if no Class H Notes are Outstanding, each Holder of Class J Notes or, if no Class J Notes are Outstanding, each Holder of Class K Notes, or, if no Class K Notes are Outstanding, at the address shown on the Note Register. The Issuer shall not approve the institution of such procedures if a Majority of the Controlling Class or the Collateral Manager, by notice to the Issuer and the Trustee within 30 days after the date of the related notice to the Trustee, object thereto. 156

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

10.17.

Any statement delivered to the Trustee pursuant to Section 10.16(b) above shall be made available by the Trustee to any Holder of a Secured Note shown on the Note Register upon written request therefor.

REPORTS TO RATING AGENCIES

In addition to the information and reports specifically required to be provided to the Rating Agencies, the Income Note Paying Agent, the Holders of Secured Notes of the Controlling Class, and any Hedge Counterparty pursuant to the terms of this Indenture, the Income Note Paying Agency Agreement or any Hedge Agreement (as the case may be), the Issuer shall provide or procure to provide the Rating Agencies and each Hedge Counterparty with (a) all information or reports delivered to the Trustee hereunder and (b) such additional information as the Rating Agencies, the Income Note Paying Agent or any Hedge Counterparty may from time to time reasonably request and such information may be obtained and provided without unreasonable burden or expense. The Issuer shall promptly notify the Trustee, the Income Note Paying Agent and each Hedge Counterparty if the rating of any Class of Secured Notes has been, or it is known by the Issuer that such rating will be, changed or withdrawn. The Issuer shall notify each Rating Agency in the case of (i) termination or amendment of any Transaction Document or organizational document of the Issuer, (ii) termination or change of party to any of the Transaction Documents or (iii) material breach of any of the Transaction Documents by any party thereto. From time to time Fitch may request information or reports from the Collateral Manager on the properties underlying the Collateral, including, without limitation, information on underwritten cash flow and occupancy. With respect to any Collateral Debt Security that is a Trust Preferred Security, for so long as Fitch is rating any Class of Outstanding Secured Notes, the Issuer shall provide to Fitch via email to [email protected] the following report or information (if available) with respect to the issuing entity of the related Trust Preferred Security: (a) if the issuing entity of such Trust Preferred Security is a private company, the financials for such company; (b) annual audited financials; (c) quarterly financials; and (d) quarterly compliance certificates. 10.18.

TAX MATTERS

The Issuer agrees to treat, and hereby notify the Trustee to treat, and, by accepting a Secured Note, each Holder of the Secured Notes agrees to treat, the Secured Notes, for U.S. federal, state and local income tax purposes, as indebtedness of the Issuer, to report all income (or loss) in accordance with such treatment and not to take any action inconsistent with such treatment except as otherwise required by any taxing authority under applicable law. The Issuer agrees not to elect to be treated as other than a corporation for U.S. federal income tax purposes. 10.19.

TAX INFORMATION (a)

The Issuer shall provide on a timely basis to any holder of a beneficial interest in Rule 144A Definitive Notes (or its designee), Rule 144A Global Notes (or its designee) and Definitive Retained Notes (or its designee), upon written request therefor certifying that it is such a holder, (i) all information that a U.S. shareholder making a “qualified electing fund” election (as defined in the Code) is required to obtain for U.S. federal income tax purposes and (ii) a “PFIC Annual Information Statement” as described in Treasury Regulation 1.1295-1 (or any successor Internal Revenue Service release or Treasury Regulation), including all representations and statements required by such statement, and will take any other steps necessary to facilitate such election by a holder of a beneficial interest in any Rule 144A Definitive Notes, Rule 144A Global Notes and Definitive Retained Notes. The Issuer shall also provide, upon request of a Holder of, or a holder of a beneficial interest in, any Rule 144A Definitive Notes, Rule 144A Global 157

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes and Definitive Retained Notes, any information that such Holder or holder of a beneficial interest reasonably requests to assist such Holder or holder of a beneficial interest with regard to any filing requirements the Holder or holder of a beneficial interest may have as a result of the controlled foreign corporation rules under the Code. The cost and expense of the preparation and delivery of the PFIC Annual Information Statement shall be at the expense of the Issuer. (b)

The Issuer will treat each purchase of Collateral Debt Securities as “purchase” for tax accounting and reporting purposes.

(c)

The Issuer shall file, or cause to be filed, any tax returns, including information tax returns, required by any governmental authority; provided, however it shall not file, or cause to be filed, any United States federal, state or local income or franchise tax return in any state of the United States unless it shall have obtained an opinion of nationally recognized tax counsel experienced in such matters prior to such filing that, under the laws of such jurisdiction, the Issuer is required to file such income or franchise tax return.

(d)

If required to prevent the withholding and imposition of United States income tax, the Issuer agrees to deliver or cause to be delivered a United States Internal Revenue Service Form W-9 or applicable successor form, or such other form as may be required by the underlying documents with respect to any asset, to each issuer or obligor of or counterparty with respect to any asset at the time such asset is purchased or entered into by the Issuer and annually thereafter.

(e)

Notwithstanding any contrary agreement or understanding, the Collateral Manager, the Issuer, the Trustee and the Noteholders and beneficial owners of the Notes (and each of their respective employees, representatives or other agents) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Indenture and all materials of any kind (including opinions or other tax analyses) that are provided to them relating to such tax treatment and tax structure. The foregoing provision shall apply from the beginning of discussions between the parties. For this purpose, the tax treatment of a transaction is the purported or claimed U.S. tax treatment of the transaction under applicable U.S. federal, state or local law, and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed U.S. tax treatment of the transaction under applicable U.S. federal, state or local law.

(f)

A Note holder (or beneficial owner of a Note) will, upon request, notify the Issuer whether or not the Noteholder (or beneficial owner of such Note) is a United States person within the meaning of Section 7701(a)(30) of the Code and the name and status of such Noteholder or beneficial owner as an individual, partnership, corporation or other entity and such other information the Issuer shall reasonably request for purposes of tax reporting of the Issuer or other Noteholders.

(g)

The Issuer agrees that it does not intend for this Indenture to represent an agreement to enter into a partnership, a joint venture or any other business entity for U.S. Federal income tax purposes. The Issuer shall not represent or otherwise hold themselves out to the United States Internal Revenue Service or other third parties as partners in a partnership or members of a joint venture or other business entity for U.S. Federal income tax purposes. 158

Processed and formatted by SEC Watch - Visit SECWatch.com

10.20.

CURE ADVANCES (a)

To the extent that the Trustee receives any amounts from the Income Note Paying Agent in respect of any Cure Advances made at the election of the Holders of the Majority of the Income Notes in accordance with the Income Note Paying Agency Agreement, together with a copy of the written instruction received by the Income Note Paying Agent from the Holders of the Majority of the Income Notes in accordance with the Income Note Paying Agency Agreement, to exercise the Issuer’s rights in respect of a Cure Advance, the Trustee shall promptly remit such amounts to the Collateral Manager for application in the payment of such Cure Advances (subject to the Servicer Override).

(b)

The Holders of the Majority of the Income Notes will be entitled to reimbursement from any subsequent payments or recoveries on each Real Estate Interest in respect of which it makes a Cure Advance in accordance with the Priority of Payments; provided that, if at any time the Collateral Manager determines in its sole discretion, exercised in good faith (subject to the Service Override) that a Cure Advance previously made is a Nonrecoverable Cure Advance, the Holders of the Majority of the Income Notes will be entitled to reimbursement for such Cure Advance from subsequent payments or collections with respect to all of the Collateral Debt Securities on any Business Day during any Interest Period prior to the end of the related Due Period (or on a Payment Date prior to any payment of interest on or principal of the Notes in accordance with the Priority of Payments). Reimbursement of such Nonrecoverable Cure Advances will be made first from Collateral Interest Collections and, then, to the extent Collateral Interest Collections were insufficient, from Collateral Principal Collections. The Trustee shall remit any amounts due and payable in respect of repayment of Cure Advances or Nonrecoverable Cure Advances, as the case may be, to the Holders of the Majority of the Income Notes in accordance with the Income Note Paying Agency Agreement.

10.21. PURCHASE OF RELATED SENIOR LOANS BY HOLDERS OF SUBORDINATE MORTGAGE LOAN INTERESTS OR MEZZANINE LOANS. To the extent that the underlying documents related to any Subordinate Loan Interest, or Mezzanine Loan provides that (i) the holders of the related Subordinate Loan Interest or Mezzanine Loan may, subject to the rights of the more subordinate holders and the mezzanine loan holders, purchase the related Senior Loan or commercial mortgage loan from the holder thereof generally at a price equal to the outstanding principal amount of such Senior Loan or commercial mortgage loan, plus accrued and unpaid interest up to the purchase date, plus any unreimbursed servicing advances with respect to the related commercial mortgage loan and any accrued and unpaid interest on such advances, plus, in certain circumstances, additional fees to the special servicer and (ii) is exercisable by the Issuer, and (iii) if the Issuer does not otherwise purchase such Senior Loan or commercial mortgage loan in accordance with the applicable Reinvestment Criteria, a Majority of the Income Noteholders may direct the Issuer to exercise its purchase option on behalf of such Majority of the Income Noteholders, to the extent that the Issuer has received funds from the Majority of the Income Noteholders for such purpose, at any time, regardless of whether such purchase would occur during the Reinvestment Period. The Majority of the Income Noteholders will provide the necessary funds directly to the Issuer to make such purchase; provided that the Issuer shall not commit to make any such purchase until the necessary funds have been actually received from the Income Noteholders. In making its determination whether to exercise such option, the Majority of the Income Noteholders may act in their own interest only and are not required to take into account the interests of any other Noteholders. The related Subordinate Loan Interest or Mezzanine Loan will remain as part of the Collateral; however, the Senior Loan or commercial mortgage loan purchased through the exercise of such purchase option will be transferred to the Majority of the Income 159

Processed and formatted by SEC Watch - Visit SECWatch.com

Noteholders or any designee thereof in exchange for the requisite purchase price received from such Income Noteholders. ARTICLE XI APPLICATION OF MONIES 11.1.

DISBURSEMENTS OF FUNDS FROM PAYMENT ACCOUNT; PRIORITY OF PAYMENTS (a)

Collateral Interest Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Secured Notes in connection with an Event of Default, in accordance with a Note Valuation Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Interest Collections, to the extent of Available Funds in (i) the Collection Account and (ii) to the extent funds are not available in the Collection Account, the Interest Reserve Account, less (x) any collections in respect of interest applied to reimburse any outstanding Cure Advance (other than a Nonrecoverable Cure Advance) to the extent of a specific recovery in full of such Cure Advance from the obligor of the specific proceeds of the Collateral Debt Security as to which such Cure Advance was made, as described under Section 10.20, and (y) any amounts in respect of interest applied to reimburse Nonrecoverable Cure Advances as described in Section 10.20 will be applied by the Trustee in the following order of priority: (1)

to pay, in the following order: (i)

taxes and filing fees and registration fees (including annual return fees) payable by the Issuer, if any; and then,

(ii)

the amount of any due and unpaid Trustee Fee; and then,

(iii)

the amount of any due and unpaid fees to the Administrator; and then,

(iv)

the amount of any due and unpaid Trustee Expenses; and then,

(v)

the amount of any due and unpaid fees and expenses of the Rating Agencies; and then,

(vi)

the amount of any due and unpaid expenses of the Administrator and any due and unpaid Administrative Expenses not included in (iii), (iv) and (v) above, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee;

(vii)

to deposit into the Expense Reserve Account the amount needed to bring the amount on deposit therein to U.S.$25,000 (unless the Collateral Manager directs that a lesser amount be deposited to the Expense Reserve Account); and then, 160

Processed and formatted by SEC Watch - Visit SECWatch.com

(viii)

the amount of any reimbursement to the Trustee for nonrecoverable servicing advances (together with interest thereon) made by the Trustee and not reimbursed pursuant to any Servicing Agreement.

provided that the cumulative amount paid under (iii) through (viii) above (excluding any Administrative Expenses due or accrued with respect to the actions taken on or prior to the Closing Date and accounting fees that the Trustee is required to pay (other than certain accountants’ fees related to annual reviews) and fees the Trustee pays in connection with any Event of Default and any default of the Collateral Debt Securities) may not exceed U.S.$279,500 in the aggregate in any consecutive 12-month period; (2)

to pay the Senior Collateral Management Fee with respect to such Payment Date and any Senior Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date (excluding any interest payable on such unpaid Senior Collateral Management Fee);

(3)

to pay an amount equal to the Non-Monthly Pay Asset Interest Reserve Amount for deposit into the Non-Monthly Pay Asset Interest Reserve Account;

(4)

to pay first, any Hedge Counterparty, any amounts due to such Hedge Counterparty under any Hedge Agreement, excluding any termination payments where such Hedge Counterparty is the Defaulting Party or the sole Affected Party and second, to the extent funds in the related Derivative Contract Counterparty Account are insufficient, any Derivative Contract Counterparty, any amounts due to such Derivative Contract Counterparty, excluding any termination payments where such Derivative Contract Counterparty is the Defaulting Party or the sole Affected Party;

(5)

to pay Periodic Interest on the Class A-1 Notes and any Defaulted Interest thereon;

(6)

to pay Periodic Interest on the Class A-2 Notes and any Defaulted Interest thereon;

(7)

to pay Periodic Interest on the Class A-3 Notes and any Defaulted Interest thereon;

(8)

to pay Periodic Interest on the Class B Notes and any Defaulted Interest;

(9)

if either of the Class A/B Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal of the most senior Class of Notes then Outstanding until such Class A/B Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class A/B Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class A/B Coverage Test is satisfied or until the Class B Notes are paid in full; provided that for purposes of determining if the Class A/B Principal Coverage Test is 161

Processed and formatted by SEC Watch - Visit SECWatch.com

satisfied after giving effect to any payments under this Section 11.1(a)(9), the denominator of the Class A/B Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to any of the sections above and pursuant to this Section 11.1(a)(9) on the related Payment Date; (10)

if a Rating Confirmation Failure occurs, on each Payment Date commencing with the Payment Date following the Calculation Date following such Rating Confirmation Failure, to pay principal on the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes, in that order, in the amounts necessary for each Rating Agency to confirm its respective ratings of the Notes assigned on the Closing Date or until each Class of Notes is paid in full;

(11)

to pay Periodic Interest on the Class C Notes and, if no Class A Notes and no Class B Notes are Outstanding, any Defaulted Interest on the Class C Notes;

(12)

to pay the Class C Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(13)

to pay Periodic Interest on the Class D Notes and, if no Class A Notes, no Class B Notes and no Class C Notes are Outstanding, any Defaulted Interest on the Class D Notes;

(14)

to pay the Class D Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(15)

to pay Periodic Interest on the Class E Notes and, if no Class A Notes, no Class B Notes, no Class C Notes, and no Class D Notes are Outstanding, any Defaulted Interest on the Class E Notes;

(16)

to pay the Class E Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(17)

if either of the Class C/D/E Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal of the most senior class of Notes then Outstanding until such Class C/D/E Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class C/D/E Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes are paid in full and so on, until such Class C/D/E Coverage Test is satisfied or until the Class E Notes are paid in full; provided that for purposes of determining if the Class C/D/E Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(17), the denominator of the Class C/D/E Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to any of the sections above and pursuant to this Section 11.1(a)(17), on the related Payment Date; 162

Processed and formatted by SEC Watch - Visit SECWatch.com

(18)

to pay Periodic Interest on the Class F Notes and, if no Class A Notes, no Class B Notes, no Class C Notes, no Class D Notes and no Class E Notes are Outstanding, any Defaulted Interest on the Class F Notes;

(19)

to pay the Class F Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(20)

to pay Periodic Interest on the Class G Notes and, if no Class A Notes, no Class B Notes, no Class C Notes, no Class D Notes, no Class E Notes and no Class F Notes are Outstanding, any Defaulted Interest on the Class G Notes;

(21)

to pay the Class G Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(22)

to pay Periodic Interest on the Class H Notes and, if no Class A Notes, no Class B Notes, no Class C Notes, no Class D Notes, no Class E Notes, no Class F Notes and no Class G Notes are Outstanding, any Defaulted Interest on the Class H Notes;

(23)

to pay the Class H Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(24)

if either of the Class F/G/H Coverage Tests is not satisfied as of the preceding Calculation Date, to pay principal of the most senior Class of Notes then Outstanding until such Class F/G/H Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes are paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class F/G/H Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class F/G/H Coverage Test is satisfied or until the Class H Notes are paid in full; provided that for purposes of determining if the Class F/G/H Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(a)(24) the denominator of the Class F/G/H Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to any of the sections above and pursuant to this Section 11.1(a)(24) on the related Payment Date;

(25)

to pay Periodic Interest on the Class J Notes and, if no Class A Notes, no Class B Notes, no Class C Notes, no Class D Notes, no Class E Notes, no Class F Notes, no Class G Notes and no Class H Notes are Outstanding, any Defaulted Interest on the Class J Notes;

(26)

to pay the Class J Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(27)

to pay Periodic Interest on the Class K Notes and, if no Class A Notes, no Class B Notes, no Class C Notes, no Class D Notes, no Class E Notes, no Class F Notes, no Class G Notes, no Class H Notes and no Class J Notes are Outstanding, any Defaulted Interest on the Class K Notes; 163

Processed and formatted by SEC Watch - Visit SECWatch.com

(28)

to pay the Class K Cumulative Applicable Periodic Interest Shortfall Amount and interest thereon, if any;

(29)

to pay first, any termination payments payable by the Issuer under any Hedge Agreement upon the termination of the related Hedge Agreement and not payable pursuant to Section 11.1(a)(4), and second, to the extent funds in the related Derivative Contract Counterparty Account are insufficient, any termination payments payable by the Issuer under any Derivative Contract upon the termination of the related Derivative Contract and not payable pursuant to Section 11.1(a)(4), in each case if such termination occurred solely as the result of an event of default or a termination event with respect to which any Hedge Counterparty or Derivative Contract Counterparty, as the case may be, is the Defaulting Party or the sole Affected Party, as the case may be;

(30)

to pay, in the following order: (i)

to any Servicer or the Trustee, any reimbursements for nonrecoverable servicing advances (together with interest thereon) due and owing and not paid out of collections received pursuant to the terms of the related Servicing Agreement or (in the case of the Trustee) pursuant to Section 11.1(a)(1)(viii) above;

(ii)

any due and unpaid Trustee Expenses and unpaid Administrative Expenses, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee, in each case, in the same order of priority as provided in Section 11.1(a)(1) and to the extent not paid in full under Section 11.1 (a) (1) without regard to any limitation on any maximum amounts payable on such date contained therein; and

(iii)

on a pro rata basis, any due and unpaid expenses and other liabilities of the Issuer to the extent not paid under Section 11.1(a)(1), whether as a result of an amount limitation imposed thereunder or otherwise;

(31)

to pay, first, the Subordinate Collateral Management Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date, and second, any accrued and unpaid interest on the then-due and unpaid Collateral Management Fee;

(32)

to repay, pro rata, the amount of any outstanding Cure Advances not previously reimbursed, if any;

(33)

at the election of 100% of the Holders of the Income Notes, an amount of Income Note Excess Funds as determined by such Holders in accordance with such election, to be deposited in the Interest Reserve Account; and

(34)

all Income Note Excess Funds after giving effect to any election pursuant to Section 11.1(a)(33) above, to the Income Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Income Note Paying Agency Agreement. 164

(b)

Collateral Principal Collections. On any Payment Date that is not a Redemption Date or a Payment Date following the occurrence and continuation of an acceleration of the Secured Notes in connection with an Event of Default, in accordance with a Note Valuation Report prepared by the Collateral Administrator as of the last day of the Due Period preceding such Payment Date, Collateral Principal Collections, to the extent of Available Funds in the Collection Account, less (i) any amounts in respect of principal applied to reimburse any outstanding Cure Advance (other than a Nonrecoverable Cure Advance) to the extent of a specific recovery in full of such Cure Advance from the obligor of the specific proceeds of the Collateral Debt Security as to which such Cure Advance was made, as described Section 10.20 and (ii) any amounts in respect of principal applied to reimburse Nonrecoverable Cure Advances as described under Section 10.20 will be applied by the Trustee in the following order of priority: (1)

to the payment of the amounts referred to in Section 11.1(a)(1) through (8), in the same order of priority specified therein, but only to the extent not paid in full thereunder;

(2)

if either of the Class A/B Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(9) are insufficient to cause the Class A/B Coverage Tests to be satisfied, to pay principal of the most senior Class of Notes then Outstanding until such Class A/B Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class A/B Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class A/B Coverage Test is satisfied or until the Class B Notes are paid in full; provided that for purposes of determining if the Class A/B Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(2), the denominator of the Class A/B Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to any clause or subclause of Section 11.1(a) on the related Payment Date and pursuant to Section 11.1(b)(1) above and this clause (2); provided, further, that the numerator of the Class A/B

Processed and formatted by SEC Watch - Visit SECWatch.com

Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections applied pursuant to any of the clauses above and pursuant to this Section 11.1(b)(2) on the related Payment Date; (3)

if a Rating Confirmation Failure occurs, on each Payment Date commencing with the Payment Date following the Calculation Date following such Rating Confirmation Failure, to the extent that the amounts paid pursuant to Section 11.1(a)(10) are insufficient to pay such amounts in full thereunder, to pay principal on the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes in that order, in the amounts necessary for each Rating Agency to confirm its respective ratings of the Notes assigned on the Closing Date or until each Class of Notes is paid in full;

(4)

if the Class A Notes and the Class B Notes are no longer Outstanding, to pay Periodic Interest on the Class C Notes and any Defaulted Interest on the Class C 165

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(11) are insufficient to pay such amounts in full thereunder; (5)

if the Class A Notes and the Class B Notes are no longer Outstanding, to pay the Class C Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that the amounts paid pursuant to Section 11.1(a)(12) are insufficient to pay such amounts in full thereunder;

(6)

if the Class A Notes, the Class B Notes and the Class C Notes are no longer Outstanding, to pay Periodic Interest on the Class D Notes and any Defaulted Interest on the Class D Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(13) are insufficient to pay such amounts in full thereunder;

(7)

if the Class A Notes, the Class B Notes, and the Class C Notes are no longer Outstanding, to pay the Class D Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that amounts paid pursuant to Section 11.1(a)(14) are insufficient to pay such amounts in full thereunder;

(8)

if the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes are no longer Outstanding, to pay Periodic Interest on the Class E Notes and any Defaulted Interest on the Class E Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(15) are insufficient to pay such amounts in full thereunder;

(9)

if the Class A Notes, the Class B Notes, the Class C Notes, and the Class D Notes are no longer Outstanding, to pay the Class E Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that amounts paid pursuant to Section 11.1(a)(16) are insufficient to pay such amounts in full thereunder;

(10)

if either of the Class C/D/E Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(17) are insufficient to cause the Class C/D/E Coverage Tests to be satisfied, to pay principal of the most senior Class of Notes then Outstanding until such Class C/D/E Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class C/D/E Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class C/D/E Coverage Test is satisfied or until the Class E Notes are paid in full; provided that for purposes of determining if the Class C/D/E Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(9), the denominator of the Class C/D/E Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to any of the foregoing sections above and pursuant to this Section 11.1(b)(9) on the related Payment Date; provided, further, that the numerator of the Class C/D/E Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections applied pursuant to any of the subsections above and pursuant to this Section 11.1(b)(9) on the related Payment Date;

(11)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes are no longer Outstanding, to pay Periodic Interest on the Class 166

Processed and formatted by SEC Watch - Visit SECWatch.com

F Notes and any Defaulted Interest on the Class F Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(18) are insufficient to pay such amounts in full thereunder; (12)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes are no longer Outstanding, to pay the Class F Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that amounts paid pursuant to Section 11.1(a)(19) are insufficient to pay such amounts in full thereunder;

(13)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes are no longer Outstanding, to pay Periodic Interest on the Class G Notes and any Defaulted Interest on the Class G Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(20) are insufficient to pay such amounts in full thereunder;

(14)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes are no longer Outstanding, to pay the Class G Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that amounts paid pursuant to Section 11.1(a)(21) are insufficient to pay such amounts in full thereunder;

(15)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes or the Class G Notes are no longer Outstanding, to pay Periodic Interest on the Class H Notes and any Defaulted Interest on the Class H Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(22) are insufficient to pay such amounts in full thereunder;

(16)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes are no longer Outstanding, to pay the Class H Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that amounts paid pursuant to Section 11.1(a)(23) are insufficient to pay such amounts in full thereunder;

(17)

if either of the Class F/G/H Coverage Tests is not satisfied as of the preceding Calculation Date and to the extent that the amounts paid pursuant to Section 11.1(a)(24) are insufficient to cause the Class F/G/H Coverage Tests to be satisfied, to pay principal of the most senior Class of Notes then Outstanding until such Class F/G/H Coverage Test is satisfied as of such Calculation Date or until such most senior Class of Notes is paid in full, and then to pay principal of the next most senior Class of Notes Outstanding until such Class F/G/H Coverage Test is satisfied as of such Calculation Date or until such next most senior Class of Notes is paid in full and so on, until such Class F/G/H Coverage Test is satisfied or until the Class H Notes are paid in full; provided that for purposes of determining if the Class F/G/H Principal Coverage Test is satisfied after giving effect to any payments under this Section 11.1(b)(17), the denominator of the Class F/G/H Principal Coverage Ratio shall be calculated after giving effect to any payments of principal on the Notes made pursuant to any section or subsection of Section 11.1(a) on the related Payment Date and pursuant to Section 11.1(b) above and this Section 11.1(b)(17) on the related Payment Date; provided, further, that the numerator of the Class F/G/H 167

Processed and formatted by SEC Watch - Visit SECWatch.com

Principal Coverage Ratio shall be calculated after giving effect to any Collateral Principal Collections applied pursuant to any of the foregoing sections above and pursuant to this Section 11.1(b)(17) on the related Payment Date; (18)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes are no longer Outstanding, to pay Periodic Interest on the Class J Notes and any Defaulted Interest on the Class J Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(25) are insufficient to pay such amounts in full thereunder;

(19)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes are no longer Outstanding, to pay the Class J Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that amounts paid pursuant to Section 11.1(a)(26) are insufficient to pay such amounts in full thereunder;

(20)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes and the Class J Notes are no longer Outstanding, to pay Periodic Interest on the Class K Notes and any Defaulted Interest on the Class K Notes, to the extent that the amounts paid pursuant to Section 11.1(a)(27) are insufficient to pay such amounts in full thereunder;

(21)

if the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes and the Class J Notes are no longer Outstanding, to pay the Class K Cumulative Applicable Periodic Interest Shortfall Amount, to the extent that amounts paid pursuant to Section 11.1(a)(28) are insufficient to pay such amounts in full thereunder;

(22)

during the Reinvestment Period, (i)

to the purchase of Substitute Collateral Debt Securities or to the Collection Account for reinvestment in Eligible Investments pending investment in Substitute Collateral Obligations in accordance with the Reinvestment Criteria; or:

(ii)

upon the occurrence of a Special Amortization, Collateral Principal Collections in an amount determined by the Collateral Manager (notice of which shall be provided to the Trustee on or prior to the related Calculation Date) will be applied as follows: (A)

if the Special Amortization Pro-Rata Condition is satisfied, to pay principal of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes on a pro rata basis (based on the outstanding principal balance (not including any Class C Cumulative Applicable Periodic Interest Shortfall Amount, any Class D Cumulative 168

Processed and formatted by SEC Watch - Visit SECWatch.com

Applicable Periodic Interest Shortfall Amount, any Class E Cumulative Applicable Periodic Interest Shortfall Amount, any Class F Cumulative Applicable Periodic Interest Shortfall Amount, any Class G Cumulative Applicable Periodic Interest Shortfall Amount, any Class H Cumulative Applicable Periodic Interest Shortfall Amount, any Class J Cumulative Applicable Periodic Interest Shortfall Amount or any Class K Cumulative Applicable Periodic Interest Shortfall Amount, as the case may be), of each such Class of Secured Notes); or; (B)

(23)

if the Special Amortization Pro-Rata Condition is not satisfied, the following payments in the following order of priority: 1)

to pay principal of any outstanding Class A-1 Notes;

2)

if the principal balance of the Class A-1 Notes has been repaid in full, to pay principal of the Class A-2 Notes;

3)

if the principal balance of the Class A-2 Notes has been repaid in full, to pay principal of the Class A-3 Notes;

4)

if the principal balance of the Class A-3 Notes has been repaid in full, to pay principal of the Class B Notes;

5)

if the principal balance of the Class B Notes has been repaid in full, to pay principal of the Class C Notes;

6)

if the principal balance of the Class C Notes has been repaid in full, to pay principal of the Class D Notes;

7)

if the principal balance of the Class D Notes has been repaid in full, to pay principal of the Class E Notes;

8)

if the principal balance of the Class E Notes has been repaid in full, to pay principal of the Class F Notes;

9)

if the principal balance of the Class F Notes has been repaid in full, to pay principal of the Class G Notes;

10)

if the principal balance of the Class G Notes has been repaid in full, to pay principal of the Class H Notes;

11)

if the principal balance of the Class H Notes has been repaid in full, to pay principal of the Class J Notes;

12)

if the principal balance of the Class J Notes has been repaid in full, to pay principal of the Class K Notes;

after the end of the Reinvestment Period, to pay each Class of Secured Notes: 169

Processed and formatted by SEC Watch - Visit SECWatch.com

(i)

first, to the Class A-1 Notes, until the Class A-1 Notes have been paid in full;

(ii)

second, to the Class A-2 Notes, until the Class A-2 Notes have been paid in full;

(iii)

third, to the Class A-3 Notes, until the Class A-3 Notes have been paid in full;

(iv)

fourth, to the Class B Notes, until the Class B Notes have been paid in full;

(v)

fifth, to the Class C Notes, until the Class C Notes have been paid in full;

(vi)

sixth, to the Class D Notes, until the Class D Notes have been paid in full;

(vii)

seventh, to the Class E Notes, until the Class E Notes have been paid in full;

(viii)

eighth, to the Class F Notes, until the Class F Notes have been paid in full;

(ix)

ninth, to the Class G Notes, until the Class G Notes have been paid in full;

(x)

tenth, to the Class H Notes, until the Class H Notes have been paid in full;

(xi)

eleventh, to the Class J Notes, until the Class J Notes have been paid in full;

(xii)

twelfth, to the Class K Notes, until the Class K Notes have been paid in full;

(24)

to pay, first, termination payments payable to any Hedge Counterparty upon the termination of the related Hedge Agreement, if such termination occurred solely as the result of an event of default or a termination event with respect to any Hedge Counterparty as the Defaulting Party or the sole Affected Party, as the case may be, to the extent that the amounts paid pursuant to Section 11.1(a)(29) are insufficient to pay such amounts in full thereunder, and second, termination payments to any Derivative Contract Counterparty if such termination occurred solely as a result of an event of default or a termination event with respect to which the Derivative Contract Counterparty is the Defaulting Party or the sole Affected Party, as the case may be, to the extent funds in the related Derivative Contract Counterparty Account are insufficient and the amounts paid pursuant to Section 11.1(a)(29) are insufficient to pay such amounts in full thereunder;

(25)

to pay, in the following order: 170

Processed and formatted by SEC Watch - Visit SECWatch.com

(c)

(i)

to any Servicer or the Trustee, any reimbursements for nonrecoverable servicing advances (together with interest thereon) due and owing and not paid out of collections received pursuant to the terms of the related Servicing Agreement or (in the case of the Trustee) pursuant to Section 11.1(b)(1) above; and

(ii)

any due and unpaid Trustee Expenses, and any due Administrative Expenses, including amounts payable to the Collateral Manager under the Collateral Management Agreement but excluding the Collateral Management Fee, in each case, in the same order of priority as provided in Section 11.1(b)(1) above and to the extent not paid in full under Section 11.1(b)(1) above and to the extent that the amounts paid pursuant to Section 11.1(a)(1) and (30) are insufficient to pay such amounts in full thereunder;

(26)

to pay, first, the Subordinate Collateral Management Fee with respect to such Payment Date and any due and unpaid Subordinate Collateral Management Fee with respect to a previous Payment Date that was not paid on a previous Payment Date, and second, any accrued and unpaid interest on the then-due and unpaid Collateral Management Fee, to the extent that the amounts paid pursuant to Section 11.1(a)(31) are insufficient to pay such amounts in full thereunder;

(27)

to repay, pro rata, the amount of any outstanding Cure Advances, if any to the extent that the amounts paid pursuant to Section 11.1(a)(32) are insufficient to pay such amounts in full thereunder; and

(28)

all Income Note Excess Funds to the Income Note Paying Agent, on behalf of the Issuer, for distributions on the Income Notes in accordance with the Income Note Paying Agency Agreement.

If an Event of Default has occurred and is continuing, on the date or dates determined by the Trustee upon a declaration of acceleration of the maturity of the Notes, the Trustee will pay, from all collections from, and proceeds of the sale or liquidation of, the Collateral (excluding any unpaid Nonrecoverable Cure Advances and any other amounts due under any Servicing Agreement together with interest thereon), in the following order: (1)

amounts corresponding to any amounts payable under in Section 11.1(a)(1) through (4), and (to the extent not covered by Section 11.1(a)(1) through (4)) Section 11.1(b)(1);

(2)

the Periodic Interest on the Class A-1 Notes (including Defaulted Interest on such Class A-1 Notes, if any);

(3)

outstanding principal on the Class A-1 Notes until paid in full;

(4)

the Periodic Interest on the Class A-2 Notes (including Defaulted Interest on such Class A-2 Notes, if any);

(5)

outstanding principal on the Class A-2 Notes until paid in full]; 171

Processed and formatted by SEC Watch - Visit SECWatch.com

(6)

the Periodic Interest on the Class A-3 Notes (including Defaulted Interest on such Class A-3 Notes, if any);

(7)

outstanding principal on the Class A-3 Notes until paid in full;

(8)

the Periodic Interest on the Class B Notes (including Defaulted Interest on the Class B Notes, if any) and then outstanding principal on the Class B Notes until paid in full;

(9)

the Periodic Interest on the Class C Notes (including Defaulted Interest on the Class C Notes, if any) and then outstanding principal on the Class C Notes (including, the Class C Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(10)

the Periodic Interest on the Class D Notes (including Defaulted Interest on the Class D Notes, if any) and then outstanding principal on the Class D Notes (including, the Class D Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(11)

the Periodic Interest on the Class E Notes (including Defaulted Interest on the Class E Notes, if any) and then outstanding principal on the Class E Notes (including, the Class E Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(12)

the Periodic Interest on the Class F Notes (including any Defaulted Interest on the Class F Notes, if any) and then outstanding principal on the Class F Notes (including, the Class F Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full,

(13)

the Periodic Interest on the Class G Notes (including any Defaulted Interest on the Class G Notes, if any) and then outstanding principal on the Class G Notes (including, the Class G Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(14)

the Periodic Interest on the Class H Notes (including any Defaulted Interest on the Class H Notes, if any) and then outstanding principal on the Class H Notes (including, the Class H Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(15)

the Periodic Interest on the Class J Notes (including any Defaulted Interest on the Class J Notes, if any) and then outstanding principal on the Class J Notes (including, the Class J Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(16)

the Periodic Interest on the Class K Notes (including any Defaulted Interest on the Class K Notes, if any) and then outstanding principal on the Class K Notes (including, the Class K Cumulative Applicable Periodic Interest Shortfall Amount, if any) until paid in full;

(17)

amounts corresponding to the amounts set forth in Section 11.1(a)(29) through (32), and Section 11.1(b)(24) through (27); and 172

(18)

to the Income Note Paying Agent, any remaining amounts for distributions on the Income Notes as set forth in Section 11.1(a)(34) and Section 11.1(b)(28).

(d)

Not later than 12:00 p.m., New York time, on or before the Business Day preceding each Payment Date, the Issuer shall, pursuant to Article X, remit or cause to be remitted to the Trustee for deposit in the Payment Account an amount of Cash sufficient to pay the amounts described in Section 11.1(a) and 11.1(b) required to be paid on such Payment Date.

(e)

If, on any Payment Date, the amount available in the Payment Account from amounts received in the related Due Period is insufficient to make the full amount of the disbursements required by the statements furnished by the Issuer pursuant to Section 10.14(b), the Trustee shall make the disbursements called for in the order and according to the priority set forth under Section 11.1(a) and 11.1(b), subject to Section 13.1, to the extent funds are available therefor.

(f)

Except as otherwise expressly provided in this Section 11.1, if on any Payment Date the amount of funds is insufficient to make the full amount of the disbursements required by any section or subsection of Section 11.1(a) or 11.1(b) to different Persons, the Trustee shall make the disbursements called for by such section or subsection ratably in accordance with the respective amounts of such disbursements then due and payable to the extent funds are available therefor.

(g)

Any amounts to be paid to the Income Note Paying Agent pursuant to Section 11.1(a)(34) or to Section 11.1(b)(28) will be released from the lien of this Indenture.

(h)

No Collateral Principal Collections will be paid to a Class of Secured Notes in accordance with the Priority of Payments on a

Processed and formatted by SEC Watch - Visit SECWatch.com

Payment Date if, after giving effect to such payment, any Principal Coverage Test for a more Senior Class of Secured Notes would have failed. ARTICLE XII PURCHASE AND SALE OF COLLATERAL DEBT SECURITIES 12.1.

SALE OF COLLATERAL DEBT SECURITIES (a)

Sale of Collateral Debt Securities. (1)

Subject to the satisfaction of the conditions specified in Section 10.15 as applicable, if the Collateral Manager, on behalf of the Issuer, pursuant to this Article XII, shall direct the Trustee to sell any Temporary Ramp-Up Security, Defaulted Security, Equity Security, Credit Improved Security, Credit Risk Security, Written Down Security or Withholding Tax Security, the Trustee shall sell in the manner directed by the Collateral Manager, any Temporary Ramp-Up Security, Defaulted Security, Equity Security, Credit Improved Security, Credit Risk Security, Written Down Security or Withholding Tax Security.

(2)

During the Ramp-Up Period, and in any event, no later than the Effective Date, the Collateral Manager shall direct the Issuer to sell or otherwise dispose of all Temporary Ramp-Up Securities. Sale Proceeds received with respect to 173

Processed and formatted by SEC Watch - Visit SECWatch.com

Temporary Ramp-Up Securities shall be reinvested in Ramp-Up Collateral Debt Securities that are Fixed Rate Collateral Debt Securities; provided that any Sale Proceeds received with respect to Temporary Ramp-Up Securities that are not reinvested in Fixed Rate Collateral Debt Securities, other than not more than U.S.$1,000,000 of such Sale Proceeds that may be reinvested in Substitute Collateral Debt Securities that are not Fixed Rate Collateral Debt Securities, shall be treated as Collateral Principal Collections and shall be applied by the Issuer to the making of payments on the Notes, subject to and in accordance with the Priority of Payments, on the Payment Date immediately following the Effective Date. (b)

Reinvestment Criteria. Following the Closing Date, the Collateral Manager will make commercially reasonable efforts to direct the reinvestment of Sale Proceeds received at any time on Collateral Debt Securities that are Defaulted Securities, Equity Securities, Credit Improved Securities, Credit Risk Securities, Written Down Securities, Repurchased Securities or Withholding Tax Securities, as well as Collateral Principal Payments in Substitute Collateral Debt Securities with an aggregate Principal Balance no less than the amount of the Sale Proceeds from the sale of such Collateral Debt Securities, in each case during the Ramp-Up Period and thereafter during the Reinvestment Period, subject to complying with the Eligibility Criteria and the Reinvestment Criteria described below, or may direct the investment of such Sale Proceeds temporarily in Eligible Investments pending such reinvestment in Substitute Collateral Debt Securities. Any such Sale Proceeds and Collateral Principal Payments will be eligible to be reinvested in Substitute Collateral Debt Securities by the Issuer and pledged to the Trustee if such Substitute Collateral Debt Securities meet each of the Reinvestment Criteria. If the Collateral Manager determines, in its sole discretion, that investments in additional Collateral Debt Securities would either be impractical or not beneficial, an amount of Collateral Principal Collections available for reinvestment pursuant to the Priority of Payments as determined by the Collateral Manager will be applied to principal on the Notes in a Special Amortization. Collateral Principal Collections (including Sale Proceeds) will not be reinvested following the Reinvestment Period. Notwithstanding the foregoing restrictions, the Collateral Manager will direct the Trustee to sell, and, the Trustee will sell in accordance with such direction, all Collateral Debt Securities in connection with a Redemption of the Notes, subject to the satisfaction of the conditions set forth in Article IX herein. During the Reinvestment Period, principal of the Notes will be payable on any Payment Date in a Special Amortization if the Collateral Manager has notified the Trustee in writing on or before the related Calculation Date that it has determined, in its sole discretion, that investments in additional Collateral Debt Securities would not be practical or beneficial. During the Ramp-Up Period, Substitute Collateral Debt Securities will be purchased with Collateral Principal Collections, if sufficient Collateral Principal Collections are available, and only if sufficient Collateral Principal Collections are not available, with Uninvested Proceeds.

(c)

Discretionary Sales. So long as no Event of Default has occurred and is continuing, the Collateral Manager, on behalf of the Issuer, may, during the Reinvestment Period, direct the Trustee to sell, and the Trustee will sell in the manner directed by the Collateral 174

Processed and formatted by SEC Watch - Visit SECWatch.com

Manager, any Collateral Debt Security (in addition to sales of any Defaulted Securities, Credit Risk Securities, Withholding Tax Securities, Repurchased Securities, Credit Improved Securities, Equity Securities and Written Down Securities) (each such sale a Discretionary Sale) so long as each of the following applies:

12.2.

(1)

the aggregate Principal Balance of all Collateral Debt Securities sold pursuant to such Discretionary Sales for a given calendar year does not exceed 10% of the CDS Principal Balance at the beginning of that year (or, with respect to calendar year 2007, as of the Closing Date);

(2)

the Collateral Manager believes in good faith that Sale Proceeds from such sale can be reinvested within 60 Business Days after the sale of such Collateral Debt Security in one or more Substitute Collateral Debt Securities having an aggregate Principal Balance of not less than 100% of the Principal Balance of the Collateral Debt Security being sold;

(3)

after giving effect to such sale and to the purchase of Substitute Collateral Debt Securities with the Sale Proceeds thereof, the Reinvestment Criteria will be met; and

(4)

such Collateral Manager has not been removed, or voted to be removed, for “cause” as set forth in the Collateral Management Agreement.

PORTFOLIO CHARACTERISTICS

Except as provided in Section 12.3(c), a security will be eligible for inclusion in the Collateral as a Pledged Collateral Debt Security only if, as evidenced by an Officer’s certificate from the Collateral Manager to the Trustee, each of the following eligibility criteria is satisfied immediately after the Issuer Grants such Collateral Debt Security to the Trustee (collectively, the Eligibility Criteria): (a)

(1) it is issued by an issuer incorporated or organized under the laws of the United States of America or it is issued by a Qualifying Foreign Obligor, (2) it is issued by a Special Purpose Vehicle or (3) S&P has rated such security or any securities issued in connection with its related securitization;

(b)

if it is a Real Estate Interest it is secured by, or the payment obligations of which are tied to, collateral substantially all of which is located in the United States or a commonwealth, territory or possession of the United States;

(c)

the principal balance of the Collateral Debt Security is not currently reduced by a realized loss, expected loss, appraisal event, appraisal reduction or similar item, other than any Real Estate Interest as to which a workout or other restructuring has occurred but as to which no such reduction has occurred since the completion of such workout or restructuring;

(d)

if such Collateral Debt Security has attached “buy/sell” rights in favor of the Issuer, such rights are freely assignable by the Issuer to any of its Affiliates;

(e)

it is U.S. Dollar-denominated, and it is not convertible into, or payable in, any other currency; 175

Processed and formatted by SEC Watch - Visit SECWatch.com

(f)

it is one (or, in the case of a Synthetic Security, references at least one of) of the Specified Types of Collateral Debt Securities;

(g)

it has an S&P Rating (which rating does not include a “p”, “pi”, “q”, “t” or “r” subscript), a Moody’s Rating and a Fitch Rating;

(h)

the acquisition, ownership, enforcement and disposition of such security will not cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or otherwise to be subject to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation (other than as attributable to property received in connection with a foreclosure, as permitted under the Transaction Documents);

(i)

the payments on such security are not subject to withholding tax unless the issuer thereof or the obligor thereon is required to make additional payments sufficient to cover any withholding tax imposed at any time on payments made to the Issuer with respect thereto;

(j)

its acquisition would not cause the Issuer or the pool of Collateral to be required to register as an investment company under the Investment Company Act;

(k)

it is not a security that is ineligible under its Underlying Instruments to be purchased by the Issuer and pledged to the Trustee;

(l)

it is not an insurance-linked debt instrument containing a provision pursuant to which the issuer’s obligation to pay interest or principal is deferred or forgiven in the event of loss due to certain natural catastrophes specified in the Underlying Instruments;

(m)

it is not a security that provides for the payment of principal upon maturity, redemption or acceleration at less than the par amount thereof;

(n)

unless it is a Derivative Contract, its Underlying Instruments do not obligate the Issuer to make any future advances or any other payment except the purchase price thereof;

(o)

it is not an Equity Security, Principal Only Security or Interest Only Security;

(p)

it is not a security issued by an Emerging Market Issuer;

(q)

it is not a security that has, at the time of purchase, any deferred or capitalized interest;

(r)

it is not a security that, at the time it is purchased, is a Credit Risk Security, a Defaulted Security, a Written Down Security or a Deferred Interest PIK Bond;

(s)

(a) if it is a Derivative Contract, the Derivative Contract Counterparty, at the time of entry into such Derivative Contract, has a short term rating of at least “A-1+” by S&P (or “A-1” by S&P if the premium (and any other relevant amount (such as coupon) required under the related Derivative Contract) to be paid by such Derivative Contract Counterparty is posted at least one payment period in advance for the term of the Derivative Contract) and is not on negative watch and a long term rating of at least “A2” and a short term rating of “P1” by Moody’s, or if there is no short term rating, a long term rating of at least “A1” by Moody’s, and (b) in the case of any Synthetic Security other than a Derivative Contract, such Synthetic Security Counterparty has a short term rating 176

Processed and formatted by SEC Watch - Visit SECWatch.com

of at least “A-1” by S&P, or if no such short term rating is available, a long-term rating of at least “A” by S&P and a long term rating of at least “A2” and a short term rating of “P1” by Moody’s, or if there is no short term rating, a long term rating of at least “Al” by Moody’s; (t)

at the time the security is purchased by the Issuer: (1)

it is not a security issued by an issuer located in a country that imposes foreign exchange controls that effectively limit the availability or use of U.S. Dollars to make when due the scheduled payments of principal and interest on such security;

(2)

it is not, and does not provide for conversion or exchange into, Margin Stock at any time over its life;

(3)

it is not the subject of (1) any offer by the issuer of such security or by any other person made to all of the holders of such security to purchase or otherwise acquire such security (other than pursuant to any redemption in accordance with the terms of the related underlying instruments) or to convert or exchange such security into or for cash, securities or any other type of consideration or (2) any solicitation by an issuer of such security or any other person to amend, modify or waive any provision of such security or any related underlying instrument, and has not been called for redemption;

(4)

it is not a security that by the terms of its underlying instruments provides for conversion or exchange (whether mandatory or at the option of the issuer or the holder thereof) into equity capital at any time prior to its maturity;

(5)

it is not a financing by a debtor-in-possession in any insolvency proceeding;

(6)

it is not a first loss tranche of any securitization unless such tranche has an S&P Rating (as defined in clause (i) of the definition of S&P Rating) or a Moody’s Rating (as defined in clause (i) of the definition of Moody’s Rating) that addresses the obligation of the obligor (or guarantor, if applicable) to pay principal of and interest on the relevant Collateral Debt Security in full, which ratings are monitored on an ongoing basis by the relevant Rating Agency;

(7)

if it is a Deemed Floating Rate Collateral Debt Security, the Deemed Floating Asset Hedge entered into with respect to such Deemed Floating Rate Collateral Debt Security conforms to all requirements set forth in the definition of Deemed Floating Asset Hedge;

(8)

if it is a Collateral Debt Security that is a REIT Debt Security, Trust Preferred Security, CMBS Security, Real Estate CDO Security or CRE Debt Obligation and is acquired after the Closing Date from the Collateral Manager or any of its Affiliates, the requirements set forth in Exhibit G regarding the representations and warranties (and remedies for any breach thereof) with respect to such Collateral Debt Security have been met;

(9)

if it is a Real Estate Interest, (i) it is either (a) serviced pursuant to a Servicing Agreement or (b) solely with regard to any Subordinate Loan Interest, the related 177

Processed and formatted by SEC Watch - Visit SECWatch.com

Senior Loan has been included in a transaction that would be classified as a CMBS Conduit Security or a CMBS Large Loan Security with an S&P Servicer, (ii) the requirements set forth in Exhibit F regarding the representations and warranties (and remedies for any breach thereof) with respect to such Real Estate Interest have been met; and (iii) the Underlying Instruments contain the basic terms that are generally accepted as market standard in the CMBS industry for Underlying Instruments; and (10)

it is not a Prohibited Asset;

provided that notwithstanding anything to the contrary herein, the Issuer may, while attempting to dispose of property acquired in foreclosure or similar circumstances, make an election under Section 882(d) of the Code to treat the income related to real property located in the United States as income that is effectively connected with a U.S. trade or business; provided, further that except for property acquired by the Issuer in foreclosure or similar circumstances and for property expressly permitted to be acquired by the Issuer, the Issuer may not purchase, acquire or hold (whether as part of a unit with a Collateral Debt Security, in exchange for a Collateral Debt Security or otherwise) any asset unless the underlying documents for such asset specify, or the Issuer has received advice of tax counsel of nationally recognized standing in the United States experienced in such matters to the effect that, under the relevant facts and circumstances with respect to such transaction, for U.S. federal income tax purposes, (i) the obligation or security is indebtedness, (ii) all obligors and issuers of the assets are classified as corporations (and no elections have been made to the contrary), (iii) no obligor on or issuer of the asset is engaged in the conduct of a trade or business within the United States, or (iv) all obligors and issuers of the assets qualify as “grantor trusts”, and all of the assets of the obligors and issuers consist of obligations or securities that the Issuer could have directly acquired and held as assets (but for restrictions related to withholding taxes) and, notwithstanding anything to the contrary herein, the Issuer shall not purchase, acquire or hold any asset the gain from the disposition of which will be subject to U.S. federal income or withholding tax under Section 897 or Section 1445 of the Code and the Treasury regulations promulgated thereunder other than United States real property interests that the Issuer acquires in foreclosure and with respect to which has made a Section 882(d) election. 12.3.

CONDITIONS APPLICABLE TO ALL TRANSACTIONS INVOLVING SALE OR GRANT (a)

Any transaction effected under Article V, Article IX, Section 10.2 or Section 12.1 shall be conducted on an arms’ length basis and if effected with the Issuer, the Trustee, the Collateral Manager or any Affiliate of any of the foregoing, shall be effected in a secondary market transaction on terms at least as favorable to the Secured Noteholders as would be the case if such Person were not so Affiliated; provided that any disposition of a Collateral Debt Security in accordance with Section 12.1 shall be deemed to comply with this Section 12.3(a). The Trustee shall have no responsibility to oversee compliance with this clause by the other parties.

(b)

Upon any purchase or substitution pursuant to this Article XII, all of the Issuer’s right, title and interest to the Pledged Security or Securities shall be, and hereby is, Granted to the Trustee pursuant to this Indenture, such Pledged Security or Securities shall be registered in the name of the Trustee, and, if applicable, the Trustee shall receive such Pledged Security or Securities. The Trustee shall receive, not later than the date of delivery of any Pledged Security pursuant to a purchase under this Article XII, (a) an Officer’s Certificate of the Collateral Manager certifying (1) compliance with the Reinvestment Criteria in accordance with Section 12.1(b), (2) that the Collateral Debt Security to be sold constitutes an Equity Security, a Defaulted Security, a Credit Risk 178

Processed and formatted by SEC Watch - Visit SECWatch.com

Security, a Credit Improved Security, a Withholding Tax Security or a Written Down Security and (3) that any security to be purchased satisfies the definition of Collateral Debt Security and (b) an Officer’s Certificate of the Collateral Manager on behalf of the Issuer containing the statements set forth in Section 3.2(b)(2) through (4), (6) and (7). (c)

Notwithstanding anything contained in this Article XII to the contrary, the Issuer shall, subject to Section 12.3(d), have the right to effect any transaction to which each Hedge Counterparty and Holders of Secured Notes evidencing 100% of the Aggregate Outstanding Amount of each Class of Secured Notes, and each Income Noteholder has consented, and of which each Rating Agency has been notified in advance.

(d)

Except as specifically provided in this Indenture, in no event may the Issuer (i) engage in any business or activity that would cause the Issuer to be treated as engaged in a U.S. trade or business for U.S. federal income tax purposes or (ii) acquire or hold any asset that is an equity interest in an entity that is treated as a partnership engaged in a U.S. trade or business for U.S. federal income tax purposes or the acquisition or ownership of which otherwise would subject the Issuer to net income tax in any jurisdiction outside its jurisdiction of incorporation. The foregoing shall not, however, preclude the Issuer from holding Equity Securities or securities received in an Offer pending their sale in accordance with Section 12.1(a)(1). ARTICLE XIII SECURED PARTIES’ RELATIONS

13.1.

SUBORDINATION (a)

Anything in this Indenture or the Secured Notes to the contrary notwithstanding, the Issuer and the Holders of the Secured Notes agree for the benefit of each Hedge Counterparty that the Secured Notes and the Issuer’s rights in and to the Collateral (solely with respect to all amounts payable to such Hedge Counterparty pursuant to Section 11.1(a)(4)), the Subordinate Interests) shall be subordinate and junior to the rights of such Hedge Counterparty with respect to payments to be made to such Hedge Counterparty pursuant to the related Hedge Agreement to the extent and in the manner set forth in Section 11.1(a)(4) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived all amounts payable to such Hedge Counterparty pursuant to Section 11.1(a)(4) shall be paid in Cash or, to the extent such Hedge Counterparty consents, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests.

(b)

Anything in this Indenture or the Secured Notes to the contrary notwithstanding, the Issuer and the Holders of the Class A2 Notes, the Class A-3 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes agree for the benefit of the Holders of the Class A-1 Notes that the Class A-2 Notes, the Class A-3 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A-1 Notes, the Subordinate Interests) shall be subordinate and junior to the Class A-1 Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and 179

Processed and formatted by SEC Watch - Visit SECWatch.com

hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A-1 Notes shall be paid in full in Cash or, to the extent a Majority of the Class A-1 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Secured Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A-1 Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Secured Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A-1 Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (c)

Anything in this Indenture or the Secured Notes to the contrary notwithstanding, the Issuer and the Holders of the Class A3 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes agree for the benefit of the Holders of the Class A-1 Notes and Class A-2 Notes that the Class A-3 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A-1 Notes and the Class A-2 Notes, the Subordinate Interests) shall be subordinate and junior to the Class A-1 Notes and the Class A-2 Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A-1 Notes and the Class A-2 Notes shall be paid in full in Cash or, to the extent a Majority of the Class A-1 Notes and the Class A-2 Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Secured Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A-1 Notes and the Class A-2 Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Secured Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A-1 Notes and the Class A-2 Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(d)

Anything in this Indenture or the Secured Notes to the contrary notwithstanding, the Issuer and the Holders of the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes agree for the benefit of the Holders of the Class A Notes that the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Secured Notes evidencing Subordinate Interests 180

Processed and formatted by SEC Watch - Visit SECWatch.com

and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Secured Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (e)

Anything in this Indenture or the Secured Notes to the contrary notwithstanding, the Issuer and the Holders of the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes agree for the benefit of the Holders of the Class A Notes and the Class B Notes that the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes and the Class B Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes and the Class B Notes to the extent and in the manner set forth in this Indenture, including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived, the Class A Notes and the Class B Notes shall be paid in full in Cash or, to the extent a Majority of the Class A Notes and the Class B Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Secured Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A Notes and the Class B Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Secured Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes and the Class B Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(f)

Anything in this Indenture or the Secured Notes to the contrary notwithstanding, the Issuer and the Holders of the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes and the Class C Notes that the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes and the Class C Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes and the Class C Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes and the Class C Notes shall be paid in full in Cash or, to the extent a Majority of each of the Class A Notes, the Class B Notes and the Class C Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Secured Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes and the Class C Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Secured Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the 181

Processed and formatted by SEC Watch - Visit SECWatch.com

Class B Notes and the Class C Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (g)

Anything in this Indenture or the Secured Notes to the contrary notwithstanding, the Issuer and the Holders of the Class E Notes, Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K agree for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes that the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes shall be paid in full in Cash or, to the extent a Majority of each of Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Secured Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Secured Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(h)

Anything in this Indenture or the Secured Notes to the contrary notwithstanding, the Issuer and the Holders of the Class F Notes, Class G Notes, Class H Notes, Class J Notes and Class K Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes that the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes shall be paid in full in Cash or, to the extent a Majority of each of Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Secured Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Secured Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes, the Class C Notes, the Class D 182

Notes and the Class E Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (i)

Anything in this Indenture or the Secured Notes to the contrary notwithstanding, the Issuer and the Holders of the Class G Notes, Class H Notes, Class J Notes and the Class K Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes that the Class G Notes, the Class H Notes, the Class J Notes and the Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes shall be paid in full in Cash or, to the extent a Majority of each of Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Secured Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Secured Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(j)

Anything in this Indenture or the Secured Notes to the contrary notwithstanding, the Issuer and the Holders of the Class H

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes, Class J Notes and the Class K Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes that the Class H Notes, the Class J Notes and the Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes shall be paid in full in Cash or, to the extent a Majority of each of Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Secured Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, 183

Processed and formatted by SEC Watch - Visit SECWatch.com

the Class E Notes, the Class F Notes and the Class G Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Secured Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Class G Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands. (k)

Anything in this Indenture or the Secured Notes to the contrary notwithstanding, the Issuer and the Holders of the Class J Notes and the Class K Notes agree for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes, that the Class J Notes and the Class K Notes and the Issuer’s rights in and to the Collateral (with respect to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes, the Subordinate Interests) shall be subordinate and junior to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Note, the Class G Notes and the Class H Notes to the extent and in the manner set forth in this Indenture including as set forth in Section 11.1(a) and hereinafter provided. If any Event of Default (including an Event of Default specified in Section 5.1(g) or (h)) has occurred and has not been cured or waived the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes shall be paid in full in Cash or, to the extent a Majority of each of Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes consent, other than in Cash, before any further payment or distribution is made on account of the Subordinate Interests. The Holders of Secured Notes evidencing Subordinate Interests and the holders of equity in the Issuer agree, for the benefit of the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes, not to cause the filing of a petition in bankruptcy against the Issuer for failure to pay to them amounts due under the Secured Notes evidencing such Subordinate Interests or hereunder until the payment in full of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes and the Class H Notes and not before one year and one day has elapsed since such payment or, if longer, the applicable preference period then in effect, including any period established pursuant to the laws of the Cayman Islands.

(l)

In the event that notwithstanding the provisions of this Indenture, any Holder of any Subordinate Interests shall have received any payment or distribution in respect of such Subordinate Interests contrary to the provisions of this Indenture, then, unless and until all amounts payable to each Hedge Counterparty pursuant to Section 11.1(a)(4) or to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes or the Class K Notes, as the case may be, shall have been paid in full in Cash or, to the extent each Hedge Counterparty or a Majority of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes or the Class K Notes, as the case may be, consent, other than in Cash in accordance with this Indenture, such payment or distribution shall be received and held in trust for the benefit of, and shall forthwith be paid over and delivered to, the Trustee, which shall pay and deliver the same to such Hedge Counterparty or the Holders of the Class A Notes, the Class B Notes, the Class C 184

Processed and formatted by SEC Watch - Visit SECWatch.com

Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes or the Class K Notes, as the case may be, in accordance with this Indenture; provided that, if any such payment or distribution is made other than in Cash, it shall be held by the Trustee as part of the Collateral and subject in all respects to the provisions of this Indenture, including this Section 13.1. (m)

13.2.

Each Holder of Subordinate Interests agrees with each Hedge Counterparty and all Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes or the Class K Notes, as the case may be, that such Holder of Subordinate Interests shall not demand, accept, or receive any payment or distribution in respect of such Subordinate Interests in violation of the provisions of this Indenture including this Section 13.1; provided that after all amounts payable pursuant to Section 11.1(a)(4) and all amounts payable in respect of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes or the Class K Notes, as the case may be, have been paid in full, the Holders of Subordinate Interests shall be fully subrogated to the rights of each Hedge Counterparty or the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, the Class G Notes, the Class H Notes, the Class J Notes or the Class K Notes, as the case may be. Nothing in this Section 13.1 shall affect the obligation of the Issuer to pay Holders of Subordinate Interests.

STANDARD OF CONDUCT

In exercising any of its or their voting rights, rights to direct and consent or any other rights as a Secured Party under this Indenture, subject to the terms and conditions of this Indenture, including Section 5.9, a Secured Party or Secured Parties shall not have any obligation or duty to any Person or to consider or take into account the interests of any Person and shall not be liable to any Person for any action taken by it or them or at its or their direction or any failure by it or them to act or to direct that an action be taken, without regard to whether such action or inaction benefits or adversely affects any Secured Party, the Issuer, or any other Person. ARTICLE XIV MISCELLANEOUS 14.1.

FORM OF DOCUMENTS DELIVERED TO TRUSTEE

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer or the Collateral Manager may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Authorized Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer of the Issuer or the 185

Processed and formatted by SEC Watch - Visit SECWatch.com

Collateral Manager or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer, the Collateral Manager or any other Person, stating that the information with respect to such factual matters is in the possession of the Issuer, the Collateral Manager or such other Person, unless such Authorized Officer of the Issuer or the Collateral Manager or such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Any Opinion of Counsel may also be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Issuer or the Collateral Manager, stating that the information with respect to such matters is in the possession of the Issuer or the Collateral Manager, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture it is provided that the absence of the occurrence and continuation of a Default is a condition precedent to the taking of any action by the Trustee at the request or direction of the Issuer, then notwithstanding that the satisfaction of such condition is a condition precedent to the Issuer’s rights to make such request or direction, the Trustee shall be protected in acting in accordance with such request or direction if it does not have actual knowledge of the occurrence and continuation of such Default as provided in Section 6.1(d). 14.2.

ACTS OF SECURED NOTEHOLDERS (a)

Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Secured Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Secured Noteholders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action or actions embodied therein and evidenced thereby) are herein sometimes referred to as the Act of the Secured Noteholders, signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section 14.2.

(b)

The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner which the Trustee deems sufficient.

(c)

The principal amount and registered numbers of Secured Notes held by any Person, and the date of his holding the same, shall be proved by the Note Register.

(d)

Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Secured Notes shall bind the Holder (and any transferee thereof) of such Secured Note and of every Secured Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Secured Note. 186

Processed and formatted by SEC Watch - Visit SECWatch.com

14.3.

NOTICES, ETC., TO TRUSTEE, THE ISSUER AND THE RATING AGENCIES

Any request, demand, authorization, direction, notice, consent, waiver or Act of Secured Noteholders or other documents provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a)

the Trustee or the Income Note Paying Agent by any Secured Noteholder or by the Issuer shall be sufficient for every purpose hereunder if in writing and sent by facsimile in legible form and confirmed by overnight courier service guaranteed next day delivery to the Trustee or the Income Note Paying Agent addressed to it at 181 West Madison Street, 32nd Floor, Chicago, Illinois 60602, Attention: CDO Trust Services Group — N-Star Real Estate CDO IX, Ltd., telephone number 312-9040467, fax number 312-602-3935, or at any other address previously furnished in writing to the Issuer or Secured Noteholder by the Trustee or Income Note Paying Agent;

(b)

the Issuer by the Trustee or by any Secured Noteholder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, to the Issuer addressed to it at c/o Walkers SPV Limited, Walker House, 87 Mary Street, George Town, Grand Cayman, KY1-9002 Cayman Islands, Attention: The Directors, or at any other address previously furnished in writing to the Trustee by the Issuer;

(c)

the Rating Agencies by the Issuer or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by facsimile in legible form, (i) in the case of Fitch, addressed to Fitch Ratings, One State Street Plaza, New York, New York 10041, facsimile no. (212) - 558-2618, Attention: Commercial Real Estate CDO Surveillance - - Additional Reporting (e-mail: [email protected]); (ii) in the case of Moody’s, addressed to Moody’s Investors Service, 99 Church Street, New York, New York 10007, facsimile no. (212) 553-0355, Attention: CDO Monitoring (e-mail: [email protected]) and (iii) in the case of S&P, addressed to S&P, 55 Water Street, 41st Floor, New York, New York, 10041, Attention: CMBS Surveillance and all Note Valuation Reports shall be sent to S&P electronically at [email protected]; or

(d)

Each Hedge Counterparty by the Issuer or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, hand delivered or sent by overnight courier service or by facsimile in legible form to each Hedge Counterparty addressed to it at the address specified in the related Hedge Agreement or at any other address previously furnished in writing to the Issuer or the Trustee by each Hedge Counterparty;

(e)

the Collateral Manager by the Issuer or by the Trustee or a Majority of the Controlling Class, or by the Collateral Administrator shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and sent by facsimile in legible form and confirmed by overnight courier service guaranteed next day delivery, or by electronic mail (where expressly provided herein) to the Collateral Manager addressed to it at the address specified in the Collateral Management Agreement or at any other 187

Processed and formatted by SEC Watch - Visit SECWatch.com

address previously furnished in writing to the Issuer or the Trustee by the Collateral Manager; (f)

the Income Note Paying Agent by the Trustee in writing sent by facsimile confirmed by overnight courier guaranteed next day delivery;

(g)

the Initial Purchaser or the Placement Agent by the Issuer, the Collateral Manager or the Trustee shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, hand delivered, sent by overnight courier service or by telecopy in legible form, to the Initial Purchaser or the Placement Agent addressed to Citigroup Global Markets Inc., 390 Greenwich Street, 4th Floor, New York, New York 10013 telecopy no. 212-7238671, Attention: Managing Directors, Global Structured Credit Products; and

(h)

to the Repository by the Issuer pursuant to this Indenture shall be made available to the Repository by electronic mail as a pdf (portable document format) file to CDO Library, c/o The Bond Market Association, 360 Madison Avenue (18th Floor), New York, NY 10017; Electronic mail address: [email protected].

Delivery of any request, demand, authorization, direction, notice, consent, waiver or Act of Secured Noteholders or other documents made as provided above will be deemed effective: (i) if in writing and delivered in person or by overnight courier service, on the date it is delivered; (ii) if sent by facsimile transmission, on the date that transmission is received by the recipient in legible form (as evidenced by the sender’s written record of a telephone call to the recipient in which the recipient acknowledged receipt of such facsimile transmission); and (iii) if sent by mail, on the date that mail is delivered or its delivery is attempted; in each case, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Business Day. 14.4.

NOTICES AND REPORTS TO SECURED NOTEHOLDERS; WAIVER

Except as otherwise expressly provided herein, where this Indenture provides for a report to Holders or for a notice to Holders of Secured Notes of any event, such notice shall be sufficiently given to Holders of Secured Notes if in writing and mailed, first-class postage prepaid, to each Holder of a Secured Note affected by such event, at the address of such Holder as it appears in the Note Register, not earlier than the earliest date and not later than the latest date, prescribed for the giving of such report or notice and such report or notice shall be in the English language. Notwithstanding any provision to the contrary contained herein or in any agreement or document related hereto, any report, statement or other information to be provided by the Trustee may be provided by providing access to the Trustee’s website containing such information. Such reports and notices will be deemed to have been given on the date of such mailing. The Trustee will deliver to the Holder of any Secured Note shown on the Note Register any readily available information or notice requested to be so delivered, at the expense of the Issuer. In addition, for so long as any Class of Secured Notes is listed on the Irish Stock Exchange and so long as the rules of such exchange so require, notices to the Holders of such Secured Notes shall also be given by the Trustee to the Irish Paying Agent for delivery to the Company Announcements Office of the Irish Stock Exchange. 188

Processed and formatted by SEC Watch - Visit SECWatch.com

Neither the failure to mail any notice, nor any defect in any notice so mailed, to any particular Holder of a Secured Note shall affect the sufficiency of such notice with respect to other Holders of Secured Notes. Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Secured Noteholders shall be filed with the Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In the event that, by reason of the suspension of the regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Secured Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. 14.5.

EFFECT OF HEADINGS AND TABLE OF CONTENTS The Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

14.6.

SUCCESSORS AND ASSIGNS

All covenants and agreements in this Indenture by the Issuer shall bind its respective successors and assigns, whether so expressed or not. Written notice of any assignment shall be promptly provided by the Issuer to each Hedge Counterparty, the Holders of Notes of the Controlling Class and each Rating Agency. 14.7.

SEVERABILITY

In case any provision in this Indenture or in the Secured Notes shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 14.8.

BENEFITS OF INDENTURE

Nothing in this Indenture or in the Secured Notes, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the Secured Noteholders, and (to the extent provided herein, and as express third-party beneficiaries hereof) the Income Noteholders, the Income Note Paying Agent, each Hedge Counterparty, the Collateral Manager and the Servicer (if and when applicable), any benefit or any legal or equitable right, remedy or claim under this Indenture. Notwithstanding the foregoing, any rights of the Income Noteholders, the Income Note Paying Agent, each Hedge Counterparty, the Collateral Manager and the Servicer to receive any payment under this Indenture (i) shall be determined in the Income Note Paying Agency Agreement, the related Hedge Agreement, the Collateral Management Agreement and the Servicing Agreement, as applicable, and (ii) are limited in recourse to the Collateral, and to the extent the proceeds of the Collateral, when applied in accordance with the Priority of Payments, are insufficient to meet the obligations of the Issuer to the Income Note Paying Agent, each Hedge Counterparty, the Collateral Manager and the Servicer in full, the Issuer shall have no further liability in respect of any such underlying obligations, and any claims against the Issuer shall be extinguished and shall not thereafter revive. 189

14.9.

GOVERNING LAW This Indenture and each Secured Note shall be governed by, and construed in accordance with, the internal laws of the State of New

York. 14.10.

SUBMISSION TO JURISDICTION

The Issuer hereby irrevocably submits to the non-exclusive jurisdiction of the Supreme Court of the State of New York sitting in Manhattan and the U.S. District Court for the Southern District of New York, and any court of appeal therefrom, in any action or proceeding arising out of or relating to the Secured Notes or this Indenture, and the Issuer hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State or federal court. The Issuer hereby irrevocably waives, to the fullest extent that it may legally do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The Issuer hereby irrevocably appoints and designates CT Corporation, 111 Eighth Avenue, 13th Floor, New York, New York 10011, or any other Person having and maintaining a place of business in the State of New York whom the Issuer may from time to time hereafter designate as the true and lawful attorney and duly authorized agent for acceptance of service of legal process of the Issuer. The Issuer agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 14.11.

COUNTERPARTS

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

Processed and formatted by SEC Watch - Visit SECWatch.com

14.12.

WAIVER OF JURY TRIAL

EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING. Each party hereby (i) certifies that no representative, agent or attorney of the other has represented, expressly or otherwise, that the other would not, in the event of a Proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it has been induced to enter into this Indenture by, among other things, the mutual waivers and certifications in this paragraph. 14.13.

JUDGMENT CURRENCY

This is an international financing transaction in which the specification of Dollars (the Specified Currency), and the specification of the place of payment, as the case may be (the Specified Place), is of the essence, and the Specified Currency shall be the currency of account in all events relating to payments of or on the Secured Notes. The payment obligations of the Issuer under this Indenture and the Secured Notes shall not be discharged by an amount paid in another currency or in another place, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on conversion to the Specified Currency and transfer to the Specified Place under normal banking procedures does not yield the amount of the Specified Currency at the Specified Place. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder or the Secured Notes in the Specified Currency into another currency (the Second Currency), the rate of exchange which shall be applied shall be that at which in accordance with normal banking procedures the Trustee could purchase the Specified Currency with the Second Currency on the Business Day next preceding that on which such judgment is rendered. The obligation of the Issuer in respect of any such sum due from the Issuer hereunder shall, notwithstanding 190

Processed and formatted by SEC Watch - Visit SECWatch.com

the rate of exchange actually applied in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by the Trustee of any sum adjudged to be due hereunder or under the Secured Notes in the Second Currency the Trustee may in accordance with normal banking procedures purchase and transfer to the Specified Place the Specified Currency with the amount of the Second Currency so adjudged to be due; and the Issuer hereby, as a separate obligation and notwithstanding any such judgment (but subject to the Priority of Payments as if such separate obligation in respect of each Class of Secured Notes constituted additional principal owing in respect of such Class of Secured Notes), agrees to indemnify the Trustee and each Secured Noteholder against, and to pay the Trustee or such Secured Noteholder, as the case may be, on demand in the Specified Currency, any difference between the sum originally due to the Trustee or such Secured Noteholder, as the case may be, in the Specified Currency and the amount of the Specified Currency so purchased and transferred. 14.14.

CONFIDENTIAL TREATMENT OF DOCUMENTS

Except as otherwise provided in this Indenture or as required by law or as required to maintain the listing of the Secured Notes on the Irish Stock Exchange, this Indenture and each Hedge Agreement shall be treated by the Trustee and the Collateral Manager as confidential. The Trustee shall provide a copy of this Indenture to the Income Note Paying Agent and to any Holder of a beneficial interest in any Secured Note upon written request therefor certifying that it is such a Holder. ARTICLE XV ASSIGNMENT OF AGREEMENTS, ETC. 15.1.

ASSIGNMENT

The Issuer, in furtherance of the covenants of this Indenture and as security for the Secured Notes and amounts payable to the Secured Noteholders hereunder and the performance and observance of the provisions hereof, hereby assigns, transfers, conveys and sets over to the Trustee, for the benefit of the Secured Parties, all of the Issuer’s estate, right, title and interest in, to and under the Corporate Services Agreement, the Collateral Management Agreement, any Servicing Agreement, any Asset Purchase Agreement and any Hedge Agreement, including (i) the right to give all notices, consents and releases thereunder, (ii) the right to give all notices of termination, including the commencement, conduct and consummation of proceedings at law or in equity, (iii) the right to receive all notices, accountings, consents, releases and statements thereunder and (iv) the right to do any and all other things whatsoever that the Issuer is or may be entitled to do thereunder; provided that nothing herein shall obligate the Trustee to determine independently whether “cause” exists for the removal of the Collateral Manager pursuant to the Collateral Management Agreement. For the avoidance of doubt, in no event shall the Trustee be required to perform the obligations of the Collateral Manager under the Collateral Management Agreement. 15.2.

NO IMPAIRMENT

The assignment made hereby is executed as collateral security, and the execution and delivery hereby shall not in any way impair or diminish the obligations of the Issuer under the provisions of the Corporate Services Agreement, the Collateral Management Agreement, Servicing Agreement, Asset Purchase Agreement or any Hedge Agreement. 191

Processed and formatted by SEC Watch - Visit SECWatch.com

15.3.

TERMINATION, ETC.

Upon the redemption and cancellation of the Secured Notes and the payment of all other Secured Obligations and the release of the Collateral from the lien of this Indenture, this assignment and all rights herein assigned to the Trustee for the benefit of the Secured Parties shall cease and terminate and all the estate, right, title and interest of the Trustee in, to and under the Corporate Services Agreement, the Collateral Management Agreement and any Hedge Agreement shall revert to the Issuer and no further instrument or act shall be necessary to evidence such termination and reversion. 15.4.

ISSUER AGREEMENTS, ETC.

The Issuer represents that it has not executed (and covenants that it will not execute) any other assignment of the Collateral Administration Agreement, the Collateral Management Agreement, Servicing Agreement, Asset Purchase Agreement or any Hedge Agreement. The Issuer agrees that this assignment is irrevocable, and that it will not take any action which is inconsistent with this assignment or make any other assignment inconsistent herewith. The Issuer will, from time to time upon the request of the Trustee, execute all instruments of further assurance and all such supplemental instruments with respect to this assignment as the Trustee may reasonably specify. ARTICLE XVI HEDGE AGREEMENTS 16.1.

HEDGE AGREEMENTS

The Issuer will, on or prior to the Closing Date, enter into the Initial Hedge Agreements with the Initial Hedge Counterparty for the purpose of managing the Issuer’s interest rate risk exposure relating to the variable rate of interest applicable to certain Classes of Secured Notes and/or the cash flow timing mismatch with respect to particular Collateral Debt Securities. On the Closing Date (or any date on which the Issuer enters into an additional or a replacement Hedge Agreement), (i) the Hedge Counterparty entering into such Hedge Agreement shall satisfy the Hedge Counterparty Ratings Requirement and (ii) the Issuer shall assign such Hedge Agreement to the Trustee pursuant to this Indenture and the Collateral Assignment of Hedge Agreement. (a)

The Trustee shall, on behalf of the Issuer and in accordance with the Note Valuation Report, pay amounts due to the Hedge Counterparty under the Hedge Agreement on any Payment Date in accordance with Section 11.1.

(b)

If a Collateralization Event occurs, the Hedge Counterparty shall within 30 days of the occurrence of such Collateralization Event either (i) enter into a Credit Support Annex and post collateral of such types, in such amounts and at such times as are sufficient to maintain the then-current rating of each Class of Secured Notes by each Rating Agency, as evidenced by receipt of Rating Agency Confirmation (ii) find a replacement Hedge Counterparty as permitted under the Hedge Agreement that satisfies the Hedge Counterparty Ratings Requirement and obtain Rating Agency Confirmation from S&P with respect to such replacement, (iii) obtain a guarantee (meeting S&P’s then-current published criteria regarding guarantees) for the obligations of the Hedge Counterparty under the Hedge Agreement from a guarantor which meets the Hedge Counterparty Ratings Requirement and obtain Rating Agency Confirmation from S&P or (iv) take such other steps as each Rating Agency that has downgraded the Hedge Counterparty may require (as confirmed to the Collateral Manager in writing) to ensure that the then-current 192

Processed and formatted by SEC Watch - Visit SECWatch.com

ratings on the Secured Notes by any Rating Agency are not reduced or withdrawn. If the Hedge Counterparty has not, within 30 days of the occurrence of such Collateralization Event, taken any of the actions required above, an additional termination event with respect to which the Hedge Counterparty shall be the sole “affected party” will be deemed to have occurred and the Issuer shall have the right to terminate the Hedge Agreement (with all costs and expenses in connection with any such termination to be paid by the Hedge Counterparty). (c)

If at any time a Substitution Event has occurred and is continuing, then the Hedge Counterparty will, (x) in the case of a Substitution Event referred to in sub-paragraph (ii) or sub-paragraph (iii) of the definition thereof, within 30 days following such Substitution Event or (y) in the case of a Substitution Event referred to in sub-clause (iii) of the definition thereof, immediately following such Substitution Event, assign its rights and obligations under the Hedge Agreement, at no cost to the Issuer, to a party (the Substitute Party) selected by the Hedge Counterparty that (i) satisfies the Hedge Counterparty Ratings Requirement, (ii) with respect to which a Rating Agency Confirmation has been obtained and (iii) that assumes all of the Hedge Counterparty’s obligations under the Hedge Agreement pursuant to an agreement satisfactory to the Issuer; provided, further, that in the event of a Substitution Event referred to in subparagraphs (ii) and (iii) of the definition thereof, the Hedge Counterparty may cure such Substitution Event by obtaining a guarantee for the obligations of the Hedge Counterparty by a guarantor which meets the Hedge Counterparty Ratings Requirement; provided, further, that in the event of a Substitution Event referred to in subparagraph (i) of the definition thereof, the Hedge Counterparty may cure such Substitution Event by obtaining a guarantee for the obligations of the Hedge Counterparty by a guarantor which meets the Hedge Counterparty Ratings Requirement and with respect to which Rating Agency Confirmation from S&P has been obtained. If the Hedge Counterparty fails to assign its rights and obligations under the Hedge Agreement to a Substitute Party within 30 days following such Substitution Event (in the case of a Substitution Event referred to in sub-clauses (i) or (iii) of the definition thereof) or within seven Business Days following such Substitution Event (in the case of a Substitution Event referred to in sub-clause (ii) of the definition thereof), then (x) the Hedge Counterparty shall, while it continues in good faith to search for an eligible Substitute Party, post and maintain, or continue to maintain, as the case may be, collateral in accordance with a Credit Support Annex of such types, in such amounts and at such times and on such terms as are sufficient to maintain the then-current rating of each Class of Secured Notes by each Rating Agency as evidenced by the receipt of Rating Agency Confirmation, and (y) in the case of a Substitution Event referred to in sub-paragraph (i) of the deifnition thereof, the Issuer shall have the right to terminate the Hedge Agreement with all costs of such termination to be paid by the Hedge Counterparty (subject to receipt of Rating Agency Confirmation from S&P).

(d)

The Issuer may, after the Closing Date, enter into additional Hedge Agreements (including one or more Deemed Floating Asset Hedges) with additional Hedge Counterparties as the Issuer may elect in its sole discretion, in each case (i) subject to Rating Agency Confirmation, (ii) in the event a proposed additional Hedge Agreement has an initial notional amount which exceeds U.S.$25,000,000, with the prior consent of the Initial Hedge Counterparty (so long as it continues to act as Initial Hedge Counterparty), such consent not to be unreasonably conditioned, delayed or withheld, and (iii) in the case of additional Hedge Counterparties, with the delivery to the Issuer of an 193

Processed and formatted by SEC Watch - Visit SECWatch.com

Opinion of Counsel to the additional Hedge Counterparty; provided that the Issuer will not be required to obtain Rating Agency Confirmation in connection with entering into any Deemed Floating Asset Hedges or Cashflow Hedge Agreements which are Form-Approved Hedge Agreements with a Hedge Counterparty that satisfies the Hedge Counterparty Ratings Requirement. (e)

The Trustee shall, prior to the Closing Date in respect of the Initial Hedge Agreement, cause the Custodian to establish a segregated, non-interest bearing Securities Account which shall be designated as a “Hedge Counterparty Collateral Account” with respect to the Hedge Counterparty in respect of which the Trustee shall be the Entitlement Holder and which the Trustee shall hold in trust for the benefit of the Secured Parties. The Trustee shall deposit all collateral received from such Hedge Counterparty under the Hedge Agreement in such Hedge Counterparty Collateral Account. Any and all funds at any time on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be held in trust by the Trustee for the benefit of the Secured Parties. The only permitted withdrawal from or application of funds on deposit in, or otherwise standing to the credit of, each Hedge Counterparty Collateral Account shall be (i) for application to obligations of the Hedge Counterparty to the Issuer under the Hedge Agreement that are not paid when due (whether when scheduled or upon early termination) or (ii) to return collateral to the Hedge Counterparty when and as required by the Hedge Agreement in each case upon the direction of the Issuer pursuant to an Issuer Order. No assets credited to any Hedge Counterparty Collateral Account shall be considered an asset of the Issuer for purposes of any of the Coverage Tests unless and until the Issuer or the Trustee on its behalf is entitled to foreclose on such assets in accordance with the terms of the Hedge Agreement.

(f)

Upon its receipt of notice that the Hedge Counterparty has defaulted in the payment when due of its obligations to the Issuer under any Hedge Agreement (or, if earlier, when the Trustee becomes aware of such default) the Trustee shall make a demand on such Hedge Counterparty, or any guarantor, if applicable, demanding payment forthwith. The Trustee shall give notice to the Secured Noteholders and each Rating Agency upon the continuance of the failure by such Hedge Counterparty to perform its obligations for two Business Days following a demand made by the Trustee on such Hedge Counterparty.

(g)

If at any time the Hedge Agreement becomes subject to early termination due to the occurrence of an “event of default” or a “termination event” (each as defined in the Hedge Agreement) solely attributable to the Hedge Counterparty or other comparable event, the Issuer and the Trustee shall take such actions (following the expiration of any applicable grace period) to enforce the rights of the Issuer and the Trustee thereunder and under the Collateral Assignment of Hedge Agreement as may be permitted by the terms of such Hedge Agreement and consistent with the terms hereof, and shall apply any proceeds of any such actions (including the proceeds of the liquidation of any collateral pledged by the Hedge Counterparty) to enter into a replacement Hedge Agreement on substantially identical terms or on such other terms as to which each Rating Agency shall have provided a Rating Agency Confirmation (to the extent such Rating Agency has not waived its right of review) with a Substitute Party with respect to which the Hedge Counterparty Ratings Requirement is satisfied and each Rating Agency shall have provided a Rating Agency Confirmation. If the Issuer is the sole non-Affected Party or the sole non-Defaulting Party with respect to such “event of default” or “termination event”, the Issuer will (with the assistance of the Collateral Manager) obtain quotations 194

Processed and formatted by SEC Watch - Visit SECWatch.com

with respect to such replacement Hedge Agreement from five prospective counterparties Independent from the Issuer, the Collateral Manager and each other that satisfy the Hedge Counterparty Ratings Requirement and with respect to which a Rating Agency Confirmation (to the extent such Rating Agency has not waived its right of review) shall have been obtained and enter into a replacement Hedge Agreement with the prospective counterparty that provides the lowest quotation (if the Issuer is required to make a payment to such replacement counterparty) or the highest quotation (if such replacement counterparty is required to make a payment to the Issuer). (h)

The Issuer shall notify each Rating Agency if at any time the Hedge Counterparty is required to post collateral or assign its rights and obligations in and under the Hedge Agreement.

(i)

The Hedge Agreement may not be amended or modified at any time other than to effect the appointment of a substitute Hedge Counterparty or to effect a modification which is of a formal, minor or technical nature or is to correct a manifest error and which, in the opinion of the Trustee (based upon an Opinion of Counsel) would not have a material adverse effect on the interests of Holders of the Secured Notes or of Holders of any Class or Classes of Secured Notes or the Holders of the Income Notes; provided that the Issuer has obtained Rating Agency Confirmation (to the extent such Rating Agency has not waived its right of review) with respect to any such modification. The Trustee shall provide the Collateral Manager and the Rating Agencies with a copy of any such modification within 10 Business Days before effecting such modification.

(j)

The Issuer shall enter into a Hedge Agreement only if the payments from the Hedge Counterparty thereunder are not subject to withholding tax or if the Hedge Counterparty shall be required in accordance with the terms of the Hedge Agreement to pay additional amounts to the Issuer sufficient to cover any withholding tax due on payments made by the Hedge Counterparty to the Issuer under such Hedge Agreement, subject to the Issuer making customary payee tax representations and providing customary tax documentation. The Issuer shall not enter into any Hedge Agreement the acquisition (including the manner of acquisition), ownership, enforcement or disposition of which would subject the Issuer to tax on a net income basis in any jurisdiction outside the Issuer’s jurisdiction of incorporation.

(k)

The Issuer will not terminate or amend any Hedge Agreement without receiving Rating Agency Confirmation (to the extent such Rating Agency has not waived its right of review) with respect to such termination or amendment. 195

Processed and formatted by SEC Watch - Visit SECWatch.com

IN WITNESS WHEREOF, we have set our hands as of the date first above written.

Executed as a Deed by N-STAR REAL ESTATE CDO IX, LTD., as Issuer By: /s/ John Cullinane Name: John Cullinane Title: Director In the presence of:

Witness Name: Witness Title:

/s/ Brittany Webster

Brittany Webster Administrative Assistant

LASALLE BANK NATIONAL ASSOCIATION, as Trustee By: /s/ Jessica J. Mead Name: Jessica J. Mead Title: Vice President

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 12.1 Ratio of Combined Fixed Charges and Preference Dividends to Earnings (in thousands, except ratios) Th e C om pany (consolidate d) Ye ar En de d De ce m be r 31, 2008

Interest Expense Preference Security Dividend

2006

2005

$191,472 $242,560 $104,239 $32,568 $ 20,925 16,533 860 — 212,397 259,093 105,099 32,568

3,352 $ — 3,352

285 — 285

Net income continuing operations 719,666 47,892 37,035 8,273 Fixed charges 212,397 259,093 105,099 32,568 Preference Security Dividend (20,925) (16,533) (860) — $911,138 $290,452 $141,274 $40,841 $

(2,441) 3,352 — 911 $

1,194 285 — 1,479

0.27

5.19

Ratio

(1)

2007

Th e C om pany Th e Pre de ce ssor (consolidate d) Pe riod 10/29/2004 1/1/2004 to to 12/31/2004(1) 10/28/2004

4.29

1.12

Earnings were insufficient to cover fixed charges by $2.4 million

1.34

1.25

Processed and formatted by SEC Watch - Visit SECWatch.com

QuickLinks Exhibit 12.1 Ratio of Combined Fixed Charges and Preference Dividends to Earnings (in thousands, except ratios)

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 21.1 NorthStar Realty Finance Corp. List of Significant Subsidiaries En tity Nam e

NorthStar Realty Finance Limited Partnership NRFC Sub-REIT Corp. NRFC NNN Holdings LLC NRFC WA Holdings LLC NRFC WA Holdings II LLC NorthStar OS VIII, LLC NS CDO Holdings VIII 2, LLC N-Star Real Estate CDO VIII, Ltd NRFC Wakefield Holding Company LLC Wakefield Capital, LLC NorthStar Real Estate Securities Opportunity Fund GP, Ltd. NorthStar Real Estate Securities Opportunity Master Fund, LP NorthStar Landco, LLC G/NRF Holdings, LLC

Form ation Ju risdiction

Delaware Maryland Delaware Delaware Delaware Delaware Delaware Cayman Delaware Delaware Cayman Cayman Delaware Delaware

Processed and formatted by SEC Watch - Visit SECWatch.com

QuickLinks Exhibit 21.1 NorthStar Realty Finance Corp. List of Significant Subsidiaries

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have issued our reports dated February 25, 2009, with respect to the consolidated financial statements, schedules, and internal control over financial reporting included in the Annual Report of NorthStar Realty Finance Corp. on Form 10-K for the year ended December 31, 2008. We hereby consent to the incorporation by reference of said reports in the Registration Statements (Forms S-8 No. 333-120025 and No. 143549) pertaining to the NorthStar Realty Finance Corp. 2004 Omnibus Stock Incentive Plan, as amended, Registration Statement (Form S-8 No. 333132891) pertaining to the NorthStar Realty Finance Corp. 2004 Long-Term Incentive Bonus Plan, Registration Statement (Form S-3 No. 333132890) pertaining to the NorthStar Realty Finance Corp. offering entitling the holders to purchase common stock, preferred stock, depositary shares, debt securities, shares or units, as amended, Registration Statement (Form S-3 No. 142057) pertaining to the NorthStar Realty Finance Corp. Dividend Reinvestment and Stock Purchase Plan Program, and Registration Statements (Forms S-3 No. 146679 and No. 152545) pertaining to the NorthStar Realty Finance Corp. resale registration of common stock. /s/ GRANT THORNTON LLP New York, New York February 25, 2009

Processed and formatted by SEC Watch - Visit SECWatch.com

QuickLinks Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 31.1 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO 17 CFR 240.13a-14(a)/15(d)-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, David T. Hamamoto, Chief Executive Officer of NorthStar Realty Finance Corp., certify that: 1.

I have reviewed this annual report on Form 10-K of NorthStar Realty Finance Corp. for the fiscal year ended December 31, 2008;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ DAVID T. HAMAMOTO

David T. Hamamoto Chief Executive Officer

Processed and formatted by SEC Watch - Visit SECWatch.com

Date: February 25, 2009

Processed and formatted by SEC Watch - Visit SECWatch.com

QuickLinks Exhibit 31.1 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO 17 CFR 240.13a-14(a)/15(d)-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 31.2 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO 17 CFR 240.13a-14(a)/15(d)-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Andrew C. Richardson, Chief Financial Officer of NorthStar Realty Finance Corp., certify that: 1.

I have reviewed this annual report on Form 10-K of NorthStar Realty Finance Corp. for the fiscal year ended December 31, 2008;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ ANDREW C. RICHARDSON

Andrew C. Richardson Chief Financial Officer

Processed and formatted by SEC Watch - Visit SECWatch.com

Date: February 25, 2009

Processed and formatted by SEC Watch - Visit SECWatch.com

QuickLinks Exhibit 31.2 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO 17 CFR 240.13a-14(a)/15(d)-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 32.1 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of NorthStar Realty Finance Corp. (the "Company") for the period ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), David T. Hamamoto, as Chief Executive Officer of the Company hereby certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: 1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.

Dated: February 25, 2009

By:

/s/ DAVID T. HAMAMOTO

David T. Hamamoto Chief Executive Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Processed and formatted by SEC Watch - Visit SECWatch.com

QuickLinks Exhibit 32.1 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 32.2 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of NorthStar Realty Finance Corp. (the "Company") for the period ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Andrew C. Richardson, as Chief Financial Officer of the Company hereby certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: 1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.

Dated: February 25, 2009

By:

/s/ ANDREW C. RICHARDSON

Andrew C. Richardson Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Processed and formatted by SEC Watch - Visit SECWatch.com

QuickLinks Exhibit 32.2 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002